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ECB tries to dampen bets on streak of rate cuts By Reuters

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© Reuters. European Central Bank (ECB) President Christine Lagarde speaks during a press conference following the Governing Council’s monetary policy meeting at the ECB headquarters in Frankfurt, Germany, March 7, 2024. REUTERS/Kai Pfaffenbach/File Photo

By Balazs Koranyi and Francesco Canepa

FRANKFURT (Reuters) – The European Central Bank tried to dampen speculation on a streak of interest rate cuts on Wednesday even as it acknowledged encouraging data about slowing price and wage rises.

Many ECB policymakers have expressed support for a first reduction in borrowing costs from their current record highs, most likely in June, with the debate now focused on how many more cuts would follow.

But President Christine Lagarde said the ECB could not commit to a certain number of rate cuts even after it starts reducing borrowing costs.

“Our decisions will have to remain data dependent and meeting-by-meeting, responding to new information as it comes in,” Lagarde said. “This implies that, even after the first rate cut, we cannot pre-commit to a particular rate path,” she told a conference in Frankfurt.

Echoing Lagarde, the ECB’s chief economist Philip Lane said he and colleagues will be “calibrating for a long time to come” the appropriate level of rates.

And fellow board member Isabel Schnabel even raised the prospect of a new era of structurally higher interest rates.

“The exceptional investment needs arising from structural challenges related to the climate transition, the digital transformation and geopolitical shifts may have a persistent positive impact on the natural rate of interest,” Schnabel said.

Money markets are pencilling in three cuts by December with some chance of a fourth, which would lower the 4% rate the ECB pays on bank deposits to 3.25% or 3.0%.

Inflation in the euro zone has fallen from a double-digit percentage increase in the autumn of 2022 to 2.6% last month.

And Lagarde hinted that this fall was likely to be “more durable and less beholden to assumptions about commodity prices” than in the past due to an expected fall in underlying inflation, which strip out volatile food and energy prices.

She also welcomed ECB data showing annual pay growth had slowed for 4.4% in January to 4.2% in March.

STAGNATION

On the flipside, the euro zone’s economic growth has stagnated and Spanish central bank governor Pablo Hernandez de Cos said event there was some evidence that the ECB’s rate hikes were having a bigger impact than anticipated.

“We shall be closely monitoring the materialisation of such risks and calibrate accordingly the degree of monetary restriction,” de Cos told the same event.

But Lagarde spelled out the conditions needed for the ECB to start cutting rates: slowing wage growth, a continued fall in inflation and new internal projections confirming that price growth is returning to its 2% target.

“If these data reveal a sufficient degree of alignment between the path of underlying inflation and our projections, and assuming transmission remains strong, we will be able to move into the dialling back phase of our policy cycle and make policy less restrictive,” Lagarde said.

The ECB will hold policy meetings on April 11, June 6, July 18, Sept 12, Oct 17 and Dec 12.

Some ECB governors, including Latvia’s Martins Kazaks and the Netherlands’ Klaas Knot have highlighted the advantage of moving when new forecasts are published — that is in June, September and December.

By contrast, Greek central bank governor Yannis Stournaras said two cuts before the ECB’s summer break in August seemed reasonable, followed by two more by the end of the year.

Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said Lagarde’s comments on Wednesday would form the basis for reaching consensus among policymakers.

“We expect the ECB to cut rates in June, pause in July (although the doves may push harder), and resume cutting at every meeting from September,” he said on Twitter.

(Writing By Francesco Canepa; Editing by Sharon Singleton and Toby Chopra)

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United Airlines (UAL) 1Q 2024 earnings

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A United Airlines Boeing 737 Max 9 aircraft lands at San Francisco International Airport.

Justin Sullivan | Getty Images

United Airlines on Tuesday cut its aircraft-delivery expectations for the year as it grapples with delays from Boeing, the latest airline to face growth challenges because of the plane-maker’s safety crisis.

United expects to receive just 61 new narrow-body planes this year, down from 101 it said it had expected at the beginning of the year and contracts for as many as 183 planes in 2024.

“We’ve adjusted our fleet plan to better reflect the reality of what the manufacturers are able to deliver,” CEO Scott Kirby said in an earnings release. “And, we’ll use those planes to capitalize on an opportunity that only United has: profitably grow our mid-continent hubs and expand our highly profitable international network from our best in the industry coastal hubs.”

United said it plans to lease 35 Airbus A321neos in 2026 and 2027, turning to Boeing’s rival for new planes as the U.S. manufacturer faces caps on its production and increased federal scrutiny. In January, United said it was taking Boeing’s not-yet-certified Max 10 out of its fleet plan. The airline said it has converted some Max 10 planes for Max 9s.

