By Timothy Gardner

WASHINGTON (Reuters) – U.S. President Joe Biden’s administration has protected about 84%, or $96.7 billion in clean energy grants created by its signature climate law from any clawback by the next administration, a White House official said on Friday.

WHY IT’S IMPORTANT

The 84% of the grants from the Inflation Reduction Act have been “obligated”, meaning contracts have been signed between U.S. agencies and recipients. The outgoing administration hopes this will help to continue the deployment of clean energy even after Monday’s inauguration of President-elect Donald Trump, a climate change skeptic who has pledged to rescind all unspent IRA funds.

BY THE NUMBERS

Here are examples of programs that have been obligated. About 94% of Department of Energy funding for state energy efficiency rebate programs for home retrofits and appliances, or about $8.8 billion, has been obligated. A U.S. Department of Agriculture program to help electric co-ops to procure more clean energy has been 97% obligated, or about $9.45 billion. At the Environmental Protection Agency, some $38 billion has been obligated, with 100% in a greenhouse gas reduction fund obligated and about 94% of all of its IRA grant programs obligated.

Some $11 billion has been announced but not obligated. Much of that is for upcoming fiscal years and for USDA programs.

KEY QUOTES

“This is all big progress and ensures that these investments should actually flow to communities and recipients as intended,” Kristina Costa, a deputy assistant to Biden and director of the clean energy office at the White House, told Reuters.

Even though some $11 billion in funds are not obligated, the fact that they have been announced publicly “creates some political pressure to not rescind those commitments, particularly in areas where those programs are going to Republican states and districts in rural areas and otherwise,” Costa said.

By David Ljunggren

(Reuters) – Canada’s ruling Liberal Party is looking for a new leader to replace Prime Minister Justin Trudeau, who announced on Jan. 6 he intended to step down.

The Liberal Party will pick a new chief on March 9.

Former Finance Minister Chrystia Freeland said on Friday she was running. Former Bank of Canada Governor Mark Carney announced his candidacy on Thursday.

Here are the top contenders.

FORMER FINANCE MINISTER CHRYSTIA FREELAND

Freeland, 56, was one of Trudeau’s closest allies during his nine years in power and had been serving as finance minister. Freeland unexpectedly resigned in December after an argument over spending and penned a letter attacking the prime minister’s leadership and his love of “political gimmicks.” 

Freeland, the most high-profile member of the government after Trudeau, had been finance minister since August 2020 and helped craft the government’s multi-billion-dollar social spending program to help fight the pandemic. 

She had previously been foreign minister and led the Canadian team that successfully renegotiated a trilateral trade deal with the United States and Mexico after then-President Donald Trump threatened to tear up the agreement. 

She joined the government in November 2015, first serving as trade minister. Before entering politics in 2013, Freeland worked as a journalist and in senior editorial roles with several media companies, including the Financial Times, the Globe and Mail, and Reuters, where she worked from 2010 to 2013. She has written two books.

FORMER BANK OF CANADA GOVERNOR MARK CARNEY

Carney, 59, is the only major candidate who is not part of the Trudeau government. Carney’s name has been circulating for years as a potential Liberal leader, largely thanks to his financial credentials. He launched his bid for the leadership on Thursday, casting himself as an outsider who was not part of Trudeau’s unpopular government and said he wanted to focus on the struggling economy.

Carney worked for Goldman Sachs before joining the Canadian finance ministry in 2004. He was named Bank of Canada governor in 2007 and quickly had to deal with the after-effects of the global financial crisis in 2008. In 2013, he took over as governor of the Bank of England, becoming the first person to head two major central banks. 

Carney forecast the economic damage that would result if Britain left the European Union, prompting attacks from pro-Brexit advocates. After leaving the bank in 2020, he was appointed United Nations special envoy for climate action and finance. He was vice chairman at Brookfield Asset Management (TSX:BAM) but has stepped down from the role to campaign.

