Latest news with #IndradipGhosh
Yahoo
02-06-2025
- Business
- Yahoo
Bank of Canada to hold rates at 2.75% but cut at least twice more this year: Reuters poll
By Mumal Rathore and Indradip Ghosh BENGALURU (Reuters) - The Bank of Canada will hold interest rates at 2.75% on Wednesday as policymakers await further news on an economy that grew faster than expected last quarter, with at least two more cuts likely this year, according to a majority of economists in a Reuters poll. That strong consensus around the upcoming decision came after data on Friday showed the economy grew quicker than predicted last quarter, at 2.2%. The surprising growth was primarily driven by exports as U.S. companies rushed to stockpile Canadian goods before U.S. President Donald Trump's tariffs kick in. Lower household spending and weak domestic demand, however, suggest a downturn is coming. Also, Trump's recent announcement he would double tariffs on imported steel and aluminum to 50% could further worsen the outlook. Still, solid economic growth in Q1 and core inflation flirting with the upper end of the BoC's 1-3% target range will provide ample reason for the central bank to hold rates this week for a second straight meeting. Over 75% of economists, 20 of 26, polled by Reuters said so following the gross domestic product data release. That is in line with interest rate futures pricing. "There isn't urgency from the growth numbers, and there is caution from the core inflation numbers," said Douglas Porter, chief economist at BMO Capital Markets, who expects the BoC to hold. "The overall GDP numbers have been surprisingly resilient. While the economy is certainly not as strong as the headline suggests, the reality is (that) it has managed to grind out some modest growth." Prior to the release, economists were unsure about the decision. Among top Canadian banks, BMO, CIBC and TD shifted their call to a pause from a cut while Scotiabank stood pat on their earlier view of no change. The BoC has already cut the rate by a cumulative 225 basis points since June 2024. Although there was no clear consensus on where rates would be by end-2025, nearly 75% of economists - 17 of 23 - said the BoC would cut rates at least twice more this year, including eight forecasting another two reductions, seven saying a further three cuts and two a further four. "While we would argue a cut would be the right step, odds are the BoC won't deliver one just yet, having signaled that it's less willing to be forward-looking amidst considerable uncertainty over the outlook," said Avery Shenfeld, chief economist at CIBC. "So we look for a pause (on Wednesday), but one accompanied by a message that leaves the door open for rate relief ahead." Last month, BoC Governor Tiff Macklem explicitly warned of a possible growth slowdown in coming quarters. But the BoC will refresh its economic outlook in July, which could be another reason to wait this week. The economy grew 0.1% in April, better than feared, but that is unlikely to be sustained. It will contract 1.0% and 0.5% this quarter and next, respectively, poll medians showed. If realised, that would meet the technical definition of a recession. "Whatever happens next, the BoC cannot assume the status quo will hold ... We believe Canadian growth is likely to slow sharply through the middle part of the year, justifying further rate cuts," said Andrew Kelvin, head of Canadian and global rates strategy at TD Securities. (Other stories from the Reuters global economic poll)
Yahoo
14-04-2025
- Business
- Yahoo
Reuters poll: Rising Canada recession risk to trigger at least two more rate cuts this year
By Indradip Ghosh BENGALURU (Reuters) - Growing recession risks to Canada from the U.S.-led trade war will push the Bank of Canada to cut interest rates at least twice more this year, although a majority of economists said policymakers will leave them unchanged on Wednesday. U.S. President Donald Trump's surprise announcement last week to put a 90-day pause on reciprocal tariffs, except China, did little to alter pessimism around Canada's economic prospects as U.S. levies on autos, steel and aluminum remain in place. Unpredictable U.S. trade policy alongside Trump's increasingly severe dispute with No. 2 economy China has raised the chances of a global economic downturn and Canada is likely to suffer, given around 80% of its exports go to the U.S. Economists in the April 7-11 Reuters poll, taken amid the tariff policy uncertainty, now expect the Canadian economy to grow 1.2% and 1.1% this year and next, respectively, down significantly from 1.7% and 1.6% predicted a month ago. A handful also forecast the economy to fall into recession this year. "We look for the BoC to pause at 2.75% in April as it waits for more clarity around tariff impacts before easing further," said Andrew Kelvin, head of Canadian and global rates strategy at TD Securities. "Trade policies in place are sufficient to subtract about a percentage point from Canadian a slowdown in growth begins to take hold, we expect the BoC to resume easing." Just over 60% of economists, 18 of 29, expected the BoC to keep its overnight rate steady on April 16 at 2.75%. The other 11 predicted a 25 basis point reduction. However, just