By Davide Barbuscia

NEW YORK (Reuters) – An optimistic outlook on the U.S. economy is prompting U.S. bond giant PIMCO to favor stocks and some other risk assets, while seeking protection against inflation as the new U.S. government could implement policies that put upward pressure on prices.

The bond-focused asset manager, with $2 trillion in assets, expects interest rate cuts by major central banks to boost both stocks and bonds going forward, with the two asset classes providing diversification by moving in opposite directions.

However, it is also cautious on the trajectory of inflation, partly due to possible fiscal and trade policies under the impending new administration of U.S. President-elect Donald Trump.

“Although restrictive central bank rates have brought inflation levels down close to targets, the long-term fiscal outlook in the U.S. includes continued high deficits, and geopolitical surprises could cause a spike in oil prices or snarl supply chains,” portfolio managers Erin Browne and Emmanuel Sharef said in a note on Wednesday.

“Trade policies, such as tariffs, and deglobalization trends could also pressure inflation higher,” they said.

The Federal Reserve is largely expected to cut interest rates for the third consecutive time at its next rate-setting meeting in December.

At the same time, recent strong economic data as well as expectations of inflationary policies under Trump, such as tariffs and a clamp down on illegal immigration, have prompted traders to trim bets on how deeply the U.S. central bank will be able to ease rates.

PIMCO expects a so-called soft landing for the U.S. economy – a scenario where inflation keeps declining without an economic contraction – but it also favors strategies such as equity options to mitigate geopolitical and monetary policy risks.

It said it is overweight U.S. Treasury Inflation-Protected Securities (TIPS), which remained an “attractively priced hedge” against the risk of rising inflation.

(Reuters) – Federal Reserve Governor Michelle Bowman, among the U.S. central bank’s most hawkish policymakers, on Wednesday called for a cautious approach to any further interest rate cuts, noting that inflation remains a concern and the labor market is strong.

The Fed reduced its policy rate earlier this month by a quarter of a percentage point to the 4.50%-4.75% range, a move that Bowman said she supported because it aligns with her preference for lowering short-term borrowing costs gradually. Bowman had cast a lone dissent on the Fed’s half-percentage-point rate reduction in September.

With inflation still elevated and progress toward the Fed’s 2% goal looking to have stalled, Bowman said in remarks prepared for delivery in West Palm Beach, Florida to the Forum Club of the Palm Beaches, “I would prefer to proceed cautiously in bringing the policy rate down to better assess how far we are from the end point, while recognizing that we have not yet achieved our inflation goal and closely watching the evolution of the labor market.”

Bowman said she believes the neutral policy rate – the level of borrowing costs that neither bolsters nor brakes economic growth – is much higher that it was before the COVID pandemic, “and therefore we may be closer to a neutral policy stance than we currently think.”

Indeed, she added, “we should also not rule out the risk that the policy rate may attain or even fall below its neutral level before we achieve our price stability goal.”

Bowman said she would watch incoming data and meet with a broad range of contacts before the Fed’s Dec. 17-18 meeting to assess the appropriateness of the current policy stance, and signaled that she feels the central bank is under no constraint to deliver another rate cut, as markets currently expect.

“I am pleased that the November post-meeting statement included a flexible, data-dependent approach, providing the (Federal Open Market) Committee with optionality in deciding future policy adjustments,” she said.

The bigger risk for the Fed is to its price stability goal, though deterioration in labor conditions is possible, she said.

(This story has been corrected to show Fed’s half-point rate cut was in September, not November, in paragraph 2)

PARIS (Reuters) – The Arnault family holding will not pressure LVMH brands into forging partnerships with Paris FC once it acquires a controlling stake in the French capital’s soccer club, Antoine Arnault, son of billionaire Bernard Arnault, said on Wednesday.

Instead, if brands want to do so, Antoine Arnault said he would put them in touch with the club but would not force them to strike a deal if it does not fit their brand strategy.

Arnault, who will represent Agache, the Arnault family’s holding company, on the second-tier French soccer club’s board, also said buying a controlling stake was a long-term investment.

“It’s important, sports-wise, to do things gradually, to build, grow and improve by doing things gradually, step by step, without rushing,” he told a press conference, adding: “We’re in it for the long run.”

The proposed takeover continues a trend of billionaires buying soccer clubs across Europe, while overhauling a Paris-based club that could potentially rival Ligue 1 champions Paris Saint Germain, owned by Qatar Sports Investments.