HOUSE LEADER KARINA GOULD

Gould, 37, is seeking to become the first female leader of the Liberal Party. She entered parliament in 2015 and was named minister of democratic institutions in January 2017, becoming the youngest-ever female cabinet minister at age 29. Although she pushed through some voting reforms, her ministry was dissolved after the 2019 election and she took over the relatively low-key foreign aid ministry. She also became the first federal cabinet minister to take a maternity leave after giving birth in 2018. She became minister of families in 2021 and in 2023 was named the Liberals’ House of Commons leader.

Three other people have announced they intend to take part but they have little chance of winning. They are backbench legislators Chandra Arya and Jaime Battiste as well as former member of parliament Frank Baylis.   

By Andrea Shalal

WASHINGTON (Reuters) – The International Monetary Fund on Friday raised its forecast for global growth in 2025 by one-tenth of a percentage point, with stronger-than-expected growth in the U.S. offsetting downward revisions in Germany, France and other major economies.

In its latest World Economic Outlook, the IMF projected global growth of 3.3% in both 2025 and 2026, and said global headline inflation was set to drop to 4.2% in 2025 and 3.5% in 2026, allowing a further normalization of monetary policy and ending the global disruptions of recent years.

But it said global growth remained below the historical average of 3.7% from 2000-2019, and warned countries against unilateral measures such as tariffs, non-tariff barriers or subsidies that could hurt trading partners and spur retaliation.

Such policies “rarely improve domestic prospects durably” and may leave “every country worse off,” IMF chief economist Pierre-Olivier Gourinchas said in a blog released Friday.

The new IMF forecast comes days before the inauguration of U.S. President-elect Donald Trump, who has proposed a 10% tariff on global imports, a 25% punitive duty on imports from Canada and Mexico until they clamp down on drugs and migrants crossing borders into the U.S., and a 60% tariff on Chinese goods.

“An intensification of protectionist policies, for instance in the form of a new wave of tariffs, could exacerbate trade tensions, lower investment, reduce market efficiency, distort trade flows and again disrupt supply chains,” the IMF said, noting growth could suffer both in the near and medium term.

Gourinchas told Reuters there was clearly “tremendous uncertainty” about future U.S. policies that was already affecting global markets, but the global lender needed to wait for specifics to draw clearer conclusions.

Rising confidence and positive sentiment in the U.S. could boost demand and spur near-term growth, but excessive deregulation especially in the financial sector could “generate boom-bust dynamics for the United States in the longer term, with repercussions for the rest of the world,” the IMF wrote.

DIGITAL CURRENCY OVERSIGHT

Gourinchas said the IMF would be looking carefully at any moves by the incoming U.S. administration to deregulate digital currencies, noting the need to ensure adequate oversight of cross-border payments to avert future “runs” on the system.

“The payment system is the blood that irrigates the economy, and if there is the emergence of alternative forms of payments, and these become important in the economy, you also have the potential for collapses or runs,” he said.

“This is a very fluid environment, but there is a need to be careful if there is a concentration of risks, if a few actors become critical for the payment system,” he said.

Tariffs could make it harder for businesses to get needed inputs, leading to higher prices, and immigration restrictions – also promised by the incoming Trump administration – could lead to labor constraints, which could also raise costs, he said.

Higher inflation would prevent the Federal Reserve from cutting interest rates as initially planned, he told reporters, adding that new U.S. policies would also likely strengthen the U.S. dollar and tighten financial conditions elsewhere.

Looser U.S. monetary policy, driven by tax cuts and other expansionary measures, could boost economic activity in the near term, but could require bigger fiscal adjustments later on that could then weaken the role of U.S. Treasuries as a global safe asset and lead to fiscal vulnerabilities, the IMF said.

“The increase in U.S. long-term yields, despite the Federal Reserve easing, reflects some market nervousness about future policies,” Gourinchas told a news conference.

