US Fed leaves rates unchanged, flags ‘lack of further progress’ on inflation

US Fed leaves rates unchanged, flags ‘lack of further progress’ on inflation
US Fed Chair Jerome Powell addressing the media. AFP
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Updated 12 May 2024
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US Fed leaves rates unchanged, flags ‘lack of further progress’ on inflation

US Fed leaves rates unchanged, flags ‘lack of further progress’ on inflation
  • Policy rate remains in 5.25 percent-5.50 percent range
  • Fed policymakers concerned by recent inflation data
  • Markets take ‘dovish’ view of Fed chief’s remarks

WASHINGTON : The US Federal Reserve held interest rates steady on Wednesday and signaled it is still leaning toward eventual reductions in borrowing costs, but put a red flag on recent disappointing inflation readings that could make those rate cuts a while in coming, Reuters reported.

Indeed, Fed Chair Jerome Powell said that after starting 2024 with three months of faster-than-expected price increases, it “will take longer than previously expected” for policymakers to become comfortable that inflation will resume the decline toward 2 percent that had cheered them through much of last year.

That steady progress has stalled for now, and while Powell said rate increases remained unlikely, he set the stage for a potentially extended hold of the benchmark policy rate in the 5.25 percent-5.5 percent range that has been in place since July.

US central bankers still believe the current policy rate is putting enough pressure on economic activity to bring inflation under control, Powell said, and they would be content to wait as long as needed for that to become apparent — even if inflation is simply “moving sideways” in the meantime.

The Fed’s preferred inflation measure — the personal consumption expenditures price index — increased at a 2.7 percent annual rate in March, an acceleration from the prior month.

“Inflation is still too high,” Powell said in a press conference after the end of the Federal Open Market Committee’s two-day policy meeting. “Further progress in bringing it down is not assured and the path forward is uncertain.”

Powell said his forecast remained for inflation to fall over the course of the year, but that “my confidence in that is lower than it was.”

Whether there are rate cuts this year or not remains in doubt.

“If we did have a path where inflation proves more persistent than expected, and where the labor market remains strong but inflation is moving sideways and we’re not gaining greater confidence, well, that would be a case in which it could be appropriate to hold off on rate cuts,” Powell said. “There are paths to not cutting and there are paths to cutting. It’s really going to depend on the data.”

Despite the uncertainty of the current economic moment, Powell’s characterization of rate hikes as “unlikely” cheered investors concerned about a newly hawkish Fed chief.

US stock and bond prices turned higher as Powell preached patience that may delay rate cuts, but also means a high bar for any more hikes. The Fed raised its benchmark policy rate by 5.25 percentage points in 2022 and 2023 to curb a surge in inflation.

Powell’s remarks on Wednesday were “notably less hawkish than many feared,” said analysts at Evercore ISI. “The basic message was that cuts have been delayed, not derailed.”

Investors in contracts tied to the Fed’s policy rate increased bets that rate cuts could begin in September rather than later in the year as reflected in earlier market pricing.

Balance Sheet 

The Fed’s latest policy statement kept key elements of its economic assessment and policy guidance intact, noting that “inflation has eased” over the past year, and framing its discussion of interest rates around the conditions under which borrowing costs can be lowered.

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the Fed repeated in its unanimously-approved statement.

That continues to leave the timing of any rate cut in doubt, and Fed officials made emphatic their concern that the first months of 2024 have done little to help the cause.

“In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective,” the Fed said in its statement.

The US central bank also announced it will scale back the pace at which it is shrinking its balance sheet starting on June 1, allowing only $25 billion in Treasury bonds to run off each month versus the current $60 billion. Mortgage-backed securities will continue to run off by up to $35 billion monthly.

The step is meant to ensure the financial system does not run short of reserves, as happened in 2019 during the Fed’s last round of “quantitative tightening.”

While the move could loosen financial conditions at the margin at a time when the US central bank is trying to keep pressure on the economy, policymakers insist their balance sheet and interest rate tools serve different ends.

The Fed maintained its overall assessment of economic growth, saying that the economy “continued to expand at a solid pace. Job gains have remained strong and the unemployment rate has remained low.”

Powell reconciled that with the relatively weak, 1.6 percent growth of gross domestic product in the first quarter by saying that the 3.1 percent increase in private domestic demand was a better gauge of where the economy stands, with output buttressed by a recent jump in immigration.

