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Banxico Minutes reveal rift on inflation and Mideast war threats
The minutes of the latest policy meeting of the Bank of Mexico, published on Thursday, reveal that the board is deeply divided over how to balance 'new inflation risks', such as those posed by the escalating conflict in the Middle East, with the needs of an economy struggling. Minutes from the Bank of Mexico's latest policy meeting published on Thursday reveal a board deeply divided?over how to weigh?new inflation risks, including a resurging conflict in the Middle East, against the needs of a weak economy. The controversial decision saw Governor Victoria Rodriguez, deputies Omar Mejia, Gabriel?Cuadra and Jonathan Heath vote in favor of a cut. Galia Borja and Jonathan Heath dissented. The dissenting members called for a cautious approach due to the new uncertainty created by geopolitical tensions. Borja, in her dissension, said that the escalation of the Middle East conflict had increased oil prices and volatility on financial markets. This has introduced new risks for inflation as well as?economic activity. In my opinion, the information is not sufficient to accurately assess the 'implications' of this shock. The majority of the board argued, however, that Mexico's slow economy would act as a buffer to these inflationary pressures. In the minutes, it was noted that "most members believed that the ample slack in the Mexican economy will help to mitigate the impact of the shocks" from the conflict. The debate over how much weight to give to the Middle East conflict reflects an underlying philosophical difference: whether the primary mission of the central bank is to control?inflation, or if monetary policy should be used to stimulate Mexico's slow economy. Heath, who is the'most hawkish member of the board, called for a pause on rate cuts while current shocks subside. He also warned that lowering interest rates 'while core inflation continues and non-core inflation increases undermines the credibility of the bank. Heath, the?most hawkish on?the board, advocated for a pause in rate cuts until current shocks dissipate, and warned that easing the interest rate?while core inflation persists and non-core inflation rises undermines the bank's?credibility. The debate ?is particularly acute as Mexico navigates a challenging economic landscape, marked by both higher-than-projected inflation and a relatively stagnant economy--conditions that make every interest rate decision profoundly consequential. (Reporting and editing by Emily Green; Brendan O'Boyle, Natalia Siniawski)
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Georgieva, IMF economist, says central banks need to balance energy inflation and demand softening.
Kristalina Georgeeva, the Managing Director of the International Monetary Fund, said on Thursday that central bankers should be ready to tighten their monetary policies if war-driven energy prices shocks continue. Georgieva said at an event previewing 'next week’s IMF/World Bank annual meetings that if the Iran War ceasefire is maintained and the oil supply shock is brief, they might be able to maintain a steady rate of inflation with only a small increase. This would result in a de facto easing of the monetary policy. She warned central bankers not to be tempted to tighten rates if they were slow to react to the?post COVID-19 inflation. She told them to remain alert to 'data. Georgieva warned: "Be careful, focus on the conditions. If you tighten too early and unnecessarily you will halt growth." Then the demand could shrink. Then, you'll go from a "supply shock" to a "supply-and-demand-shock." It could get ugly." Reporting by David Lawder, Editing by Chizu nomiyama
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Netanyahu: Israel wants peace talks to begin with Lebanon as soon as possible
Benjamin Netanyahu, the Israeli prime minister, said on Thursday that he had 'instructed Israel to start 'peace -talks' with Lebanon which would include disarming Hezbollah. In a statement, Netanyahu said: "In view of Lebanon's repeated request to begin direct negotiations with Israel as soon as possible." The negotiations will be centered on disarming Hezbollah, and establishing peaceful relations between Israel & Lebanon. The?Lebanese Government did not respond immediately to Netanyahu's comments. Aoun had said, an hour before Netanyahu made his?statement: "The only way to resolve the situation in Lebanon would be to reach a ceasefire, then to have direct negotiations between Israel and Lebanon." He said that he had been working on a "diplomatic" track in this area, which was being viewed by international actors as "positive". Israel launched a "renewed offensive" against Hezbollah on March 2 after the Iran-backed group?began shooting?at Israel. According to Lebanese officials, Israeli strikes killed more than 1,700 people and uprooted over a million others. Sources familiar with the group say that at least 400 Hezbollah members have been killed. The group has fired hundreds of rockets and drones into Israel.
