By Andy Bruce

LEEDS, England (Reuters) -The Bank of England should move quickly to bring down interest rates given signs of a slowdown in Britain’s economy, Alan Taylor, the BoE’s most recently appointed interest rate setter, said on Wednesday.

Taylor, an economics professor, voted to cut rates in November – when Bank Rate was cut to its current level of 4.75% – and again in December when the Monetary Policy Committee majority left it unchanged.

“We are in the last half mile on inflation, but with the economy weakening, it’s time to get interest rates back toward normal to sustain a soft landing,” Taylor said in the text of a speech he was due deliver at Leeds University.

“It is this logic that convinced me to vote for an interest rate cut in December.”

The BoE has reduced its benchmark Bank Rate twice since August – less than other central banks – and it has stressed it is likely to move gradually on further interest rate cuts, given persistent inflation pressures in Britain’s economy.

Taylor said he thought the risks around inflation had shifted in the last 12 months, by slowing more quickly than expected over 2024.

Sterling fell against the dollar around the time Taylor’s speech text was published, losing about a third of a cent.

Data published earlier on Wednesday showed Britain’s headline rate of inflation slowed to 2.5% in December, down from 2.6% in November, and underlying measures of price growth watched closely by the BoE cooled more quickly.

Taylor said that while the risks posed by inflation appeared to be fading, the possibility of a downside scenario for Britain’s economy had increased and, even if it was not his base case, it was appropriate to cut rates in response.

“Right now, I think it makes sense to cut rates pre-emptively to take out a little insurance against this change in the balance of risks, given that our policy rate is still far above neutral and would still remain very restrictive,” he said.

By Michael S. Derby

HARTFORD, Connecticut (Reuters) – Federal Reserve Bank of New York President John Williams said Wednesday that future monetary policy actions will be driven by economic data as the central bank confronts a high level of uncertainty in large part driven by potential government policy changes.

“Monetary policy is well positioned to keep the risks to our goals in balance” and “the path for monetary policy will depend on the data,” Williams said in the text of a speech prepared for delivery before the CBIA Economic Summit and Outlook 2025 in Hartford, Connecticut.

Williams, who also serves as vice-chairman of the interest-rate setting Federal Open Market Committee, pointed to the government as a key source of what limits him in providing guidance about the outlook for monetary policy.

“The economic outlook remains highly uncertain, especially around potential fiscal, trade, immigration, and regulatory policies,” Williams said, “therefore, our decisions on future monetary policy actions will continue to be based on the totality of the data, the evolution of the economic outlook, and the risks to achieving our dual mandate goals.”

At the Fed’s most recent policy meeting held last month central bankers lowered their federal funds target rate range by a quarter percentage point to between 4.25% and 4.5%. As part of updated forecasts they also trimmed estimates of rate cuts for the current year and pushed up forecasts of inflation in the wake of recent data that had been showing sticky price pressures.

The return of Donald Trump as president has cast a cloud over the outlook, with the president-elect having campaigned on trade and immigration policies economists generally believe will push inflation higher and complicate the Fed’s work of getting inflation back down to 2%.

In his remarks, Williams said the economy was in good shape and had returned to balance after the disturbances of the pandemic years. He said the process of disinflation is likely to continue but added it could take a while, noting he sees a return to the 2% target “in the coming years.”

Williams also said that he expects growth in the nation’s gross domestic product to moderate to 2% as the unemployment rate holds around 4% to 4.25%.

Williams also said the Fed’s balance sheet drawdown has been proceeding smoothly.

By Hari Kishan and Shaloo Shrivastava

BENGALURU (Reuters) – The Bank of England will cut interest rates four times this year to support a flat-lining economy, economists polled by Reuters said, but they added that risks to inflation are to the upside, suggesting policymakers may end up doing less.

Interest rate futures are pricing in only two reductions this year, and recent ructions in global bond markets underscore rising inflation concerns linked to U.S. President-elect Donald Trump’s protectionist economic agenda.