Asked about the risk the US was entering a period of “stagflation” with stagnant growth and rising prices, Powell said current conditions are nothing like those seen in the late 1970s when prices were rising more than 10 percent annually at one point alongside high unemployment.

“Right now we have ... pretty solid growth ... We have inflation running under 3 percent,” Powell said, adding: “I don’t see the ‘stag’ and I don’t see the ‘flation,.’” 


Saudi PIF strikes 3 deals to boost renewable energy component manufacturing in the the Kingdom

Saudi PIF strikes 3 deals to boost renewable energy component manufacturing in the the Kingdom
Updated 13 sec ago
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Saudi PIF strikes 3 deals to boost renewable energy component manufacturing in the the Kingdom

Saudi PIF strikes 3 deals to boost renewable energy component manufacturing in the the Kingdom

RIYADH: Saudi Arabia’s Public Investment Fund has partnered with the world’s second-largest manufacturer of solar cell components for a $2.8 billion-power production plant in the Kingdom.

A statement from TCL Zhonghuan Renewable Energy Technology Co. confirmed the agreement, which is one of three signed off by the sovereign wealth fund on July 16 as it seeks to boost Saudi Arabia’s renewable energy sector.

The deals – entered into by the PIF subsidiary Renewable Energy Localization Co. – all involve creating joint ventures with Saudi firm Vision Industries.

One plan will see RELC working with Envision Energy to transform Saudi Arabia into a manufacturer of wind turbines and components.

The third deal involves an agreement with Jinko Solar to localize production of photovoltaic cells and modules.

Saudi Arabia has invested heavily in diversifying its energy mix toward renewable sources to meet its pledge to cut carbon emissions and promote sustainable development. By 2030, the country aims to source at least 50 percent of its electricity from renewables.  

Welcoming the deals, Yazeed Al-Humied, deputy governor and head of MENA Investments at PIF, said: “The new agreements are part of PIF’s efforts to localize advanced technologies in the renewable sector in Saudi Arabia and meet commitments to increase the share of local content, as well as contribute to localizing the production of 75 percent of the components in Saudi Arabia’s renewable projects by 2030 in line with the Ministry of Energy’s National Renewable Energy Program.

“These projects will also enable Saudi Arabia to become a global hub for export of renewable technologies. PIF aims to achieve these targets through its projects and portfolio companies, including RELC, which support PIF’s progress in renewable energy and investment, and enhance partnership with the private sector.” 

In a press release setting out more details of the deals, it was revealed that the agreement with TCL Zhonghuan Renewable Energy subsidiary Lumetech S.A. PTE. will localize production of solar photovoltaic ingots and wafers with the capacity to generate 20 gigawatts of power a year.

Under this agreement, RELC will hold 40 percent of the JV, with Lumetech holding 40 percent and Vision Industries having 20 percent.

The JV with Envision Energy will involve the manufacture and assembly of wind turbine components, including blades, with an estimated annual generation capacity of 4 GW. 

In this arrangement, RELC will once again hold 40 percent of the JV, with Envision holding 50 percent and Vision Industries holding 10 percent.

The agreement with Jinko Solar entails localizing the manufacture of photovoltaic cells and modules for high-efficiency solar generation. Under the agreement, which envisages annual production of 10 GW generation capacity, RELC will hold 40 percent of the JV, with Jinko Solar holding the same amount and Vision Industries accounting for the final 20 percent.

Overall, PIF, through Acwa Power and Badeel, is currently developing a total of eight renewable energy projects with a total capacity of 13.6 GW, involving over $9 billion of investment from the wealth fund and its partners. 

Saudi Arabia’s Minister of Energy, Prince Abdulaziz Al-Saud, recently launched the Geographic Survey Project for Renewable Energy, aimed at identifying optimal sites for solar and wind power initiatives across the Kingdom, marking it as an unprecedented endeavor.


PIF’s New Murabba Development Co. unveils design of new multi-use stadium

PIF’s New Murabba Development Co. unveils design of new multi-use stadium
Updated 40 min 14 sec ago
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PIF’s New Murabba Development Co. unveils design of new multi-use stadium

PIF’s New Murabba Development Co. unveils design of new multi-use stadium

RIYADH: A new 45,000-capacity stadium is set to enhance Saudi Arabia’s sports and entertainment landscape as New Murabba Development Co. unveiled its design as part of its mixed-use project.  
In a post on X, formerly known as Twitter, the Riyadh-based company owned by the Kingdom’s Public Investment Fund announced that the facility in its upcoming real estate development in the capital’s northwest would feature flexible and multi-use spaces, allowing it to host a variety of sporting events and entertainment activities. 