Paris FC have struggled to find a fan base, with the average attendance last season at just under 5,500 in their 19,000-capacity Charlety stadium despite tickets being free since last November.

Agache said last month that LVMH Chair Bernard Arnault had teamed up with energy drinks company Red Bull to enter into exclusive talks to buy a controlling stake in the club.

Paris FC’s current owner Pierre Ferracci told the same press conference that a deal was imminent.

MOSCOW (Reuters) – Russian consumer prices rose 0.37% in the latest week, up from 0.3% in the previous week, data showed, driven by price growth for butter, sunflower oil, dairy products and potatoes, pushing the headline figure since the start of the year to 7.4%.

The Economy Ministry estimated annual inflation to have reached 8.68% as of Nov. 18, up from 8.56% a week earlier.

Wednesday’s data suggested that inflation showed no signs of slowing despite monetary tightening measures, such as an interest rate hike on Oct. 25 to 21%, its highest level in over 20 years. Prices rose by 0.3% in the week before.

Prices for butter rose by 1.4% during the week. Earlier the government started to import butter from the United Arab Emirates and Turkey to contain the price growth, which has sparked cases of supermarket theft across Russia.

“Enterprises in the dairy industry have experienced increased costs for raw materials, logistics, and employee wages. One of the reasons for the rise in raw material costs is the increase in global prices for dairy fats,” the central bank said.

Prices for potatoes, a staple food for many Russians, have risen by 74% since last December, the data showed, an increase blamed by the central bank mainly on bad weather.

“Due to unfavourable weather conditions and a reduction in planted areas, Russian farmers harvested fewer potatoes than the previous year. This led to a decrease in supply,” it added.

The regulator also blamed the weaker rouble, which lost about 20% of its value against the dollar since early August, for growth in prices for imported fruits such as oranges, lemons and bananas. Prices for bananas grew by 1.2% in the latest week.

The central bank raised its year-end inflation forecast to between 8.0% and 8.5% at its latest rate-setting meeting, while the government still maintains its forecast of 7.3%.

The Economy Ministry said the government was considering import relief for potatoes, onions, carrots, cabbage, and apples as well as an extension of a rice export ban into 2025 as part of price control measures.

By Howard Schneider

CHARLOTTESVILLE, Va. (Reuters) – U.S. inflation continues to ease, with wages and the job market cooling and excess price increases largely confined to housing, a situation in which it will likely remain appropriate to continue cutting interest rates, Federal Reserve Governor Lisa Cook said on Wednesday.

“The totality of the data suggests that a disinflationary trajectory is still in place and that the labor market is gradually cooling,” Cook said in comments prepared for delivery at the University of Virginia.

“In my view, it likely will be appropriate to move the policy rate toward a more neutral stance over time,” Cook said, while adding that the “magnitude and timing of rate cuts will depend on incoming data” that could push the Fed to accelerate or pause cuts if, for example, the labor market starts to weaken dramatically or if inflation proves stickier than expected.

Still, Cook said she envisions inflation falling to 2.2% next year and lower after that amid continued economic expansion and a labor market she described as “solid.”

“If the labor market and inflation continue to progress in line with my forecast, it could well be appropriate to lower the level of policy restriction over time until we near the neutral rate of interest,” said Cook, without specifying what she considers the neutral rate – where Fed policy neither stimulates nor restrains the economy – to be.

The current benchmark rate is set in a range of 4.50% to 4.75% percent, and Cook said she felt the three-quarters-of-a-percentage-point lopped from it at the Fed’s two prior meetings was “a strong step toward removing policy restriction.”

Cook did not explicitly endorse a rate cut at the Fed’s next meeting on Dec. 17-18.

Investors have grown less confident about whether the Fed will deliver another quarter-point at that meeting, with the odds attached to that slipping since the election of former president Donald Trump to a second term introduced the possibility of tariffs, tax cuts and immigration restrictions that could change the direction of growth, employment and inflation in uncertain ways. Current odds on CME Group’s (NASDAQ:CME) Fed Watch tool reflect about a 55%-to-45% split modestly in favor of another cut.

Growth and spending data in the meantime have also pointed to an economy that remains on solid footing, with inflation running slightly higher than anticipated.

NEW DELHI (Reuters) -India might undershoot its capex target of 11.1 trillion rupees ($131.72 billion) for fiscal year 2024-25 by around 5%, a top finance ministry official said on Wednesday.

