03/02/2026

BIZ & FINANCE TUESDAY | FEB 3, 2026

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Surging euro presents new headache for ECB

FRANKFURT: A surge in the euro will be in focus at the European Central Bank’s (ECB) meeting this week, as fears grow it could hit the eurozone’s export-driven economies and weigh on inflation. The central bank for the 21-nation single currency area is widely expected to keep interest rates on hold for its fifth straight meeting, with consumer price rises currently a touch below the ECB’s 2% target. But the euro’s recent gains have complicated the picture and may fuel debate about if and when the ECB should start cutting its key deposit rate from its current level of 2%t. Berenberg bank economist Felix Schmidt told AFP that the “big topic” at Thursday’s meeting in Frankfurt “will obviously be the euro’s strength against the dollar, and what officials will have to say about it”. The dollar has been weakening – and the euro strengthening – for some time, in particular due to worries about US President Donald Trump’s erratic stewardship of the world’s biggest economy. But it extended gains sharply last week due to various factors, briefly hitting a 4½-year high above 1.20 against the dollar when Trump appeared to welcome the US currency’s weakening. The moves are causing jitters at the ECB – a stronger euro makes imports cheaper, potentially adding to downward pressure on inflation, at a time officials were already worried about too sharp a slowdown. IMF CHIEF SAYS GLO B AL INFLATION TO DECLINE DUBAI: Global inflation is expected to fall to 3.8% this year and to 3.4% in 2027, helped by softer demand and lower energy prices, the IMF chief said yesterday. Managing Director Kristalina Georgieva said in a speech in the Annual Arab Fiscal Forum here that global growth has held up ‘remarkably well amid profound shifts in geopolitics, trade policy, technology, and demographics. Geor gieva also called for more trade integration as unilateral trade agree ments are seen on the increase. “In the world of trade fragmentation, more trade integration is absolutely paramount. What we have seen this year is that trade did not go down the way we feared it would. In fact trade is growing slightly slower than global growth,” she added. – Reuters PHILIPPINE ECONOMY TO RE B OUND IN 2026 : MINISTER MANILA: The Philippine economy will bounce back this year with growth of at least 5%, supported by sound funda mentals and a solid performance in its key revenue sectors, the finance minister said yesterday. The Philippine economy grew just 4.4% in 2025, well below the government’s 5.5% to 6.5% target for the year, as a corruption scandal weighed on public spending and undermined consumer and investor confidence. Finance Secretary Frederick Go said the country’s economic fundamentals were still intact, with inflation in check and credit ratings remaining the same. “We will bounce back. And we will definitely have a GDP of at least 5%,“ Go told foreign correspondents. – Reuters

on the Federal Reserve’s independence. Trump on Friday nominated Kevin Warsh as the US central bank’s next chief. A former Fed official, Warsh was long an inflation foe but has aligned his views with those of Trump officials seeking aggressive rate cuts. ECB President Christine Lagarde has previously sought to talk up the euro as a potential new global reserve currency, arguing the economic order backed by the dollar was “fracturing”. Still, ING economist Carsten Breski said the jitters over the stronger euro show that it is “hard to reconcile the ambition of a global euro with an export?orientated economy”. Analysts expect the currency movements to have no impact on the ECB’s rate call this week, and Lagarde will likely stay tight-lipped on the path ahead. But Brzeski said that, if the euro strengthens further, the chances of a cut at the central bank’s next meeting in March “would clearly increase”. AFP

The ECB does not target any particular exchange rate, but officials do monitor currency movements as they could impact inflation. A stronger euro is also problematic for the region’s export-driven economies, particularly Germany, as it makes the cost of companies’ goods pricier overseas. It could thus hit the eurozone economy at a time growth was starting to get back on track, potentially undermining efforts to close the gap with China and the United States. Chancellor Friedrich Merz said last week he understood concerns about the rising euro, calling it “a considerable additional burden for the German export industry”. A stronger euro is not all bad news – it boosts household spending power, at home and on holidays overseas. The rise of the single currency also points to the growing appeal of Europe at a time of investor worries about the United States due to Trump’s policies, from his tariff blitz to attacks

o European Central Bank widely expected to keep interest rates on hold for fifth straight meeting While stressing recent gains were “modest”, Austrian central bank governor Martin Kocher warned that the ECB might have to consider rate cuts if there were further increases in the euro. Lowering borrowing costs tends to support inflation while weakening currencies. “If the euro appreciates further and further, at some stage this might create of course a certain necessity to react in terms of monetary policy,” Kocher, who sits on the ECB’s rate setting governing council, told the Financial Times .