This initiative aligns with the Kingdom’s ambitions to establish itself as the premier cultural, tourist, entertainment, and sports destination in the Middle East and North Africa region. 
“The New Murabba Stadium contributes to demonstrating the extent of the efforts being made to make the Kingdom a leading global center by providing the best sports and entertainment experiences,” the company said in its X post. 
“The stadium is distinguished by its design that combines the local character inspired by the acacia tree, one of the main natural landmarks in Wadi Hanifah,” the post added. 

In addition to the stadium, the project will feature a museum, a technology and design university, an immersive theater, and over 80 entertainment and cultural venues upon completion, anticipated by the end of 2032.

“The New Murabba Stadium embodies our commitment to transforming Riyadh into a global destination for sports and entertainment,” said Michael Dyke, the CEO of the company. 

“The stadium will not only be a world-class venue for sporting events but also a vibrant community hub that enhances the quality of life for residents and visitors alike,” he added.

The New Murabba project, spanning 19 sq. km., will offer over 25 million sq. m. of floor area, 104,000 residential units, 9,000 hotel rooms, 980,000 sq. m. of retail space, and 1.4 million sq. m. of office space. 

In February 2023, Saudi Crown Prince Mohammed bin Salman announced the launch of New Murabba Development Co., aimed at transforming downtown Riyadh with a unique mix of residential, commercial, and entertainment offerings. 
In May, the Public Investment Fund-owned firm also hosted the New Murabba Partnership Forum at the InterContinental Riyadh. 
The event brought together a diverse group of vendors and partners to explore the extensive opportunities within this groundbreaking destination, poised to become the most transformative downtown area in Riyadh, according to a previous press statement. 


‘A great day for Saudi-German relations’ - Saudia delegation visits Airbus in Hamburg to celebrate historic deal

‘A great day for Saudi-German relations’ - Saudia delegation visits Airbus in Hamburg to celebrate historic deal
Updated 4 min 56 sec ago
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‘A great day for Saudi-German relations’ - Saudia delegation visits Airbus in Hamburg to celebrate historic deal

‘A great day for Saudi-German relations’ - Saudia delegation visits Airbus in Hamburg to celebrate historic deal

HAMBURG: A delegation from Saudia airline has made a special visit to Airbus’s factory in Hamburg to see for itself the progress of the largest aircraft deal in the Kingdom’s aviation history.

This landmark agreement, signed in May, includes the acquisition of 105 state-of-the-art A320neo and A321neo aircraft, which are to be distributed between Saudia and its low-cost carrier, flyadeal.

The deal is the latest in the longstanding relationship between Saudia and Airbus, which began in the early 1980s when Saudia became the launch customer for the Airbus A300-600, delivered in March 1984, coinciding with the start of operations to Colombo, Sri Lanka.

The most recent aircraft deal, valued at $19 billion, aligns closely with Saudia Group’s Vision 2030 objectives, aiming to transport 330 million travelers, accommodate 150 million visits, and serve 30 million pilgrims.

Speaking to Arab News at the event, Michael Kindsgrab, German Ambassador to Saudi Arabia, said: “This is a great day for German-Saudi economic relations. This is the biggest aircraft deal we’ve ever signed between Airbus and Saudi Arabia and Saudia airlines, so this really leads into the future for more sustainable, ever more safe, more comfortable aviation.” 

He added: “This is a very big sign of the trust Saudia places into Airbus into the possibility of Airbus to make Saudia a happy customer. It’s a very good day for Saudi-German relations. I’m happy to be part of it.”

The deal significantly strengthens Saudi Arabia’s position as a hub for entertainment, sports, and major events, bolstering its global influence. It also boosts local content, fosters business entrepreneurship, and fuels sustainable economic growth for the Kingdom.

The aircrafts each take six months to complete. AN

Strengthening capabilities and workforce

Emphasizing a holistic investment strategy, the deal prioritizes local workforce development and technology transfer, fostering innovation across the aviation sector, and contributing to local content worth an estimated SR2.5 billion ($670 million).