The Indian government’s infrastructure spending, critical to one of the world’s fastest economic growth rates, has been slow in the current year due to national elections.

“Even last year, it (capital expenditure) was budgeted at 10 (trillion rupees), and expenditure was about 95%. I see even this year we should be around the same percentage,” economic affairs secretary Ajay Seth said at an event in New Delhi.

Between April and September, the government spent just over 37% of its budgeted target of 11.1 trillion rupees for 2024-25, compared with 49% of the previous year’s target, according to government figures.

Some goods and services may not have grown at the same pace as last year in the July-September quarter, but the government sees no downside risks to its growth projection of 6.5%-7% for fiscal year 2024-25, Seth said.

Food prices are a problem area but, other than that, inflation poses no challenge, Seth said.

Retail inflation in India soared to its highest level in 14 months in October, partly due to high prices of edible oils, onions and tomatoes.

(Reuters) – Uncertainties around U.S. policies may slow global economic growth modestly in 2025, according to major brokerages. They expect U.S. President-elect Donald Trump’s proposed tariffs to fuel volatility across global markets, spurring inflationary pressures and, in turn, limiting the scope for major central banks to ease monetary policy.

World economies and equity markets have had a robust year, with global growth expected to average 3.1% this year, a Reuters poll published in October showed.

Following are forecasts from some top banks on economic growth, inflation and the performance of major asset classes in 2025:

Forecasts for stocks, currencies and bonds:

Brokerage S&P 500 US 10-year EUR/USD USD/JPY USD/CNY

target yield target

UBS Global 6400 3.80 1.04 157.0 7.60

Research

Goldman Sachs 6500 (next 4.25%(next 1.03(next 159(next 7.50(next

12-months) 12-months) 12-months 12-months 12-months)

) )

Nomura 135 6.93

Barclays (LON:BARC)

Morgan Stanley (NYSE:MS) 6500

J.P.Morgan 4.10 (Q3’25)

U.S. Inflation:

U.S. inflation (annual Y/Y for 2025)

Brokerage Headline CPI Core PCE

Goldman Sachs 2.5% 2.4%

J.P.Morgan 2.4% 2.3%

Morgan Stanley 2.3% 2.5% (4Q/4Q)

Barclays 2.3% 2.5%

Real GDP Growth:

Real GDP growth forecasts for 2025

Brokerage GLOBAL U.S. CHINA EURO AREA UK INDIA

UBS Global 2.9% 1.9% 4.0% 0.9% 1.5% 6.3% (for

Research FY 26)

Goldman Sachs 2.7% 2.5% 4.5% 0.8% 1.3% 6.3%

Barclays 3.0% 2.1% 4% 0.7% 1.2% 7.2%

Morgan Stanley 3.0% 2.1% 4.0% 1.0% 1.4% 6.5%

(FY25/FY2

6)

J.P.Morgan 2.4% 2.2% 3.9% 0.8% 1.0% 6.0%

Citigroup (NYSE:C) 1.1% 1.0%

Nomura 4.0% 6.9%

By Duncan Miriri

NAIROBI (Reuters) -Kenya has secured a $200 million loan from the African Development Bank and is in talks with the World Bank for a new $750 million loan, the finance ministry’s head of debt management told Reuters.

The East African nation’s government, which has been struggling with heavy debt, has been scrambling for new financing after deadly protests in June forced it to scrap planned tax hikes worth more than 346 billion shillings ($2.68 billion).

Raphael Owino, the director general of the Finance Ministry’s public debt management office, told Reuters that the IMF’s October approval of the seventh and eighth reviews, which paved the way for a $606 million loan tranche, had helped in its discussions for other lending.

“The World Bank is coming on board, riding on the back of IMF receipts,” Owino said. “The AfDB is already on board.”

A spokesperson in the World Bank’s Kenya office confirmed the talks for new funding, which fell under its “Development Policy Operations” (DPO) with the government.

“The amount of the current (loan) is yet to be determined. The amount will also depend on the implementation of the policy reforms agreed upon,” the spokesperson told Reuters, adding that past DPO loans averaged about $750 million.

The World Bank signed off on the most recent set of DPO loans, worth a total of $1.2 billion, in May.

Kenya has set the foreign borrowing target for the financial year to the end of June 2025 at 168 billion shillings, Finance Minister John Mbadi said last month.

