BEIJING (Reuters) - China's economy is set to grow 5% this year, after a "strong" first quarter, the International Monetary Fund said on Wednesday, upgrading its earlier forecast of 4.6% expansion though it expects slower growth in the years ahead.

The IMF said it had revised up both its 2024 and 2025 GDP targets by 0.4 percentage points but warned that growth in China would slow to 3.3% by 2029 due to an ageing population and slower expansion in productivity.

"China's economic growth is projected to remain resilient at 5% in 2024 and slow to 4.5% in 2025," the global lender said in a statement wrapping up its annual assessment of the world's second-biggest economy for 2024. "Strong Q1 GDP data and recent policy measures" drove the upgrades, it added.

China's economy grew at a faster than expected 5.3% pace year-on-year in the first quarter, comfortably above analysts' forecast for a 4.6% gain in a Reuters poll and up from a 5.2% expansion in the previous quarter.

A string of recent economic indicators for April including factory output, trade and consumer prices suggest the $18.6 trillion economy has successfully navigated some near-term downside risks, but China observers say the jury is still out on whether the bounce is sustainable.

Domestic consumption remains soft and much of that is linked to fragile confidence amid a protracted property sector crisis that is widely seen as the single biggest stumbling block to a full-blown economic recovery.

Retail sales in April, for instance, grew at their slowest pace since December 2022, when Beijing's strict zero-COVID curbs were in place, while new home prices fell at their fastest rate in nine years.

The IMF said it welcomed steps announced by policymakers earlier this month to stabilise China's beleaguered property sector and said that steps "necessary for steering the sector towards a more sustainable path should continue."

By Devayani Sathyan

BENGALURU (Reuters) - Australian home price rises will outpace overall inflation over the next couple of years, despite fading expectations of interest rate cuts, according to a Reuters poll of analysts who said the supply of affordable homes will keep falling short of demand.

Robust demand for housing and the failure of homebuilders to adequately increase supply has turned Australia into one of the world's most expensive housing markets, severely limiting options for many new homebuyers who dream of owning a property.

After surging more than 25% during the pandemic, prices fully recovered those losses by the end of 2023, rising 8.1% over the year, in a quick turnaround that came despite the Reserve Bank of Australia (RBA) jacking up interest rates to a 12-year high of 4.35% in late 2023.

Economists in a separate Reuters poll do not expect the RBA to cut rates until the fourth quarter of this year.

The Reuters survey of 14 real estate analysts taken between May 10 and 28 expected home prices to rise 5.3% this year, a consensus view largely unchanged since August 2023. Analysts predicted a 5.0% rise in 2025 and 2026.

Housing markets rarely rise that steadily and consistently, especially when interest rates are changing. Yet supported by strong economic fundamentals, relatively low unemployment and a high influx of immigrants, Australia's housing market has nearly always outpaced analysts' estimates.

"Supply-demand imbalance has obviously taken the upper hand versus the capacity-to-pay issue. So we continue to see a very moderate positive growth for Australian house prices," said My Bui, economist at AMP (OTC:AMLTF).

"We've under-built in the past two or three years already. So even if the supply picks up from here, we'll still have a little bit of under-supply that we need to catch up (from) in the past two years or so."

SHORT OF DEMAND

Asked about the supply of affordable homes over the coming two to three years, all eight who answered said it would be short of demand. Four of those eight said it would be far short.

Supply constraints, high mortgage rates and already- elevated home prices mean affordability for first-time buyers in the near term will worsen.

The average asking price of an Australian property was A$779,817 ($520,293.90) in April, according to CoreLogic, nearly eight times the average annual income.

It is close to 12 times in Sydney, where prices were forecast to rise 4.5% this year and 5.5% next.

"Unfortunately it's very hard for first-time buyers because prices have gone up quicker than they can save a deposit and quicker than they can get into the market," said Michael Yardney at Metropole. "They are suffering because the cost of living has gone up (and) the rents are sky-rocketing.

"The problem is the rich are getting richer. Those who own real estate, the value of their assets has gone up, in many cases double-digit growth over the last year. So, therefore, the house price has gone up considerably, but many people's average income hasn't," Yardney added.

