2024-12-12 16:12

FRANKFURT, Dec 12 (Reuters) - A handful of European Central Bank policymakers initially wanted a larger interest-rate cut on Thursday, worried among other things that new U.S. tariffs would hamper economic growth, three sources told Reuters. The ECB cut interest rates by a quarter of a percentage point on Thursday and kept the door open to more easing as the euro area economy is dragged down by political instability at home and the threat of a fresh U.S. trade war. But around five of the 26 members of the Governing Council initially pushed for a 50-basis-point cut in light of lower inflation and growth forecasts. They argued, in particular, that economic output could grow by less than the ECB's already downgraded 1.1% projection next year if Donald Trump's incoming U.S. administration imposed fresh tariffs on the European Union. The small minority of policymakers clamouring for the bigger cut soon yielded, the sources said, adding there was little appetite for rushing decisions given the prevailing uncertainty. An ECB spokesman declined to comment. ECB President Christine Lagarde said Thursday's cut was backed by all policymakers and that the staff's new economic projections do not reflect any U.S. tariff that has not already been introduced. Sign up here. https://www.reuters.com/markets/europe/handful-ecb-policymakers-wanted-larger-cut-worried-about-tariffs-sources-2024-12-12/

2024-12-12 14:07

LONDON, Dec 12 (Reuters) - Central banks in the euro area and Switzerland cut rates on Thursday, a day after Canada slashed rates by a hefty 50 bps. Australia, meanwhile, eased its previously dovish tone this week, while Japan remains an outlier. Here's where major rate-setters stand and what traders expect next. 1/ SWITZERLAND The Swiss National Bank, which has been at the forefront of monetary easing, cut rates by an unexpectedly large 50 basis points (bps) to 0.5% on Thursday, the lowest since November 2022 and the bank's biggest reduction in almost a decade. Swiss annual inflation was most recently reported at just 0.7% and the SNB, which is alert to the safe-haven Swiss franc strengthening beyond levels domestic exporters can bear, said it could reduce borrowing costs again next year. 2/ CANADA The Bank of Canada cut rates by 50 bps to 3.25% on Wednesday, marking the first time since the COVID-19 outbreak that it has implemented consecutive half-point cuts. It indicated further easing would be gradual after annual inflation accelerated to 2%, but with Canada's weak economy threatened by U.S. President-elect Donald Trump's proposed tariffs, markets placed 70% odds on a 25 bps cut next month. 3/ SWEDEN Sweden's economy is shrinking and its central bank, which lowered borrowing costs by 50 bps to 2.75% in November, has guided markets to expect further easing next year. The Riksbank meets next week and markets see a 25bps cut as more likely than not, with about 90 bps of easing priced in by August. 4/ NEW ZEALAND The Reserve Bank of New Zealand painted a bleak economic picture in its latest Financial Stability Report, and while it does not meet to set rates again until February, traders see good chances of swift and rapid cuts. The RBNZ has lowered its cash rate by 75 bps to 4.25% so far this cycle and markets expect it to fall to just over 3% by late 2025. 5/ EURO ZONE The ECB is firmly in easing mode, cutting its deposit rate by 25 bps to 3% on Thursday in its fourth such move this year and keeping the door open to further reductions. It also signalled that further cuts are possible by removing a reference to keeping rates "sufficiently restrictive", economic jargon for a level of borrowing costs that curbs economic growth. Markets price in roughly 130 bps worth of tightening by end-2025. 6/ UNITED STATES The Federal Reserve is moving more cautiously with monetary easing given a robust economy and President-elect Donald Trump's proposed tax cuts and import tariffs complicate the U.S. inflation outlook. While the Fed cut its main funds rate by 25bps to a range of 4.5%-4.75% in November and traders expect a further quarter point cut on Dec. 18, U.S. consumers are optimistic about the economy and their earnings prospects, and ready to spend. 7/ BRITAIN The Bank of England is also holding back from rapid easing, having cut rates in November for only the second time since 2020. Money markets imply a 90% probability the BoE will hold steady at its Dec. 19 meeting. Traders see the UK base rate falling from 4.75% currently to about 3.9% by end-2025, as higher government spending under the new Labour leadership boosts growth and keeps inflation running above the BoE's 2% target. 8/ NORWAY Norway's central bank has yet to start easing, having held its policy rate at a 16-year high of 4.5% in November and guided markets not to expect a cut at its Dec. 19 meeting. A robust economy helped push annual core inflation up to 3% in November in an unwelcome move away from the Norges Bank's 2% target. Markets currently price a rate cut by March. 9/ AUSTRALIA The Reserve Bank of Australia held rates steady at a 12-year high of 4.35% on Tuesday but softened its tone on inflation, raising the market-implied probability of a quarter-point cut in February to more than 50%. The RBA, which has not changed borrowing costs for more than a year, has taken note of a surprise economic growth slowdown as high rates deterred households from spending despite a recent round of tax cuts. 10/ JAPAN Rising inflation prompted longtime outlier the Bank of Japan to nudge borrowing costs up to 0.25% in July in a move that wreaked havoc on global trades that were underpinned by its ultra-loose monetary policies, generating a brief market rout. The BOJ has held rates since and is expected to do so again next week following political uncertainty after Japan's ruling coalition lost its majority in October elections, with a 25 bps hike seen as more likely than not in January. Sign up here. https://www.reuters.com/markets/rates-bonds/global-markets-central-banks-2024-12-12/

