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IMF Sees US Fed in Position to Cut Interest Rates Later this Year

A case of meat is pictured at a butcher shop at Reading Terminal Market after the inflation rate hit a 40-year high in January, in Philadelphia, Pennsylvania, US, February 19, 2022. REUTERS/Hannah Beier/File photo Purchase Licensing Rights
A case of meat is pictured at a butcher shop at Reading Terminal Market after the inflation rate hit a 40-year high in January, in Philadelphia, Pennsylvania, US, February 19, 2022. REUTERS/Hannah Beier/File photo Purchase Licensing Rights
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IMF Sees US Fed in Position to Cut Interest Rates Later this Year

A case of meat is pictured at a butcher shop at Reading Terminal Market after the inflation rate hit a 40-year high in January, in Philadelphia, Pennsylvania, US, February 19, 2022. REUTERS/Hannah Beier/File photo Purchase Licensing Rights
A case of meat is pictured at a butcher shop at Reading Terminal Market after the inflation rate hit a 40-year high in January, in Philadelphia, Pennsylvania, US, February 19, 2022. REUTERS/Hannah Beier/File photo Purchase Licensing Rights

The International Monetary Fund said on Friday it continues to believe that the Federal Reserve could start cutting interest rates later this year and should stay cautious, even as a fall in US June consumer prices raises expectations for an earlier rate cut, Reuters reported.

IMF spokesperson Julie Kozack told reporters at a regular news briefing that the disinflation process was underway in the United States. Kozack spoke after the release of a report showing that the US Consumer Price Index fell 0.1% in June, marking its first monthly drop in four years.

"We do support the Fed's data-dependent and cautious approach to monetary policy. We also do expect that the Fed will be in a position to reduce rates later this year, and that assessment continues to hold," Kozack said.

Kozack also noted that US growth has been "remarkably strong" and that heavy federal spending on COVID-19 relief and investments in infrastructure, clean energy and semiconductors would have a lasting positive impact on the US economy.

But Kozack repeated the IMF's recent annual policy advice for the United States to rein in its growing debt pile, a longstanding recommendation.

"Now the fiscal deficit is too high, and it is the time now, especially that the economy is strong, to take action to put debt-to-GDP on a decisive downward path. And that will require a broad set of fiscal measures," Kozack said.

The IMF now estimates that US net interest payments on federal debt are forecast to reach 3.2% of gross domestic product in fiscal 2024, which ends Sept. 30, up from 2.4% in fiscal 2023 due to higher interest rates. This ratio will "remain elevated even in the medium term" because of higher deficits and debt levels, Kozack added.

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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)

Telecommunications companies listed on the Saudi Stock Exchange (Tadawul) achieved a 12.46 percent growth in their net profits, which reached SAR 4.07 billion ($1.09 billion) during the second quarter of 2024, compared to SAR 3.62 billion ($965 million) during the same period last year.

They also recorded a 4.76 percent growth in revenues during the same quarter, after achieving sales worth more than SAR 26.18 billion ($7 billion), compared to SAR 24.99 billion ($6.66 billion) in the same quarter of 2023.

The growth in the revenues and net profitability is the result of several factors, including the increase in sales volume and revenues, especially in the business sector and fifth generation services, as well as the decrease in operating expenses and the focus on improving operational efficiency, controlling costs, and moving towards investment in infrastructure.

The sector comprises four companies, three of which conclude their fiscal year in December: Saudi Telecom Company (STC), Mobily, and Zain Saudi Arabia. The fiscal year of Etihad Atheeb Telecommunications Company (GO) ends on March 31.

According to its financial results announced on Tadawul, Etihad Etisalat Company (Mobily) achieved a 33 percent growth rate of profits, bringing its profits to SAR 661 million by the end of the second quarter of 2024, compared to SAR 497 million during the same period in 2023. The company also achieved a 4.59 percent growth in revenues to reach SAR 4.47 billion, compared to SAR 4.27 billion in the same quarter of last year.

The Saudi Telecom Company achieved the highest net profits among the sector’s companies, at about SAR 3.304 billion in the second quarter of 2024, compared to SAR 3.008 billion in the same quarter of 2023. The company registered a growth of 4.52 percent in revenues.

On the other hand, the revenues of the Saudi Mobile Telecommunications Company (Zain Saudi Arabia) increased by about 6.69 percent, as it recorded SAR 2.55 billion during the second quarter of 2024, compared to SAR 2.39 billion in the same period last year.

Commenting on the quarterly results of the sector’s companies, and the varying net profits, the head of asset management at Rassanah Capital, Thamer Al-Saeed, told Asharq Al-Awsat that the Saudi Telecom Company remains the sector leader in terms of customer base expansion.

He also noted the continued efforts of Mobily and Zain to offer many diverse products and other services.

Financial advisor at the Arab Trader Mohammed Al-Maymouni said the financial results of telecom sector companies have maintained a steady growth, up to 12 percent, adding that Mobily witnessed strong progress compared to the rest of the companies, despite the great competition which affected its revenues.

He added that Zain was moving at a good pace and its revenues have improved during the second quarter of 2024. However, its profits were affected by an increase in the financing cost by SAR 26.5 million riyals and a rise in interest, while net income declined significantly compared to the previous year, during which the company made exceptional returns.