The U.S. is witnessing a notable surge in energy costs, with oil futures escalating by approximately 30% over the last quarter, adding significantly to inflationary pressures. This rise in prices, which began in the summer, presents a formidable task for the Federal Reserve as it grapples with managing consumer price inflation, particularly with the escalating cost of energy.

If the increase in oil prices persists, it could potentially decelerate consumption and economic growth. However, strategists at Goldman Sachs have indicated that such a scenario would represent a bearable obstacle for the U.S. economy. They maintain that despite the potential negative impact on consumption and economic growth, the resilience of the U.S. economy will be tested but manageable if the rise in oil prices continues.

The upward trend in energy prices is contributing significantly to headline inflation, amplifying the challenges faced by the Federal Reserve. The central bank's efforts to manage these inflationary pressures are being tested as it navigates the escalating cost of energy.

Strategists at Goldman Sachs continue to express confidence in the resilience of the U.S. economy amidst these challenges. They anticipate that the economy will be able to withstand this headwind if the rise in oil prices persists over the coming months.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

KYIV (Reuters) - An International Monetary Fund monitoring mission started work on Monday on the second review of a $15.6 billion multi-year loan program for Ukraine.

Vahram Stepanyan, IMF's resident representative, said in a statement that the discussions with the Ukrainian government would be held on recent economic developments and fiscal, financial and structural policies.

The IMF's four-year programme for Kyiv is part of a $115-billion global package to support the economy as Ukraine battles Russia's invasion.

Ukraine's economy has been hit by the 19-month-old war and the government has relied heavily on Western aid to finance social and humanitarian payments.

The government has said Ukrainian businesses have adjusted to the new wartime reality and that the economy has been recovering more quickly than expected this year.

"After a decline of 29.1% last year, today we see a gross domestic product growth," Yulia Svyrydenko, economy minister, said in a post on Facebook (NASDAQ:META).

"Now we can say with confidence that the economy has adapted to force majeure conditions. We predict that the positive trend will continue."

Official statistics showed that GDP grew by 19.5% in the second quarter of the year compared with the same period a year earlier.

The economy ministry expects the economy to grow by about 4% this year and by up to 5% next year.

Ukraine has already received about $3.6 billion from the IMF so far this year, according to finance ministry data.

India's rapid economic growth, the fastest among major economies, is under threat as increasing household debt payments diminish consumer spending power. This trend, highlighted by recent data from the Reserve Bank of India, has emerged as a significant concern for the robustly expanding economy.

The data shows that the nation's household financial assets, which include bank deposits, cash, and equity investments, have declined after accounting for debt servicing and consumption. As a percentage of the country's GDP, these household assets have decreased from 7.2% in the previous fiscal year to 5.1% in the fiscal year that ended in March.

This reduction indicates a significant drop in spending power for Indian households. The increasing burden of debt repayments appears to be a key factor in this worrying trend, potentially restricting the flow of funds that fuel this rapidly growing economy.

The implications of this trend could be far-reaching, as consumer spending plays a vital role in driving economic growth. With household debt payments on the rise and consumer spending power decreasing, there are concerns that this could slow down India's accelerating economic growth.

This situation underscores the challenge faced by policymakers in balancing economic growth with household financial health. As India continues its economic expansion, addressing this issue will be crucial to sustaining momentum while ensuring the financial stability of its households.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

By Anant Chandak and Susobhan Sarkar

BENGALURU (Reuters) - Thailand's central bank will leave its key policy rate unchanged at 2.25% on Wednesday and likely through 2024, marking an end to a year-long tightening cycle, according to a Reuters poll, though a few economists still expect one final hike.

Despite inflation in Thailand edging up slightly to 0.88% in August, it remained below the central bank's 1-3% target range for a fourth consecutive month, suggesting little need for the Bank of Thailand (BOT) to continue hiking.

Governor Sethaput Suthiwartnarueput recently said both economic growth and inflation were expected to be lower than previously forecast due to softer tourism spending and a weak economic outlook for China, the country's major trading partner.

A strong majority of economists in a Sept. 18-22 poll, 21 of 27, expected the BOT to keep its benchmark one-day repurchase rate at 2.25% on Wednesday. Only six forecast another quarter-point hike to 2.50%.

