Aurelia Butler

NEW YORK (Reuters) – Blackstone (NYSE:BX) Inc reported a 4% rise in its fourth-quarter distributable earnings on Thursday, as the world’s largest private equity firm cashed out on more of its assets across real estate, credit, and hedge funds.Distributable earnings, which represents cash used to pay dividends to shareholders, rose to nearly $1.4 billion in the three months to Dec. 31, up from $1.3 billion a year earlier. This translated to distributable earnings per share of $1.11, which was slightly ahead of the average Wall Street analyst estimate of 95 cents, according to LSEG data.The company’s net profit from asset sales rose 16% to $424.8 million, even as high interest rates, economic uncertainty and market volatility continue to weigh on the ability of private equity firms to cash out their investments.During the fourth quarter, the value of Blackstone’s opportunistic real estate portfolio lost 3.8%, corporate private funds gained 3.5%, while private credit and liquid credits fund added 3.9% and 3.3%, respectively. Its hedge funds gained 2.3%. During this period, the benchmark S&P 500 index rose 11.2%.Blackstone’s net income under generally accepted accounting principles fell nearly 73% to $151.8 million driven primarily by principal investment losses of nearly $300 million.Blackstone’s assets under management stood at $1.04 trillion, while unspent capital reached $197.3 billion. It raised $52.7 billion of new capital during the quarter, spent $31.1 billion on new investments, and declared a dividend of 94 cents. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of Martin Sandbu’s Free Lunch newsletter. Sign up here to get the newsletter sent straight to your inbox every ThursdayWe’re coming up to a series of important central bank meetings: the European Central Bank announces its latest decisions today, the Federal Reserve and the Bank of England next week. They matter because everyone can feel we are coming up to a pivot point, and when that happens could determine everything from market behaviour to whether our economies deliver growth rather than stagnation this year. Today’s column consists of a warning about misreading the current inflation data: disinflation has come a lot longer than what many headlines might lead you to believe. Before that, though, let me bug you once more about our wonderful charity for financial literacy and inclusion — do check out the charity auction where just a few days remain to bid for lunch with yours truly, or one of my amazing colleagues.Over recent weeks, the most noticed inflation news in the US, eurozone and the UK has been that after falling consistently for many months, headline inflation rates have ticked up, sometimes going against expectations for further falls in the rate. This has played into the fear that disinflation has stalled, or its slight variant, and that there remains a lot of hard work to do before our latest inflationary episode is safely behind us. As my colleague Chris Giles described last month, this is the debate on whether the “last mile” really is the hardest. Worries about a premature end to disinflation dovetail with the argument of many central bankers that they cannot let up their vigilance. The name of the game of monetary policymakers is now to postpone any celebration of victory. Both ECB president Christine Lagarde and Dutch central bank head Klaas Knot have been trying to discourage observers from thinking that the fight against inflation has been won. “Once bitten, twice shy” is how one of my colleague Martin Arnold’s sources describes the ECB. Similarly, one Fed governor insisted last week the US central bank would “take our time”. And the BoE’s Andrew Bailey said in December there was “still some way to go”.But should we really be worried? It’s worth taking a slightly more detailed look at the alleged wobble in disinflation, beyond the uptick in headline year-on-year inflation in these three economies. Note that core inflation (excluding energy and some other volatile prices) did not pick up in the UK, unlike the headline figure:and it continued to fall in the eurozone:In the US, overall inflation as measured by the consumer price index has stabilised at just over 3 per cent year on year ever since last July — but the core CPI has kept falling:Besides, if you look at the inflation measure the Fed is actually aiming to bring down, the personal consumption expenditures index (only available up to November at the time of writing), both the headline and the core version have kept nicely falling from month to the next:There is a simple common point to observe across all of these measures: while the December uptick in some year-on-year rates is apt to trigger media headlines, those inflation measures more reflective of sustained price dynamics contain no sign whatsoever that the