In a bid to help Australians overcome the housing crisis, the Anthony Albanese-led government has pledged to build 1.2 million homes by 2030.

Analysts unanimously agreed the government should be more involved in improving affordability. "The government's job is to provide social and public housing for Australia's poor and disenfranchised people. It has not been doing that," Yardney said.

(For other stories from the Reuters quarterly housing market polls:)

($1 = 1.5020 Australian dollars)

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, said Tuesday that the US central bank's policy stance remains restrictive, however, he added that policymakers have not completely dismissed the possibility of further interest-rate increases.

“I don’t think anybody has totally taken rate increases off the table,” Kashkari stated during an event in London. “I think the odds of us raising rates are quite low, but I don’t want to take anything off the table.”

Kashkari echoed the remarks he shared in an interview with CNBC earlier in the day, where he said that the Fed should wait for more substantial progress on inflation before considering interest rate cuts.

When asked about the conditions for rate cuts in 2024, Kashkari said, “Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back.”

The Fed official also didn't rule out further rate hikes if inflation persists, saying that the central bank shouldn’t rule anything out at this point.

U.S. inflation increased by 0.3% in April, slightly less than expected, offering some relief to policymakers, but it remained 3.4% higher compared to the previous year.

Kashkari remains confident that the Fed will eventually reach its 2% inflation target but stressed the importance of patience.

“I’m not seeing the need to hurry and do rate cuts, I think we should take our time and get it right,” he told CNBC.

He also mentioned that while the central bank might consider adjusting its target rate in the future, it was premature to “move the goal posts” at this time.

Earlier this month, Kashkari suggested that the Fed might need to keep interest rates steady for "an extended period"—potentially all year—to achieve its inflation goal.

Recently, there has been a growing divergence among major central banks on interest rate policies.

The Fed, which has historically been quick to adjust rates, is becoming more cautious amid persistent inflation.

In contrast, the European Central Bank is expected to lower rates ahead of the Fed, with key ECB officials supporting a June cut. Similarly, the Bank of England is anticipated to reduce rates this summer.

(Reuters) - Federal Reserve policy statements would benefit from somewhat lengthier passages than currently employed to describe assessments of economic developments, how that influences the central bank's outlook and the risks to that outlook, Cleveland Fed President Loretta Mester said on Tuesday.

"While simpler is often seen as a virtue, it can also be a detriment, since policymaking has to be done in an uncertain world, one in which the economy is constantly being buffeted by shocks that can lead economic conditions to evolve differently than anticipated," Mester said in remarks prepared for delivery to a Bank of Japan conference in Tokyo. "With short statements, each word takes on added significance."

Fed policy statements have become shorter under the leadership of Chair Jerome Powell, and Mester - who is retiring next month - said that is not always the best choice.   "Short statements suffer from what I call a 'Hotel California' problem: We are reluctant to change particular words because of the possible signal that doing so may send," she said, referencing the hit 1970s song by the Eagles. "Words 'check in' but it is hard to get them to 'check out' even when it is desirable.

"In my view, it would be preferable for policymakers to take control of the narrative by using more words to describe the current assessment of economic developments, how they have influenced the outlook, and the risks to that outlook," she said. 

Another improvement to Fed communications would be the introduction of an "anonymized matrix" of economic and policy projections alongside the Summary of Economic Projections, or SEP, published each quarter. The SEP most notably includes a "dot plot" showing the range and clustering of policymakers' projections for the appropriate level of interest rates.

By publishing such a matrix "market participants can see the linkage between each participant’s outlook and his or her view of appropriate monetary policy associated with that outlook," Mester said. "Currently, the variables in the SEP are not linked across participants, and the median paths provided don’t necessarily represent a coherent forecast. For example, there is no guarantee that someone projecting the median inflation path would necessarily be projecting the median output path."

The recommendations from Mester - which she dubbed "use your words" and "connect the dots" - come ahead of a planned monetary policy framework review that Powell has said will start later this year and likely stretch into 2025. Mester expects the Fed will consider its communications strategy as part of the review.