"The BOT will switch to a wait-and-see mode. It is actually in a relatively comfortable position to take its time in terms of making its policy decisions because growth is strong, inflation is low," said Lavanya Venkateswaran, senior ASEAN economist at OCBC.

"We don't see inflation coming back to within BOT's target for the rest of this year at least, and possibly even in Q1 next year ... so I don't think in the near term there's a need to rush into further hikes."

None expected the central bank to raise interest rates at the following meeting in November. Median forecasts showed interest rates remaining at 2.25% through next year.

However, there was a split among those with a longer-term view on rates, with 47% of economists, nine of 19, expecting the BOT to keep rates at 2.25% until end-2024, while six predicted another hike to 2.50%, and four anticipated a cut -- three to 2.00% and one to 1.75%.

"Despite growth slumping ... it's clear the BOT is determined to raise rates at least one more time to reach its estimated neutral rate," noted Aris Dacanay, ASEAN economist at HSBC.

By Nick Carey

(Reuters) - The European Union and Britain need to take urgent action to postpone rules for electric vehicles traded between the bloc and the UK that will trigger 10% tariffs, Europe's car industry group said on Monday.

"Driving up consumer prices of European electric vehicles, at the very time when we need to fight for market share in the face of fierce international competition, is not the right move," European Automobile Manufacturers' Association (ACEA) president and Renault (EPA:RENA) CEO Luca de Meo said in a statement ahead of a planned trade meeting between EU and UK officials this week.

Under the EU-UK post-Brexit trade deal, EVs need to have 45% EU or UK content from 2024, with a 50%-60% requirement for their battery cells and packs, or face British or EU import tariffs of 10%.

The problem is that neither carmakers in Britain nor the EU have built up their EV supply chains sufficiently to meet those requirements and have called for the rules to be postponed until 2027.

Stellantis (NYSE:STLA) has said British car plants will close with the loss of thousands of jobs unless the Brexit deal is swiftly renegotiated, while Ford (NYSE:F) has said it will slow the transition to electric.

The ACEA has said the rules could cost carmakers up to 4.3 billion euros ($4.57 billion) in tariffs and hit output.

So far, the EU executive has been reluctant to renegotiate the deal.

In June, Stefan Fuehring, a European Commission official overseeing the post-Brexit EU-UK trade agreement, said the EU rules of origin were "fit for purpose" and that the bloc was not considering changing them.

($1 = 0.9400 euros)

By Munsif Vengattil and Shivangi Acharya

NEW DELHI (Reuters) - India will defer an import licence requirement for laptops and tablets, two government officials said, a policy U-turn after industry and the U.S. government complained about the move, which could hit Apple (NASDAQ:AAPL), Samsung (KS:005930) and others.

The plan will be delayed by a year, after which the government will consider whether to implement a licensing regime or not, one of the officials told Reuters, requesting anonymity.

The licensing regime, announced abruptly on Aug. 3, aimed to "ensure trusted hardware and systems" enter India, reduce dependence on imports, boost local manufacturing and in part address the country's trade imbalance with China.

But following industry objections, the initial plan was quickly delayed by about three months.

Last month U.S. trade chief Katherine Tai raised concerns with India over the move, which would also affect companies such as Dell (NYSE:DELL) and HP (NYSE:HPQ).

India's electronics ministry is now proposing a simpler import registration process that is due to start in November, said the officials, who have direct knowledge of the discussions.

A representative for India's IT ministry did not immediately respond to a request for comment.

The new 'imports management system' will need companies to obtain 'registration certificates' for imports of laptops, tablets and personal computers, instead of licences proposed earlier by the Aug.3 order, one of the officials said.

The ministry conveyed the proposal to industry officials in a meeting on Friday, they added.

India's electronics imports, including laptops, tablets and personal computers, stood at $19.7 billion in the April to June period, up 6.25% year-on-year.

India to delay import licensing of laptops after US, industry push back, sources say

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BRUSSELS (Reuters) -Europe's trade chief will push Beijing for fewer restrictions on European businesses on a four-day visit to China, when he can expect tough conversations over a planned EU investigation into electric car imports.

