Top rice supplier India bans some exports

MUMBAI, India - The world's biggest rice exporter India has banned some overseas sales of the grain "with immediate effect", the government said, in a move that could drive international prices even higher.

Rice is a major world food staple and prices on international markets have soared to decade highs as the world grappled with the Covid pandemic, the war in Ukraine and the impact of the El Nino weather phenomenon on production levels.

India would ban exports of non-basmati white rice -- which accounts for around a quarter of its total -- the consumer affairs and food ministry said.

The move would "ensure adequate availability" and "allay the rise in prices in the domestic market", it said in a statement late Thursday.

India accounts for more than 40 percent of all global rice shipments, so the decision could "risk exacerbating food insecurity in countries highly dependent on rice imports", data analytics firm Gro Intelligence said in a note.

Countries expected to be hit by the ban include African nations, Turkey, Syria, and Pakistan -- all of them already struggling with high food-price inflation -- the firm added.

Global demand saw Indian exports of non-basmati white rice jump 35 percent year-on-year in the second quarter, the ministry said.

The increase came even after the government banned broken rice shipments and imposed a 20 percent export tax on white rice in September.

India exported 10.3 million tons of non-basmati white rice last year and Rabobank senior analyst Oscar Tjakra said alternative suppliers did not have spare capacity to fill the gap.

"Typically the major exporters are Thailand, Vietnam, and to some extent Pakistan and the US," he told AFP. "They won't have enough supply of rice to replace these."

Moscow's cancellation of the Black Sea grain deal that protected Ukrainian exports has already led to wheat prices creeping up, he pointed out.

"Obviously this will add into inflation around the world because rice can be used as a substitute for wheat."

Rice prices in India rose 14-15 percent in the year to March and the government "clearly viewed these as red lines from a domestic food security and inflation point of view", ratings agency Crisil's research director Pushan Sharma said in a note.

India had already curbed exports of wheat and sugar last year to rein in prices.

Agence France-Presse

Fed mulls bigger rate hikes to cool US economy

WASHINGTON - The United States is prepared to speed up interest rate hikes –- and could raise them higher than anticipated -- if needed to cool inflation and a strong jobs market, Federal Reserve Chair Jerome Powell said.

An "unseasonably warm" January across much of the country was likely behind the robust employment, consumer spending, manufacturing and inflation figures, which pointed to a partial reversal of earlier softening trends, Powell told the Senate Banking Committee. 

"If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," he said.

He added that the "ultimate level of interest rates" is likely to be higher than previously anticipated as well.

Stocks fell sharply following Powell's comments, with the Dow Jones Industrial Average closing 1.7 percent lower.

The dollar strengthened sharply against the euro and other major currencies, while the two-year US Treasury yield surged above five percent. 

Chance of bigger hike 

The US central bank has already raised its benchmark lending rate 8 times since early last year, as it contends with inflation that remains stubbornly above its long-term target of two percent.

It raised rates last month by a quarter percentage point to 4.50-4.75 percent, its highest level since the global financial crisis.

Powell's comments raise the likelihood of the Fed lifting rates by 50 basis points at its next meeting this month, Evercore ISI economists Krishna Guha and Peter Williams wrote in a note to investors.

"We must accept that this option appears to be somewhat more live than we had previously believed," they said, though adding that a quarter-point hike was still the more likely option.

Markets are now roughly evenly split on the chances of a larger half-point rate hike, said Joe Manimbo, senior market analyst at Convera.

Despite its forceful moves, the Fed's favored inflation measure, the personal consumption expenditures (PCE) price index, rose slightly to reach an annual rate of 5.4 percent in January.

Core PCE inflation, which excludes volatile energy and food prices, also rose 4.7 percent.

At the same time, the labor market remains "extremely tight," with close to two jobs available for every one unemployed person in December, Powell said.

US job creation surged in January, with employers creating more half a million new jobs and driving the unemployment rate to its lowest level since the 1960s.

A strong labor market supports incomes and, in turn, demand.

"To restore price stability, we will need to see lower inflation in this sector, and there will very likely be some softening in labor market conditions," Powell said.

Debt ceiling pressure

At Tuesday's hearing, Powell also faced questions about ongoing negotiations between the Biden administration and Republicans in Congress over raising the debt ceiling.

"Whatever else may happen Congress really needs to raise the debt ceiling," Powell said, adding to calls for the two sides to come to an agreement.

The United States hit its $31.4 trillion borrowing cap in January, kicking off frantic talks between Congress and the White House to raise the limit and allow the US to meet pre-existing spending commitments. 

Republicans in Congress have asked for spending cuts in exchange for their support, while the Biden administration has said it wants to separate any talks over the upcoming budget from the debt limit vote.

The nonpartisan Congressional Budget Office warned last month that the country risks defaulting on its debt as soon as July if an agreement is not reached. 

Powell's appearance comes shortly after the US central bank released a semiannual report on monetary policy, which pointed to a tight labor market, robust job gains, historically low unemployment and elevated nominal wage growth.

"The process of getting inflation back down to two percent has a long way to go and is likely to be bumpy," Powell said. "We will stay the course until the job is done."

Agence France-Presse

Asian markets rise again on recovery hope as inflation data looms

HONG KONG - Asian equities pushed higher Wednesday as investors were buoyed by China's reopening and optimism that key data due this week will signal a further slowdown in US inflation.

Traders tracked a Wall Street advance as they brushed off fresh warnings that Federal Reserve rates would continue to rise and a World Bank decision to slash its global growth forecast.

After a stumble Tuesday, regional markets resumed the upward push that has characterized the start of the year thanks to China's emergence from nearly three years of zero-COVID isolation.

The reopening, easing of Beijing's tech crackdown and moves to help the property sector have raised hopes for the world's number-two economy, a crucial driver of world growth.

SPI Asset Management's Stephen Innes said: "Despite a solid start to the year, there should be a lot more upside to China's stocks, with earnings upgrades to drive further outperformance.

"Although we are not pitching a tent in that camp just yet, many investors are starting to believe China's reopening could be faster than expected on pent-up demand, a robust economic rebound and fewer supply constraints."

In early trade, Hong Kong again led the gains by piling on more than one percent, having already added about eight percent in 2023. Shanghai, Tokyo, Sydney, Seoul and Singapore were also in the ascendancy, though there were small losses in Wellington, Taipei and Manila.

Focus this week is on Thursday's US consumer price index, which is expected to show that price gains eased further in December.

