The IMF is taking a different view than markets because it anticipates higher inflation next year than the ECB

International News via Reuters:

The European Central Bank should keep its deposit rate at the current 2% level unless new shocks materially change the inflation outlook, Alfred Kammer, head of the IMF’s European Department, said on Wednesday.

The ECB has cut rates by two percentage points since June 2024 but signalled a pause for this month, even if financial investors still see another cut to 1.75% later this year.

“Risks around euro zone inflation are two-sided,” Kammer told Reuters on the sidelines of the ECB Forum on Central Banking in Sintra, Portugal.

“This is why we think the ECB should stay the course and not move away from a 2% deposit rate unless there is a shock that materially changes the inflation outlook. Right now we don’t see anything of such magnitude.”

Part of the reason why the IMF is taking a different view than markets is because it anticipates higher inflation next year than the ECB.

The ECB projects price growth falling below its 2% target for 18 months from the third quarter, bottoming out at 1.4% in early 2026.

“For next year, we see inflation at 1.9%, which is above the ECB’s own projections, partly because we take a different view on energy prices,” Kammer said.

While most ECB policymakers see inflation risks balanced, there is an increasing group, including Finland’s Olli Rehn, Belgium’s Pierre Wunsch and Portugal’s Mario Centeno, who have all warned about the risk of inflation falling too low.

Reporting by Balazs Koranyi; editing by Mark Heinrich

Climate change is increasing the frequency and intensity of heatwaves, droughts and wildfires, with far-reaching economic repercussions

International News via Reuters:

Recent heatwaves across Europe could slow economic growth in Europe by half a percentage point in 2025, a report by Allianz Research showed, comparing a day with temperatures above 32 degrees Celsius to half a day of strikes.

In Europe, GDP losses range from 0.1 percentage points for Germany to as much as 1.4 percentage points for Spain, where temperatures are around ten degrees higher in summer.

Climate change is increasing the frequency and intensity of heatwaves, droughts and wildfires, with far-reaching economic repercussions.

Globally, the heatwaves translate to a GDP reduction of 0.6 percentage points this year, Allianz Research said.

China, Spain, Italy and Greece could each see GDP losses of nearly one percentage point due to the current heatwaves, the Allianz Research report said, while the U.S. may face a decline of around 0.6 percentage points and France of up to a third of a point.

Extreme temperatures also reduce labour productivity, with the International Labour Organization forecasting that heat stress will reduce total potential working hours worldwide by 2.2% by 2030.

Productivity losses due to heat can be mitigated, Allianz Research said, calling for structural measures to prepare cities and adapt workplaces.

Reporting by Maria MartinezEditing by Ludwig Burger

Planned supply increases by the Organization of the Petroleum Exporting Countries appear already priced in by investors

International News via Reuters:

Oil futures edged up on Wednesday as Iran suspended cooperation with the U.N. nuclear watchdog and markets weighed expectations of more supply from major producers next month while the U.S. dollar softened further.

Brent crude added 60 cents, or 0.9%, to $67.71 a barrel at 1017 GMT, while U.S. West Texas Intermediate crude rose 55 cents, or 0.8%, at $66 a barrel.

Brent has traded between a high of $69.05 a barrel and low of $66.34 since June 25, as concerns of supply disruptions in the Middle East producing region have ebbed following the ceasefire between Iran and Israel.

Iran put into effect a law on Wednesday that stipulates that any future inspection of its nuclear sites by the International Atomic Energy Agency needs approval by Tehran’s Supreme National Security Council. The country has accused the institution of siding with Western countries and providing a justification for Israel’s air strikes.

“The market is pricing in some geopolitical risk premium from Iran’s move on the IAEA,” said Giovanni Staunovo, commodity analyst at UBS. “But this is about sentiment, there are no disruptions to oil.”

Planned supply increases by the Organization of the Petroleum Exporting Countries and its allies including Russia, know as OPEC+, appear already priced in by investors and are unlikely to catch markets off-guard again imminently, said Phillip Nova senior market analyst Priyanka Sachdeva.

Four OPEC+ sources told Reuters last week the group plans to raise output by 411,000 barrels per day next month when it meets on July 6, a similar amount to hikes agreed for May, June and July.