Trade Commissioner Valdis Dombrovskis will take part in a joint economic and trade dialogue, meet Chinese officials and European companies active in China and deliver two speeches during his Sept. 23-26 trip to Shanghai and Beijing.

For the European Union, the visit is designed to renew dialogue with China after its COVID-19 closure and as EU wariness grows over Beijing's closer ties with Moscow following Russia's 2022 invasion of Ukraine.

Dombrovskis will arrive just over a week after the EU executive said it would investigate whether to impose punitive tariffs to protect European producers against cheaper Chinese electric vehicle imports.

The enquiry may result in a frostier reception in China, but sources with knowledge of the trip say it could usefully lead to a more focused discussion on "trade irritants".

The EU blames its 400 billion euro ($426.32 billion) trade deficit partly on Chinese restrictions on European companies and says the EU market is largely open.

A "thousand" barriers to market access have propelled the trade deficit to its "highest in the history of mankind", EU Ambassador to China Jorge Toledo lamented at a forum in Beijing on Thursday.

EU's trade deficit with China widened to $276.6 billion in 2022 from $208.4 billion a year earlier, Chinese customs data show.

The economic and trade dialogue on Monday between Dombrovskis and Chinese Vice Premier He Lifeng, the 10th such discussion since 2008, will be a "litmus test" for two sides, according to Chinese nationalist tabloid Global Times.

'DE-RISK'

The European Union Chamber of Commerce in China said in a report on Wednesday that Chinese authorities were sending contradictory messages to foreign businesses. For many, a swift economic rebound expected after the reopening of China's borders in January failed to materialise.

"Although official announcements aimed at improving the business environment have been released, so has a slew of national security-focused legislation, which has deepened uncertainty and raised compliance risks," the report said.

This includes an anti-espionage law that bans the transfer of information related to national security and interests that it does not specify. It could result in punishments for foreign companies engaged in regular business.

The EU is also expected to be asked during the visit to clarify what it means by "de-risk" in the context of China.

EU officials say the bloc is seeking to curb its reliance on the world's second-largest economy, particularly for materials and products needed for its green transition, but wishes to retain trade ties.

Large European industries have started revising their supply chains to see where they have excessive dependency on China, as they have been "shocked" by Chinese restrictions on exports of strategic metals germanium and gallium, Toledo said.

China placed export curbs on eight gallium and six germanium products from August in its latest salvo of an escalating war between Beijing and Washington over access to materials used in making high-tech microchips.

Germany is also planning to force telecoms operators to slash the use of equipment from Huawei and ZTE (HK:0763) in their 5G networks, prompting a warning from China that it would not "stand idly by" should Berlin proceed with the curb.

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U.S. bond yields have climbed to a significant 17-year high this week, following the Federal Reserve's decision to maintain a higher interest rate stance at its September policy meeting. The two-year U.S. Treasury note yield reached 5.2% on Thursday, marking a 1.4 percentage point increase since May and its highest level since 2006. The 10-year Treasury note yield is also nearing a 16-year high of 4.5%.

This surge in yields is largely attributable to the Federal Reserve's interest rate cuts in 2020, introduced in response to the Covid-19 pandemic. Investors flocked to safe assets like Treasuries, leading to an increase in Treasury prices and subsequently suppressed yields.

However, due to ongoing economic strength and a tight labor market fueling persistent inflationary pressures, the Federal Reserve is expected to continue its tightening policy well into 2023. This could potentially lead to further decreases in bond prices as markets anticipate a higher peak in the federal-funds rate this year and fewer cuts in 2024.

This trend of rising monetary policy rates isn't exclusive to the U.S., with 38 central banks worldwide reporting their highest rates since 1995 when adjusted for gross domestic product. With persistent inflation and a robust economy, interest rates are unlikely to revert to zero in the near future.

Investors are being advised to secure current yields through Treasuries, bank certificates of deposit, or other structured investments. Despite potential short-term increases, bond yields are expected to be significantly lower a year from now.

By 2024, the Federal Reserve is likely to ease off in response to progress on inflation and signs of slowing U.S. economic growth. This easing may not immediately involve cutting the federal-funds rate but will allow officials to signal that they have reached peak rates for this cycle more definitively.