But while that could possibly allow the Federal Reserve to take a lighter approach to its monetary tightening campaign, policymakers continue to push back against any pivot away from rate hikes.

Markets were battered last year by fears that almost a year of hikes will tip the economy into recession.

Bank boss Jerome Powell said that "restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy".

Meanwhile, Fed governor Michelle Bowman said that while inflation was coming down, "we have a lot more work to do" and that once rates had peaked they would have to stay there for some time. 

She added that "unemployment has remained low as we have tightened monetary policy and made progress in lowering inflation".

"I take this as a hopeful sign that we can succeed in lowering inflation without a significant economic downturn," she said.

And JP Morgan Chase CEO Jamie Dimon said borrowing costs could actually go higher than the five percent priced in by markets, suggesting they could hit six percent.

There was little reaction to the World Bank slashing its 2023 global growth forecast by about half and a warning that the economy was "perilously close" to recession owing to high inflation, rising interest rates and Russia's invasion of Ukraine.

Economists have warned of a slump in the world economy as countries battle soaring costs and central banks simultaneously hike interest rates to cool demand amid ongoing disruptions from the war in Ukraine.

The World Bank's latest forecast points to a "sharp, long-lasting slowdown", with growth pegged at 1.7 percent this year, roughly half the pace it predicted in June, according to its Global Economic Prospects report.

Key figures around 10:30 a.m. in Manila 

Tokyo - Nikkei 225: UP 1.1 percent at 26,457.56 (break)

Hong Kong - Hang Seng Index: 1.5 percent at 21,642.27

Shanghai - Composite: UP 0.3 percent at 3,177.88

Dollar/yen: UP at 132.44 yen from 132.21 yen on Tuesday

Euro/dollar: DOWN at $1.0733 from $1.0739

Pound/dollar: UP at $1.2156 from $1.2153

Euro/pound: DOWN at 88.31 pence from 88.34 pence

West Texas Intermediate: DOWN 0.8 percent at $74.54 a barrel

Brent North Sea crude: DOWN 0.7 percent at $79.51 a barrel

New York - Dow: UP 0.6 percent at 33,704.10 (close)

London - FTSE 100: DOWN 0.4 percent at 7,694.49 (close)

Agence France-Presse

Brazil's central bank holds 13.75 percent interest rate amid 'high' inflation

BRASILIA - Brazil's central bank held its benchmark interest rate at 13.75 percent, remarking that inflation "remains high" despite receding for three months in a row, just four days before a presidential election.

It is the second meeting in a row that the bank's monetary policy committee left the Selic interest rate unchanged after putting the brakes on 12 straight increases.

In a statement, the monetary committee said it remained "vigilant" and that the high interest rate level would be maintained "as long as it takes to control inflation."

The committee did not rule out a "resumption of the cycle of increases" if prices do not lower "as expected." For now, "inflation remains high" despite dropping for several months.

The decision comes as the country braces for a divisive second-round presidential election between far-right President Jair Bolsonaro and leftist former leader Luiz Inacio Lula da Silva on Sunday.

The interest rate decision was in line with market forecasts, which were reflected in a survey of more than a hundred consultants and financial institutions by the Valor economic newspaper.

The benchmark interest rate has remained at the same level since August, when the committee applied the last increase of half a percentage point.

Haunted by a history of hyperinflation, Brazil was among the first countries to start raising interest rates after the monetary easing of the coronavirus pandemic when the Selic stood at a record low of two percent.

Since March 2021, the central bank had rapidly raised its key rate from an all-time low of two percent, including three whopping hikes of 1.5 percentage points from October 2021 to February 2022.

The long period of high inflation in Latin America's largest economy has been fueled by rising global food and oil prices spurred on by the war between Russia and Ukraine.

Slowing inflation 

This trend has slowed in recent months. 

The consumer price index was negative in July (-0.68 percent), August (-0.36 percent) and September (-0.29 percent). 

Annual inflation stood at 7.17 percent in September, prior to the first round of the presidential elections on October 2.

The successive declines reduced market forecasts, and inflation is now expected to lower to 5.60 percent by the end of the year, almost half of what was initially projected, according to a survey released by the central bank (BCB) this week. 

Bolsonaro has highlighted the "unprecedented deflation" during his campaign.

He is currently polling 45 percent to Lula's 49 percent ahead of the second round, according to Datafolha polling data published Friday.

Economists warn, however, that the negative trend is not yet established and that price increases are still a latent threat.

By keeping the Selic at the current high level, the monetary committee hopes that 2023 inflation will lower to the 3.25 percent target set by the central bank.

Only then can they begin cutting rates, analysts say.

Analysts have warned about the impact of high interest rates on GDP, which is projected to grow 2.76 percent by the end of this year, far from the stagnation that was expected in early 2022, according to the BCB Focus survey.

Brazil is easing up on its interest rate as the US Federal Reserve and European Central Bank have shifted into full-on tightening to curb inflation.

Agence France-Presse

European Central Bank again eyes jumbo rate hike to 'tame inflation beast'

BRUSSELS - The European Central Bank is expected to set aside recession worries and deliver another jumbo interest rate hike this week to cool inflation, as Russia's war on Ukraine sends energy prices soaring.

Inflation in the 19-nation eurozone climbed to an all-time high of nearly 10 percent in September, five times the ECB's target of two percent.

The ECB's governing council last month raised its key interest rates by an unprecedented 75 basis points, and many observers expect it to repeat the move at Thursday's meeting.

Households and businesses are bracing for a grim winter as Russia continues to squeeze gas supplies to Europe, raising fears of energy shortages and high electricity and heating bills.

The war has also pushed up food costs, while pandemic-era supply chain snarls combined with higher manufacturing costs have added to price pressures on a range of goods.

"Those who thought inflation was dead now know better," said Joachim Nagel, the head of Germany's Bundesbank central bank.

"Now the beast has woken up from its slumber... it's up to monetary policymakers to tame it again," he recently told students at Harvard University.

Like other central banks, the ECB is using a series of rate hikes to bring inflation under control -- at the risk of slowing economic activity to such an extent that it triggers a downturn.

"The 75 basis point rate hike looks like a done deal," said ING economist Carsten Brzeski.

"The ECB has turned a blind eye on recession risks," he added.

Analysts from Capital Economics said they saw the ECB going even bigger, predicting a 100 basis-point jump followed by smaller hikes over the coming months.

In the United States, where inflation is running at a 40-year high, the Federal Reserve recently said there was no "painless" way to combat runaway prices.

