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Biden signs documents of US support for Sweden, Finland to join NATO

WASHINGTON, Aug 9 (Reuters) – US President Joe Biden on Tuesday signed documents endorsing Finland and Sweden’s accession to NATO, the most significant expansion of the military alliance since the 1990s as it responds to Russia’s invasion of Ukraine.

Biden signed the US “instrument of ratification” welcoming the two countries, the final step for their endorsement by the United States.

“It was and is a watershed moment I believe in the alliance and for the greater security and stability not only of Europe and the United States but of the world,” he said of their entry into the post World War Two alliance.

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The US Senate backed the expansion by an overwhelming 95-1 last week, a rare display of bipartisan unity in a bitterly divided Washington. Both Democratic and Republican Senators strongly approved membership for the two Nordic countries, describing them as important allies whose modern militaries already worked closely with NATO. read more

The vote was a sharp contrast with some rhetoric in Washington during the administration of former Republican President Donald Trump, who pursued an “America First” foreign policy and criticized NATO allies who failed to reach defense spending targets.

Sweden and Finland applied for NATO membership in response to Russia’s Feb. 24 invasion of Ukraine. Moscow has repeatedly warned both countries against joining the alliance.

Putin is getting “exactly what he did not want,” with the two countries entering the alliance, Biden said.

NATO’s 30 allies signed the accession protocol for Sweden and Finland last month, allowing them to join the nuclear-armed alliance once all member states ratify the decision. read more

The accession must be ratified by the parliaments of all 30 North Atlantic Treaty Organization members before Finland and Sweden can be protected by Article Five, the defense clause stating that an attack on one ally is an attack on all.

Ratification could take up to a year, although the accession has already been approved by a few countries including Canada, Germany and Italy.

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Reporting by Patricia Zengerle and Jeff Mason Editing by Mark Heinrich and Grant McCool

Our Standards: The Thomson Reuters Trust Principles.

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Business

Global cenbanks lift rates by nearly 1,200 bps in July

Plastic letters arranged to read “Inflation” are placed on Chinese Yuan banknote in this illustration taken, June 12, 2022. REUTERS/Dado Ruvic/Illustration

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LONDON, Aug 3 (Reuters) – Major developed and emerging market central banks around the globe delivered nearly 1,200 basis points in interest rate hikes in July alone, ramping up their fight against multi-decade high inflation with Canada surprising markets with an outsized move.

Central banks overseeing five of the 10 most heavily traded currencies delivered 325 basis points of rate hikes between them last month. This brings the total volume of rate hikes since the start of the year across G10 central banks to 1,100 basis points.

However, July’s tally was less than the 350 basis points seven central banks delivered in June.

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“We’ve reached peak hawkishness of the central banks,” Christian Kopf, head of fixed income portfolio management at Union Investment, told Reuters.

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“Central banks have made it clear that they will not overdo it with the rate hikes,” Kopf said, adding that it was also the message conveyed by US Federal Reserve chair Jerome Powell.

July was dotted with some eye catching moves. Canada emerged as the chief hawk, stunning markets by delivering the first 100-basis-point rate increase among the world’s advanced economies in the current cycle, lifting its key policy rate to 1.5%.

New Zealand delivered its sixth straight interest rate rise and signaled it remained comfortable with its planned aggressive tightening path to restrain runaway inflation. read more

And then of course the big one: The Fed delivered its second straight 75-basis-point rate hike, reinforcing its commitment to contain red-hot inflation running at 40-year highs. read more

There was no let up for policymakers in emerging markets, where inflation had been on a tear for much longer than in developed economies.

Nine out of 18 central banks delivered 850 bps of rate hikes in July. In total, emerging market central banks have raised interest rates by 5,265 bps year-to-date – nearly double the 2,745 bps for the whole of 2021, calculations show.

“Emerging market central banks remain more worried about inflation than growth,” BofA’s David Hauner said in a recent note to clients.

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Hungary moved twice in July, jacking up its base rate by 300 basis points to 10.75% with borrowing costs into double-digit territory for the first time since late 2008 – and flagging more hikes ahead. read more

Colombia and Chile piled in with a 150 bps and 75 bps hike respectively, though emerging market uber-hawk Brazil, which has lifted rates to 13.25 bps already in June, took a breather.

However, emerging markets have also seen cuts with Russia reducing interest rates ratcheted up to 20% in the wake of its Feb. 24 invasion of Ukraine, which sparked sweeping sanctions. read more

Inflation pressures would remain a headache for policy makers, said Tobias Adrian, director at the Monetary and Capital Markets Department at the International Monetary Fund (IMF).

“The magnitude of the inflation has been a surprise to central banks and markets, and there remains substantial uncertainty about the outlook for inflation,” Adrian wrote in a blog on Monday.

“Inflation risks appear strongly tilted to the upside,” Adrian said, adding there was a substantial risk that price pressures were becoming entrenched and expectations unanchored.

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Reporting by Karin Strohecker and Vincent Flasseur in London, Additional reporting by Dhara Ranasinghe; Editing by Jacqueline Wong

Our Standards: The Thomson Reuters Trust Principles.

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