Aurelia Butler

(Reuters) -Americans’ outlook for inflation was mixed last month amid expectations for bigger price rises across a range of key goods and services, while worries about missing debt payments mounted, a report from the Federal Reserve Bank of New York said on Monday. The bank found in its March Survey of Consumer Expectations that the public sees inflation a year from now at 3%, unchanged from the prior month. The expected level of inflation three years from now rose to 2.9% from 2.7% in February, while five years from now inflation is seen at 2.6% from the prior month’s prediction of 2.9%.Evan as the survey found a fragmented inflation outlook, the public in March forecast bigger rises in food, gasoline, rent, college and medical costs a year from now compared to February. Meanwhile, the expected rise of home prices a year from now held steady at 3% for the sixth straight month. The New York Fed report on what consumers foresee for the economy comes as Fed officials, traders and investors are trying to divine whether unexpectedly sturdy inflation gains at the start of the year mean that last year’s swift retreat in inflation has stalled. In February, the Fed’s preferred price pressure index, the personal consumption expenditures price index, was up by 2.5% compared to a year earlier, a higher rate than January’s 2.4% year-over-year gain. Anxiety that inflation may no longer be moving as quickly toward the Fed’s 2% inflation target has driven investors to pare back estimates of when the Fed will be able to lower its short-term rate target, with futures markets now split on the prospect of a June easing. Strong hiring data released on Friday showing robust payroll expansion in March further complicated the case for the Fed cutting rates. Fed officials have over recent days cautioned that they need to see more progress on inflation before they can sign off on an easing. Fed Governor Michelle Bowman, speaking on Friday, even warned the central bank might need to act further to cool price pressures, saying “while it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse.” Fed officials believe the expected path of inflation greatly influences the actual level of inflation and have been sanguine on the state of projected price increases, which have on balance come down amid the broader retreat in inflation. On Wednesday, markets get a fresh look at price pressures when the government reports on consumer prices for March. The Consumer Price Index is seen rising by 3.4% from the same month a year ago, while stripped of food and energy factors, the index is projected to rise by 3.7%. “Inflation data remains the top factor in determining the time when it becomes appropriate to cut rates,” said Tim Duy, chief U.S. economist with SGH Macro Advisors. “To keep the June rate cut in play, the Fed needs to see March and April inflation numbers more like those in the second half of last year,” he said, adding “that means this week’s inflation data could knock out a June cut.”The New York Fed report said that views on the labor market were mixed last month, with expectations about earnings growth unchanged but respondents more pessimistic about job prospects. And while those surveyed on balance viewed their personal financial situations more positively, the largest number in four years were worried about missing a debt payment. Those fears were concentrated in lower-income households and among respondents aged 40 to 60.Over recent months Fed data has shown some signs that more consumers are running into challenges on the debt front, burdened by higher borrowing rates tied to Fed policy actions and reduced savings as pandemic support levels have run their course. More

This article is an onsite version of our Disrupted Times newsletter. Subscribers can sign up here to get the newsletter delivered three times a week. Explore all of our newsletters hereToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.There were further signs of a recovery in the chips market today as Taiwan Semiconductor Manufacturing Co, the world’s biggest producer, announced it would take advantage of generous US subsidies to build cutting-edge products in Arizona from 2028.TSMC’s move, realised with $11.6bn in grants and loans available under the 2022 Chips Act, also gets the US closer to its goal of bringing 20 per cent of advanced semiconductor manufacturing onshore by 2030. The deal means that chipmakers such as Nvidia and AMD, by the end of the decade, will no longer have to rely on Asian production. Although tensions appear to be easing, the chip industry has for a while been at the centre of tussles between Washington and Beijing. TSMC’s move helps mitigate risks that a Chinese invasion of Taiwan could upend supply chains. At the same time, China is also looking to replace foreign technology with homegrown solutions. It has recently blocked the use of Intel and AMD chips in government computers as well as seeking to sideline Microsoft’s Windows operating system.The chip market is in full recovery mode after suffering a severe downturn last year. TSMC said in January that it expected a return to strong growth with revenues expected to increase by up to 25 per cent. Its bullishness was echoed last week by Samsung, which forecast a 10-fold jump in profits. Demand is being driven by the need for high-end chips in artificial intelligence, with dram memory chip prices up 20 per cent in the first quarter and Nand flash memory chips — used for data storage — up by as much as 28 per cent. This time last year Samsung had been among those cutting production to deal with a global glut as sector profits tumbled.Geopolitics aside, there is another strong argument for ending Asia’s dominance in semiconductor manufacturing: the risk of earthquakes. The smallest vibration has the ability to wreck chip production, yet nearly all advanced manufacturing takes place in the quake-prone region, particularly in Taiwan, home to the Pacific’s “Ring of Fire” line of seismic faults. Last week’s quake off the east coast led to plants being evacuated.Listen to the latest Behind the Money podcast on how Malaysia is emerging as a surprise winner as companies look to insulate their chip supply chains from geopolitical tensions.Need to know: UK and Europe economyThe UK Post Office Horizon public inquiry resumes tomorrow, the penultimate phase of the probe into one of the country’s biggest miscarriages of justice. It will focus on the role that company executives, government ministers and figures from Fujitsu played in handling the cases of wrongly-accused sub-postmasters.Russia is using precision missiles to destroy Ukrainian power stations in areas less protected than Kyiv, some of which cannot be fully restored in time for next winter. Ukrainian officials said the damage was worse than in the winter of 2022-23, with the apparent aim now being permanent, irreparable damage.Ekrem İmamoğlu’s re-election as Istanbul mayor has sent a jolt of enthusiasm through Turkey’s invigorated opposition and cemented his position as President Recep Tayyip Erdoğan’s chief adversary. İmamoğlu told the FT that Erdoğan would “shorten his political life” if he “does not get the message and continues to do the same things”. Pro-Russia candidate Peter Pellegrini was elected president of Slovakia, consolidating the grip of Robert Fico’s ruling coalition. His narrow win followed a vitriolic campaign during which Pellegrini accused his pro-EU and pro-Nato rival Ivan Korčok of wanting to drag Slovakia into the Russia-Ukraine war.Need to know: global economyGold prices continue to rise, today hitting another all-time high of $2,353.79 a troy ounce. Prices have been buoyed by the prospect of US rate cuts, fears of an escalating conflict in the Middle East and by demand from central banks and Chinese consumers.Until recently, Japan had become an outlier in the global economy where inflation, interest rates and wage growth all remained near zero — or in some cases below it. A Big Read assesses whether the country is finally becoming a “normal economy”.Need to know: businessVitol, the world’s largest independent commodity trader, hit net profits of $13bn in 2023, illustrating how much the privately owned group has benefited from disruption to energy markets caused by Russia’s full-scale invasion of Ukraine.MBDA, a European missile powerhouse originally formed from a merger of British Aerospace’s missile manufacturing division and France’s Matra, is being held up as a model for defence industry collaboration as Europe tries to bolster military output in the face of war in Ukraine. Global stock market concentration is at its highest level in decades, increasing risk for passive investors. US equities, led by the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) now account for more than 70 per cent of global developed markets as measured by the MSCI World Index. US regulators will investigate a new mishap involving a Boeing aircraft after a piece of engine housing fell off a Southwest Airlines plane.Forget “shrinkflation,” the new catchphrase for companies trying to avoid public opprobrium for making products smaller but keeping their price the same is “price pack architecture,” writes Alphaville’s Louis Ashworth. New York City’s only super-tall tower outside Manhattan, Michael Stern’s Brooklyn Tower at 9 DeKalb Street, is shrouded in gloom and uncertainty. The building goes to auction on June 10 after its lender, Silverstein Capital Partners, began foreclosure procedures because of a loan default.The Brooklyn Tower, second from right, has remade the borough’s skyline but may end up as an albatross for its investors More