A slowdown of economic growth and the US job market will be "required" to bring down inflation, said the Fed, which has hiked rates faster and more aggressively than the ECB.

ECB president Christine Lagarde has warned that the euro area was also facing "a significant slowdown".

If Russia completely cuts off gas flows to Europe, the eurozone economy could shrink by nearly one percent in 2023, ECB vice-president Luis de Guindos added.

It's a scenario that has become more likely after Russia in late August halted gas flows through the crucial Nord Stream 1 pipeline to Europe's biggest economy, Germany.

The German economy, whose energy-hungry industries relied heavily on Russian gas before the war, is now forecast to shrink by 0.4 percent in 2023.

Chancellor Olaf Scholz has unveiled a 200-billion-euro ($197 billion) energy fund to help citizens cope with price shocks, irking European neighbors who can't afford the same fiscal largesse.

With other eurozone countries such as France and Spain also rolling out support measures, the ECB has warned governments not to fall into the trap of spending so much that they boost inflation.

Germany's hawkish Finance Minister Christian Lindner agreed, saying last week that fiscal policy "must not counter the measures of central banks" by strengthening demand.

The ECB is also expected to use this week's meeting to discuss bringing other monetary policy levers in line with its inflation-busting efforts.

Policymakers are likely to consider changes to the super cheap, long-term loans (TLTROs) offered to banks in recent years to help the eurozone through several crises -- sometimes at negative rates.

As a consequence of the ECB's rapid rate hikes since July, lenders can now make a profit by parking their excess TLTRO cash at the central bank and pocketing the new, higher deposit rate -- leaving the ECB looking for ways to incentivize early repayment of the loans.

The ECB may also ponder how best to shrink its multi-trillion-euro balance sheet, after years of hoovering up government and corporate bonds to drive up stubbornly low inflation.

But given the uncertain outlook and the risk of rattling financial markets, analysts say the start of any "quantitative tightening" is some way off.

Agence France-Presse

Stocks drop and dollar rises as inflation, rate fears return

HONG KONG - Equities tumbled Thursday, tracking a sell-off on Wall Street, while the dollar jumped further as surging inflation, interest rate hikes and recession fears returned to the fore.

Traders in Europe were keeping tabs on Westminster a day after Prime Minister Liz Truss's government was plunged into a fresh crisis and facing collapse following the resignation of home secretary Suella Braverman.

That came days after the sacking of finance minister Kwasi Kwarteng and has left Truss's premiership on a knife-edge.

The positive start to the week, helped by forecast-beating earnings and a major UK government policy U-turn, gave way to the downbeat mood that has characterized markets all year as traders contemplated an extended period of uncertainty.

News that UK inflation bounced back above 10 percent in September highlighted the struggle central banks have in bringing prices down, despite lifting borrowing costs in recent months.

That followed a similarly glum reading out of New Zealand earlier in the week and helped push up government bond yields around the world, indicating higher interest rates.

The unease on trading floors, and concerns that prices are showing no sign of easing, also sent investors back into the safety of the dollar, adding more inflationary pressure outside the United States and dragging on stock markets.

"As is often the case, rising US yields and the strong US dollar are the sledgehammers pounding global equities lower," said SPI Asset Management's Stephen Innes. 

After Wall Street's drop, markets across Asia were deep in the red, with selling also fuelled by concerns about the Chinese economy as Covid cases spike in the country and leaders stick to lockdown strategies.

A decision to delay the release of third-quarter growth data this week added to the unease among investors.

Hong Kong led losses, shedding almost three percent at one point, while Tokyo, Sydney, Seoul, Wellington, Taipei, Shanghai, Mumbai and Manila were also in the red.

There was a brief rally in the afternoon sparked by a report that China was considering easing quarantine rules for people coming into the country, though traders were unable to maintain momentum.

London's FTSE 100 fell in the morning. Frankfurt was also down but Paris edged up.

The losses wiped out most of the gains enjoyed at the start of the week, even as positive earnings reports came in from Netflix and top Wall Street banks, with Ellen Hazen of F.L.Putnam Investment Management warning worse could be yet to come.

"As we look at third-quarter results, we think there are going to be more misses than the market is currently expecting," she told Bloomberg Radio.

"If you look at GDP for this year, it keeps getting revised downward and it's really hard for companies to keep growing their earnings in the face of that."

On forex markets the dollar briefly broke to as high as 150.08 yen for the first time since 1990, putting pressure on Japanese authorities who said saying they were keeping a close watch on the market and were ready to step in to support the beleaguered currency.

But analysts warned the yen would continue to slide as long as the Bank of Japan refuses to tighten monetary policy at the same time as the Federal Reserve presses on with its sharp rate hikes.

The pound was also back under pressure, having bounced Monday after Britain's new finance minister Jeremy Hunt reversed virtually all of Truss's debt-fuelled, tax-cutting mini-budget that hammered financial markets.

Sterling was hovering just above $1.12 -- against more than $1.14 Tuesday -- owing to the chaos in Westminster, with many of the prime minister's own party calling for her to stand down, while there is speculation that more members of the cabinet could walk.

Oil prices extended Wednesday's rally that came in reaction to a drop in US petroleum stockpiles, and despite President Joe Biden's decision to release 15 million barrels from US strategic reserves.

The crude was the last batch to be released from the 180 barrels pledged by Biden earlier this year, aimed at bringing costs down.

But Innes added: "Markets will mostly ignore further releases from the Strategic Petroleum Reserves -- prices are elevated because of the medium- and longer-term gap between supply and demand resulting from years of oil industry swoon and the resulting low capital expenditure.

"So, the impact of additional... releases will likely have diminishing returns with (reserves) at a multi-decade low."

Key figures around 0810 GMT 

Tokyo - Nikkei 225: DOWN 0.9 percent at 27,006.96 (close)

Hong Kong - Hang Seng Index: DOWN 1.4 percent at 16,280.22 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,035.05 (close)

London - FTSE 100: DOWN 0.2 percent at 6,914.36

Pound/dollar: DOWN at $1.1210 from $1.1219 on Wednesday

Dollar/yen: UP at 149.90 yen from 149.88 yen

Euro/dollar: UP at $0.9794 from $0.9778 

Euro/pound: UP at 87.18 pence from 87.10 pence

West Texas Intermediate: UP 1.5 percent at $86.86 per barrel

Brent North Sea crude: UP 1.2 percent at $93.52 per barrel

New York - Dow: DOWN 0.3 percent at 30,423.81 (close)

Agence France-Presse

New Zealand hikes interest rates to seven-year high

WELLINGTON - New Zealand's central bank on Wednesday delivered its eighth consecutive interest rate hike, sending the country's borrowing costs to their highest level in more than seven years, as it joins a global battle against surging inflation.

