US Fed leaves rates unchanged, flags ‘lack of further progress’ on inflation

US Fed leaves rates unchanged, flags ‘lack of further progress’ on inflation
US Fed Chair Jerome Powell addressing the media. AFP
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Updated 12 May 2024
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US Fed leaves rates unchanged, flags ‘lack of further progress’ on inflation

US Fed leaves rates unchanged, flags ‘lack of further progress’ on inflation
  • Policy rate remains in 5.25 percent-5.50 percent range
  • Fed policymakers concerned by recent inflation data
  • Markets take ‘dovish’ view of Fed chief’s remarks

WASHINGTON : The US Federal Reserve held interest rates steady on Wednesday and signaled it is still leaning toward eventual reductions in borrowing costs, but put a red flag on recent disappointing inflation readings that could make those rate cuts a while in coming, Reuters reported.

Indeed, Fed Chair Jerome Powell said that after starting 2024 with three months of faster-than-expected price increases, it “will take longer than previously expected” for policymakers to become comfortable that inflation will resume the decline toward 2 percent that had cheered them through much of last year.

That steady progress has stalled for now, and while Powell said rate increases remained unlikely, he set the stage for a potentially extended hold of the benchmark policy rate in the 5.25 percent-5.5 percent range that has been in place since July.

US central bankers still believe the current policy rate is putting enough pressure on economic activity to bring inflation under control, Powell said, and they would be content to wait as long as needed for that to become apparent — even if inflation is simply “moving sideways” in the meantime.

The Fed’s preferred inflation measure — the personal consumption expenditures price index — increased at a 2.7 percent annual rate in March, an acceleration from the prior month.

“Inflation is still too high,” Powell said in a press conference after the end of the Federal Open Market Committee’s two-day policy meeting. “Further progress in bringing it down is not assured and the path forward is uncertain.”

Powell said his forecast remained for inflation to fall over the course of the year, but that “my confidence in that is lower than it was.”

Whether there are rate cuts this year or not remains in doubt.

“If we did have a path where inflation proves more persistent than expected, and where the labor market remains strong but inflation is moving sideways and we’re not gaining greater confidence, well, that would be a case in which it could be appropriate to hold off on rate cuts,” Powell said. “There are paths to not cutting and there are paths to cutting. It’s really going to depend on the data.”

Despite the uncertainty of the current economic moment, Powell’s characterization of rate hikes as “unlikely” cheered investors concerned about a newly hawkish Fed chief.

US stock and bond prices turned higher as Powell preached patience that may delay rate cuts, but also means a high bar for any more hikes. The Fed raised its benchmark policy rate by 5.25 percentage points in 2022 and 2023 to curb a surge in inflation.

Powell’s remarks on Wednesday were “notably less hawkish than many feared,” said analysts at Evercore ISI. “The basic message was that cuts have been delayed, not derailed.”

Investors in contracts tied to the Fed’s policy rate increased bets that rate cuts could begin in September rather than later in the year as reflected in earlier market pricing.

Balance Sheet 

The Fed’s latest policy statement kept key elements of its economic assessment and policy guidance intact, noting that “inflation has eased” over the past year, and framing its discussion of interest rates around the conditions under which borrowing costs can be lowered.

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the Fed repeated in its unanimously-approved statement.

That continues to leave the timing of any rate cut in doubt, and Fed officials made emphatic their concern that the first months of 2024 have done little to help the cause.

“In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective,” the Fed said in its statement.

The US central bank also announced it will scale back the pace at which it is shrinking its balance sheet starting on June 1, allowing only $25 billion in Treasury bonds to run off each month versus the current $60 billion. Mortgage-backed securities will continue to run off by up to $35 billion monthly.

The step is meant to ensure the financial system does not run short of reserves, as happened in 2019 during the Fed’s last round of “quantitative tightening.”

While the move could loosen financial conditions at the margin at a time when the US central bank is trying to keep pressure on the economy, policymakers insist their balance sheet and interest rate tools serve different ends.

The Fed maintained its overall assessment of economic growth, saying that the economy “continued to expand at a solid pace. Job gains have remained strong and the unemployment rate has remained low.”

Powell reconciled that with the relatively weak, 1.6 percent growth of gross domestic product in the first quarter by saying that the 3.1 percent increase in private domestic demand was a better gauge of where the economy stands, with output buttressed by a recent jump in immigration.