British inflation slowed unexpectedly last month and core measures of price growth – tracked by the BoE – fell more sharply, suggesting scope for more cuts even though the Federal Reserve may only have one cut left to go.

While interest rates futures are pricing in just two 25 bps rate cuts from the BOE for the year, a 60% majority of economists polled Jan. 10-15, 38 of 63, expect four quarter-point cuts, taking Bank Rate to 3.75%. That outlook was unchanged from last month.

All 65 economists in the current survey expect the central bank to trim Bank Rate by a quarter percentage point on Feb. 6.

Despite that unanimity on the near-term outlook, some economists do not hold much confidence in how many rate cuts the BoE will be able to deliver, echoing recent cautious language from policymakers themselves.

“With underlying inflation already high, and a range of survey based inflation expectations moving higher, the BoE is likely to be more hesitant,” noted economists at JP Morgan.

“We expect the BoE will still cut in February, but the Bank will find it harder to send a confident message about future easing if inflation expectations continue to rise.”

All but two of 25 economists who answered an additional question said it was more likely UK inflation this year will come in higher than their forecasts rather than lower. Inflation as measured by the consumer price index (CPI) was forecast to average 2.5% this year and 2.1% next. 

Complicating matters has been a punishing sell-off in the pound in recent days and in UK government debt, along with U.S. Treasuries, which has pushed the yield on the benchmark 10-year gilt to its highest since 2008.

“The increase in yields is mainly a global story,” noted Michael Saunders, senior advisor at Oxford Economics and former BoE Monetary Policy Committee member.

“However, if domestic fiscal concerns introduce a risk premium on UK assets, then the MPC might need to keep Bank Rate higher in order to dampen the inflationary impact of a weaker pound. But we see this as a risk, rather than being our baseline assumption,” Saunders wrote.

The UK economy barely grew in the second half of last year. It was forecast to grow just 0.9% in 2024, and by an average of 1.3% this year and 1.5% next year.

(Other stories from the Reuters global economic poll)

(Reuters) – Michigan Governor Gretchen Whitmer on Wednesday warned that potential 25% tariffs on imports from Mexico and Canada suggested by President-elect Donald Trump could harm the U.S. auto sector, boost vehicle prices and benefit China.

The Democratic governor said in a speech in Detroit imposing tariffs would damage supply chains and slow production lines and would cut “jobs on both sides of the border. Think about this: 70% of all the auto parts we make in Michigan go directly to our neighbors…. The only winner in this equation is China. They would love nothing more than to watch us cripple America’s auto ecosystem all by ourselves. This is a matter of national security.”

By Fergal Smith

TORONTO (Reuters) – Canadian home sales took a breather in December but were still 10% higher in the fourth quarter compared to the third quarter as the Bank of Canada cut borrowing costs, data from the Canadian Real Estate Association (CREA) showed on Wednesday.

The fourth quarter increase stood among the stronger quarters for activity in the last 20 years outside of the pandemic, CREA said.

“The number of homes sold across Canada declined in December compared to a stronger October and November, although that was likely more of a supply story than a demand story,” Shaun Cathcart, CREA’s senior economist, said in a statement.

“Our forecast continues to be for a significant unleashing of demand in the spring of 2025, with the expected bottom for interest rates coinciding with sellers listing properties for sale in big numbers once the snow melts.”

The Bank of Canada has cut interest rates by 1.75 percentage points since June to 3.25% to support the economy.

Sales fell by 5.8% in December from November but were up 19.2% on an annual basis.

The industry group’s home price index edged up 0.3% on the month and was down 0.2% annually.

Investing.com — The latest U.S. Consumer Price Index (CPI) report has sparked a range of reactions from Wall Street analysts, with key implications for Federal Reserve policy and market expectations.

ING maintained its forecast of three rate cuts in 2025 but adjusted its timing, suggesting cuts may begin in June rather than March. 