The Reserve Bank of New Zealand stayed true to its course of the past 18 months, unveiling another 50 basis point increase in its key rate to 3.5 percent -- a level not seen since May 2015 -- and warned of more rises in a bid to stymie price rises.

The move came as its counterparts in the United States, Europe and elsewhere ramp up rates to curtail decades-high inflation, fuelling concerns they could trigger a prolonged global downturn.

The central bank warned inflation could climb beyond the current 7.3 percent rate, which is already a 32-year high.

Wednesday's announcement came on the same day New Zealand's government unveiled a better financial position than expected in its accounts to the end of June.

A rise in tax revenue and slower growth in spending resulted in a deficit of NZ$9.7 billion (US$5.6 billion), considerably less than the forecast deficit of NZ$19 billion.

Agence France-Presse

ECB poised for big rate hike in face of record inflation

FRANKFURT, Germany - After raising interest rates for the first time in over a decade at their last meeting, European Central Bank policymakers are poised to deliver another bumper hike on Thursday in a show of determination to tame soaring inflation.

Steep increases in the price of energy in the wake of the Russian invasion of Ukraine have heaped pressure on households and sent the pace of consumer price rises to new highs. 

Eurozone inflation hit 9.1 percent in August, a record in the history of the single currency and well above the two-percent rate targeted by the ECB.

Meanwhile on Monday, the euro fell to a 20-year low against the dollar Monday, dropping below $0.99 as fears of a eurozone recession grew.

The ECB was unlikely to raise its rates "with the explicit goal of strengthening the currency", said Frederik Ducrozet, head of macroeconomic research at Pictet, but the euro's struggles against the greenback could "have some bearing on its decision-making".

The Frankfurt-based institution is playing catch-up with other central banks in the United States and Britain that started raising rates harder and faster in response to inflation.

The "only question" for the ECB's meeting this week was "whether it will be a 50 or 75 basis point hike," said Carsten Brzeski, head of macro at the ING bank.

Speaking at the annual Jackson Hole central banking symposium at the end of August, ECB board member Isabel Schnabel said the central bank needed to show "determination" to tame price rises.

Under this approach, the central bank would respond "more forcefully to the current bout of inflation, even at the risk of lower growth and higher unemployment", she said.

In her speech in the US, Schnabel stressed the need for the people to "trust" that the ECB will restore their purchasing power.

The ECB's 25-member governing council surprised with a 50-basis-point hike at its last meeting in July, bringing an end to eight years of negative interest rates in one fell swoop.

So-called forward guidance issued by the ECB, which limited its scope for action, has been ditched. Policymakers would now take their decisions "meeting-by-meeting", the ECB President Christine Lagarde announced in July.

With that, the door has been opened for the ECB to follow in the footsteps of the US Federal Reserve and raise rates by a 75 basis points.

Following August's red-hot inflation numbers, the influential head of the German central bank, Joachim Nagel, said the ECB needed a "strong rise in interest rates in September".

"Further interest rate steps are to be expected in the following months," the Bundesbank president predicted.

But the ECB's chief economist, Philip Lane, has counselled colleagues to follow a "steady pace" of interest rate rises.

Hiking at a rate that was "neither too slow nor too fast" was important due to the "high uncertainty" around the economy and the future path of inflation.

Alongside its policy decisions, the ECB will also share an updated set of economic forecasts for the eurozone.

In its last estimates, published in June, the ECB said it expected inflation to sit at 6.8 percent in 2022 before falling to 3.5 percent next year, while growth would slow from 2.8 percent this year to 2.1 in 2023.

But a more severe energy shock as Russia reduces gas deliveries to Europe could push the eurozone into a "deeper winter recession" and hold growth to zero percent in 2023, said Ducrozet.

At the same time, the soaring cost of energy would drive inflation close to double digits by the end of the year, he predicted.

The ECB had "no choice but to commit to faster monetary tightening as long as inflation keeps rising" even as a recession loomed, said Ducrozet. 

Agence France-Presse

Global stocks fall as Euro hits new 20-year low

NEW YORK, United States - Global stocks were down Tuesday as the euro dove to a new two-decade low against the dollar and traders waited nervously for news on the next US interest rate hikes.

The single currency tumbled to $0.9901, but later clawed back losses as the greenback was hit by poor US economic data.

The dollar had strengthened this week against other currencies ahead of a speech Friday by US Federal Reserve chief Jerome Powell, as markets speculate that the central bank will continue tighten its monetary policy.

Higher interest rates boost the American currency as they make dollar-denominated debt more attractive to investors.

But the euro also has been weighed down by a gloomy outlook for the eurozone economy as Russia's war in Ukraine has sent energy prices soaring.

The unit plunged below parity with the dollar Monday on recession fears to plumb the lowest levels since 2002, when it first came into physical circulation.

In the latest blow, S&P Global's closely watched monthly composite purchasing managers' index (PMI) showed that eurozone economic activity fell for the second month in a row in August.

'Investors are bracing' 

Wall Street indices ended mostly lower, with the Dow Jones falling 0.5 percent.

With the Jackson Hole central banking symposium this week, the focus is on what Fed chief Powell says about plans to tackle high prices, with many fearing officials could send the economy into recession.

"I think that investors are bracing for some hawkish commentary from Fed chair Powell this coming week," said Jack Ablin of Cresset Capital.

European equities and Asian markets also slid amid stubborn worries about the Fed's movements.

US natural gas prices meanwhile hit a fresh 14-year high on Tuesday at $10.028.

But across the Atlantic, European natural gas prices fell, although they remain elevated on fears of a halt to Russia's gas deliveries. The Dutch TTF Gas Futures contract stood at 268.45 euros down from Monday.

Gas had spiked to record peaks in March after key producer Russia launched its invasion of neighboring Ukraine.

That has sparked surging domestic energy bills, fueling decades-high inflation that has prompted tighter monetary policy around the world.

Moscow's maneuvers have hit the single currency hard because the bloc relies heavily on imported Russian gas, said Societe Generale analyst Kit Juckes. 

Fears increased after Russia's Gazprom said Friday the Nord Stream pipeline would be closed for maintenance at the end of the month, cutting Europe's crucial gas deliveries.