Tensions within Labour over its policy towards the EU burst to the surface on Monday after the party was forced to deny a report that it planned to re-enter a customs union if it wins the general election.The paper from the Eurasia Group political consultancy cited unnamed “senior Labour insiders” as saying the party would seek to revive a high-alignment deal, originally brokered by former prime minister Theresa May but rejected by parliament in 2019, in an attempt to boost economic growth.“[That] deal is a first-term ambition. A de facto customs union by another name. It is the first step of where we’d want to get to,” one of the insiders reportedly said, adding they were reflecting new internal thinking on the EU relationship within the Labour leadership.They added that if the opposition party won an October election with a large majority, as current opinion polls suggest, then Labour leader Sir Keir Starmer would travel to Brussels as early as December to signal his desire for a “fundamental upgrade” of the EU-UK economic relationship.Labour quickly denied the briefing, which was sent to Eurasia Group clients on Monday morning, insisting the party was sticking to its “red lines” on the EU, which include remaining outside both the single market and a customs union.Nick Thomas-Symonds, the shadow Cabinet Office minister who is expected to be put in charge of Labour’s promised re-engagement with Europe if the party wins power at the next election, said the party position had not changed.“Labour has long been clear that we are committed to making Brexit work. We have set out clear red lines on the future of our relationship with the European Union: no return to the single market, the customs union or return to freedom of movement,” he added.Forging a customs union with the EU would require unravelling other parts of UK trade policy, including the trade deals signed with Australia and the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership.Labour has promised to improve the EU-UK trading relationship, but within those “red lines”, saying it will seek a veterinary agreement to reduce border frictions for food products, improve touring opportunities for musicians and boost reciprocal access for professionals.However, internal critics of the party’s stance warn these moves are too limited and will not be sufficient to deliver the other planks of the party’s policy platform, including an industrial strategy and being the fastest-growing economy in the G7.Under May’s rejected deal, the UK remained in a de facto customs union with the EU and committed to high levels of regulatory alignments in areas including environmental and labour standards — a position Eurosceptics rejected as too close to the bloc.Mujtaba Rahman, managing director for Europe at Eurasia Group, who authored the client note, said any move to structurally deepen economic ties would require Labour to take a more proactive approach than at present.“They would need to make an early and clear move with Europe after the election, but also make an argument to the UK electorate about the benefits such an arrangement would carry for UK trade and investment and Labour’s growth agenda,” he added.Brussels would potentially be open to such a proposal, a person briefed on the European Commission’s approach to the UK told the Financial Times, and it is monitoring what might be possible under a Starmer government.“It would be a massive negotiation, but there would be openness from the EU side,” they added. “There’s been quite a lot of thinking on the possibilities here . . . but there will naturally be strings attached, whether financial, trade or on freedom of movement.”Several other Brussels-based officials said they were open to a deal but sceptical that Starmer would want to make the necessary compromises. A customs union is possible “if conditions are met” said one EU official, but they warned there would be no special treatment for the UK. London “would be bound by the European Court of Justice and surrender sovereignty”, said a second official. “Every time we made a new trade agreement it would automatically apply to the UK,” they added. The 27 member states are generally in favour of closer ties with the UK but remain wary of reopening deals struck after years of bruising negotiations. “We have moved on,” said another diplomat.Video: We need to talk about Brexit | FT Film More