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US yields rise after Middle East data
U.S. treasury yields rose modestly on the day following a flurry economic data as investors 'kept a keen eye on any Middle East developments that could threaten the current truce in?Iran War. U.S. crude jumped 8.55% to $100.42 a barrel and Brent shot up to $99.30 up 4.8%, as concerns over a fragile two-week Middle East truce raised fears that energy flow through the Strait of Hormuz would remain restricted. Shippers were reluctant to resume transit. The traffic through the Strait of Hormuz was well below 10% of its normal volume on Thursday despite a U.S. - Iran ceasefire. Tehran asserted control by warning vessels to stay within its territorial waters. Israel has bombed additional targets in Lebanon which Tehran claims must be included in the truce, further jeopardizing it. The Federal Reserve finds it hard to justify rate cuts when oil prices are high. The Treasury market has completely handed over the reins to the commodity sector and the energy space. Thomas Urano is co-chief investment officers at Sage Advisory in Austin. It's not good that oil prices will be in the hundreds or even the 90s. This will keep inflation high. It will be very hard for the new Fed Chair to say that we need two rate cuts. TREASURY YIELDS EDGED?HIGER The yield of the benchmark U.S. Treasury?note has increased 2.2 basis points, to 4.313%. The yields increased after Commerce Department data revealed that gross domestic product grew at a 0.5% annualized pace, down from 0.7% previously reported and below the 0.7% estimated by economists. The 30-year bond yield rose by 2.4 basis points, to 4.91%. The personal consumption expenditures index rose 0.4% in February, which was expected, following a 0.3% increase unrevised in January. Initial jobless claims for the week increased by 16,000, to 219,000 seasonally adjusted, exceeding the 210,000 estimated. The part of the U.S. Treasury curve that is closely watched, measuring the difference between yields of two-year and 10-year Treasury bills, as an indicator of expectations for economic growth, was positive by 51.9 basis points. The week's sales will be capped on Thursday by $22 billion in 30-year bonds. RATE CUT?PROSPECTS MINING The two-year U.S. Treasury?yield (which typically moves in line with interest rate expectation for the Fed) eased by 0.2 basis points, to 3.792%. The Fed's top officials warned earlier this week about the inflation risk posed by the rapid rise in oil due to the "war" even though it slowed the economy and labor market. The minutes of the Fed's March 17-18 meeting were released on Wednesday. They showed that a growing number of policymakers believed that higher interest rates might be necessary to combat inflation, which continues to exceed the central banks' 2% target. According to CME's FedWatch Tool the markets are pricing in 23.3% of a chance that the Fed will cut rates by at least 25 basis points during its December meeting. This is about on par with expectations a week earlier, but down from 82.5 percent a month before. The five-year U.S. Treasury inflation-protected Securities (TIPS), which are backed by the Treasury, have a breakeven rate of 2.610%. This was down from 2.598% in April. The 10-year TIPS Breakeven Rate was at 2,351% last, which means the market expects inflation to average 2.4% per year over the next decade.
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USA Rare Earth is considering building a French magnet plant
USA Rare Earth is considering building a permanent magnetic?plant? in France, according to its CEO, who announced the decision on Thursday after paying 40 million euros ($47m) for a stake of French rare earth processing company Carester. The United States, Europe, and other countries are working to secure domestic supplies of rare Earths. These are essential for green energy, electronics, and defence, and they want to reduce their dependence on China, the world's largest producer. The company announced that as part of its efforts to create an integrated rare-earths operation,?which includes mining, processing, and magnet manufacturing, USA Rare Earth would purchase a 12.5% share in Carester. Carester is currently constructing a processing facility in southern France. InfraVia will buy the same stake in Carester, which is a crucial?minerals funds seeded by France, according to the statement. Barbara Humpton, CEO of the company, told investors that "they (the French government), are interested in... supporting a possible USA Rare 'Earth magnet-making plant in southern France." Robert Steele, CFO, declined to provide any further information or timeline. USA Rare Earth received a $1.6billion debt-and equity funding package from the U.S. Government in January. It has a magnet manufacturing plant in Stillwater Oklahoma that is expected to open later this year. Carester's French facility will produce heavy rare Earths which are needed for magnets. However, analysts expect that they may be hard to find due to expected shortages. In the deal, USA Rare Earth will receive 15-year supply agreements and offtake agreements. This allows it to send materials from its Round Top Mine in Texas for processing, then buy the processed heavy rare earth oxides. USA Rare Earth, through its unit Less Common Metals, which is a British company that manufactures rare earth alloys and metallics, signed a contract with Carester last May to build a facility in France. Carester has received 216 millions euros from Japanese sources and the French government for its Caremag unit. This unit is expected to produce 1,400 tons of rare earth oxydes a year using recycled magnets and mining concentrations.