"The euro's problem is... the threat from continued squeezing of gas supplies and the cost of replacing Russian gas," Juckes said.

Oil prices -- which have fallen for weeks as recession worries hit demand expectations -- rebounded after Saudi Arabia suggested OPEC and other major producers could cut output citing "volatility" in crude markets.

Key figures at around 2030 GMT

New York - Dow: DOWN 0.5 percent at 32,909.59 points (close)

New York - S&P 500: DOWN 0.2 percent at 4,128.73 (close)

New York - Nasdaq: UNCH at 12,381.30 (close)

EURO STOXX 50: DOWN 0.2 percent at 3,652.52 (close)

London - FTSE 100: DOWN 0.6 percent at 7,488.11 (close)

Frankfurt - DAX: DOWN 0.3 percent at 13,194.23 (close)

Paris - CAC 40: DOWN 0.3 percent at 6,362.02 (close)

Tokyo - Nikkei 225: DOWN 1.2 percent at 28,452.75 (close)

Hong Kong - Hang Seng Index: DOWN 0.8 percent at 19,503.25 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,276.22 (close)

Euro/dollar: UP at $0.9973 from $0.9943 Monday

Pound/dollar: UP at $1.1835 from $1.1767

Euro/pound DOWN at 84.25 pence from 84.98 pence

Dollar/yen: DOWN at 136.7710 yen from 137.48 yen

West Texas Intermediate: UP 3.7 percent at $93.74 per barrel

Brent North Sea crude: UP 3.9 percent at $100.22

Agence France-Presse

Asian markets drop as Fed minutes cause fresh rate hike woe

HONG KONG - Markets dropped in Asia on Thursday following a sell-off in New York spurred by minutes from the Federal Reserve indicating officials intended to keep lifting interest rates to tackle decades-high inflation.

While policymakers said they would eventually have to start tempering their tightening pace, they said they would keep borrowing costs elevated "for some time", though admitted there was a risk of going too far and damaging the economy.

The minutes dampened hopes that after a period of quick, sharp increases this year, the bank could possibly begin lowering them in 2023 once inflation was coming down.

Bets on a more dovish approach in the new year had been boosted by data showing inflation came down quicker in July than expected. That helped drive a rally in equities from their June lows and weighed on the dollar.

But the realization that policy would likely stay restrictive undermined the sense of optimism, pushing all three indexes on Wall Street down Wednesday with the tech-heavy Nasdaq taking the biggest hit, while the dollar rallied and extended gains in Asia. 

And news that UK inflation spiked above 10 percent for the first time since 1982 added to the downbeat mood.

Asian traders appeared increasingly worried that the Fed will slip up as it tries to bring down inflation without causing another recession in the world's biggest economy.

Tokyo, Hong Kong, Sydney, Shanghai, Seoul, Taipei, Mumbai, Wellington and Bangkok were down, though Singapore, Manila and Jakarta edged up. 

London fell in the morning while Frankfurt and Paris rose.

"The key takeaway from these minutes would appear to show that there is little inclination on the part of anyone on the (policy board) to even look at the possibility of rate cuts," said Michael Hewson at CMC Markets.

He added that they "chime with more recent comments from Fed officials which suggest that we could see at least another 1.5% in rate rises by year end".

And JP Morgan Asset Management's Meera Pandit told Bloomberg Television: "We do still anticipate there's going to be a lot of interest-rate volatility in the back half of the year, especially once markets start to perhaps acknowledge the fact that we might not necessarily see cuts in 2023 that are being priced in."

Sentiment was also dragged by continuing worries about China's economy, with Goldman Sachs and Nomura slashing their growth outlooks again following another weak round of data and as the country reels from Covid-19 lockdowns.

The announcements came after Beijing on Monday cut interest rates in a surprise move, before Premier Li Keqiang called on six key provinces -- accounting for about 40 percent of the economy -- to bolster pro-growth policies.

But Nomura economists said that while officials will likely unveil further measures "rolling out a comprehensive stimulus package is of low probability in a year of government reshuffle, while the need for maintaining zero-Covid makes conventional stimulus measures much less effective". 

Agence France-Presse

UK inflation jumps to new 40-year high

LONDON - British inflation surged to a new 40-year high in July on rising food prices, official data showed Wednesday, adding to a cost-of-living crisis as the country faces the prospect of recession.

The Consumer Prices Index (CPI) accelerated to 10.1 percent last month from 9.4 percent in June, the Office of National Statistics said.

The Bank of England warned earlier this month that inflation will climb to just over 13 percent this year, the highest level since 1980.

It also projected that the country would enter a recession that would last until late 2023.

The central bank raised its key rate by 0.50 percentage points to 1.75 percent at its last policy meeting, the biggest hike since 1995.

The BoE move mirrors aggressive monetary policy from the US Federal Reserve and the European Central Bank last month, as the world races to cool red-hot inflation that has been fuelled by Russia's invasion of Ukraine.

The UK's statistics office said the "largest movements" in the CPI in July came from food.

Bread and cereals were the largest contributors to the rise in food prices, followed by milk, cheese and eggs.

Agence France-Presse

JPMorgan Chase reports lower profits, gives cautious economic outlook

NEW YORK, United States - JPMorgan Chase reported a drop in second-quarter profits and warned that a weakening global economic outlook prompted the firm to set aside additional funds to cover potential bad loans.

Executives sketched out a complex economic picture, with US households still relatively well off in terms of savings, a strong job market and robust consumer spending.

But headwinds -- including high inflation, geopolitical uncertainty and fast-changing Federal Reserve policy to sharply curtail liquidity and raise interest rates -- "are very likely to have negative consequences on the global economy sometime down the road," said Chief Executive Jamie Dimon in a statement.

While consumers are "in very good shape," there are "a serious set of issues" that threaten the outlook, Dimon told reporters on a conference call.

These include the worry that Russia will cut off Germany's natural gas supply and the possibility the Federal Reserve's aggressive plan may not be sufficient to rein in inflation.

"The markets will be volatile," Dimon predicted. "You can't have all these kind of things going on and not have volatile markets."

Global equities have been under pressure throughout 2022 as economists increasingly highlight rising recession risks, although some believe any downturn would be relatively mild.

The big US bank posted earnings of $8.6 billion for the second quarter, down 28 percent from the same three months of last year, in results that missed analyst expectations.

Revenues were $30.7 billion, up one percent.