Additionally, the agreement will transform the Saudi small and medium enterprise sector into an essential contributor within Airbus’ global supply chain.

Addressing the Saudi delegation in Hamburg, President of Airbus International Wouter van Wersch described the deal as “a fantastic opportunity for us to strengthen our cooperation”.

He continued: “We are ready right here and right now to grow with the Kingdom through its ambitions. We can turn many opportunities into realities.”

Van Wersch said that each aircraft takes six months to finish, and added: “We have many Saudis working in our teams, and our cooperation is built on a strong partnership through various activities.” 

Another significant outcome of this deal is that it will promote strong economic and diplomatic collaboration between Saudi Arabia and European countries, reinforcing commitments to

regional stability and global cooperation.

This will create investment opportunities and foster the creation of high-caliber, direct and indirect jobs in the Airbus manufacturing countries across Europe, particularly in Germany.

Reflecting on the 40-year relationship between his company and Airbus, director general of Saudia Ibrahim Al-Omar said the latest agreement was a “historical deal.”

Al-Omar also stressed that the partnership will reflect a robust effect that goes beyond just the immediate participants, benefiting regions in Germany and Europe by creating high-quality jobs.

Moreover, the partnership exemplifies how international collaborations can spur innovation and economic growth globally.

Speaking to Arab News, Al-Omar said: “Our visit today has provided us with a special opportunity to witness the efforts and processes that define Airbus leadership in the industry. 

“The facility and the skilled workforce at Airbus demonstrate a commitment to excellence that aligns perfectly with Saudia Group’s vision to enhance our guest experience and expand our capability. We are excited about the future and the promising production timeline.”

He added that together the firms are “not only shaping the future of aviation but also building a legacy of excellence and innovation.”

Also speaking to Arab News, Khaled Tash, the group chief marketing officer for Saudia, noted that as Airbus is a key economic driver in Europe, other countries on the continent will see benefits from the order.

“A deal like these 105 aircraft – imagine what kind of job opportunities it creates here in Germany, in France, in Spain, in the UK where the different parts are being manufactured, but also back in Saudi Arabia,” he said.

Tash further explained that each new aircraft requires about six to eight pilots and co-pilots, along with over 20 cabin crew members.

Additionally, a significant number of technicians and engineers are needed to maintain and perform all necessary maintenance work on the aircraft.

“The amount of job opportunities that such deals create, make it a social economic deal, much more than just an airline deal with a manufacturer,” Tash said.

A new experience 

The $19 billion deal, announced at the Future Aviation Forum in Riyadh in May, will see Saudia acquire 54 A321neo planes, while flyadeal will receive 12 A320neo and 39 A321neo aircrafts .

The agreement was announced in the presence of Minister of Transport and Logistic Services Saleh bin Nasser AI-Jasser, Director General of Saudia Group Ibrahim Al-Omar, and Benoît de Saint-Exupéry, executive vice president of sales of Airbus.

Speaking at the forum, Al-Omar stated that over the next five years, 88 new aircraft will be added to the fleet, adding: “If we refer to the renovation of the guest cabin, we promise everyone a new experience in the business and hospitality classes based on privacy and the innovation of new products as this project will include new aircraft in addition to the current fleet.”

He went on to say that the first plane will be equipped with new seats by the end of 2025.

Starting in the fourth quarter of 2024, Saudi Airlines will begin offering fast and high-quality internet services on its flights.

Additionally, the airline will equip its aircraft with high-resolution screens that are Bluetooth-enabled and compatible with most smart devices. This upgrade will be implemented on both new and existing aircraft.

Saudi Arabia’s Aviation Strategy aims to triple passenger numbers, connect to over 250 destinations, and manage 4.5 million tonnes of cargo by 2030.


Saudi Arabia, Thailand to enhance opportunities in energy fields amid top ministerial meeting

Saudi Arabia, Thailand to enhance opportunities in energy fields amid top ministerial meeting
Updated 16 July 2024
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Saudi Arabia, Thailand to enhance opportunities in energy fields amid top ministerial meeting

Saudi Arabia, Thailand to enhance opportunities in energy fields amid top ministerial meeting

RIYADH: Saudi Arabia and Thailand are on track to enhance opportunities in various energy fields thanks to a top ministerial meeting between officials from both countries. 

