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IMF chief Georgieva says ‘big policy issues’ resolved in talks with Egypt By Reuters

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© Reuters

Written by Andrea Shallal and Omar Fahmy

WASHINGTON (Reuters) – International Monetary Fund Managing Director Kristalina Georgieva said on Friday that IMF officials have resolved all “major policy issues” with Egyptian authorities in their discussions of a new lending program and will meet again on Saturday.

Georgieva said in a press conference that the two sides are still working on smaller technical details, but these are not trivial issues and are related to the Egyptian exchange rate policies.

Egyptian Finance Minister Mohamed Maait told a local TV channel late on Friday that the Egyptian authorities are in the final stage of negotiations with the IMF and that his country is expected to sign a deal with the International Monetary Fund “very soon.”

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Mait did not announce the extent of Egypt’s request, saying that this point is still under negotiation with the International Monetary Fund, but the final figure will be announced within two days.

He explained that “the International Monetary Fund did not demand the budget, financial policies, and support program. The Fund is keen on this stage that requires social protection and assistance to the segments of society affected by the wave of inflation.” However, the IMF was “keen on exchange rate flexibility”.

Egypt is seeking to tie up a new package from the International Monetary Fund during the annual meetings of the International Monetary Fund and the world in Washington this week, hoping to stop a currency crisis that has restricted imports and raised market anxiety over the repayment of foreign debt.

Talks with the International Monetary Fund over the financial support package began in March, shortly after the Ukrainian crisis that plunged its already volatile finances into further chaos and prompted foreign investors to withdraw nearly $20 billion from Egyptian treasury markets in a matter of weeks.

Goldman Sachs (NYSE:) has calculated that Egypt needs a total support package of $15 billion in addition to the money already received from the Gulf states earlier this year.

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Maait told local media that Egypt could only expect $3-5 billion, but a person familiar with the matter said the package is likely to be at the lower end of that range.

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Trade talks between the European Union and the United States on Monday were overshadowed by tax concerns over climate measures, by Reuters

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© Reuters. FILE PHOTO: US Secretary of State Antony Blinken takes a look during a news conference at a meeting of NATO foreign ministers in Bucharest, Romania, November 30, 2022. REUTERS/Stoyan Nenov/File Photo

By David Lauder

COLLEGE PARK, Maryland (Reuters) – Top European Union officials plan to loudly complain to their U.S. counterparts at a trade meeting on Monday that the bloc’s electric cars are cut off from tax breaks in U.S. President Joe Biden’s climate law.

The US-EU Trade and Technology Council (TTC), a year-old transatlantic forum for dialogue, focused its first two meetings on regulatory cooperation and presenting a united front against China’s non-market economic practices.

But the 27-nation bloc fears that its $430 billion inflation-cutting bill combined with generous $7,500 tax breaks for Tesla (NASDAQ: ), Ford and other North American-made electric vehicles will seriously hurt European automakers.

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The topic is on the agenda for the TTC meeting on the campus of the University of Maryland in College Park, Maryland, officials from the United States and the European Union said.

Participants included US Secretary of State Antony Blinken, Secretary of Commerce Gina Raimondo, US Trade Representative Catherine Tay, and Executive Vice Presidents of the European Commission Valdis Dombrovskis and Margaret Vestager.

In a draft joint statement on December 1 to be released later Monday, the two sides will say, “We acknowledge the EU’s concerns and reaffirm our commitment to addressing them constructively.”

The draft document, which was seen by Reuters and may be subject to review, did not specify specific procedures for resolving the dispute.

“The Inflation Reduction Act will be part of the scope of discussions on trade,” a White House National Security Council spokesman said in a statement.

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The spokesman added that the US side is “committed to continuing to understand the EU’s concerns” through a newly established working group.

The spokesperson said the meeting will produce a “joint roadmap” for evaluating and measuring trustworthy AI technologies as well as a task force to reduce research barriers related to quantum computing science and technology.

European and South Korean officials criticized the inflation law at the G-20 summit in Indonesia last month. During his state visit to Washington last week, French President Emmanuel Macron told CBS it was a “job killer” for Europe.

Biden told Macron in Washington that there could be “amendments” to the law to make it easier for European countries to share credits.