The bank said it added $428 million in credit reserves due to a "modest deterioration in the economic outlook." In the year-ago period, JPMorgan's profits were boosted by a $3 billion release in reserves.

Dimon said even in the case of a recession, JPMorgan would need to hold "a lot less" in reserves compared with the $15 billion it set aside early in Covid-19. 

The bank experienced $657 million in charge-offs for bad loans in the second quarter, up only modestly from the level in the previous quarter.

JPMorgan enjoyed a boost from higher net interest income following Fed interest rate increases. But the bank also incurred higher expenses on salaries, technology and marketing.

The bank temporarily suspended share buybacks to meet new federal stress test requirements for managing risk assets, Dimon said.

Consumers still spending 

The results came as the Labor Department this week reported another large spike in wholesale and consumer prices, which are the heart of investor fears about the consumer-driven US economy.

But JPMorgan Chief Financial Officer Jeremy Barnum said "there's essentially no evidence" at this point of a drop-off in consumption.

The bank's credit card data confirms that consumers are spending more on food and gasoline, but that they are still also spending on travel and dining.

"That indicates to us that consumers still don't feel so pinched by inflation that they're cutting back on discretionary spending, and that's a relatively positive sign," Barnum said.

Persistently high inflation has also raised fears that the Fed will adopt an even tougher line on monetary policy after the central bank announced a 0.75-percentage-point hike, its biggest since 1994.

The latest inflation readings have prompted talk of a potential for full point rate increase at the policy meeting later this month -- one that Fed Governor Christopher Waller said Thursday he could support if coming data show no signs of a slowdown.

Dimon said there is evidence of the hit from the Fed shift, but the impacts could worsen if the US central bank is unable to slow the economy with a "soft landing," Dimon said.

JPMorgan shares finished down 3.5 percent to $108.00.

The suspension of share buybacks is "spooking" investors, said Briefing.com, calling it "a signal that management feels the need to be cautious with its money."

Agence France-Presse

Central banks must act quickly on inflation, warns BIS

ZURICH, Switzerland - Central banks must not let inflation become entrenched, with the threat of stagflation looming over the global economy, the Bank for International Settlements warned Sunday in its annual economic report.

BIS, considered the central bank of central banks, said institutions will have to move swiftly to ensure a return to low and stable inflation, while limiting the impact on growth.

"The key for central banks is to act quickly and decisively before inflation becomes entrenched," said BIS general manager Agustin Carstens.

"If it does, the costs of bringing it back under control will be higher. The longer-term benefits of preserving stability for households and businesses outweigh any short-term costs."

BIS's flagship report said that in restoring low, stable inflation, central banks should seek to minimize the hit to economic activity, in turn safeguarding financial stability.

BIS said engineering a so-called soft landing had historically been difficult, and the starting conditions now were making the task all the more challenging.

"It would be more desirable if we could have a soft landing because that would mean that the tightening of monetary policy could be more subdued," Carstens told a press conference.

"But even if this is not the case, definitely the priority should be to combat inflation," to prevent the world economy from slumping. 

STAGFLATION DANGERS

After the shock of the Covid-19 pandemic, central banks initially saw the return of inflation as temporary as the economy picked up again.

But the rise in prices has sharply accelerated since Russia's invasion of Ukraine in February.

BIS said the global economy risked entering a new era of high inflation.

The dangers of stagflation -- stagnant growth coupled with rising prices -- loom large, as a combination of lingering disruptions from the pandemic, the war in Ukraine, soaring commodity prices and financial vulnerabilities cloud the outlook, it added.

Policymakers must press ahead with reforms to support long-term growth and lay the groundwork for more normal fiscal and monetary policy settings, BIS said.

While the European Central Bank plans to raise interest rates in July and then again September, the US Federal Reserve on Wednesday carried out its largest rate hike since 1994.

The Fed announced a 0.75-percentage-point rise and said it is prepared to do so again next month in an all-out battle to drive down surging inflation.

1970s COMPARISON

Established in Basel in 1930, the BIS is owned by 62 central banks, representing countries that account for about 95 percent of global gross domestic product (GDP).

In its annual report, the BIS looked at the stagflation of the 1970s, when the oil shocks of 1973 and 1979 caused inflation to jump.

In 1973, oil prices had more than doubled in the space of a month. Oil occupied a much more central place in the economy, it said.

Moreover, inflation was already rising before the oil shock, while the global economy is now emerging from a long phase of low inflation.

But the BIS also highlighted other points of vulnerability, including the current high level of private and public debt.

And with Russia's war in Ukraine, inflation this time is not only based around oil, but also other sources of energy, agricultural raw materials, fertilizers and metals.

The most pressing challenge for central banks is therefore to bring inflation down to low levels, according to the BIS.

High inflation situations tend to be self-reinforcing, warned the BIS, especially when wages spiral into an attempt to offset rising prices.

Agence France-Presse

India hikes interest rates by 50 basis points to fight inflation

MUMBAI - India's central bank on Wednesday hiked rates for the second time in two months, as Asia's third-largest economy reels from galloping inflation in the wake of the Ukraine war.

The Reserve Bank of India raised its key repo rate by 50 basis points to 4.90 percent, a month after kicking off an aggressive monetary tightening cycle with a surprise 0.4 percentage point rise.

Agence France-Presse

European Central Bank signals rate hike as soon as July to combat inflation

FRANKFURT, Germany - European Central Bank chief Christine Lagarde hinted Wednesday at a first interest rate hike in July to tackle soaring inflation, echoing the actions of other major central banks and heralding the end of the eurozone's cheap money era.

The ECB should end its bond-buying stimulus "early in the third quarter" and could raise interest rates "only a few weeks" later, Lagarde said in a speech in the Slovenian capital Ljubljana. 

The comment is the clearest sign yet from Lagarde that the ECB is ready to move on rates sooner rather later, as the institution trails rate hikes made by the US Federal Reserve and others to tame global inflation.

Any hike would be the ECB's first in over a decade and would lift rates from their current historically low levels.

These include a minus 0.5 deposit rate which effectively charges banks to park their excess cash at the ECB overnight.

Inflation in the eurozone climbed to 7.5 percent in April, an all-time high for the currency club and well above the ECB's own two-percent target.

The surge, driven in no small part by steep increases in prices for energy due to the Russian invasion of Ukraine, has strengthened calls for the ECB to follow its peers towards hikes. 

ECB policymakers will decide their course of action in upcoming June 9 and July 21 meetings, with the July date now seen as the most likely opportunity for a rate announcement.