DIVERGENT TRENDS

The IMF said it raised its growth forecast for the United States to 2.7% based on robust labor markets and accelerating investment, an increase of half a percentage point from its October forecast, with growth to taper to 2.1% next year.

It cut its euro area forecast by 0.2 percentage points to 1.0% for 2025, and by 0.1 percentage point to 1.4% for 2026, citing weaker-than-expected momentum in manufacturing and heightened political and policy uncertainty.

Gourinchas said the divergence between the United States and Europe was due to structural factors, reflecting stronger U.S. productivity growth particularly in the technology sector. It would linger, unless issues such as the business environment and deeper capital markets were addressed.

The IMF nudged its China growth forecast up by 0.1 percentage point to 4.6%, and by 0.4 percentage point to 4.5% for 2026, citing a fiscal stimulus package unveiled in November.

Gourinchas said China notified the IMF late on Thursday that its economy grew by 5% in 2024, a “positive surprise” compared to the IMF’s forecast of 4.8%. But he said Beijing said still needed to make domestic demand a bigger engine of its growth and stop relying solely on external demand.

The IMF cut the forecast for the Middle East and Central Asia region by 0.3 percentage point to 3.6% in 2025 and by the same amount to 3.9% for 2026, largely due to a downward revision for Saudi Arabia given recent voluntary oil production cuts.

DISINFLATION CONTINUING

The IMF said progress on lowering inflation was expected to continue, helped by the gradual cooling of labor markets and an expected decline in energy prices.

But new inflationary pressures fueled by increased trade tensions could arise that could result in higher-for-longer interest rates and strengthen the dollar.

In a blog accompanying the outlook, Gourinchas said central bankers had successfully reassured consumers they would keep a grip on inflation during the last surge, but expectations could become de-anchored if price pressures emerged again so soon after the recent surge. That meant monetary policy would need to be more “agile and proactive,” he said.

“The danger is that some of that … credibility capital may have been eroded,” he said, noting that households could be “very cautious and very reactive” if prices started rising again.

WASHINGTON (Reuters) – The Bank of Japan is expected to hike interest rates twice in 2025 and twice more in 2026, International Monetary Fund chief economist Pierre-Olivier Gourinchas said on Friday.

In its latest World Economic Outlook, the IMF forecast that Japan’s economy would grow by 1.1% in 2025, moderating slightly to growth of 0.8% in 2026, leaving its October forecast unchanged.

“We’re … expecting that there will be something like two more rate hikes by the Bank of Japan in 2025 and two additional rate hikes in 2026,” Gourinchas said, adding that the gradual pace of tightening was warranted and would ensure that the economy was able to meet its inflation target.

By Andrea Shalal

WASHINGTON (Reuters) – China notified the International Monetary Fund on Thursday that its economy grew by 5% in 2024, IMF Chief Economist Pierre-Olivier Gourinchas told reporters, calling the development a “positive surprise” compared to the IMF’s forecast of 4.8%.

Gourinchas said the IMF had increased its forecast for Chinese growth slightly to 4.6% for 2025 and by four-tenths of a percentage point to 4.5% for 2026, reflecting some increased momentum caused by fiscal measures, although that was offset by trade policy uncertainty.

But he stressed that China, the world’s second-largest economy, still needed to make domestic demand a bigger engine of its growth, a message long delivered by the IMF to Chinese authorities, but that had not happened yet.

“The Chinese economy needs to pivot to a more domestically-driven engine of growth,” Gourinchas said during an online news conference on Friday, adding that it would become increasingly difficult for the Chinese economy to expand through external trade alone.

“China is a very large economy, and it cannot just rely on the rest of the world to fuel its own domestic growth,” he said, adding that Chinese authorities had adopted some measures to move in that direction, but more work was needed.

Any weakness in the Chinese economy would have spillover effects for many emerging and developing countries, posing a risk factor for the global economy, he said.

The IMF forecast Chinese growth would stabilize at 4.5% in 2026 as trade uncertainty dissipated and higher retirement ages slowed the decline in the country’s labor supply.

