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Central bank moves and supply shocks among top risks to global economy: Reuters poll

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October 28, 2021

By Shrutee Sarkar

BENGALURU (Reuters) – Central banks reducing emergency stimulus too quickly and further supply chain disruption are among the top risks to the world economy next year as the COVID-19 pandemic lingers, according to economists in a global Reuters poll.

Given global growth has likely peaked, forecasters have broadly sided with the view shared by many top central bankers that the recent surge in inflation will be transitory, even though their forecasts are drifting higher.

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But even though supply chain bottlenecks pose a serious threat to the recovery and there is scant sign so far of a sudden easing, some stock markets are trading close to record highs even as interest rates are now on the rise.

The concern is after an extended period of record low rates and emergency policy that central bankers https://www.reuters.com/business/fed-faces-showdown-supply-demand-patience-collide-2021-10-27 may get impatient and feel compelled to respond to the current spike in inflation where people are now feeling the pinch. [ECILT/US]

Reuters polls covering more than 500 economists from around the world concluded that 13 of 25 central banks would raise interest rates at least once before the end of next year. Some already have, like central banks of New Zealand, Russia and Brazil.

But about one-quarter of 171 economists responding to an extra question said central banks dialing down stimulus too quickly was one of the biggest downside risk to the global economy.

A similar number of respondents said more supply chain disruptions or flare-ups in the COVID-19 pandemic, set to enter its third year in 2022 as a much-diminished but still not vanquished threat, were the top risks.

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“Many major central banks are now cautiously shuffling towards the exit when it comes to their ultra-loose monetary policies. They aren’t doing this because of the strength of the economic recovery,” said Jan Lambregts, head of global economics and markets research at Rabobank.

“Cost-push inflation appears to have set the wheels in motion at central banks who said they now have a broader socio-political focus. Getting this one wrong could therefore prove very costly in terms of maintaining their policy independence.”

Indeed, global growth was expected to slow to 4.5% next year from a blistering 5.9% this year, largely unchanged from July. That slowdown next year is a bit sharper than International Monetary Fund https://www.reuters.com/business/imf-cuts-global-growth-outlook-supply-bottlenecks-hobble-pandemic-recovery-2021-10-12’s latest projection of 4.9%.

Growth was forecast to slow to around that pace in 2023, at 3.5%, according to the poll.

“The initial burst of activity linked to reopening is over, and growth momentum is rapidly losing pace. Fading fiscal support is playing a role but so too are the direct impact of COVID-19 related restrictions and disruptions,” noted Janet Henry, global chief economist at HSBC.

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“Despite the uncertainties, many central banks want to bring the era of ultra-loose monetary policy to an end.”

Most central banks are eyeing the exit. But there are some notable large exceptions.

The Bank of England https://www.reuters.com/world/uk/bank-england-raise-rates-025-q1-possibly-sooner-2021-10-21, the Bank of Canada https://www.reuters.com/business/bank-canada-raise-rates-q3-next-year-possibly-sooner-2021-10-25 are expected to raise rates next year and the European Central Bank https://www.reuters.com/world/europe/ecb-raise-rates-2024-risk-remains-earlier-hike-2021-10-22 is predicted to hike in 2024, but the Bank of Japan https://www.reuters.com/world/asia-pacific/japans-q3-growth-forecast-trimmed-further-covid-19-drag-2021-10-15 is now forecast to do nothing with interest rates through the end of the forecast horizon.

INFLATION FORECASTS UP MODESTLY

Economists upgraded inflation outlooks for 18 of 21 developed economies, by between 0.1 and 0.7 percentage points, and for 15 of 27 emerging economies, by between 0.1 and 1.8 percentage points.

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But nearly two-thirds of economists, 117 of 182, who responded to an extra question, said the recent surge in global inflation was unlikely to persist over the next 2-3 years.

The remaining 65 respondents said persistently higher inflation was likely, and among them over 60% said there was a high risk it dents world growth.

“It’s likely that inflation will fall back in every major economy next year. But there is evidence that underlying inflation pressures are building,” said Neil Shearing, group chief economist at Capital Economics.

“I don’t think that’s the 1970s-style inflation episode, but when you look across all indicators in the labour market and the product market, they all point to price increases and a higher rate of underlying inflation.”