By Sherin Elizabeth Varghese

(Reuters) - Gold prices held steady on Tuesday as the dollar eased, while investors looked forward to key U.S. inflation data that could offer clues on how soon the Federal Reserve can cut interest rates.

Spot gold was flat at $2,350.85 per ounce, as of 0350 GMT, after rising about 1% in the previous session.

U.S. gold futures rose 0.8% to $2,352.00.

"A very strong dollar picture supported by a change in the U.S. monetary policy stance where the Fed starts looking for evidence to kick start interest rate hikes instead of easing could be a major risk as we could see a further corrective move in spot gold," said Kelvin Wong, a senior market analyst for Asia Pacific at OANDA. [USD/]

However, in the short term, spot gold is still more skewed towards the positive side rather than the negative side and $2,310 is a key short-term support for this week, Wong added.

The core personal consumption expenditures price index (PCE), the Fed's preferred inflation measure, is due on Friday.

Fed meeting minutes released last week showed that the policy response, for now, would involve maintaining the benchmark policy rate at its current level but also reflected discussions of possible further hikes.

Traders' bets indicated rising scepticism that the U.S. central bank will lower rates more than once in 2024, currently pricing in about a 62% chance of a rate cut by November according to the CME FedWatch Tool.

Bullion is known as an inflation hedge, but higher rates increase the opportunity cost of holding non-yielding gold.

Vietnam's central bank will stop auctioning gold in the domestic market and launch a new measure to stabilise domestic prices, it said on Monday.

Spot silver rose 0.2% to $31.73, platinum was up 0.4% to $1,058.50 and palladium gained 0.2% to $991.18.

By Nivedita Balu and Fergal Smith

TORONTO (Reuters) - Canada, Mexico and Argentina on Monday started to settle securities trades faster, halving settlement time to one day, in a move designed to reduce counterparty risk and improve market liquidity.

Settlement is the final stage of a trade, when buyers get their securities delivered and sellers are paid.

Market participants and regulators in the United States are paying close attention to the implementation of the so-called T+1 in Canada, Mexico and Argentina because Wall Street will shift to one-day settlement on Tuesday for equities, corporate and municipal bonds and other securities.

As global markets are highly integrated, any hiccups there could signalize potential issues for the United States too.

"Everything is bright green at this point in time. There are no issues and everybody is extremely optimistic," said Keith Evans, executive director of the Canadian Capital Markets Association, a federally incorporated industry organization.

Volumes will likely be up to 25% lighter than normal due to the U.S. holiday on Monday, making it "somewhat of an advantage" for Canada, Evans added.

In Argentina, Gonzalo Pascual Merlo, chief executive of local exchange operator BYMA, told Reuters that the change would further strengthen the country's capital markets.

"Implementing this measure brings clear benefits for the whole ecosystem, from liquidity providers to investors and other participants," he said.

A BYMA spokesman added that implementing the quicker settlement would "strengthen the friction-less arbitrage with other global markets and reduce counterparty risk in normal settlement, increasing security for capital markets participants."

Although regulators have been discussing the implementation of one-day settlement for a long time, it gained more traction after the 2021 trading frenzy around the "meme stock" GameStop (NYSE:GME) highlighted the need to reduce counterparty risk and improve capital efficiency and liquidity in securities transactions.

In China and India, the new standard is already in place, while Britain and the European Union plan to shift in the coming years.

The more countries or markets adopt T+1, the more efficient the faster settlement it will be for global investors.

Currency trades funding securities transactions currently settle in two days. Because of issues like this, regulators and market participants expect a temporary increase in trade fails. Research firm ValueExchange found in a survey that market participants expect the trade fail rate to increase to 4.1% after T+1 implementation from 2.9%.

"The next few days promise to be challenging," said Nawan Butt, head of capital markets at Purpose Investments in Toronto. "We have to spend the time to handhold all trades and make sure trade fail rates remain low as funding costs are quite high with the current interest rate backdrop."

TOKYO (Reuters) - Japanese corporate services prices in April rose at their fastest pace since early 2015, Bank of Japan data showed on Tuesday, boosted by labour costs in the services sector.