French officials say they hope an executive order from the White House will give European countries a respite, without having to seek congressional reviews — a step the White House wants to avoid.

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Bad Job Data | financial times

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This article is an in-site version of the unprotected newsletter. Participation over here To have our newsletter sent straight to your inbox every day of the week

good morning. It turns out that the United States is not going to win the World Cup. Another bad prediction for the Unhedged Foundation, but we won’t be disappointed. We now expect a glorious victory for England, which will close immediately UK stock discount. Email us: robert.armstrong@ft.com & ethan.wu@ft.com.

Bad news about jobs

The stock market bulls have no use for strong job growth now. A strong economy means a relentless Fed and thus a greater chance of a recession.

In this context, the headline for the November payroll report on Friday looked bad, which means strong. Average hourly earnings grew at the fastest pace over the year. Combined with upward revisions to wage data for September and October, many concluded that it was time to dash hopes that the labor market would cool off without help from a hawkish Federal Reserve.

However, the report was noisy. Some wondered if, after A.J Steep decline In survey response rate, data should be taken at face value. Others have argued that lower hours may have tainted hourly earnings data. Here is Preston Moy at Employment America:

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Average hourly earnings are derived by dividing “total dollars spent on payroll” by “total hours worked,” so bustling movements in hours worked are reflected in average earnings. For example, higher workplace absences due to illness can increase working hours while keeping total payroll expenses high, resulting in higher average earnings. Sectoral inflection points – such as the recent downturn in transportation and warehousing jobs – could raise average earnings if disproportionately low-wage workers are let go.

Moi prefers to focus on the recent slowdown in other wage measures. That’s fair enough. Wage growth appears to have peaked.

These details are important, and the big picture is clear enough. By most measures, the job market is very tight (although it has softened slightly) and wage growth is very hot (although a little cool). Some are reassured by marginal changes in the right direction, but charts like the one below, from Barclays, don’t make us feel confident that normalcy is on the horizon:

It is worth explaining why wage growth is important to inflation. Here’s what Jay Powell thought of his speech last week:

Finally, we come to basic services other than housing. . . This may be the most important category for understanding the future development of core inflation. Since wages constitute the largest cost in providing these services, the labor market holds the key to understanding inflation in this category

The idea that wages drive higher prices for services seems counterintuitive. You get your hair cut and most of what you pay goes to the hairdresser. The price of a haircut and the wages of a hairdresser are closely related.

In reality, though, not all services work this way (car repairs depend on parts costs, transit on fuel costs, etc.). As we wrote last Thursday, Powell’s claim is perfect. The best way to understand the wage inflation link is that it works through consumption, as Matt Klein explained in his latest issue of override:

It is not that higher wages increase corporate costs. . . The bigger issue is that income from business is the largest and most reliable source of financing consumer spending. Wages can rise 1-3 percentage points faster or slower than consumer prices for a variety of reasons – including but not limited to compositional and definitional differences – but larger gaps between wage and price growth rates do not exist essentially outside of World War II and the rationing of war Korean, the productivity boom of the late 1990s, and the first year of the pandemic.

High wage growth is important because it keeps consumption above trend, which supports inflation. High wages are not the only reason behind high rates of consumption. Consumers still have a lot of savings. Strategas puts the excess savings balance (relative to pre-pandemic levels) at $1.3 trillion, which, on current trend, could take about 14 months to run out. But the Fed cannot withdraw savings from individuals’ bank accounts. The lever to reduce consumption makes the labor market worse for workers, forcing them to rely on dwindling savings until spending falls as well.

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The market believes that the Fed will succeed in bringing inflation back to target, and quickly. See the dark blue line in the Barclays chart. Other lines show past market efforts to forecast inflation:

Hence the rebound in stocks since October. The market is pricing in some type of soft landing.

There are three main ways it could be wrong. First, the Fed manages to deal with inflation, but that takes time and causes a recession at the same time. This is an Unhedged view. Secondly, the Federal Reserve accept inflation slightly above its current target, and it’s fortunate enough to avoid a recession and inflationary spiral. The third is a big, stupid mistake in Arthur Burns style policy, as Bank of America’s Ralph Axel argues in a recent note:

We believe that the markets have become complacent with how simple the Fed’s path has been, and therefore the markets’ trajectory. The current view of the market is that it is one battle and once victory is declared the game is over and it is time to buy. . .