The gathering, attended by the Kingdom’s Minister of Energy Prince Abdulaziz bin Salman and Thailand’s Deputy Prime Minister and Energy Minister Pirapan Salirathavibhaga, who is currently visiting Saudi Arabia, shed light on many energy fields.

Topics of discussion included oil and gas, renewable energy, and hydrogen, as well as carbon extraction, use and storage, and energy efficiency, according to a statement. 

This falls in line with the ongoing efforts between both sides to further propel economic ties between them. 

Trade relations between the two nations saw business soar to $8.8 billion in 2023, up from $7.5 billion following the countries restoring ties in 2022. 

This represents nearly 22 percent of Thailand’s total trade with the Middle East, underscoring a flourishing economic partnership.

Moreover, during the meeting, the two sides discussed the Kingdom’s efforts to lead the transformation in the field of energy through projects such as the “Saudi Green Initiative” and the “Middle East Green Initiative.” 

Earlier this week, the Kingdom’s Minister of Investment Khalid Al-Falih highlighted that Saudi Arabia is set to enhance private sector cooperation with Thailand as the Southeast Asian nation opens its first board of investment office in Riyadh. 

On the sidelines of the business forum in the Saudi capital at the time, Al-Falih emphasized that this marks Thailand’s inaugural office in the Middle East, encouraging stronger bonds and new investment opportunities in both countries.

Addressing the business delegation at the Saudi-Thailand Investment Forum, Al-Falih said at the time: “Representative offices from the Kingdom of Saudi Arabia and your country will do a great deal of facilitating private sector to private sector cooperation and allowing us to reach the potential that I mentioned.”    

The minister also stressed at the time the common parallels between the two countries, noting they share a “great deal of complementarity.”

Thailand has its National Strategy 2037, whereas Saudi Arabia has its Vision 2030.   

“Which naturally leads me to emphasize the energy sector, including its multifaceted branches downstream: biofuels, biochemicals and CCUS (carbon capture utilization and storage), hydrogen, and renewables,” he said at the time.


Closing Bell: Saudi main index closes in green at 12,080

Closing Bell: Saudi main index closes in green at 12,080
Updated 16 July 2024
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Closing Bell: Saudi main index closes in green at 12,080

Closing Bell: Saudi main index closes in green at 12,080

RIYADH: Saudi Arabia’s Tadawul All Share Index continued its upward trend for the third consecutive day on Tuesday, gaining 132.67 points or 1.11 percent to close at 12,080.37.

The total trading turnover of the benchmark index was SR7.25 billion ($1.93 billion), with 140 of the listed stocks advancing and 73 declining. 

Similarly, Saudi Arabia’s parallel market Nomu edged up by 0.27 percent to 25,919.13. 

The MSCI Tadawul Index also gained 15.72 points to close at 1,513.57. 

The best-performing stocks of the day were AYYAN Investment Co. and Al Sagr Cooperative Insurance, whose share prices surged by 9.96 percent each. 

Other top performers on the benchmark index were Miahona Co. and Makkah Construction and Development Co., as their share prices soared by 7.70 percent and 6.40 percent respectively. 

The worst performer of the day was Al-Baha Investment and Development Co. The firm’s share price slipped 7.69 percent to SR0.12. 

On the announcements front, Lana Medical Co.’s fully owned subsidiary Lana Investment Co. said it acquired a 50 percent stake in Solar Laser Systems Co. and Solar Maccom Co.

Lana said in a statement to Tadawul that the SR6 million deal would be financed from the company’s own resources. 

The statement added that the impact of the deal will be visible in the company’s financial performance from Jan.1, according to the terms and conditions of the agreement. 

Meanwhile, Al-Hokail Academy Specialized Digital Polyclinics Co. announced that it has decided to cancel its initial public offering in Saudi Arabia’s parallel market. 

“This is in order to ensure the interest of investors and shareholders. This comes with the aim of ensuring the best possible conditions for listing, and the company aims with this decision to enhance the confidence of investors and shareholders in the strength and sustainability of its business,” the company said in a statement to Tadawul. 

Additionally, LIVA Insurance Co. said that it received approval from Banque Saudi Fransi to provide insurance services to the bank for one year starting from July 16. 

In a Tadawul statement, the insurance provider said that the deal will provide positive impacts on the company’s financial results for 2024 and 2025.