For a graphic on Reuters Poll: Global economic growth outlook:

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https://fingfx.thomsonreuters.com/gfx/polling/lgpdwlbayvo/Reuters%20Poll%20-%20Global%20economic%20growth%20outlook.png

Growth in China, the world’s second-largest economy, was projected to slow to 5.5% in 2022 from an expected expansion of 8.2% this year. Most other major emerging market economies were expected to struggle this year and next. [ECILT/CN][ECILT/LTAM][ECILT/IN][ECILT/AFR]

“While developing Asian economies (ex-China) have been disproportionately hit by the Delta variant, they have shown some signs of a renewed pick-up as COVID-19 cases fall. Still, the economies with low levels of vaccinations remain vulnerable,” said Lloyd Chan, senior economist at Oxford Economics.

(For other stories from the Reuters global long-term economic outlook polls package)

(Reporting by Shrutee Sarkar; Analysis by Sujith Pai and Hari Kishan; Polling and additional reporting by the Reuters Polls team in Bengaluru and bureaus in Buenos Aires, Istanbul, Johannesburg, London, Shanghai, and Tokyo; Editing by Ross Finley, John Stonestreet and Hugh Lawson)

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Amazon asks India antitrust body to revoke Reliance-Future deal approval

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November 28, 2021

By Aditya Kalra and Abhirup Roy

NEW DELHI (Reuters) – Amazon has asked India’s antitrust regulator to revoke its approval for Future Retail’s $3.4 billion sale of retail assets to Reliance, saying it was “illegally obtained”, violating an order suspending the deal, a letter seen by Reuters shows.

The approval for the deal was a “nullity in the eyes of law” as an arbitrator’s order was still in force, according to the letter sent by Amazon.com Inc to the Competition Commission of India (CCI) last week.

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The battle between two of the world’s richest men, Amazon founder Jeff Bezos and Reliance Industries Ltd boss Mukesh Ambani, marks a contest for preeminence in India’s booming, nearly trillion-dollar retail market.

The winner in the fight for Future Retail Ltd, India’s second-largest retailer and Amazon’s estranged local partner, will get pole position in the race to meet the daily needs of more than a billion people.

The CCI, Amazon, Future Group and Reliance did not respond to requests for comment.

Future has said the arbitrator’s suspension order was invalid but Indian courts have declined to overturn it.

If the regulator agrees with the previously unreported letter, it would be a major setback for oil-to-telecom conglomerate Reliance.

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Amazon won an injunction against the deal from a Singapore arbitrator last year, alleging Future had violated contracts that prevented it from selling the assets to entities including Reliance.

But the CCI later cleared the deal.

Future misled the CCI and continued to seek approval for the deal, Amazon said in the letter dated Wednesday, calling the injunction a “brazen attempt to subvert the rule of law”.

Amazon asked for a personal hearing from the CCI to make its case.

The letter comes as Amazon is also battling allegations that it misrepresented facts and concealed information while seeking antitrust clearance for a 2019 deal with Future Group.

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Amazon has so far successfully used this deal’s contracts to block Future’s deal with Reliance.

(Reporting by Aditya Kalra and Abhirup Roy in New Delhi; Additional reporting by Zeba Siddiqui; Editing by William Mallard)

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Exclusive-Visa complains to U.S. govt about India backing for local rival RuPay

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November 28, 2021

By Aditya Kalra

NEW DELHI (Reuters) – Visa Inc has complained to the U.S. government that India’s “informal and formal” promotion of domestic payments rival RuPay hurts the U.S. giant in a key market, memos seen by Reuters show.

In public Visa has downplayed concerns about the rise of RuPay, which has been supported by public lobbying from Prime Minister Narendra Modi that has included likening the use of local cards to national service.

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But U.S. government memos show Visa raised concerns about a “level playing field” in India during an Aug. 9 meeting between U.S. Trade Representative (USTR) Katherine Tai and company executives, including CEO Alfred Kelly.

Mastercard Inc has raised similar concerns privately with the USTR. Reuters reported in 2018 that the company had lodged a protest https://reut.rs/3cQA2La with the USTR that Modi was using nationalism to promote the local network.

“Visa remains concerned about India’s informal and formal policies that appear to favour the business of National Payments Corporation of India” (NPCI), the non-profit that runs RuPay, “over other domestic and foreign electronic payments companies,” said a USTR memo prepared for Tai ahead of the meeting.

Visa, USTR, Modi’s office and the NPCI did not respond to requests for comment.