Evidence suggests that the 10-year yield typically peaks a few months after the Federal Reserve's final rate hike, which could occur at the Federal Open Market Committee's November or December meetings. Other international central banks, such as the Bank of England, European Central Bank and the Swiss National Bank, appear to have ceased hiking their rates, while Brazil and Poland have started reducing interest rates from their recent peaks.

Despite the largest increase in bond yields in decades, the stock market has experienced a rally in 2023 due to expanding valuation multiples. However, the higher-for-longer interest rates pose a risk for stocks and offer upside potential for bond prices. In a weaker economy scenario that necessitates rate cuts, earnings may fail to meet expectations. Therefore, adding more bonds to a portfolio today can provide an attractive return rate and diversification, offering stability to investors' portfolios.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

MEXICO CITY (Reuters) -Mexico's foreign ministry urged U.S. authorities on Thursday not to take "unilateral measures" complicating trade at the border with the United States, as some ports of entry have been shut down.

U.S. officials have temporarily closed some border crossings to shift Customs and Border Protection (CBP) officers to process more migrant arrivals, limiting the flow of goods into the country.

Mexico added it was in constant contact with U.S. authorities and business leaders "to look for operations to be reestablished, given the situation."

Rail operator Union Pacific (NYSE:UNP) said thousands of tons of customer freight were stalled as train traffic to Mexico via Eagle Pass in Texas has halted.

The pass is one of the busiest gateways between the U.S. and Mexico and was shut as media outlets reported migrants from Mexico riding on rail cars to cross into the small Texas city.

"(Our) other gateways cannot handle the extra traffic and we are notifying customers of an embargo at Eagle Pass, effective immediately," Union Pacific said late on Wednesday.

The influx of migrants prompted Eagle Pass Mayor Rolando Salinas to issue emergency declaration, citing a "severe undocumented immigrant surge".

The situation is expected to continue for seven days from Tuesday, according to the city's official account on social media platform X, formerly Twitter.

Cargo processing at the Bridge of the Americas on the border between El Paso, Texas, and the Mexican city of Juarez was also halted this week because of more migrant arrivals.

Meanwhile, Mexican rail operator Ferromex recently stopped some cargo trains, bringing estimated losses of up to 40 million pesos ($2.32 million) a day, after a spate of deaths and serious injuries of migrants riding on them.

($1 = 17.2070 Mexican pesos)

In a historic settlement agreement reached by the Biden administration on Thursday, September 21, 2023, at least $6 billion in student loans is set to be forgiven for hundreds of thousands of borrowers. However, allegations of violations from a major student loan servicer have cast a shadow over the agreement.

The settlement, approved by the Supreme Court last spring, resolved Sweet v. Cardona, a class-action lawsuit initiated against the Trump administration by student loan borrowers. The lawsuit was filed over delayed or rejected applications for the Borrower Defense to Repayment program. This program allows students to apply for loan forgiveness if they can prove their school engaged in deceptive practices.

As part of the settlement, the Education Department committed to forgive $6 billion in student loans for over 200,000 applicants who attended an institution from an approved list of schools. Additional relief measures include refunds of past payments and corrections to damaged credit reports. The department also pledged to expedite processing for other borrowers applying for the Borrower Defense program.

Since its implementation earlier this year, federal student loan debt discharge has been initiated for at least 128,000 class members, according to the Project on Predatory Student Lending, the legal group representing the borrowers.

However, controversy arose when MOHELA, a major Education Department loan servicer, was accused by the Project on Predatory Student Lending of violating the terms of the Sweet v. Cardona settlement. MOHELA allegedly informed class members that they must resume loan repayments in October, contrary to the settlement agreement which states that approved borrowers should not be required to make payments while their loans are being discharged.

The Project on Predatory Student Lending raised concerns about this issue in a letter sent to MOHELA, warning that legal action could be pursued if the collections efforts continued.

This incident with MOHELA forms part of a wider issue as student loan payments resumed following the student loan pause last month. Over 40 million borrowers are now resuming repayment, amidst numerous reported problems including long call hold times and misinformation from loan servicers. The Consumer Financial Protection Bureau, a federal agency overseeing the financial services sector, has warned student loan servicers that it is monitoring the situation closely.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.