($1 = 129.0000 Kenyan shillings)

By Indradip Ghosh

BENGALURU (Reuters) – The U.S. Federal Reserve will trim interest rates next month but make shallower cuts in 2025 than expected just a month ago due to the risk of higher inflation from President-elect Donald Trump’s proposed policies, according to most economists in a Reuters poll.

Prospects for a price resurgence based on his planned policies, including higher tariffs and tax reductions, led markets to nearly halve rate cut pricing to around 75 basis points by end-2025 over the past few weeks.

Relentless economic strength, stubborn inflation and stock markets flirting with record highs have become barriers against hasty rate cuts. Fed Chair Jerome Powell said last week “the economy is not sending any signals that we need to be in a hurry to lower rates.”

Still, nearly 90% of economists, 94 of 106, in the Nov. 12-20 Reuters poll expected a 25bp cut in December, taking the fed funds rate to 4.25%-4.50%. Twelve expected no change, compared to only three in last month’s survey.

But market pricing showed there is now less than a 60% chance of a December cut. Until recently only a few were betting against such a move.

“We’re still calling for a December cut. We think the data will behave. But you can see why markets kind of pricing another sort of coin flip…the economy is still very strong, inflation is still running above target,” said Stephen Juneau, a U.S. economist at Bank of America.

“We’ll see deregulation, easier fiscal policy, more protectionist trade policy and a tighter immigration stance. They all kind of pose an upside risk to inflation…the Fed is unlikely to cut as deeply as we previously considered because they’re going to see inflation continue to be stuck above their target.”

BofA recently upped its terminal fed funds rate forecast to 3.75%-4.00% from 3.00%-3.25%.

The inflation outlook over the next two years was broadly upgraded from last month, poll medians showed, with personal consumption expenditures (PCE) inflation – the Fed’s preferred gauge – predicted to mostly remain above the Fed’s 2% target until at least 2027.

An 85% majority, 57 of 67 respondents, said the risk of inflation resuming next year had risen.

Most economists said Trump’s proposed tariffs would be implemented early next year, which according to a strong majority, 44 of 51 will have a significant impact on the U.S. economy.

Tariffs on imports from China could shave up to 1 percentage point from Chinese economic growth next year, a separate Reuters poll showed.

“A universal tariff… on all imported goods and even higher tariffs on Chinese goods are likely to lead to a rebound in inflation,” said Philip Marey, senior U.S. strategist at Rabobank.

“Keep in mind unemployment is still relatively low and, especially with increased border security, it would not take long for wage pressures to creep back up. This only reinforces our long-held call the Fed’s cutting cycle will be cut short in 2025.”

The Fed will deliver a 25bps cut in the first three quarters but then be on hold, poll medians showed, putting the fed funds rate at 3.50%-3.75% by end-2025, 50bps higher than last month’s projection. But there was no clear consensus.

Nearly 30% of economists, 29 of 99, predicted the rate to be in a 3.75%-4.00% range or higher and 28 saw it at 3.50%-3.75%, higher than the Fed’s 2.9% current estimate of the neutral rate, which neither stimulates nor restrains the economy.

Among 72 common contributors in this and last month’s poll, two-thirds, 48, lifted their end-2025 rate forecasts by around 50bps on average.

The U.S. economy, which grew an annualized 2.8% last quarter, will expand 2.7% this year and 2% in 2025 and 2026, poll medians showed. That is faster than what Fed officials currently see as the non-inflationary growth rate of 1.8% over coming years.

(Other stories from the Reuters global economic poll)

SANTIAGO (Reuters) – Tighter external financing conditions could impact Chile’s households, businesses and mortgages, increasing default risks they might face, the central bank said on Wednesday.

In its Financial Stability Report for the second half of the year, the bank said households’ financial position continues to improve but remains below pre-pandemic levels.

It said the local banking system had enough guarantees and capital to withstand severe shocks. Despite that, the bank said the main risk to domestic financial stability was posed by external factors.

“Elevated levels of public and private debt in the world, along with high deficits, are the main worry,” the report said, noting this had led to high long-term interest rates.

It added that rising geopolitical tensions over the past few months could have a negative impact on stability. Those most impacted would be groups the bank considers “most vulnerable”.

On Tuesday the bank’s board voted unanimously to keep capital requirements for risk assets at the current level of 0.5%, a measure activated in May 2023 that obliges banks to set aside a cushion to absorb potential losses.