disinflation that’s been at work for more than a year in Europe and a year and a half in the US is fizzling out.And, in fact, even the headline rates don’t tell the story you might think. There is a mechanical aspect to year-on-year inflation measures — that is to say, the percentage by which this month’s price level is above that of the same month a year ago — that creates a risk of bias towards being too worried about persistent inflation. The fact that central banks all target a year-on-year inflation rate leads to an asymmetry between inflation and disinflation that isn’t sufficiently taken into account in our debate. At worst, it can fuel a bias towards keeping interest rates too high for too long. The asymmetry is this. Suppose you start from completely stable prices (or constant inflation at the 2 per cent target). Then something causes prices to accelerate — say a megalomaniac dictator invading a neighbouring country or cutting off natural gas exports. The year-on-year inflation rate will go up immediately, reflecting the ongoing inflationary pressures. But the day prices stop rising (or stop rising faster than the target rate), inflation will remain above target for a full year, simply because year-on-year inflation measures the changes that have happened in all of the past 12 months and not just what is happening now. Our most used inflation measure will pick up inflationary pressure immediately but only recognise the end of disinflation one year late. The chart below represents a stylised version of this phenomenon.The graph shows a situation where prices rise faster than the normal 2 per cent annualised rate for 18 months, indicated by the shaded area, leaving prices about 18 per cent above where they would otherwise be. You can see that the year-on-year inflation picks up this inflationary pressure immediately, but only gradually returns to 2 per cent a full year after disinflation is complete (disinflation back to 2 per cent happens right after the 18 months in this constructed example). The point four-to-five months to the right of the shaded area in that graph essentially illustrates where we are today. In the UK, the consumer price index is basically unchanged since September. In the US, the PCE index is actually lower (in November, the last available reading) than in September. So is the eurozone price index targeted by the ECB. And just for laughs, why not look at US prices with the index the ECB uses (the “harmonised index of consumer prices”): on that measure, prices have been outright falling and are down almost 1 per cent since September.Don’t make too much of this. Things could still change, and the devil is in the detail of how you define specific inflation measures. But understand what it means in terms of judging incoming data. The point is that there is no observable price inflation right now. The arithmetic of year-on-year inflation means the current above-target numbers do not reflect any ongoing price rises; they simply capture inflationary pressures that were at work more than about five months ago. So, for all we can see, the inflationary episode ended many months ago. As Paul Krugman puts it, there is no last mile.Central bankers know this, of course. It’s basic arithmetic. But you will not have heard any of them say in public that the required disinflation was complete by last autumn. The honest thing to say — if you really want to keep interest rates high — would be that the job is done but could come undone, so it’s better to keep rates high out of an abundance of caution. The reason to do this, but not to say it, is surely that it’s hard to defend in public — and central bankers’ fear of having to reverse course. That may be a sensible plan to avoid losing face. But it’s not an encouraging basis for public policy.Other readablesEU business leaders would like to see more common infrastructure spending at EU level, it emerges from my colleague Peggy Hollinger’s interview with the head of the European Round Table for Industry. As I wrote last week, that is where a “grand bargain” on the next EU budget could lie. A new study shows how European politics is not just divided between left and right, but by which crisis matters most in different countries.It’s a Free Lunch article of faith of sorts that there are lots of unused opportunities for greater productivity out there, which are not exploited when it is too cheap to use a lot of labour rather than sophisticated machinery (I have written about this as the car wash parable). Today’s exhibit: a nice Wall Street Journal video about how modular construction needs many fewer hands and makes for faster building. Also, note Leo Lewis’s note on how high-productivity Japanese housebuilders are muscling in on the US market.Numbers newsRecommended newsletters for youChris Giles on Central Banks — Your essential guide to money, interest rates, inflation and what central banks are thinking. Sign up hereUnhedged — Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. Sign up here More