Asked about the risk the US was entering a period of “stagflation” with stagnant growth and rising prices, Powell said current conditions are nothing like those seen in the late 1970s when prices were rising more than 10 percent annually at one point alongside high unemployment.

“Right now we have ... pretty solid growth ... We have inflation running under 3 percent,” Powell said, adding: “I don’t see the ‘stag’ and I don’t see the ‘flation,.’” 


Oil Updates — crude near 3-week high on supply fears, US stocks drop

Oil Updates — crude near 3-week high on supply fears, US stocks drop
Updated 26 March 2025
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Oil Updates — crude near 3-week high on supply fears, US stocks drop

Oil Updates — crude near 3-week high on supply fears, US stocks drop
  • Brent, WTI hit three-week highs in the previous session
  • Trump press on Venezuelan, Iranian oil fans bullish sentiment
  • Russia, Ukraine agree to sea, energy truce

NEW YORK/SINGAPORE: Oil prices edged higher on Wednesday on supply concerns with the US stepping up efforts to limit Venezuelan and Iranian oil exports, while a bigger-than-expected drop in US crude inventories also lent support.

Brent crude futures gained 20 cents, or 0.3 percent, to $73.22 a barrel by 7:04 a.m. Saudi time, while US West Texas Intermediate crude futures rose 20 cents, or 0.3 percent, to $69.20 a barrel.

Both contracts hit their highest in three weeks in the previous session.

“Crude oil prices maintain their bullish bias after Trump’s sanctions on Venezuelan oil, raising supply-side concerns,” Priyanka Sachdeva, a senior market analyst at Phillip Nova, wrote in a market commentary on Wednesday.

On Monday Trump signed an executive order authorizing his administration to impose blanket 25 percent tariffs under the 1977 International Emergency Economic Powers Act on imports from any country that buys Venezuelan crude oil and liquid fuels.

Oil is Venezuela’s main export. China, already a target of US import tariffs, is its largest buyer.

Trade of Venezuelan oil to top buyer China stalled on Tuesday, as Chinese traders and refiners said they were waiting to see how the order would be implemented and whether Beijing would direct them to stop buying.

Washington last week also imposed a new round of sanctions on Iran’s oil sales targeting entities including Shouguang Luqing Petrochemical, a “teapot,” or independent refinery in east China’s Shandong province, and vessels that supplied oil to such plants in China, the top buyers of Iranian crude.

The market was also buoyed by American Petroleum Institute data that showed US crude inventories fell by 4.6 million barrels last week, a sign of healthy demand for fuel in the world’s largest economy.

Analysts polled by Reuters were expecting a decline of 1 million barrels.

Official US government data on crude inventories is due on Wednesday.

The upswing in oil prices is a temporary phenomenon, with the potential economic slowdown due to Trump’s tariffs keeping a lid on price gains, Phillip Nova’s Sachdeva said.

Further capping oil prices, the US reached deals with Ukraine and Russia to pause attacks at sea and against energy targets, with Washington agreeing to push to lift some sanctions against Moscow.

Kyiv and Moscow both said they would rely on Washington to enforce the deals, while expressing skepticism that the other side would abide by them.


Tesla says it will launch in Saudi Arabia in April

Tesla says it will launch in Saudi Arabia in April
Updated 26 March 2025
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Tesla says it will launch in Saudi Arabia in April

Tesla says it will launch in Saudi Arabia in April

RIYADH: Tesla will launch in Saudi Arabia early next month, according to a post announcing the opening on the company’s website.

Elon Musk’s electric vehicle brand trades in other countries in the Middle East, but not in Saudi Arabia, the Gulf region’s largest market.

Tesla has seen EV sales slump in Europe and the brand has been targeted by a wave of protests in the US since Musk, the company’s CEO, became an adviser to US President Donald Trump and began sweeping cuts to the federal government.

The launch event in Riyadh, scheduled for April 10, will display Tesla’s electric vehicles and products powered by solar energy, the post said.

“Experience the future of autonomous driving with Cybercab, and meet Optimus, our humanoid robot, as we showcase what’s next in AI and robotics,” it added, without saying when the products would go on sale in the Kingdom.

Tesla’s sales and market share in Europe have fallen this year even as EV registrations on the continent have grown.

Musk’s brand has sold 42.6 percent fewer cars in Europe so far this year, data from the European Automobile Manufacturers Association showed on Tuesday, as Musk has stirred controversy globally.