- Rate rise -

At its last meeting in April, the ECB's governing council resolved to end its vast monthly bond purchases "in the third quarter".

Over recent years, the scheme has hoovered up billions of euros in government and corporate bonds each month to stoke economic growth and keep credit flowing in the 19-nation currency club.

The ECB should draw a line under it "early" in the third quarter, which starts in July, Lagarde specified on Wednesday.

Ending net purchases under the programme would open the door to an interest rate rise that could follow "only a few weeks" after, she said. 

After the initial move the process of monetary policy "normalisation", taking interest rates out of negative territory, would be "gradual".

- July pressure -

"To sum up Lagarde's speech: first rate hike on July 21," Carsten Brzeski, head of macro at ING bank, said on Twitter.

Decisions by the Fed and the Bank of England to raise rates aggressively to counter inflation have added to the pressure on the ECB to act.

German central bank president Joachim Nagel said Tuesday he "will advocate a first step normalising ECB interest rates in July".

The call made by the head of the traditionally conservative Bundesbank has been echoed by other members of the governing council.

On Wednesday, the head of the French central bank Francois Villeroy de Galhau also said the ECB would "progressively raise rates from the summer" to steer inflation towards the ECB's two-percent target. 

The central bank is set to ratchet up interest rates at a delicate moment for the economy.

The war in Ukraine has both pushed up prices and added to supply chain disruptions, putting further strain on households and businesses.

In response to the invasion, the European Union has sought to reduce its reliance on Russian energy imports and is in discussions over an embargo of Russian oil that would add to the economic stress.

The ECB would raise its rates in July "followed by a return to zero in September" Gilles Moec, chief economist at Axa insurance, told AFP.

But "between the war in Ukraine, a complicated coronavirus situation in China", which has seen a series of lockdowns and spillovers from rate hikes in the United States, the ECB will not be able to "pursue normalisation easily", Moec said.

Agence France-Presse

Bitcoin falls below $30,000, lowest since July 2021

TOKYO - Bitcoin slumped below $30,000 for the first time since July 2021 on Tuesday as cryptocurrencies track sinking markets with investors spooked by aggressive US monetary tightening and surging inflation.

The world's largest cryptocurrency by market value fell as low as $29,764 in Tuesday trade, before recovering above $30,000, extending a recent collapse in price as investors desert assets viewed as risky.

Bitcoin's value has more than halved since a November surge that saw the token hit a record of nearly $69,000.

While crypto enthusiasts view bitcoin as a hedge against inflation, an influx of more traditional investors tend to view it as a riskier asset.

They have been offloading bitcoin and other digital tokens along with other volatile assets like tech stocks as the US Federal Reserve moves to hike interest rates to tackle decades-high inflation.

"Bitcoin is breaking below some key technical levels as the never-ending selloff on Wall Street continues," said Edward Moya, senior market analyst for the Americas at Oanda.

"The institutional investor is paying close attention to bitcoin as many who got in last year are now losing money on their investment," he added.While the token's "long-term fundamentals have not changed in months", concerns about growth and a possible recession are creating "a very difficult environment for cryptos", Moya said.

"No one is looking to buy the crypto dip just yet and that leaves bitcoin vulnerable here."

The slump in crypto follows dives on US equities and other markets, with the tech-rich Nasdaq closing down 4.3 percent on Monday, the S&P 500 declining 3.2 percent and the Dow ending off 2.0 percent.

Agence France-Presse

US Fed signals 3 rate hikes in the cards in 2022 as inflation fight begins

The Federal Reserve said it would end its pandemic-era bond purchases in March and pave the way for three quarter-percentage-point interest rate hikes by the end of 2022 as the economy nears full employment and the US central bank copes with a surge of inflation.

"The economy no longer needs increasing amounts of policy support," Fed Chair Jerome Powell said in a news conference in which he contrasted the near-depression conditions at the onset of the coronavirus pandemic in 2020 with today's environment of rising prices and wages and rapid improvement in the job market.

The pace of inflation is uncomfortably high, he said after the end of the Fed's latest two-day policy meeting, and "in my view, we are making rapid progress toward maximum employment," a combination of circumstances that has now convinced all Fed officials, even the most dovish, that it is time to exit more fully the pandemic policies put in place two years ago.

The scenario laid out by the central bank in its new policy statement and economic projections envisions the pandemic, despite the spread of the Omicron variant, giving way to a particularly benign set of economic conditions - a "soft landing" in which inflation eases largely on its own, interest rates increase comparatively slowly, and the unemployment rate is pinned to a low 3.5 percent level for three years.

Some analysts were skeptical.

"This is a forecast that implicitly has favorable developments that allow them to leave accommodation but get favorable inflation," said Vincent Reinhart, chief economist at Dreyfuss & Mellon, noting that the three-year rate hike cycle projected by Fed officials never reaches levels that would be considered restrictive, yet inflation is still expected to fall.

"Is that the way to bet?" he said.

The core of Fed officials thinks so. In their new economic projections, policymakers forecast that inflation would run at 2.6 percent next year, an increase over the 2.2 percent they projected in September, but then fall to 2.3 percent in 2023 and 2.1 percent in 2024.

Unemployment is seen dropping to 3.5 percent next year, well below the point Fed officials feel is sustainable in the long run, and remaining there through 2024.

As a result of that combination of rising prices and strong employment, officials at the median projected the Fed's benchmark overnight interest rate would need to rise from its current near-zero level to 0.90 percent by the end of 2022. That would kick off a hiking cycle that would see the policy rate climb to 1.6 percent in 2023 and 2.1 percent in 2024 - still loose by most estimates.

Dropped from the latest policy statement was any reference to inflation as "transitory," with the Fed instead acknowledging that price increases had exceeded its 2 percent target "for some time."

Annual inflation has been running at more than double the Fed's target in recent months.

To open the door to higher borrowing costs, the Fed announced it was doubling the pace of its bond-buying taper, putting it on track to end the purchases of Treasuries and mortgage-backed securities (MBS) by March. Until recently, the central bank had been buying $120 billion of Treasuries and MBS each month to help fuel the economic recovery.

US stocks closed higher, with the S&P 500 gaining more than 1.6 percent, while yields on Treasury securities were also up. The dollar initially strengthened after the release of the Fed statement and projections before surrendering the gains to trade lower on the day against a basket of major trading partners' currencies.

Traders in interest rate futures were pricing a first rate hike in May, and two more by the end of 2022.