The Corporate Services Price Index (CSPI) rose 2.8% year-on-year in April, following a 2.4% increase in the previous month. For the month, the service prices rose 0.7% from March, slowing from the prior month's 0.9%.

The annual gains reflect rising labour costs in labour-intensive service businesses such as machine repair and industrial facility renovation.

The index is closely watched by policymakers as they look for solid wages to spark durable demand-led inflation, which is a prerequisite for further Bank of Japan rate hikes after its landmark decision in March to end negative rates.

The BOJ has signaled it will continue to raise interest rates albeit at a sedate pace given the fragile state of the Japanese economy.

TOKYO (Reuters) - Japanese corporate services prices in April rose at their fastest pace since early 2015, Bank of Japan data showed on Tuesday, boosted by labour costs in the services sector.

The Corporate Services Price Index (CSPI) rose 2.8% year-on-year in April, following a 2.4% increase in the previous month. For the month, the service prices rose 0.7% from March, slowing from the prior month's 0.9%.

The annual gains reflect rising labour costs in labour-intensive service businesses such as machine repair and industrial facility renovation.

The index is closely watched by policymakers as they look for solid wages to spark durable demand-led inflation, which is a prerequisite for further Bank of Japan rate hikes after its landmark decision in March to end negative rates.

The BOJ has signaled it will continue to raise interest rates albeit at a sedate pace given the fragile state of the Japanese economy.

By Kanishka Singh

(Reuters) -Tornado-spawning thunderstorms that swept the Southern Plains and the Ozark Mountains have killed at least 21 people across four U.S. states as of Monday afternoon and wrecked hundreds of buildings, as forecasters warned of more severe weather.

The death toll over the three-day Memorial Day holiday weekend included at least eight fatalities in Arkansas, seven in Texas, four in Kentucky and two in Oklahoma, according to tallies by state emergency authorities.

A severe thunderstorm watch was issued for parts of New Jersey, New York and Pennsylvania until Monday evening, the National Weather Service said. The watch was in effect for more than 30 million people in the Northeast, as the storms were expected to move to that part of the East Coast.

Kentucky Governor Andy Beshear declared a state of emergency early on Monday. The weather service issued a severe thunderstorm watch for the Atlanta area and other parts of Georgia and for several western South Carolina counties until at least Monday afternoon.

"It was a tough night for our people," Beshear posted on social media platform X on Monday. He later said in a press briefing that devastating storms had hit almost the entire state. The storms damaged 100 state highways and roads, officials said.

At least seven people perished - including a 2-year-old and a 5-year-old from a family - and nearly 100 were injured on Saturday night when a powerful tornado struck communities in North Texas near the Oklahoma border, Governor Greg Abbott told a Sunday news conference.

Late on Sunday, Arkansas Governor Sarah Huckabee Sanders said at least eight people died in her state after the storms. An Arkansan suffering from chronic obstructive pulmonary disease died due to a lack of oxygen when the power went out.

President Joe Biden offered condolences for the lives lost when he spoke on Monday with Oklahoma Governor Kevin Stitt and Governors Abbott and Sanders, the White House said.

The Federal Emergency Management Agency was on the ground conducting damage assessments with state and local counterparts, the White House said, adding that Biden had directed federal agencies to provide support as needed.

Hundreds of thousands of Americans were without power on Monday due to the weather, according to the PowerOutage.US tracking website. In Kentucky alone, more than 160,000 customers lacked electricity.

In some areas, restoring power could take days, Kentucky Governor Beshear said in a news briefing.

The weather service warned that additional storms would move through the Ohio and Tennessee valleys, bringing damaging winds, large hail and more tornadoes, as well as heavy downpours capable of triggering flash floods.

The latest extreme weather came just days after a powerful tornado ripped through an Iowa town, killing four people, and more twisters touched down in Texas last week.

The U.S. is preparing for what government forecasters have called a potentially "extraordinary" 2024 Atlantic hurricane season beginning next Saturday.

(Reuters) -The European Central Bank is ready to cut interest rates next month but policy must continue to be restrictive this year as wage growth will not normalise until 2026, ECB chief economist Philip Lane told the Financial Times.