Indonesia’s inflation jumps at quickest pace in almost 3 years JAKARTA: Indonesia in January reported its quickest pace of inflation in nearly three years, its statistics bureau said yesterday, as it also released surprisingly strong export and import growth in December. The inflation rate accelerated to 3.55% in January from 2.92% a month prior, below the 3.78% that was expected by analysts polled by Reuters. The January reading was slightly above the central bank’s target range of 1.5% to 3.5% and marked the fastest pace since May 2023, LSEG Refinitiv data showed. Inflation in Southeast Asia’s largest economy has remained within or under Bank Indonesia’s preferred range since mid-2023, allowing the central bank to embark on a rate-cutting cycle amounting to 150 basis points between September 2024 and September 2025.

BR I E F S

manufacturing sector, but it’s happening at a snail’s pace,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. The manufacturing output index, a key component of the headline figure, climbed back above the 50 threshold to 50.5 in January from 48.9 in December, indicating modest production growth. However, new orders fell for the third consecutive month. The decline in new work was less severe than in December but still dragged down the headline index. Factory job cuts continued for the 32nd straight month, although the pace of reduction was the slowest since September. – Reuters A senior official at Statistics Indonesia, Ateng Hartono, said the relatively high reading in January was due to a low base effect because the government gave electricity tariff discounts to some customers in the early months of 2025 to help economic growth. “In March or April, I’m sure inflation rate will normalise as long as there is no other government policy affecting the rate,” he said. The annual core inflation rate, which strips out government-controlled prices and volatile food prices, picked up to 2.45% in January from 2.38% in December. The Reuters poll had expected 2.37%. Meanwhile, Indonesia reported a US$2.52 billion trade surplus in December, beating a forecast of US$2.45 billion in a Reuters poll, official data showed yesterday, with exports outpacing imports over the month. Exports rose 11.64% annually in December to reach US$26.35 billion, compared with a forecast 2.4% drop in a Reuters poll, propped up by higher shipments of palm oil and nickel products. Imports rose 10.81% year-on-year to US$23.83 billion, compared to the 0.7% drop expected by analysts. Overall, Indonesia posted a trade surplus of US$41.05 billion rupiah for the full year of 2025, up from US$31.33 billion in 2024. – Reuters

A vendor sits next to toys for sale in a park in Surabaya. The annual core inflation rate, which strips out government-controlled prices and volatile food prices, picked up to 2.45% in January from 2.38% in December.– AFPPIC

UK manufacturing PMI rises to highest since August 2024 LONDON: A closely watched barometer of the health of Britain’s manufacturing sector rose to its highest since August 2024 in January as inflows of new work increased by the most in nearly four years, adding to signs of a pickup after a sluggish end to 2025. “UK manufacturing made a solid start to 2026, showing encouraging resilience in the face of rising geopolitical tensions,” said Rob Dobson, a director at S&P Global Market Intelligence. costs for chemicals, energy, food products, freight, metals, packaging and plastics, as well as suppliers passing on higher labour costs after last year’s rise in employment taxes and the minimum wage.

Meanwhile, eurozone factory activity remained in contraction territory in January for the third straight month amid persistent weakness in new orders despite output returning to growth, a survey showed. The HCOB Eurozone Manufacturing PMI, compiled by S&P Global, rose to 49.5 in January from December’s nine-month low of 48.8, slightly higher than a preliminary estimate of 49.4. “Some progress can be seen in the

“There was also a positive bounceback in business confidence, which rose to its highest level since before the 2024 Autumn budget,” he added. The manufacturing PMI showed that employment in the sector continued to fall – though by the smallest amount since Reeves raised employment taxes in October 2024 – while businesses’ input costs rose by the most since August 2025. S&P said manufacturers reported higher

The S&P Global Purchasing Managers’ Index for British manufacturing rose to 51.8 in January from 50.6 in December, slightly higher than an earlier provisional estimate of 51.6. The new orders component rose to 53.2 from 50.2, its highest since February 2022, lifted by the first growth in export orders in four years, which reflected stronger demand from Europe, the United States, China and other emerging economies.