It lowered its annual capital expenditure estimate to $6.5 billion from about $9 billion.

United is also facing a Federal Aviation Administration safety review, which has prevented some of its planned growth. A spokeswoman told CNBC earlier this month that the carrier will have to postpone its planned service from Newark, New Jersey, to Faro, Portugal, and service between Tokyo and Cebu, Philippines.

United earlier this month postponed its investor day, which was scheduled for May, “because our entire team is focused on cooperating with the FAA to review our safety protocols and it would simply send the wrong message to our team to have an exciting investor day focused primarily on financial results.”

The airline said it would have reported a profit for the quarter if not for a $200 million hit from the temporary grounding of the Boeing 737 Max 9 in January.

The FAA temporarily grounded those jets after a door plug blew out minutes into an Alaska Airlines flight, sparking a new safety crisis for Boeing and slowing deliveries of its planes to customers including United, Southwest and others.

The airline posted a net loss of $124 million, or a loss of 38 cents a share, in the first quarter compared with a $194 million loss, or 59 cents, a year earlier. Revenue rose nearly 10% in the first quarter compared with the year-earlier period to $12.54 billion, with capacity up more than 9% on the year.

Here’s what United reported in the first quarter compared with what Wall Street expected, based on average estimates compiled by LSEG:

  • Loss per share: 15 cents adjusted vs. a loss of 57 cents expected
  • Revenue: $12.54 billion vs. $12.45 billion expected

The airline expects to post earnings of between $3.75 and $4.25 in the second quarter, ahead of analysts’ estimates of about $3.76 a share. Airlines make the bulk of their profits in the second and third quarters, during peak travel season.

The carrier also reiterated its full-year earnings forecast of between $9 and $11 a share.

United’s shares were up more than 4% in after-hours trading on Tuesday.

United executives will hold a call with analysts at 10:30 a.m. ET on Wednesday.

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Ex-Post Office boss regrets ‘missed opportunity’ to halt Horizon scandal

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“On reflection, and I have reflected on this very hard, when I finished being the Horizon programme director [in early 2000] it would have been very beneficial if I had notified both the lawyers and the [investigations team] that Horizon was a new system coming in, and that they should be very cautious about evidence coming out of that system,” he said.

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Sri Lanka’s economic crisis and debt restructuring efforts By Reuters

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COLOMBO (Reuters) – Sri Lanka’s government rejected a proposal from its international bondholders on Tuesday on restructuring the more than $12 billion the country owes to them.

It means a near two-year spell in default will drag on for Sri Lanka and that the country’s next tranche of vital IMF support money could potentially get delayed.

Below is a timeline of the key events in the crisis and the efforts to resolve it:

2021-2022: Sri Lanka’s economy crumbles after years of overspending leaves its foreign exchange reserves critically low and the government unable to pay for essentials, such as fuel and medicine.

The country’s bonds suffer from multiple downgrades by credit rating agencies warning of the increasing risk of default. At the start of 2022 it manages to make a $500 million bond payment but it leaves its foreign exchange reserves precariously low.

MAY, 2022 – Sri Lanka is declared in default after it fails to make a smaller $78 million bond coupon payment.

JULY, 2022 – Public anger drives protesters to storm then-President Gotabaya Rajapaksa’s office and residence. Rajapaksa flees to the Maldives, before moving on to Singapore.

Current President Ranil Wickremesinghe is voted into power by Sri Lankan lawmakers.

MARCH, 2023 – The International Monetary Fund approves a near $3 billion bailout for Sri Lanka after talks with Wickremesinghe’s government and assurances about its plans to repair the country’s finances.

OCTOBER, 2023

Sri Lanka announces an agreement with China’s EXIM (export/import) Bank to delay payments on about $4.2 billion worth of loans the Chinese lender it has extended to the country.

NOVEMBER, 2023

Other creditor nations including India, Japan and France agree to restructure about $5.9 billion in debt.

MARCH, 2024

A group of Sri Lankan officials arrives in London to meet with a number of investment funds that hold its more than $12 billion worth of government bonds. Talks advance to the key “restricted” phase where proposals are discussed privately and those involved agree not to buy or sell any of the debt on the open market.

© Reuters. FILE PHOTO: A general view of the main business district as rain clouds gather above in Colombo, Sri Lanka, November 17, 2020. REUTERS/Dinuka Liyanawatte/File Photo

APRIL, 2024

The government rejects a proposal tabled by the bondholders. The main stumbling blocks are that some the “baseline” assumptions used differ to those of the IMF and that the plan did not include a contingency option for the government in case the economy fails to recover as expected.



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