Activists across the US have staged so-called “Tesla Takedown” demonstrations over Musk’s role leading the Department of Government Efficiency, which has cut thousands of jobs, frozen foreign aid and canceled thousands of programs and contracts.

The Wall Street Journal reported in 2023 that Saudi Arabia was in early talks for Tesla to establish a factory in the kingdom. Musk denied the report.

The Kingdom has been trying to shift its economy away from oil, while its sovereign wealth fund is the majority investor in Lucid Group — one of the EV startups looking to challenge Tesla. 


IMF reaches staff-level agreement with Pakistan on first review of $7 billion bailout

IMF reaches staff-level agreement with Pakistan on first review of $7 billion bailout
Updated 26 March 2025
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IMF reaches staff-level agreement with Pakistan on first review of $7 billion bailout

IMF reaches staff-level agreement with Pakistan on first review of $7 billion bailout
  • Review will ensure “total access over the 28 months of around $1.3 billion,” the IMF said
  • Islamabad secured the $7 billion EFF last summer to help claw its way out of economic crisis

KARACHI: IMF staff and Pakistani authorities have reached a staff-level agreement on the first review under Pakistan’s Extended Fund Facility (EFF) and on a new arrangement under the Resilience and Sustainability Facility (RSF), the IMF said on Tuesday. 

Islamabad secured the $7 billion EFF last summer to help claw its way out of an economic crisis, with an immediate disbursement of about $1 billion.

“The strong implementation of the EFF-supported program continues, and the authorities remain committed to advancing a gradual fiscal consolidation to sustainably reduce public debt, maintaining a sufficiently tight monetary policy to keep inflation low, accelerating cost-reducing energy sector reforms to enhance its viability, and implementing Pakistan’s reform agenda to accelerate growth, while strengthening social protection and health and education spending,” the IMF said in a statement as it announced the staff-level agreement. 

The agreement comes after an IMF team led by Nathan Porter held discussions from February 24-March 14 in Karachi and Islamabad.

The review will ensure “total access over the 28 months of around $1.3 billion,” the IMF said.

“The staff-level agreement is subject to approval of the IMF’s Executive Board. Upon approval, Pakistan will have access to about $1.0 billion (SDR 760 million) under the EFF, bringing total disbursements under the program to about $2.0 billion.”

Porter said over the past 18 months, Pakistan had made significant progress in restoring macroeconomic stability and rebuilding confidence despite a challenging global environment. 

“While economic growth remains moderate, inflation has declined to its lowest level since 2015, financial conditions have improved, sovereign spreads have narrowed significantly, and external balances are stronger,” the statement said. 

Porter said it was critical to entrench the progress achieved over the past one and a half years, building resilience by further strengthening public finances, ensuring price stability, rebuilding external buffers and eliminating distortions in support of stronger, inclusive and sustained private sector-led growth.

The IMF program has played a key role in stabilizing Pakistan’s economy and the government has said the country is on course for a long-term recovery.

Meanwhile, the RSF will support Pakistan’s efforts in building resilience to natural disasters, enhancing budget and investment planning to promote climate adaptation, improving the efficient and productive use of water, strengthening the climate information architecture to improve disclosure of climate risks, and aligning energy sector reforms with mitigation targets.


Pakistani energy giants increase investment in Reko Diq copper-gold mine project to $1.25 billion

Pakistani energy giants increase investment in Reko Diq copper-gold mine project to $1.25 billion
Updated 25 March 2025
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Pakistani energy giants increase investment in Reko Diq copper-gold mine project to $1.25 billion

Pakistani energy giants increase investment in Reko Diq copper-gold mine project to $1.25 billion
  • Reko Diq, one of the world’s largest underdeveloped copper-gold mine, is jointly owned by Canadian mining firm Barrick Gold Corp. and Pakistan
  • Feasibility study shows project has a mining life of 37 years and is expected to yield 13.1 million tons of copper and 17.9 million ounces of gold