The main flaw in our view of the Fed in the 1960s and 1970s is the same as it is today: The Fed wants to do no harm. While today the Fed is aware of its protectionist policy “mistakes” in the recent inflationary episode, it has already demonstrated its penchant for continued dovish choices with its slow transition away from easy policy in 2021 and its desire to move closer to bound rates more often. Slower pace while inflation is still very high and jobs average around 300k a month. . .

In the 1960s, the Fed eased after periods of high unemployment, raising rates again and then easing again, allowing inflation to fester for 15 years in this halting approach. We think the Fed is liable to repeat these mistakes

We don’t think the Fed will make that mistake. Yes, it will likely raise rates by 50 basis points instead of 75 at this month’s meeting, and future rate increases could come in 25 basis point increments. But this option is about preserving discretion, not a policy of facilitation. Federal Reserve officials are Aware Stop and go hazards. Don’t overthink: The biggest risk to markets is that the Fed needs to be tough, and it is. (Wu & Armstrong)

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Global central banks extend November rate hike push by Reuters

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© Reuters. FILE PHOTO: The Federal Reserve building is seen in front of the Federal Reserve Board and is expected to signal plans to raise interest rates in March as it focuses on fighting inflation in Washington, US, January 26, 2022. REUTERS/Joshua Roberts/File Photo

Written by Karen Stroeker and Vincent Flasser

LONDON (Reuters) – The pace and scope of interest rate hikes by central banks in November accelerated again as policymakers around the world grappled with decade-long high inflation.

Central banks that oversee six of the 10 most traded currencies delivered 350 basis points of rate increases between them last month.

The US Federal Reserve, the Bank of England, the Reserve Bank of Australia, the Norwegian Bank of Norway, Sweden’s Riksbank and the Reserve Bank of New Zealand all raised interest rates in November.

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The European Central Bank, Bank of Canada, Swiss National Bank and Bank of Japan did not hold rate-setting meetings in November.

The recent moves raised the total interest rates in 2022 from the G10 central banks to 2,400 basis points.

Interest rates will continue to rise, said Alexandra Dimitrijevic of global agency Standard & Poor’s (NYSE:) in Standard & Poor’s (NYSE:) ratings, looking forward to 2023. “Central banks’ determination to lower inflation suggests that interest rates should continue to rise. “.

Interest rates in developed markets https://www.reuters.com/graphics/GLOBAL-MARKETS/klpygkyzepg/G10CEN1.2.gif

Global financial markets have been in a tailspin in recent weeks as investors try to gauge how quickly and to what extent the US Federal Reserve and other major central banks will raise interest rates to combat inflationary pressures, while fears of a slowdown in global growth linger. spread out.

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Some nascent signs that US inflation may be slowing have cheered markets in recent days, as Federal Reserve officials are scheduled to meet on December 13-14.

On Wednesday, Federal Reserve Chairman Jerome Powell said the US central bank may lower the pace of interest rate hikes “as early as December.”

Data from central banks in emerging markets showed a similar pattern. Eight of the 18 central banks delivered a total of 400 basis points to raise interest rates in November – from 325 basis points in October, but somehow less than 800 basis points per month in both June and July.

Emerging market interest rates https://www.reuters.com/graphics/GLOBAL-MARKET/lbvggnegavq/EMCEN1.1.gif

Indonesia, South Korea, Mexico, Thailand, Malaysia, the Philippines, Israel and South Africa all raised interest rates in November, indicating the wave of policy tightening towards Asia and a shift away from emerging Latin America and Europe, as the cycle draws to a close.

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Nafez Zouk said Aviva (LON:) Investors.

Outside Turkey, where President Recep Tayyip Erdogan is pushing for lower interest rates, it made another record cut of 150 basis points to bring rates down to single digits, even though inflation has soared to more than 80%.

Not all EM central banks in the sample held rate-setting meetings last month.

Calculations showed that central banks in emerging markets raised interest rates by a total of 7,165 basis points year-to-date, more than double the 2,745 basis points for the full year of 2021.

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