OSLO (Reuters) – Norway’s central bank kept its benchmark interest rate unchanged at 4.50% on Thursday, as unanimously expected by analysts, and said the cost of borrowing would likely stay at that level “for some time ahead”.The prospects for the Norwegian economy did not appear to have changed materially since December, Norges Bank’s monetary policy committee said in a statement, while adding it would take time before the full effects of previous rate hikes are seen.”The committee assesses that the policy rate is now sufficiently high to return inflation to target within a reasonable time horizon,” Norges Bank Governor Ida Wolden Bache said.The Norwegian crown strengthened to 11.34 against the euro at 1013 GMT, from 11.38 just before the announcement.The central bank in December raised the benchmark rate in a surprise decision even as inflation had come off earlier highs, aiming to stamp out price pressures and shore up the currency.”Monetary policy is having a tightening effect, and the economy is cooling down,” Norges Bank said on Thursday.”At the same time, business costs have increased considerably in recent years, and continued high wage growth and the crown depreciation through 2023 will likely restrain disinflation,” it added.Norway’s core inflation stood at 5.5% year-on-year in December, a 15-month low, down from a record 7.0% last June but still exceeding the central bank’s goal of 2.0%.The central bank did not provide fresh economic forecasts or a new forward rate curve. Those are due to be updated when the next policy decision is announced on March 21.While Norges Bank has kept the door ajar to a potential future rate hike, its main scenario as communicated last month is for rates to start falling towards the end of 2024 as inflation subsides.The central bank’s December forecast had indicated that an initial rate cut would come in the autumn of 2024, but also left open the possibility of different outcomes, Bache said on Thursday.”If cost inflation remains elevated, or the crown depreciates again, inflation may remain high for longer than previously projected. In that case, the committee is prepared to raise the policy rate again,” Bache told a press conference.”If there is a more pronounced slowdown in the Norwegian economy or inflation declines more rapidly, the policy rate may be lowered earlier than envisaged in December,” she added.A majority of economists participating in the Reuters poll predicted there would be one rate cut in the July-September quarter of 2024 and another one in the final three months, each by 25 basis points, bring the benchmark rate to 4.0% at the end of the year.Money market rates, meanwhile, indicated that Norges Bank will deliver four rate cuts this year, but this is likely to prove incorrect, Nordea Markets wrote in a note to clients, adding that a first reduction would come only in September. More

BUDAPEST (Reuters) – Hungary’s central bank on Thursday criticised a government proposal to replace interbank rates with Treasury bill yields as the main, much lower reference rate for loans as “misguided”, saying it would reduce the scope for policy manoeuvre.On Monday government officials proposed applying Treasury bill yields as the benchmark lending rate for corporate loans to cut borrowing costs as part of Prime Minister Viktor Orban’s efforts to revive Hungary’s economy.A surge in inflation last year to 25%, the highest in the European Union, pushed Hungary’s economy into recession and while growth is expected to resume in 2024, a Reuters poll last month suggested it would miss the government’s 3.6% forecast.”Such misguided measures and ad hoc ideas — such as the current plan to replace BUBOR — only harmfully narrow the room for manoeuvre in economic policy and complicate the achievement of longer-term objectives,” the bank said.The bank’s press office did not immediately respond to emailed questions about whether this remark and the market’s reaction to the government’s plan meant a lower likelihood of the bank lowering its base rate by 100 bps next Tuesday.The forint gained 0.5%, rebounding from three-month lows hit earlier this week on the proposal and also on the prospects for the central bank accelerating the pace of rate cuts next week.Orban’s government, which faces European and local elections this year, has been calling on the central bank, which has cut interest rates by a combined 725 basis points (bps) since May, to do more to help the economy.The government, which has a long track record of tax changes and other measures hitting the bank sector, believes the proposed reforms to the benchmark lending rate will boost investment and economic growth.The central bank, however, said the proposal could backfire in various ways, such as by making banks interested in pushing up Treasury bill yields. It said comments by S&P Global, first reported by Reuters, signalled possible risks to Hungary’s credit rating.S&P Global Financial Institutions analyst Lukas Freund told Reuters the proposal represented another example of Budapest’s unconventional policy, which aimed to boost the economy, but posed a risk to the financial sector. More