2024-12-12 14:03

FRANKFURT, Dec 12 (Reuters) - The European Central Bank cut interest rates for the fourth time this year on Thursday and kept the door open to further easing ahead as inflation closes in on its goal and the economy remains weak. The central bank for the 20 countries that share the euro reduced the rate it pays on bank deposits, which drives financing conditions in the bloc, to 3.0% from 3.25%. It was at a record 4.0% only in June. It also signalled that further cuts are possible by removing a reference to keeping rates "sufficiently restrictive", economic jargon for a level of borrowing costs that curbs economic growth. "Financing conditions are easing, as the Governing Council’s recent interest rate cuts gradually make new borrowing less expensive for firms and households," the ECB said. "But they continue to be tight because monetary policy remains restrictive and past interest rate hikes are still transmitting to the outstanding stock of credit." There is no universal definition of what constitutes a restrictive rate but economists generally see neutral territory, which neither fuels nor cools growth, at between 2% and 2.5%. With Thursday's decision, the ECB also cut the rate at which it lends to banks for one week - to 3.15% - and for one day, to 3.40%. These facilities have barely been used in recent years as the ECB has supplied the banking system with more reserves than it needs via massive bond purchases and long-term loans. But they may become more relevant in the future as those programmes end. The ECB confirmed on Thursday it would stop buying bonds under its Pandemic Emergency Purchase Programme this month. Sign up here. https://www.reuters.com/markets/europe/ecb-cuts-interest-rates-fourth-time-this-year-2024-12-12/

2024-12-12 13:49

Dec 12 (Reuters) - Traders of interest-rate futures that settle to the Federal Reserve's policy rate added to bets the central bank rate will cut borrowing costs next week and follow up next year with further reductions, after economic data showed weekly claims for unemployment insurance unexpectedly rose. Traders now see the probability of a rate cut next week at about 97%, up from about 94% before the report, and are pricing in another three quarter-point rate cuts in 2025. Sign up here. https://www.reuters.com/markets/rates-bonds/traders-add-bets-fed-will-keep-cutting-rates-next-year-2024-12-12/

2024-12-12 13:38

WASHINGTON, Dec 12 (Reuters) - The number of Americans filing new applications for jobless benefits unexpectedly rose last week and more people continued to collect unemployment checks at the end of November relative to the beginning of the year as demand for labor cools. Initial claims for state unemployment benefits increased 17,000 to a seasonally adjusted 242,000 for the week ended Dec. 7, the Labor Department said on Thursday. Economists polled by Reuters had forecast 220,000 claims for the latest week. Last's week jump in claims likely reflected volatility after the Thanksgiving holiday and likely does not mark an abrupt shift in labor market conditions. Claims are likely to remain volatile in the weeks ahead, which could make it difficult to get a clear read of the labor market. Through the volatility, the labor market is slowing. Though job growth accelerated in November after being severely constrained by strikes and hurricanes in October, the unemployment rate ticked up to 4.2% after holding at 4.1% for two consecutive months. An easing labor market makes it more likely that the Federal Reserve will cut interest rates next week for the third time since it embarked on its policy easing cycle in September, despite little progress in lowering inflation down to its 2% target in recent months. The U.S. central bank's benchmark overnight interest rate is now in the 4.50%-4.75% range, having been hiked by 5.25 percentage points between March 2022 and July 2023 to tame inflation. A stable labor market is critical to keeping the economic expansion on track. Historically low layoffs account for much of the labor market stability, and have driven consumer spending. The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 15,000 to a seasonally adjusted 1.886 million during the week ending Nov. 30, the claims report showed. The elevated so-called continued claims are a sign that some laid-off people are experiencing longer bouts of unemployment. The median duration of unemployment spells rose to the highest level in nearly three years in November. Sign up here. https://www.reuters.com/markets/us/us-weekly-jobless-claims-unexpectedly-rise-2024-12-12/

2024-12-12 12:25

Dec 12 (Reuters) - Rio Tinto (RIO.AX) , opens new tab said on Thursday it plans to invest $2.5 billion to ramp up production capacity at the miner's Rincon lithium project in Argentina. As part of the ramp up, the project's capacity will reach 60,000 tonnes, including a 3,000-tonne starter plant and 57,000-tonne expansion plant, according to Rio Tinto. The Rincon project earlier had a capacity of 53,000 tonnes. "The attractive long-term outlook for lithium driven by the energy transition underpins our investment in Rincon," Rio Tinto CEO Jakob Stausholm said. Construction of the newly expanded plant is scheduled to begin mid-2025, with initial production from Rincon is expected in 2028. Sign up here. https://www.reuters.com/markets/commodities/rio-tinto-spend-25-bln-expand-argentina-lithium-project-capacity-2024-12-12/