China’s top legislative body in September approved plans to raise the retirement age for men to 63 from 60, and to 58 from 55 for women in white-collar work. For women in blue-collar jobs it increased to 55 from 50.

(Reuters) – Fastenal (NASDAQ:FAST) posted fourth-quarter profit below analysts’ estimates on Friday, as a sustained slowdown in construction sector dented demand for its fasteners and other safety products.

Shares of the Winona, Minnesota-based company fell 5.7% in premarket trading.

U.S. construction activity has slowed due to increased financing costs for big projects amid higher interest rates, hurting demand for industrial supplies.

“Slow rate of growth was exacerbated by many of our largest customers enacting unusually sharp production cuts in the last two weeks of December during holiday-related plant shutdowns,” Fastenal said.

Sales of fasteners, one of the core segments of the wholesale distributor, fell to 29.9% of the company’s total sales, compared with 31.1% a year earlier.

Fastenal posted a profit of 46 cents per share in the fourth quarter, while analysts on average had expected 48 cents, as per data compiled by LSEG.

Its total revenue for the quarter rose 3.7% from a year earlier to about $1.82 billion, but missed estimates of $1.84 billion.

By Gabriel Burin

BUENOS AIRES (Reuters) – Mexico’s economy will stay sluggish this year, a Reuters poll of economists found, as the country braces for a possible radical shift in U.S. tariff and migration rules that could dramatically worsen the outlook.

Private spending and investment, already weakened by this high uncertainty and elevated interest rates, is likely to receive some support from steps focused on low-wage earners and on certain industrial sectors.

But Mexicans are waiting for U.S. President-elect Donald Trump’s inauguration on Jan. 20 to see if he carries through on a threat to levy 25% tariffs on goods crossing the border. Mexico currently has a free trade agreement with the U.S. and Canada.

In Mexico, Latin America’s No.2 economy after Brazil, gross domestic product is set to expand 1.2% in 2025 compared to 1.6% last year, according to the median estimate of 32 economists polled Jan. 9-16.

“Growth prospects are weighed down by three main factors: reduced private consumption resilience, weaker export performance, and declining fixed investment influenced by U.S. political uncertainty and Mexico’s legislative agenda,” wrote Pamela Diaz Loubet, Mexico economist at BNP Paribas (OTC:BNPQY).

“Although nearshoring remains a long-term opportunity, political noise and investor hesitation are delaying expected capital inflows, which were previously seen as drivers of recovery.”

The administration of Mexico’s President Claudia Sheinbaum has signalled it expects to avoid the tariffs threatened by Trump with actions on illegal migration and drug trafficking to placate U.S. concerns.

In another apparent nod, Mexico presented a plan to curb imports from China following Trump’s allegations it had become a back door for Chinese goods entering the United States.

But even with a government currently focused on fiscal restraint and global bond yields on the rise, the poll suggests the central bank, Banxico, has limited room to ease policy more aggressively to support activity in a worst-case scenario.

The bank cut its benchmark rate to 10% from a record high of 11.25% in five quarter-percentage point moves last year. It is forecast to reduce them by another 150 basis points to 8.50% by the end of 2025, poll medians showed. 

Asked how would the central bank react if Washington announces new tariffs on Mexico this month, seven of 11 respondents said it should maintain the currently expected path for monetary easing.

Three said it would cut rates less than currently expected, while only one expected deeper reductions.

“Even though higher tariffs would add headwinds to growth in Mexico, the immediate response is to at most maintain the pace of cuts – no acceleration to 50 basis points moves,” said Alberto Ramos, head of Latin America economic research at Goldman Sachs.

“It will be difficult for Banxico to pursue a very dovish path. In doing so they would elicit a negative market reaction that could lead to tighter rather than looser financial conditions, and soon force the central bank to return to a conservative stance.”