KARACHI: Pakistani state-owned Oil & Gas Development Company Ltd. (OGDCL) and Pakistan Petroleum Ltd. (PPL) have increased their investments in the Reko Diq gold and copper mining project to $1.25 billion, the energy firms said in separate filings in the Pakistan Stock Exchange (PSX).
The OGDCL and PPL, each holding 8.33 percent stake in the multi-billion-dollar project through Pakistan Minerals (Private) Limited, have completed their feasibility studies. The third state-owned shareholder is Government Holdings (Private) Limited, according to the stock filings.
Each of the two oil and gas explorers have decided to increase their funding commitment with respect to the project, reflecting their pro rata share of total capital investment, inclusive of project financing costs, to $627 million. The financing cost is to be adjusted according to the actual project cost and inflation.
On Tuesday, the Economic Coordination Committee (ECC) of the federal cabinet also approved a summary regarding the Reko Diq project and changes in its overall development plan, the Finance Division said in a statement.
“The ECC took up a summary by the Petroleum Division regarding the Reko Diq Project and changes in its overall development plan and related financial commitments and project finance considerations due to inflation and enhanced scope of the project concerning capacity, energy mix, alternative water supply options and updated processing plants and machinery,” the statement read.
“The ECC noted the factors leading to the project escalations, and approved the proposals contained in the summary with the directions to the Ministries of Petroleum & Finance to continue close coordination with a view to ensuring timely implementation of all agreed actions.”
Reko Diq, one of the world’s largest underdeveloped copper-gold mine, is jointly owned by Canadian mining firm Barrick Gold Corp. and Pakistan. Out of the total shareholding of Reko Diq project, 25 percent is held by the provincial government of Balochistan — 15 percent on a fully funded basis through Balochistan Mineral Resources Limited and 10 percent on a free carried basis — and 50 percent is held by Barrick Gold Corporation which is the operator of the project.
As per the estimates, the increase in copper and gold prices has offset the impact of higher project costs, according to the two energy firms. The feasibility study of the project shows it has a mining life of 37 years and is expected to yield 13.1 million tons of copper and 17.9 million ounces of gold.
The project will be executed in two phases, with the phase one having an estimated capital outlay of $5.6 billion that is exclusive of the financing costs and inflation. It is planned to be funded through a limited-recourse project financing facility of up to $3 billion with the remaining funded through shareholder contributions, the OGDCL and PPL said.
The energy companies plan to fund the second phase through a mix of revenue generation from the project, additional project financing and shareholder contributions, if required. Under the updated feasibility study phase one is planned to process 45 million tons per annum (Mtpa) of mill feed from 2028. While phase two is planned to double the processing capacity to 90 Mtpa by 2034.
The project will leverage five of the currently identified 15 porphyry surface expressions within the current mining lease, highlighting substantial future growth potential. Negotiations for the proposed project financing are ongoing.


Closing Bell: Saudi main index closes in red at 11,706

Closing Bell: Saudi main index closes in red at 11,706
Updated 25 March 2025
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Closing Bell: Saudi main index closes in red at 11,706

Closing Bell: Saudi main index closes in red at 11,706

RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Tuesday, as it shed 71.87 points, or 0.61 percen,t to close at 11,706.21. 

The total trading turnover of the benchmark index was SR5.47 billion ($1.46 billion), with 72 of the listed stocks advancing and 161 declining. 

The Kingdom’s parallel market Nomu gained 3.11 points to close at 30,613.74, while the MSCI Tadawul Index edged down by 0.65 percent to 1,483.55. 

The best-performing stock on the main market was Umm Al Qura for Development and Construction Co. The firm’s share price surged by 7.69 percent to SR21.

The share price of Abdullah Saad Mohammed Abo Moati for Bookstores Co. increased by 3.54 percent to SR38, and Bawan Co. also saw its stock price rise by 2.9 percent to SR49.65.

Conversely, the share price of MBC Group Co. dropped by 5.51 percent to SR44.60. 

On the announcements front, Perfect Presentation for Commercial Services Co. said that its net profit for 2024 reached SR163.33 million, representing a rise of 26.33 percent compared to the previous year.

In a Tadawul statement, the company revealed that its gross profit increased by 19.26 percent year on year in 2024 to reach SR250.92 million. 

The share price of Perfect Presentation for Commercial Services Co. dropped by 1.19 percent to SR13.26.

Alamar Foods Co. said its net profit stood at SR35.01 million in 2024, representing a decline of 38.11 percent compared to the previous year. 

In a Tadawul statement, the food company revealed that the decline in net profit was due to weaker sales driven by ongoing regional geopolitical issues. 

The stock price of Alamar Foods Co. edged down by 1.39 percent to SR70.80.