NEW DELHI (Reuters) – India’s federal government may keep its gross market borrowing for 2024/25 close to this fiscal year’s level, according to two government sources, as it looks to rein in its borrowings that have more than doubled, mainly due to pandemic spending.India may peg its gross market borrowing for next fiscal year at between 15 trillion rupees ($180.47 billion) and 15.5 trillion rupees, when Finance Minister Nirmala Sitharaman presents the federal budget on Feb. 1, the two officials aware of the development told Reuters.That is close to its 15.43 trillion rupees target for the current fiscal year that ends on March 31. Of that, the government has raised about 14.08 trillion rupees, or about 91%, as of Jan. 22.But that is already roughly double its gross market borrowings of 7.1 trillion rupees in 2019/20, just before the COVID-19 pandemic. “The government is serious about reducing its market borrowings this fiscal year,” one of the officials said.Both the officials did not want to be named as they are not allowed to speak to the media about budget plans, which are in the final leg of discussions before they are unveiled next week.The likely gross borrowing figures are also close to economists’ estimate of 15.6 trillion rupees, according to a Reuters poll.Despite being an election year where Prime Minister Narendra Modi is bidding for a rare third straight term in power, the government is likely to rein in its fiscal deficit by at least 50 basis points by capping its spending on welfare schemes and subsidies.The Reuters poll also showed economists expect the government to reduce its fiscal deficit to 5.3% of gross domestic output in 2024/25, from 5.9% this year.India’s finance ministry did not immediately reply to an email and a message seeking comments. ($1 = 83.1180 Indian rupees) More

1. Futures subdued with data, earnings in focusU.S. stock futures hovered broadly around the flatline on Thursday, as investors awaited the release of key economic data and gauged a bevy of quarterly corporate results (see below).By 05:00 ET (10:00 GMT), the S&P 500 futures contract had added 5 points or 0.1%, Nasdaq 100 futures were mostly unchanged, and Dow futures had inched up by 104 points or 0.3%.The benchmark S&P 500 extended a recent rally on Wednesday, increasing by 0.1% to its fourth straight record close. Boosting the index were shares in Netflix (NASDAQ:NFLX), which surged after the streaming giant reported subscriber growth that smashed Wall Street expectations.Solid results from Dutch chipmaking equipment manufacturer ASML (AS:ASML) also fueled an uptick in semiconductor stocks, providing some lift to the tech-heavy Nasdaq Composite. The 30-stock Dow Jones Industrial Average, meanwhile, dipped by about 0.3%.2. U.S. GDP aheadTraders will likely be paying close attention to the release of the key first reading of U.S. growth data for the fourth quarter, which could be an indicator of the health of the world’s largest economy.Economists are predicting that real gross domestic product (GDP) in the U.S. grew at a 2.0% annual rate in the final three months of last year, slowing from 4.9% in the third quarter.Markets are hunting for any signs of the impact of a period of elevated interest rates on wider activity. A recent uptick in stocks has been partly fueled by hopes that the U.S. may be on course for a so-called “soft landing”, in which the Federal Reserve’s monetary policy tightening campaign successfully cools inflation without sparking a steep economic downturn.Fed officials have moved to temper this optimism, suggesting that while such a scenario is becoming increasingly more conceivable, it is not yet an inevitability. The GDP figure may factor into how this outlook, although analysts at ING argued that the publication of the Fed’s preferred measure of price growth on Friday will be “far more important” for rate-setters.While the Fed is widely tipped to keep borrowing costs on hold at more than two-decade highs of 5.25% to 5.50% at its next meeting later this month, the outcome of this week’s data could determine how policymakers approach potential rate cuts this year.3. Tesla flags sales slowdownElon Musk’s Tesla has warned that it expects to see “notably lower” sales growth in 2024 versus the prior year, as the electric vehicle giant faces intensifying competition and