(Other stories from the Reuters global economic poll)

(Reporting and polling by Gabriel Burin in Buenos Aires; additional reporting and polling by Noe Torres in Mexico City; Editing by Ross Finley and Tomasz Janowski)

LONDON (Reuters) -Britain’s Financial and Conduct Authority (FCA) said on Friday it would collaborate with the government on a new approach that supports economic growth, after finance minister Rachel Reeves called on regulators to remove barriers to growth.

“We want to collaborate with you in a fundamentally different way to support the growth mission,” FCA Chief Executive Nikhil Rathi wrote in a letter sent Thursday to Prime Minister Keir Starmer and finance minister Rachel Reeves.

Reeves has urged Britain’s regulators to eliminate barriers to growth, tasking them with creating a regulatory environment that boosts investment and innovation.

She has also called on regulators to institute cultural change to deliver growth instead of focusing “excessively” on managing risk.

“To achieve the deep reforms necessary, your acceptance that we will take greater risks and rigorously prioritise resources is crucial,” Rathi said in the letter. “Growth will be a cornerstone of our strategy, through to 2030.”

Setting out a series of proposals for reform, Rathi said the FCA would aim to boost capital investment, speed up digital innovation and reduce the regulatory burden for startups and other busineses.

Among the proposed digital reforms, Rathi said the FCA was considering removing a 100-pound ($122) cap on payments with contactless cards, giving businesses and consumers more flexibility.

($1 = 0.8202 pounds)

SINGAPORE (Reuters) – Financial markets are betting China will not use the yuan as a policy tool to offset expected U.S. tariffs in a second Donald Trump presidency, based on a view that sharp depreciation like that seen in his first term will be more harmful than helpful to the struggling economy.

From the pricing of yuan forwards to interest rate derivatives and analysts’ forecasts, indications are that China is already permitting a slow depreciation of the yuan to adjust to a broadly stronger dollar as it braces for Trump 2.0.

But pricing also shows investors are expecting a gradual, moderate depreciation, with sell-side analysts seeing a 5-6% drop from current levels by year end.

During Trump’s first term as president, the yuan was allowed to weaken more than 12% against the dollar during a series of tit-for-tat U.S-Sino tariff announcements between March 2018 and May 2020.

Trump has threatened tariffs of up to 60% on imports of Chinese goods during his second term beginning on Monday, though some reports suggest levies may be ramped up gradually.

But things are different now, analysts say. The yuan is already weak, the economy is fragile, portfolio money has been leaving China, and its exports to America are a smaller proportion of its overall global trade, too small to justify a big devaluation.

The yuan, or renminbi as it is also known, has been languishing near 16-month lows against the dollar for days and has fallen for three straight years. It was near record highs of 6.3 per dollar in 2018.

Reuters reported last month that there are discussions in official circles about allowing it to fall to 7.5 per dollar, a roughly 2% drop from current levels.

Most of that depreciation, though, will likely come a result of interest rate differentials between the U.S. and China, which have widened to about 300 basis points.

The dollar is already elevated at current levels around 7.3 yuan, and “to break this level significantly higher is not realistic,” said Ju Wang, head of Greater China FX and rates strategy at BNP Paribas (OTC:BNPQY).

Wang pointed to how nearly half of China’s $1 trillion trade surplus was with countries other than the United States, particularly neighbours such as Vietnam that have grown as hubs for finishing Chinese manufactured goods.

In both the 2015 and 2019 periods of sharp yuan falls, China was forced to defend its policy and explain it was not engaging in any kind of beggar-thy-neighbour currency devaluation tactic. A cheaper exchange rate helps exporters by making their prices more competitive internationally.

“There is a responsibility on China’s side to keep the currency relatively stable because you still enjoy a fairly large trade surplus with the rest of the world. The world cannot take on a one-to-one adjustment in dollar-yuan against the tariff,” said Wang.