“We are all talking about additional supply coming to the market, but the supply has not really hit the market,” Staunovo said. “Probably because it’s being consumed domestically.”

Saudi Arabia lifted shipments in June by 450,000 bpd from May, according to data from Kpler, its highest in more than a year. However, overall OPEC+ exports are relatively flat to slightly down since March, Staunovo said. He expects this to persist over the summer as hot weather drives higher energy demand.

The greenback continued to weaken, falling to a 3-1/2-year low against major peers earlier on Wednesday. A weaker dollar tends to support oil prices, as it could boost demand for buyers paying in other currencies.

U.S. non-farm payrolls data due on Thursday will shape expectations around the depth and timing of interest rate cuts by the Federal Reserve in the second half of this year, said Tony Sycamore, analyst at IG.

Lower interest rates could spur economic activity which would in turn boost oil demand.

Official U.S. oil stockpile data from the Energy Information Administration is due Wednesday at 10:30 a.m. ET. [EIA/S]

American Petroleum Institute data late on Tuesday showed U.S. crude oil inventories rose by 680,000 barrels in the past week at a time when stockpiles typically draw amid the summer demand season, sources said.

Reporting by Anna Hirtenstein in London; Additional reporting by Sudarshan Varadhan and Trixie Yap in Singapore; Editing by Christian Schmollinger, Rachna Uppal and David Evans

The initiative pushes for the systematic inclusion of clauses in new public and commercial lending

International News via Reuters:

A number of wealthy creditor nations and multilateral lenders have launched an initiative that aims to give sovereign borrowers breathing space on debt payments in the event of a climate or humanitarian crisis, Spain said on Tuesday.

The Debt Suspension Clause Alliance was launched during a U.N. conference in Seville – a once in a decade meeting aimed at furthering development finance goals and guidelines.

The initiative pushes for the systematic inclusion of clauses in new public and commercial lending that allow for a temporary suspension of debt payments in the face of extraordinary events, such as natural disasters, food crises or health emergencies.

“The logic behind these clauses is simple but powerful: to create immediate fiscal space in times of greatest need, allowing countries to focus their resources on response and recovery without risking their solvency or ability to meet social spending,” said economy minister Carlos Cuerpo.

Speaking on the sidelines of the conference, Spain’s Foreign Minister Jose Manuel Albares told Reuters that the suspension clause for debt repayments could also cover war.

The governments of Canada, France and Britain were among the co-leaders of the initiative together with multilateral banks, including the Inter-American Development Bank, the European Investment Bank, the African Development Bank, the Development Bank of Latin America and the Caribbean and the Asian Development Bank.

Deutsche Bank has become the first private institution to join the initiative, Cuerpo later told a press conference in Seville, without giving details on what this would mean in practice for Germany’s largest bank.

“What we want is to… advance in standardizing the different concepts within these clauses, expand their application, and also be able to broaden their ability to open up more fiscal space when it would be needed going forward,” Cuerpo said.

Deutsche Bank declined to provide additional details.

A number of multilateral lenders have already added such clauses in their lending – including inserting them retroactively in some existing loans.

The Inter-American Development Bank said in the statement on Tuesday that adding climate-resilient debt clauses in sovereign loans had extended $3.2 billion in protection across several countries. It said it would expand this to more nations and broaden its scope.

The European Investment Bank last year made climate-resilient debt clauses available to 70 developing countries.

The World Bank – one of the biggest multilateral development lenders – has also broadened the scope of its Climate Resilient Debt Clauses for the most vulnerable countries in recent years.

Reporting by David Latona in Seville and Karin Strohecker in London, additional reporting by Virginia Furness in London and Tom Sims in Frankfurt, editing by Ros Russell

“Investors are looking at options” in a climate characterised by uncertainty and unpredictability

International News via Reuters:

There is no prospect of a major challenge to the dollar’s status as the world’s reserve currency of choice any time soon, central bankers gathered for an annual conference in the Portuguese resort of Sintra said on Tuesday.

U.S. President Donald Trump’s unpredictable economic, trade and security policies have spurred questions over whether the U.S. currency, which accounts for 58% of the world’s reserves, can remain at the centre of the global monetary system.