PRICE STABILITY

Though the Fed made any rate hikes contingent on some further improvement in the job market, the new policy projections left little doubt that borrowing costs will rise next year, absent a major economic shock. All 18 policymakers indicated at least a single rate increase would be appropriate before the end of 2022.

All told, the new projections and policy statement began to pin down the central bank's plan to exit the extraordinary monetary policy put in place in the spring of 2020 to nurse the economy through the fallout of the pandemic.

The health crisis is still underway, the Fed acknowledged, with the new variant adding to uncertainty about the course of the economy.

Powell, for example, told reporters that he would like to know how the US labor market will function after people are free of healthcare, childcare and other pandemic worries, but "it doesn't look like that is coming anytime soon."

Yet he also downplayed Omicron's potential economic risks, saying he did not expect the Fed would have to resume emergency bond purchases or take other steps to counter any fresh COVID-19 wave, and that economic performance would be less and less influenced by the pace of coronavirus infections.

Fed officials projected US economic growth of 4.0 percent next year, an increase over the 3.8 percent forecast in September and more than double the economy's underlying trend.

In some of his most pointed comments about inflation yet, Powell said that sharply rising prices had now emerged as a bigger threat to jobs than the pandemic.

"What we need is another long expansion," he said. "That's what it would really take to get back to the kind of labor market that we'd like to see, and to have that happen we need to make sure that we maintain price stability."

-reuters-

China virus fallout pushes central banks to cut rates: analyst

MANILA -- Virus-stricken China poses a drag on the global economy, giving the world's central banks, including the Philippines, room to cut interest rates earlier than expected, ING Bank said Friday.

World commodity prices will remain "depressed" due to weak demand from China, where millions are on lockdown and with many countries closing their borders to those from the mainland, said ING Bank analyst Nicholas Antonio Mapa.

With Thailand cutting rates and the US Federal Reserve likely to cut this year due to the coronavirus outbreak, Mapa said investors seeking higher yields are unlikely to leave the Philippines.

"If everyone's cutting, there's no change in the relative field," Mapa told ANC's Market Edge. "Everybody's alternatives are few and far between."

Bangko Sentral ng Pilipinas Governor Benjamin Diokno fired the first half of his planned 50-basis point cut in the overnight borrowing rate last Thursday, calling it a "preemptive" move.

Diokno said first half economic growth could be reduced by 0.3 point because of the virus. Mapa said he could lower his forecast for full year growth to 6.4 percent from 6.5 percent.

The BSP governor is "very clear where he wants to be," Mapa said. "Transparency and good communications from the BSP will go a long way in maintaining financial market calm."

source: news.abs-cbn.com

China inflation surges as pork prices soar

BEIJING - China's consumer inflation accelerated at its fastest pace in almost 6 years in September as African swine fever sent pork prices soaring nearly 70 percent, official data showed Tuesday.

Authorities have gone as far as tapping the nation's pork reserve to control prices of the staple meat, as the swine fever crisis could become a political and economic liability for the state.

The consumer price index (CPI) -- a key gauge of retail inflation -- hit 3.0 percent last month, the National Bureau of Statistics (NBS) said, up from 2.8 percent in August and the highest since since November 2013.

Analysts in a Bloomberg news poll had forecast 2.9 percent.

The rise was caused by food price inflation, particularly disruptions to pork supply, Capital Economics said in a note.

The price of pork soared 69.3 percent on-year in September, the NBS said.

Beijing's official statistics say around one million pigs have been killed since the first outbreak of swine fever in August but that is widely considered to be an underestimate.

This in turn has also pushed up prices of other meats including beef, chicken and duck and eggs by up to 19 percent as consumers switched to other sources of protein. 

"Looking ahead, consumer price inflation should continue to accelerate in the coming months as supply disruptions continue to push up pork prices and as the drag from lower oil prices eases," said Martin Lynge Rasmussen from Capital Economics.

Producer prices, however, continued to slide for the fifth straight month, hit by weakening demand and mounting trade tensions with the US.

The producer price index (PPI) -- an important barometer of the industrial sector that measures the cost of goods at the factory gate -- contracted 1.2 percent in September from the previous year, the NBS said.

A slowdown in factory gate inflation reflects sluggish demand, while a turn to deflation could dent corporate profits and drag on the world's number two economy.

This in turn could lead to a drop in prices globally. 

source: news.abs-cbn.com

Zimbabwe inflation soars to nearly 300%: IMF

Zimbabwe's annual inflation rate soared to nearly 300 percent in August spurred mainly by a collapsing currency, the International Monetary Fund (IMF) said Thursday after a mission to the crisis-weary country.

In a statement, the IMF said year-on-year inflation "reached almost 300 percent in August".

The local currency has fallen from parity against the American dollar to 16.5 Zimbabwean dollars (ZWL) per US dollar following currency reforms introduced in February in a bid to solve a chronic monetary crisis.

In June, inflation had stood at 176 percent.

The latest estimates are stoking fears of a return of the kind of hyperinflation that wiped out savings 10 years ago when the economy collapsed and prices of goods and services skyrocketed every week.

Early last month Finance Minister Mthuli Ncube said the government would stop publishing inflation figures until February next year to allow the statistics agency to collect fresh data using the new currency since prices were no longer pegged in US dollars.

The US dollar had been the national currency since 2009 when the country trashed its own currency following hyperinflation of as much as 500 billion percent.

But in June, Zimbabwe ended the use of US dollars and other foreign currencies and replaced them by two local parallel currencies -- "bond notes" and electronic RTGS dollars.

After its two-week mission, the IMF team concluded that the southern African country remains in "economic difficulties" which have been "exacerbated by severe weather shocks".

"GDP growth in 2019 is expected to be steeply negative, as the effects of drought on agricultural production and electricity generation, impact of cyclone Idai, and the significant fiscal consolidation to correct past excesses serve to drag on growth," it said in a statement.

It said that social conditions had "deteriorated sharply", with more than half of the country's population unlikely to be able to feed itself adequately between now and the next harvest season in the first half of 2020.

"Weakening confidence, policy uncertainty, a continuation of FX market distortions, and a recent expansionary monetary stance" had increased pressure on the exchange rate, it said. 

President Emmerson Mnangagwa, on taking over from Robert Mugabe, promised to revive the economy and declared Zimbabwe "open for business".

But nearly two years later, the economy is floundering and many Zimbabweans say they are worse off than they were under Mugabe.

sn/jh

source: news.abs-cbn.com