over half of economists, 15 of 29, predicted two more rate cuts by the end of the third quarter as recession fears rise. That will take the rate to 2.25%, the lower end of the Bank's 2.25% to 3.25% range for a "neutral" rate that neither stimulates nor restricts growth. There was no clear majority among economists where rates would be by year-end. Interest rate futures are currently pricing around 40 basis points of reductions this year. RECESSION RISK HIGH Recent weakness in the labour market and worsening business and consumer sentiment has already raised the alarm and all but one of 15 economists who answered an additional question said the risk of a recession this year was high. The BoC cut its key rate for a seventh consecutive time last month, to 2.75%, marking a total of 225 basis points of reductions since early June. But the recent surge in inflation, which hit an eight-month high of 2.6% in February, far above the mid-point of the BoC's target range of 1%-3%, puts the BoC in a difficult spot. All 16 economists said U.S. tariffs had negatively impacted business sentiment, with over 60% saying it was "very negative." Inflation will average 2.4% and 2.1% in 2025 and 2026, respectively, compared to 2.2% and 2.1% predicted in March. (Other stories from the Reuters global economic poll) Sign in to access your portfolio
Yahoo
24-03-2025
- Business
- Yahoo
Euro zone economy growth accelerates to seven-month high in March, PMI shows
By Indradip Ghosh (Reuters) -Euro zone business growth remained weak in March despite expanding at its fastest pace in seven months supported by an easing in the long-running manufacturing downturn but held back by slower growth in services, a survey showed. The slight improvement in the common currency bloc's business climate could gain more traction over the coming months as plans for a spending splurge in infrastructure and defence, particularly in Germany, raise optimism for a turnaround in Europe's economic fortunes. HCOB's preliminary composite euro zone Purchasing Managers' Index, compiled by S&P Global, rose to 50.4 this month from February's 50.2, its highest since August. It has remained above the 50 mark separating growth from contraction since the start of this year. Growth in activity was still meagre, however, and the index was below a prediction in a Reuters poll for a rise to 50.8. "The March PMI shows cautious further manufacturing output PMI soared ahead of a possible further escalation of the trade war. For the first quarter, this means that a positive GDP growth print is likely after stagnation at the end of last year," said Bert Colijn, chief economist at ING. "Expectations of significant defence and infrastructure investment help optimism about a more sustained recovery – especially in Germany, where the manufacturing PMI soared – but export orders could remain under pressure given the trade war and global sluggish demand." Business activity in Germany, Europe's largest economy, expanded at its sharpest pace in 10 months due to the first increase in manufacturing production in nearly two years. However, activity in the services sector lost momentum. In France, the bloc's second-biggest economy, activity contracted for a seventh consecutive month as business confidence fell to its lowest level since April 2020. Meanwhile in Britain, outside the European Union, the composite PMI hit a six-month high as a pick-up in services growth offset manufacturing's persistent contraction. That will offer some comfort to finance minister Rachel Reeves ahead of a challenging speech on the economy and the public finances this week. EURO ZONE GROWTH IMPROVING An index measuring the bloc's dominant services industry declined to 50.4 from last month's 50.6, below the Reuters poll forecast of 51.0. But a nearly three-year contraction in manufacturing eased and its headline PMI increased to an over two-year high of 48.7 from 47.6 in February. The Reuters poll had predicted it at 48.2. An index measuring factory output that feeds into the composite PMI showed expansion for the first time in two years. It jumped to 50.7 from 48.9, its highest since May 2022. Faced with higher costs, manufacturing firms raised prices charged. Both input and output inflation hit their highest in seven months. However, prices grew at a slower pace in the services sector. In a sign of improving sentiment among businesses, employment generation gathered pace this month. The composite employment index rose to 50.1 from 49.2, above breakeven for the first time in eight months. Sign in to access your portfolio
Zawya
24-03-2025
- Business
- Zawya
Euro zone economy growth accelerates to seven-month high in March, PMI shows