The ECB has all but promised a rate cut for June 6, so the debate has shifted to subsequent moves and markets have dialled back their expectations, betting on just one more cut this year.

"Barring major surprises, at this point in time there is enough in what we see to remove the top level of restriction," Lane told the FT in an interview published on Monday.

"The best way to frame the debate this year is that we still need to be restrictive all year long," he added. "But within the zone of restrictiveness we can move down somewhat."

While Lane made no explicit comment about the July policy meeting, a string of policymakers including fellow board member Isabel Schnabel have already said that a second step should not come quite so soon.

Wage growth is expected to "visibly" decelerate next year and policymakers can then debate normalising policy.

At 4%, the ECB's deposit rate holds back growth and there is little debate that the first few cuts, at least until 3% but possibly further, merely remove restriction rather than provide stimulus.

"We need to see more progress (on inflation) before we move from maintaining the restrictive phase to thinking about normalisation," Lane added.

Lane said ECB policymakers needed to keep rates in restrictive territory this year to ensure that inflation kept easing and did not get stuck above the bank's target, which "would be very problematic and probably quite painful to eliminate".

A key wage indicator accelerated last week, spooking some but Lane said the figure was well anticipated and a slowdown was already in the works.

"Deceleration does not necessarily mean an immediate return to steady state," Lane said. "This year the adjustment is clearly quite gradual."

By Vivek Mishra

BENGALURU (Reuters) - India's economy likely grew at its slowest pace in a year in the January-March quarter due to weak demand, according to a Reuters poll of economists who said the possibility of growth significantly surpassing their forecasts was low.

The country's gross domestic product (GDP) unexpectedly grew by 8.4% in October-December compared to a year earlier, thanks to a sharp drop in subsidies which provided an artificial boost to net indirect taxes. But economic activity, as measured by gross value added (GVA), showed a more modest 6.5% expansion.

Economists in the poll said that situation was unlikely to have been repeated in the last quarter.

Growth in Asia's third-largest economy likely slowed to an annual 6.7% in January-March, more in line with the long-term GDP growth rate, according to a Reuters poll of 54 economists. GVA growth was expected to slow to 6.2%.

Most economists in the poll said growth likely slowed due to moderation in both the manufacturing and services sectors. They also cited a muted contribution from agriculture.

Forecasts for GDP growth were in a 5.6%-8.0% range. The data are due at 1200 GMT on May 31, just days before general election results will be announced on June 4. Prime Minister Narendra Modi is expected to win a rare third term in power.

"We expect some sanity to return," said Kunal Kundu, India economist at Societe Generale (OTC:SCGLY). "Among the components, we do not expect any major improvement."

Over two-thirds of economists who answered an additional question said the possibility of GDP growth significantly surpassing their forecast was low. The rest said it was high.

"Core inflation continuing to drop and recording the lowest growth since the onset of the pandemic is symptomatic of weak domestic demand," Kundu said.

Weaker growth in private consumption, which accounts for 60% of GDP, was also likely to appear in upcoming quarters.

Economic growth, which likely averaged 7.7% last fiscal year, was forecast to slow to 6.8% this fiscal year and 6.6% in the next, suggesting consistent 8% growth was still some distance away for the world's fastest-growing major economy.

While most economists reckon 8% or higher growth is needed to generate adequate job growth for millions of young people joining the work force, some are skeptical that can be consistently achieved.

Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said 5-6% was a "reasonable" potential growth rate for India's economy.

"For this potential to be reaped, though, reforms need to be pursued, and Modi 2.0 took some steps back on this front - a reversal of agriculture reforms, delay in the implementation of new labour codes and a broad turn away from regional trade agreements."

A growing divergence between financial economists' GDP forecasts and government estimates has also raised questions over how India measures growth.

The National Statistical Office (NSO) said it expected GDP growth to be 5.9% in the January-March quarter.

"I think there is a slight overestimation of the informal sector GDP...which is why things on the ground probably do not look as exuberant as the headline numbers suggest," said Dhiraj Nim, economist at ANZ.

The informal sector contributes nearly half of the country's GDP and employs about 90% of India's workforce.