Modi has promoted homegrown RuPay for years, posing a challenge to Visa and Mastercard in the fast-growing payments market. RuPay accounted for 63% of India’s 952 million debit and credit cards as of November 2020, according to the most recent regulatory data on the company, up from just 15% in 2017.

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Publicly, Kelly said in May that for years there was “a lot of concern” that the likes of RuPay could be “potentially problematic” for Visa, but he stressed that his company remained India’s market leader.

“That’s going to be something we’re going to continually deal with and have dealt with for years. So there’s nothing new there,” he told an industry event.

‘NOT SO SUBTLE PRESSURE’

Modi, in a 2018 speech, portrayed the use of RuPay as patriotic, saying that since “everyone cannot go to the border to protect the country, we can use RuPay card to serve the nation.”

When Visa raised its concerns during the USTR gathering on Aug. 9, it cited the Indian leader’s “speech where he basically called on India to use RuPay as a show of service to the country,” according to an email U.S. officials exchanged on the meeting’s readout.

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Finance Minister Nirmala Sitharaman said last year that “RuPay is the only card” banks should promote. The government has also promoted a RuPay-based card for public transportation payments.

While RuPay dominates the number of cards in India, most transactions still go through Visa and Mastercard as most RuPay cards were simply issued by banks under Modi’s financial inclusion programme, industry sources say.

Visa told the U.S. government it was concerned India’s “push to use transit cards linked to RuPay” and “the not so subtle pressure on banks to issue” RuPay cards, the USTR email showed.

Mastercard and Visa count India as a key growth market, but have been jolted by a 2018 central bank directive for them to store payments data “only in India” for “unfettered supervisory access”.

Mastercard faces an indefinite ban on issuing new cards in India after the central bank said it was not complying with the 2018 rules. A USTR official privately called the Mastercard ban “draconian”, Reuters reported in September.

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(Reporting by Aditya Kalra in New Delhi; Editing by William Mallard)

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‘Flash mob’ thieves target U.S. retail stores on Black Friday

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November 28, 2021

By Steve Gorman

LOS ANGELES (Reuters) – Black Friday shoppers weren’t the only ones out hunting for bargains on the day after Thanksgiving. Thieves were busy as well.

Police in Los Angeles and cities elsewhere across the country spent much of their holiday weekend patrols looking for suspects in a spate of “flash mob” robberies on Friday, part of a surging U.S. crime trend in which groups of thieves swarm a store, ransack the shelves and flee.

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Authorities also have used the term “smash-and-grab” to describe the trend.

At least two such robberies were reported on Saturday by the Los Angeles Police Department (LAPD) and the Los Angeles County Sheriff’s Department. A local television station, KCAL-TV, counted a total of six smash-and-grab heists on the city’s west side alone on Friday.

In one incident, a group of eight men entered a Home Depot outlet at a shopping mall in Lakewood, south of downtown Los Angeles, walked directly to the tool aisle and snatched a bunch of hammers, sledgehammers and crowbars valued at about $400 before making their getaway, the sheriff’s office said.

According to L.A. television station KTTV, the Home Depot robbery on Friday night involved up to 20 suspects who pulled up to the store in as many as 10 cars and donned ski masks before raiding the tool aisle.

“We tried to stop them,” store employee Luis Romo told KTTV. “We closed the front entrance, and they put their sledgehammers up and whoever got in the way, they were going to hurt them.”

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The Los Angeles City News Service said four suspects in that robbery were arrested on Saturday by Beverly Hills police.

In a similar incident Friday afternoon, a group of 10 men or more invaded a store in the city’s Fairfax district and started grabbing merchandise without paying for it, pushing employees out of the way before fleeing the scene, according to LAPD.

Police are investigating possible ties between that incident and a flurry of other robberies and retail thefts on Friday and earlier in the week, including two smash-and-grabs reported on Wednesday, an LAPD spokesperson said.

The rash of retail crime prompted the LAPD to place its officers on a citywide tactical alert on Friday afternoon.

Mass robberies also were reported on Friday at two Best Buy electronics stores in the Minneapolis-St. Paul area, one of them involving as many as 30 suspects, while a spree of pre-dawn retail burglaries were under investigation in Chicago.

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In one of the biggest flash-mob robberies reported on the West Coast in recent days, police in the San Francisco suburb of Walnut Creek were seeking about 80 suspects who swarmed and ransacked a department store last Saturday.

(Reporting by Steve Gorman in Los Angeles; Editing by Paul Simao)

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