Euro zone business activity grew at its fastest pace in seven months in March, supported by an easing in the long-running manufacturing downturn despite slower growth in services, a survey showed. The improving business climate in the common currency bloc could gain more traction over the coming months as plans for a spending splurge in infrastructure and defence, particularly in Germany, raise optimism for a turnaround in Europe's economic fortunes. HCOB's preliminary composite euro zone Purchasing Managers' Index, compiled by S&P Global, rose to 50.4 this month from February's 50.2, its highest since August. It has remained above the 50 mark separating growth from contraction since the start of this year. Growth in activity was still meagre, however, and the index was below a prediction in a Reuters poll for a rise to 50.8. An index measuring the bloc's dominant services industry declined to 50.4 from last month's 50.6, below the Reuters poll forecast of 51.0. But a near three-year-long contraction in manufacturing eased and its headline PMI increased to an over two-year high of 48.7 from 47.6 in February. The Reuters poll had predicted it at 48.2. An index measuring factory output that feeds into the composite PMI showed expansion for the first time in two years. It jumped to 50.7 from 48.9, its highest since May 2022. "Just in time with the beginning of spring we may see the first green shoots in manufacturing," said Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. "While we should not be carried away by a single data point, it is noteworthy that manufacturers expanded their output for the first time since March 2023." Faced with higher costs, manufacturing firms raised prices charged. Both input and output inflation hit their highest in seven months. However, prices grew at a slower pace in the services sector. In a sign of improving sentiment among businesses, employment generation gathered pace this month. The composite employment index rose to 50.1 from 49.2, above breakeven for the first time in eight months. (Reporting by Indradip Ghosh; Editing by Toby Chopra)
Yahoo
14-03-2025
- Business
- Yahoo
Hopes for euro zone, Germany growth rising even before debt deal news: Reuters poll
By Indradip Ghosh BENGALURU - Optimism was already building among economists on German and euro zone growth in a Reuters poll taken just before key political parties in Germany agreed a historic deal on debt, suggesting bigger revisions to forecasts in coming days. Chancellor-in-waiting Friedrich Merz reached an agreement with the Greens on Friday on a plan to dramatically increase state borrowing to fund defence and infrastructure investment, fuelling hopes for a turnaround in Europe's economic fortunes. The proposals by Merz's conservatives and the Social Democrats mark one of the biggest political changes in Germany since the fall of the Berlin Wall in 1989. Even before Friday's news, economists in the March 10-14 Reuters poll broke a long spell of downgrades to 2025 euro zone growth predictions, leaving the forecast steady at 0.9%. They also upgraded the 2026 growth view for the first time in nearly a year, to 1.3% from 1.2% seen last month. German economic growth was expected to expand 0.2% this year and pick up to 1.1% next year, compared with 1.0% expected in a January survey. Those forecasts are now likely to mark a line in the sand, although most respondents said they were wary of over-optimism until it became clear that change was really coming. "It is now more or less a given that we're going to get the deal, and when we talked two days ago there was still a big chance of failure," said Carsten Brzeski, global head of macro at ING, who expects German growth to pick up in the second half of the year. "I would expect an additional maybe 0.5pp of growth in Germany this year. For the euro zone, it would mean small upward revisions of 0.1pp to 0.2pp." Several economists had already made more substantial upgrades to their 2026 growth forecasts. But most say an escalating trade war led by U.S. President Donald Trump, and his constant flip-flops on tariffs, still pose a considerable risk to the growth outlook. Fabio Balboni, senior European economist at HSBC, said "the potential for fiscal support to have a meaningful impact on near-term growth is relatively limited, while the potential for tariffs to hurt growth is very large." Trump on Thursday threatened to slap a 200% tariff on European wine and spirits after the European Union said it would levy tariffs on American goods next month. That in turn was a reaction to Trump's 25% tariffs on steel and aluminum imports, which took effect on Wednesday. ECB IN DIFFICULT SPOT All of that complicates the outlook for the European Central Bank, which cut its key deposit rate for the sixth time since June to 2.50% last week. ECB President Christine Lagarde declined to repeat her past guidance that the downward direction of rates was clear and warned of "phenomenal uncertainty". Inflation will remain above the ECB's 2% target at least until 2026, poll medians showed. Nearly 55% of economists, 40 of 73, expected only two more 25 basis point reductions this year - most likely in April and then another sometime in Q3, compared to back-to-back rate cuts until at least July predicted last month. Nearly 40% of economists, 23 of 62, expected the ECB to pause in April. "I would say April is pretty much up in the air and reasons for a pause have actually grown quite a bit," said Bas van Geffen, senior macro strategist at Rabobank. "If the economy stays strong and inflation stays higher than expected, because of tariffs and this new fiscal stimulus, there is a risk the window for cuts is already closing." (Other stories from the Reuters global economic poll) Sign in to access your portfolio