“Focus on the blue bars, which are the MoM. We need to see them averaging 0.17% MoM (the black line) in order to be confident the annual rate of core inflation is on the path to the 2% target,” said the firm, noting that current inflation levels are “still running too hot for comfort.”

Morgan Stanley (NYSE:MS) interprets the softer-than-expected CPI figures as further evidence of disinflation, particularly within core services excluding housing. 

The bank expects a March rate cut, emphasizing the print’s support for the narrative that recent inflation acceleration was temporary. “ Weaker inflation should give the Fed more confidence that recent acceleration was just a bump,” said the bank.

Morgan Stanley foresees sequential inflation acceleration in January due to seasonality but anticipates a meaningful year-over-year decline.

Wolfe Research describes the CPI data as slightly softer than expected, projecting a modest 0.19% increase in December core PCE inflation, with a year-over-year rate of 2.8%. Wolfe expects two rate cuts in 2025, likely in May and September, suggesting the print helps counter overblown Fed hiking expectations.

Wells Fargo (NYSE:WFC) notes that while headline inflation was hot in December due to food and energy prices, the core CPI showed improvement. However, the bank remains cautious, pointing out that the inflation trend is still stubbornly above the Fed’s target. As a result, Wells Fargo now anticipates only two rate cuts in September and December, down from the previously expected three.

ANNAPOLIS, Maryland (Reuters) – U.S. inflation data for December indicates price pressures are continuing to ease, Richmond Federal Reserve President Thomas Barkin said on Wednesday after a government report showed that an important underlying measure of price increases had slowed last month.

The Consumer Price Index report for December “continues the story we have been on, which is that inflation is coming down towards target,” Barkin told reporters at a Maryland Chamber of Commerce event.

By Hannah Lang and Chris Prentice

WASHINGTON (Reuters) – Top Republican officials at the U.S. Securities and Exchange Commission are poised to begin overhauling the agency’s cryptocurrency policies potentially as early as next week when President-elect Donald Trump takes power, said three people briefed on the matter. Among the measures commissioners Hester Peirce and Mark Uyeda are weighing are initiating the process that would ultimately lead to guidance or rules clarifying when the agency considers a cryptocurrency to be a security, and reviewing some crypto enforcement cases pending in the courts, two of the people said. Paul Atkins, Trump’s crypto-friendly pick for SEC chair and former agency commissioner, is widely expected to end a crypto crackdown led by President Biden’s Democratic SEC chair Gary Gensler, but it is unclear when the Senate will confirm him.

Gensler has said he will step down on Jan. 20 when Trump is sworn in.

As of next week, Peirce and Uyeda will hold the majority among the agency’s politically-appointed commissioners and are poised to get the ball rolling in the interim, the people said.

Like Atkins, the pair are crypto enthusiasts who have criticized Gensler’s tough stance on the industry and have in the past floated alternative crypto-friendly initiatives. Peirce and Uyeda were aides to Atkins when he was at the SEC from 2002 to 2008 and the three have a good relationship, according to one of the sources and several other former SEC officials. The three have discussed potential crypto policy changes, said the sources who declined to be identified discussing private policy plans.

Peirce, Atkins and their representatives did not respond to requests for comment. A spokesperson for Uyeda did not respond to a request for comment. Worried about fraud and market manipulation, Gensler’s SEC brought at least 83 crypto-related enforcement actions, suing multiple prominent companies like Coinbase (NASDAQ:COIN) and Kraken, agency data shows. In many cases, the SEC argued crypto tokens behave like securities and that the companies and their products should comply with SEC rules, although some allege fraud. In the first few days of the new administration, the SEC is expected to begin a review of those court cases and potentially freeze some litigation that does not involve allegations of fraud, said two of the sources. Some of those cases could eventually be withdrawn. Many of those defendants argue cryptocurrencies are more like commodities than securities and that it is not clear when SEC rules apply. They have called for the SEC to write new regulations which would clarify when a token is a security. Peirce and Uyeda are expected to kick off the early stages of that rule-writing process, likely with a call for industry and public feedback, the two sources said.