stalling demand from cost-conscious carbuyers.In a presentation to shareholders, the company said it is currently “between” an initial growth wave sparked by the popularity of its Models 3 and Y, and a second that it believes will be initiated by a lower-cost, next-generation offering. Musk told analysts in a post-earnings call that the car is slated to begin production in the second half of 2025, adding that it will feature “revolutionary manufacturing technology.”Musk also flagged that margins “will be good” if interest rates come down quickly and “won’t be that good” if they do not. “[W]e don’t have a crystal ball, so it’s difficult for us to predict this with precision,” he noted.Tesla’s stock price slipped in premarket U.S. trading on Thursday. Shares in major Chinese EV makers also fell after Musk warned that these groups would “demolish” their foreign rivals without trade barriers, feeding concerns over eventual export restrictions on the sector.Tesla’s announcement comes as several other big-name U.S. businesses are due to unveil their latest quarterly earnings. On Thursday, carriers American Airlines (NASDAQ:AAL) and Southwest Airlines (NYSE:LUV) are set to report before the bell, while payments firm Visa (NYSE:V) and chipmaker Intel (NASDAQ:INTC) will post results after markets close in New York.4. FAA halts Boeing 737 MAX expansionThe U.S. aviation regulator has said that it will not let Boeing expand production of its 737 MAX jet, in the latest blow to the planemaker following a dangerous mid-air breach on its MAX 9 model earlier this month.Shares in Boeing inched down premarket on Thursday.The Federal Aviation Administration said in a statement that the move, which will halt the expanding of output of one of Boeing’s most popular line of planes, is needed to “ensure accountability and full compliance” by the company with quality control procedures. Fresh concerns have arisen around the safety of Boeing’s planes after a non-fatal fuselage blowout on a MAX 9 operated by Alaska Airlines on Jan. 9.It was still unclear how the FAA’s decision would hit Boeing’s production plans or its finances. The MAX fleet includes the MAX 8, a key source of revenue for Boeing.However, the FAA gave the green light for MAX 9 jets to return to skies once they have passed safety inspections.”The exhaustive, enhanced review our team completed after several weeks of information gathering gives me and the FAA confidence to proceed to the inspection and maintenance phase,” said FAA Administrator Mike Whitaker in a statement.5. Crude rises after U.S. inventories drawOil prices climbed higher Thursday, boosted by U.S. crude inventories falling more than expected last week as well as stimulus measures from top importer China.By 05:00 ET, the U.S. crude futures traded 1.57% higher at $76.22 a barrel, while the Brent contract climbed 1.3% to $81.11 per barrel, trading once more above the widely-watched $80 a barrel level.U.S. crude stockpiles tumbled by a hefty 9.2 million barrels last week, according to the Energy Information Administration, but this figure was impacted by the harsh winter weather which shut in refineries and kept motorists off the road.Output of U.S. crude fell from a record 13.3 million barrels per day two weeks ago to a five-month low of 12.3 barrels per day last week.Elsewhere, the People’s Bank of China on Wednesday unexpectedly cut reserve requirements for local banks, freeing up more liquidity in another attempt to foster economic growth in the world’s largest oil importer.Upgrade your investing with our groundbreaking, AI-powered InvestingPro+ stock picks. Use coupon PROPLUSBIYEARLY to get a limited time discount on our Pro and Pro+ subscription plans. Click here to find out more, and don’t forget to use the discount code when checking out! More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.It’s 2021 again. We have rising Covid cases, poor prospects for British athletes at the Olympics, and a public fight about transitory inflation. Back then, the argument made by “team transitory” economists (and Jay Powell, for a while) was that price pressures were mostly attributable to lockdowns, jams in supply chains and Russia’s war in Ukraine. But inflation picked up pace and prices rose in an increasing number of sectors, even as economies reopened. The Fed abandoned “transitory” and started raising interest rates. By the time CPI passed 9 per cent in 2022, the argument seemed dead. But the dramatic drop in inflation in the last year, without a commensurate increase in unemployment, has revived the fight. Joseph Stiglitz, the Nobel-prize-winning economist, in November published “A Victory Lap for the Transitory Inflation Team”, which does what the headline promises. He says the “self-correcting” trajectory of car and house prices shows that inflation was transitory