European Central Bank President Christine Lagarde, who has argued the euro could over time become an alternative to the dollar if Europe’s currency zone enacted necessary reforms, said 2025 could in future be viewed as “pivotal” in this respect.

“(But) for a major change to occur it will take a lot of time and a lot of effort,” she told a panel with her U.S., British, Japanese and Korean counterparts.

She noted that “investors are looking at options” in a climate characterised by uncertainty and unpredictability and that there was evidence that the euro was benefiting from that.

“It’s not going to happen just like that overnight. It never did historically,” she said. “But there is clearly something that has been broken. Whether it is fixable, or whether it is going to continue to be broken – I think the jury’s out.”

Bank of Japan Governor Kazuo Ueda also noted that any significant change would depend on structural reforms.

“It’s to a certain extent up to what areas like Europe or China will do in terms of improving the efficiency or convenience of their currencies,” he said, citing as an example the efforts at capital market integration in the euro zone.

Bank of England Governor Andrew Bailey said any change to the dollar’s status was a long way off.

“I don’t see … a sort of a major shift at the moment,” he said, arguing that any reserve currency had to offer a supply of safe assets into the market that can be used for purposes of collateral and security.

Bank of Korea Governor Rhee Chang-yong said the prospect of a long-term shift of the dollar sentiment was a subject of discussion for some even as they retained their dollar holdings.

“It looks like people are talking about it. But at this moment they keep the dollar share while increasing their hedging ratio,” he told the panel.

Lagarde told a recent audience in Berlin that there was an opening for a “global euro moment”, if it earned it.

She said Europe would need to build a deeper, more liquid capital market, bolster its legal foundations and underpin its commitment to open trade with security capabilities.

While the dollar’s current share of international reserves is the lowest it has been in decades, its 58% tally is still well above the euro’s 20% share.

Writing by Mark John. Editing by Mark Potter

The slowdown comes after a record number of corporate agitators made demands

International News via Reuters:

Activist investors who push companies for operational changes and management shake-ups waged fewer campaigns during the first half of 2025 as tariffs, wars and U.S. President Donald Trump’s unpredictable policies made them more cautious, new data show.

The pace of investor demands, aimed at pushing up a company’s share price, fell 12% to 129 campaigns launched during the first six months of 2025, compared with 147 a year ago, according to numbers compiled by investment bank Barclays.

“The environment was shaped by mixed economic signals, fears about wars and geopolitical tensions and the instability created by future tariffs and trade wars,” said Jim Rossman, global head of shareholder advisory at Barclays. “And taken together that is creating an environment of caution.”

The slowdown comes after a record number of corporate agitators made demands last year and the pace of campaigns jumped by 17% in the first three months of this year.

Elliott Investment Management, among the world’s most powerful corporate activists, pressed for changes at six companies, including BP and Hewlett Packard Enterprise, roughly half the number of campaigns it launched a year ago. But it deployed $8.8 billion in assets, the most of any activist this year.

Also so-called first-timers who were becoming more comfortable employing activist tactics last year stepped to the sidelines late in the first half.

During the second quarter when stock markets gyrated as Trump threatened harsher tariffs only to reverse course before suggesting them again, campaigns launched by first-timers dropped 27% from the first quarter of this year, the data show.

But the slowdown does not hint at a pause in activity or suggest activist investors are going soft, Rossman said.

Corporate agitators, including Mantle Ridge, Ancora Holdings and Jana Partners have, as a group, forced bigger changes at companies in the first half of this year than a year ago, the data show.

Settlements between activist investors and companies jumped 32% to 37 in the first half of 2025 and left activists with 86 board seats, marking a 16% increase. They won seats, often a measure of success for activists, at companies ranging from industrial gases maker Air Products and Chemicals to food processing company Lamb Weston.

“As a group activists are having a strong year, winning settlements and board seats and managing to engage with a number of companies privately,” Rossman said.

Most activists continue to focus their attention on companies in the United States with 60 campaigns launched, down from 61 a year earlier. There were 37 campaigns in Japan, down from 51 a year ago. Activity in Europe declined by 17% to 24 campaigns launched in the first half compared with a year ago.

Reporting by Svea Herbst-Bayliss; Editing by Stephen Coates