When asked about the yuan, the People’s Bank of China (PBOC) told Reuters on Friday the country has sufficient foreign exchange reserves and more experience in responding to external shocks … “so it has the confidence, conditions and ability to keep the renminbi exchange rate fundamentally stable at a reasonable equilibrium level”.

STABILITY IS KEY

Domestic considerations about the sluggish economy also call for a stable financial system and currency so residents and businesses don’t shift their savings abroad.

Falling domestic bond yields and wobbly stock and property markets have hastened that rush to hoard dollars.

“If the renminbi becomes a very unstable currency, people will try to convert it into U.S. dollars, buy gold, et cetera. Which is not what the PBOC wants,” said Vincent Chan, China strategist at Aletheia Capital.

While it has been difficult to interpret the PBOC’s plans for the yuan, it has made every effort to contain the currency’s weakness, so much so that it stays strong in trade-weighted terms.

The trade-weighted CFETS yuan index, which measures the Chinese currency against a basket of 25 peers, remains near its highest level in over two years, showing the yuan so far remains slightly less competitive than currencies of its trading partners.

Authorities have put a floor under falling domestic yields, including by suspending a bond purchase programme. They have encouraged companies to borrow abroad to attract more dollars home and the central bank has often fixed the yuan’s trading band at a stronger level than market expectations.

While China’s leaders pledged in December to loosen monetary policy and take other steps to support economic growth in 2025, interest rate swaps show markets are pricing out the odds of rate cuts, because they think the PBOC will prioritise yuan stability.

Alpine Macro (BCBA:BMAm)’s China strategist Yan Wang sees the 7.7 level in dollar/yuan as the upper limit for the PBOC, implying about a further 5% decline.

“Yuan pressures in the near-term may be hard to avert,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho (NYSE:MFG). “But it may be managed such that trade-weighted yuan stability is not unduly compromised.”

($1 = 7.3317 Chinese yuan renminbi)

By Andy Bruce

(Reuters) – British government bonds rallied for a third day running on Friday, all but wiping out a sharp spike in yields since the start of the year that had briefly prompted comparisons with former Prime Minister Liz Truss’ “mini-budget” crisis of 2022.

Yields across the range of gilt maturities had fallen by around 6 basis points on the day as of 1200 GMT, pushed lower by figures showing an unexpected fall in British retail sales in December that added to a run of lacklustre economic data.

The 10-year gilt yield stood at 4.622%, on track for its biggest weekly fall since July and down 30 basis points from a peak hit on Jan. 9 of 4.925%, which was its highest yield since 2008.

Last week’s lurch higher in yields was spurred mostly by shifting U.S. markets, but it put pressure on finance minister Rachel Reeves because it raised the risk that she would not meet her own fiscal rules without further tax rises or spending cuts.

On Wednesday, Britain’s opposition Conservative Party said Reeves did not have the confidence of the market, citing the moves in bonds.

But the gilt market has rallied over the last three days, in part due to downbeat economic data – with retail sales sliding unexpectedly in December – and the increasing likelihood of a Bank of England interest rate cut on Feb. 6.

The 10-year gilt yield has now increased only 5 basis points since the end of 2024 – meaning it has outperformed the equivalent benchmark bond from every other Group of Seven advanced economy bar the United States.

However, 10-year yields are still around 0.35 percentage points higher than when Reeves delivered her first budget on Oct. 30, which set out plans for higher taxes and greater borrowing to fund investment.

Thirty-year gilt yields – which bore the brunt of the selloff and touched their highest since 1998 on Monday at 5.472% – are now just 6 basis points higher than at the end of 2024 at 5.17%.

Investors on Friday priced in 68 basis points of interest rate cuts from the Bank of England by the end of the year – or between two and three 0.25 percentage point reductions – compared with fewer than 50 bps earlier in the week.

“We still think this is on the low side – we continue to forecast 100 bps of cuts,” said Andrew Goodwin, chief UK economist at Oxford Economics. “If we’re proven right on Bank Rate there’s still scope for yields at the longer end to fall.”