all along. The problem was one of supply — not enough cars, for example — rather than too much demand from consumers with more to spend thanks to post-Covid economic recovery programmes. The implication is that the Fed’s enormous interest rate increases are not primarily responsible for the slowdown in inflation in 2023. “What role did the US Federal Reserve play in all this? Given that its interest-rate hikes did not help resolve the chip shortages, it cannot take any credit for the disinflation in car prices. Worse, the rate hikes probably slowed the disinflation in housing prices. Not only do significantly higher rates inhibit construction; but they also make mortgages more expensive, thus forcing more people to rent instead of buy. And if there are more people in the market for rentals, rental prices — a core component in the consumer price index — will increase,” says Stiglitz.The stakes of this argument are higher than in an ordinary spat among macroeconomists. If the Fed’s hikes were not responsible for bringing down inflation, the bank can cut interest rates whenever it likes without threatening an acceleration. That’s the view of Ajay Rajadhyaksha, FT Alphaville contributor and global chair of research at Barclays:It is not clear to me that it was rate hikes that ultimately brought inflation down. Very thoughtful economists said that unemployment had to rise dramatically to bring inflation down — and it hasn’t. We are back down to near 2 per cent inflation, but the labour market hasn’t slowed. There’s an argument that “team transitory” was right all along — though it took longer than expected,The continued strength of the labour market is the key point here. Economists including Larry Summers, Jason Furman and Laurence Ball argued that unemployment was going to have to rise dramatically for the Fed to bring inflation down. These arguments are rooted in the concept of the Phillips curve, which maintains that unemployment and inflation have an inverse relationship. The Fed’s preferred gauge of inflation — the core personal consumption expenditures index — today stands at 3.2 per cent, having fallen from a peak of 5.6 per cent in early 2022. Over that same period, unemployment has been virtually flat, moving from 3.8 per cent in February 2022 to 3.7 per cent today. Without mass lay-offs, it’s harder to argue that inflation was a demand-side problem, one in which Americans had too much cash on hand. Inflation has come down despite the fact that unemployment remains low and wage growth has been strong. The changes in demand haven’t been big enough to explain the change in inflation. Claudia Sahm, former Fed economist and originator of the “Sahm rule” recession indicator, has been a member of “team transitory” from the start. The steady rate of US unemployment proves inflation was a supply, not demand, issue, she says. “If this was all about demand, we would be in trouble. We would be in a situation more like the 1970s. The fact we had inflation come down so much, and unemployment not rise too much, meant we didn’t need a recession to get inflation down. If inflation had been driven by demand, we would have needed a recession to get inflation down,” said Sahm.  The Fed does not yet seem convinced by these arguments. Governor Christopher Waller last week said “Well, if these are temporary supply shocks, when they unwind, the price level should go back to where it was. It’s not. Go to Fred. Pull up CPI. Take the log. Look at that thing. The [price level] is permanently higher. That doesn’t happen with supply shocks. That comes from demand. And this was a permanent increase in demand and permanent increase in debt.”That’s not exactly true. Inflation has been frustratingly persistent in some parts of the economy, like core services, a category that includes rent. But prices for core goods — a category that includes used cars — had been slowing for much of last year, with some prices even declining. There was a surprise uptick in core goods in December, however, which would be worrisome if it continues. Other counterarguments to team transitory are that the Fed’s interest rate cuts kept market expectations of inflation lower. That may be true, but it is hard to know how much market expectations of inflation actually feed through to the real economy. The fight is expected to rage on: it’s impossible to know what would have happened if the Fed had not raised interest rates. The only real way to get an answer would be to cut rates, a little (as a treat), and watch the reaction in inflation data. There’s the added benefit that cutting early would prevent the lay-offs and economic crunch that become more likely the longer that interest rates are high. But the Fed’s not known for taking preventive action. Nor is it known for making decisions to settle fights between economists.  More