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Hong Kong provides diesel subsidies and toll waivers in order to reduce fuel costs
Hong Kong has taken'steps to help the transport sector - with rising fuel prices - on Thursday. A HK$3 per litre'subsidy is being offered on 'diesel used by commercial vehicles and vessels, and a 50% discount on tolls for commercial traffic that uses government tunnels. Hong Kong, which imports almost all of its energy, relies on fossil fuels for ?power generation and has some of the world's highest gasoline prices, ?according to globalpetrolprices.com. The government announced that the measures would support diesel-powered?public and commercial vehicles?, vessels?and related industries for a period of two months. They will cost approximately HK$1.8 billion (US$230?million). The statement said that private cars and motorcycles will not be included in the 'tunnel toll reduction. This is expected to cost HK$160m in revenue. The Inter-departmental fuel supply monitoring task force told John Lee, Hong Kong's leader, that 80% of the petroleum products imported into the city are from mainland China. Its government is in constant communication with Beijing, to ensure stable energy supplies. Hong Kong's transportation sector is being affected by rising fuel prices and concerns about supply, as some shuttle buses and ferries reduce services. A task force for public transport will be?also?established?to?fast-track operators like?public buses?and ferries?who are seeking flexibility in managing higher fuel costs.
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Colorado State forecasters see below-average hurricane season
Colorado State University weather forecasters said that the 2026 Atlantic Hurricane'season is expected to be below historic averges because an 'El Nino' formation will send?winds through the southern U.S. which could tear tropical storms apart. The CSU team predicts that an El Nino of moderate to strong intensity is likely at the peak of the Atlantic hurricane season, which is August-October. The Atlantic hurricane season starts on June 1, and lasts until November 30. The fiercest storms are usually seen between August and October. Colorado State's closely-watched forecast predicts that two major hurricanes with wind speeds exceeding 111 miles per hours (179 kph) will develop in 2026, out of the total of six named tropical storms. Between 1991 and 2020, the 'average hurricane season' produced three major hurricanes from a total of seven hurricanes. In the eastern tropical Atlantic, sea surface temperatures are also cooler than normal. In the western tropical Atlantic, sea surface temperatures are above average. This could help storm development. Four of the five hurricanes in 2025 will be deemed major. In 2025 there were 13 named storms, which caused more than $9 billion worth of damage and claimed 126 lives. (Reporting and editing by Jan Harvey; Erwin Seba)
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Polestar CEO speaks up for used car market as fuel prices rise and EVs become cheaper
?Polestar's CEO Michael Lohscheller stated on Thursday that used car sales are exceeding new vehicle sales, due to a rise in gasoline and diesel costs from the war in Iran driving customers towards less expensive EV options. Online car platforms reported last month that the war in Iran has boosted used electric vehicle sales in Europe. "Used cars are growing faster than brand new vehicles, especially since so many people have come forward and said, "we are price-sensitive." Lohscheller said after the company announced its first-quarter results: "We prefer used cars and look at electric vehicles." Polestar's sales of used cars?rose 47% during the quarter. The overall sales increased 7%, to 13,126 vehicles. Polestar stated in February that it expected a low-double-digit growth in volume this year, without giving any financial forecast. The company announced on Thursday that it will disclose its outlook when it releases its fourth-quarter results. It is required to do so by the end of April, but the exact date has not been set. Polestar has been focusing its strategic efforts on the European'market,' a move it made in the last year to increase?margins? and revenue?amid an uncertain global EV market and a rise in costs?and widening losses? Lohscheller said that there is a growing market for electric vehicles in southern Europe, which still has low EV penetration but also large markets that could soon overtake Sweden. The company's performance in Europe is still strong, but it has struggled in other markets, such as the U.S., where the company sold only 735 cars during the third quarter. This represents just 5.6% of the total sales, compared to 11.1% in the previous year.
Greenland's prime minister rejects Trump's remarks as NATO tensions increase
Greenland's Premier Jens-Frederik Nielsen stated on Thursday that he represents an?advanced nation seeking to?maintain the global order. He was responding to the latest remarks about the Arctic Island by U.S. president Donald Trump.
Trump vented his frustration on Wednesday with NATO, as relations reached a point of crisis?over Iran war. He stated that the military alliance wasn't?around when it was needed and that he remembered Greenland still, a "BIG POORLY RUN, PIECE ICE".
Nielsen said: "What's important to us is maintaining the 'world community' that we built after World War Two, where we have a defence alliance that we respect and where international law is respected by everyone."
"These things are under attack now and I believe that allies should work together to try to maintain them. He said, "I hope that this will happen."
NATO allies were already scrambling earlier this year to keep the alliance together after Trump renewed his bid to seize Greenland, from Denmark, another NATO member.
Nielsen reacted on Thursday to Trump's characterization of his country.
"We aren't some piece of ice. He said that we are "a proud population of 57, 000?people who work every day as good global citizens with full respect for our allies." (Reporting and editing by Louise Rasmussen, Terje Solsvik, Stine Jacobsen)
(source: Reuters)