Reuters and others have previously reported that the SEC is also likely to quickly rescind accounting guidance that has made it prohibitively costly for some listed companies to hold crypto tokens on behalf of third parties.

Trump, who courted crypto campaign cash with pledges to be a “crypto president,” is also expected to issue executive orders urging regulators to review their crypto policies, Reuters reported. Bitcoin soared past $100,000 for the first time in December on excitement over the new crypto-friendly administration.

‘HELD ACCOUNTABLE’ Still, even with a head start, reaching an agreement on crypto regulations could take months or longer, as could resolving complex enforcement actions that hinge on the definition of a security. Dismissing dozens of enforcement actions would be unprecedented, and could set a risky precedent by politicizing the enforcement process, said Philip Moustakis, partner at Seward & Kissel and former SEC attorney. In some cases, the court may object, said other lawyers.

One option for the agency would be to re-open settlement negotiations, said Robert Cohen, a partner at Davis Polk who previously worked in the SEC’s enforcement division. Settlement talks, aimed at averting lengthy and public litigation, are the norm, but crypto companies say the SEC under Gensler has been unwilling to engage in substantive discussions. Cohen added the new SEC leadership would likely continue to take a tough line on crypto fraud. “I think the industry wants to see fraudsters or wrongdoers held accountable,” he added.

(Additional reporting and writing by Michelle Price; Editing by Nick Zieminski)

Investing.com — In an unexpected move, Bank Indonesia (BI) has trimmed its policy rate by 25bps, a strategy aimed at bolstering domestic growth.

Prior to this, BI had underscored its concentration on stability and the absolute level of the Indonesian Rupiah (IDR), leading to worries about the near-term growth outlook.

These concerns, coupled with fears of potentially diminished loan growth potential in 2025, amplified share price corrections from Emerging Market (EM) sell-off amid broader global macroeconomic concerns.

Despite lowering its 2025 Gross Domestic Product (GDP) growth forecast to a range of 4.7-5.5%, down from the previous 4.8-5.6%, BI anticipates that system loan growth will be sustained at 11-13%.

In response to the rate cut, Morgan Stanley (NYSE:MS) analysts commented that “uncertainties remain regarding the global macro outlook and therefore IDR stability.”

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

By David Shepardson

WASHINGTON (Reuters) – The U.S. Commerce Department said Wednesday it is imposing new export controls on biotechnology equipment and related technology because of national security concerns tied to artificial intelligence and data science.

Washington has raised concerns that China could use U.S. technology to strengthen military capabilities and help design new weapons through AI. The department said the laboratory equipment could be used for “human performance enhancement, brain-machine interfaces, biologically-inspired synthetic materials, and possibly biological weapons.”

The new export controls, which restrict shipments to China and other countries without a U.S. license, are for high-parameter flow cytometers and certain mass spectrometry equipment, which Commerce said can “generate high-quality, high-content biological data, including that which is suitable for use to facilitate the development of AI and biological design tools.”

This is the latest effort by Washington to restrict U.S. technology to China. On Monday, Commerce moved to further restrict AI chip and technology exports from China aimed at helping the United States maintain its dominant status in AI by controlling it around the world.

U.S. lawmakers have been considering a number of proposals to keep Americans’ personal health and genetic information from foreign adversaries and aim to push U.S. pharmaceutical and biotech companies to lessen their reliance on China for everything from drug ingredient manufacturing to early research.

Last week, U.S. lawmakers called on the Commerce Department to consider restricting the export of U.S. biotechnology to the Chinese military, citing concerns Beijing could weaponize it.

The Chinese Embassy in Washington last week said Beijing “firmly opposes any country’s development, possession or use of biological weapons.”

In August, U.S. lawmakers called on the Food and Drug Administration to ramp up scrutiny of U.S. clinical trials conducted in China, citing the risk of intellectual property theft and the possibility of forced participation of members of China’s Uyghur minority group.