Aurelia Butler

This week’s European Central Bank meeting is set to be one of the most fiercely debated in months. For more than a year there has been a broad consensus among the eurozone’s monetary policymakers that interest rates need to go higher in order to tame inflation. Rates have been pushed up by 4.25 percentage points since July 2022. But with signs of an impending eurozone recession becoming harder to ignore — and annual price growth now at half its 10.6 per cent peak — the unity over the direction of travel is fraying. The central bank’s governors are split: some prefer another, possibly final, 25 basis point rate rise, while others are pressing for a pause. And, following a slew of weak economic data, a narrow majority of investors are now expecting the ECB to hold fire on Thursday. ECB watchers are torn too.Over the summer, indicators of activity in the eurozone’s manufacturing and services sectors pointed to a forthcoming economic slowdown. Higher interest rates, which are currently at 3.75 per cent, have constrained lending too. Indeed, on Monday, the European Commission downgraded the eurozone’s growth outlook for this year from 1.1 per cent to 0.8 per cent — with a contraction in its largest economy, Germany. The hold camp argues that slowing economic growth could bring inflation down without further rate rises, and that an even higher cost of credit risks a deeper slowdown. A pause would then allow the ECB to monitor developments, including the pass-through of previous rate rises, until its next meeting in late October. While this narrative is plausible, investors may be underplaying the probability that the central bank ends up nudging rates higher at this meeting.First, core inflation — a measure of underlying price pressures — remains too high. Although easing, it was 5.3 per cent last month — well above its historic average. With the labour market still tight, annual pay growth is adding to price pressures, particularly in services. Second, while economic growth has weakened more than anticipated, a few upside risks to inflation have also emerged. Oil prices have risen and Europe’s reliance on liquefied natural gas means it remains exposed to global supply shocks, including recent strike action at plants in Australia. Alongside still elevated core prices growth, these shocks could keep inflation — and medium-term inflation expectations, which edged up in July — higher for longer.Third, after falling behind on inflation the ECB has preferred to convey a hawkish bias. Erring on the side of doing too much rather than too little on inflation has been its broad message. The ECB has gone against market expectations in the past, and may feel the need to do so again on Thursday to underscore its inflation-fighting credentials. After all, president Christine Lagarde used her Jackson Hole speech last month to outline how structural shifts risk bringing more persistent price pressures and uncertainty, and warned “the fight against inflation is not yet won.”There is a possibility that markets interpret a decision to hold as a signal that the hiking cycle is complete. Lagarde could try to articulate a hawkish hold or skip, and create room for a potential rise next month. But that may be hard to pull off. If investors assume rates have peaked, financial conditions could loosen. There are potential pitfalls in either direction: keeping rates on hold invites criticism that it is giving up too early, but raising them risks making a looming economic downturn worse. Either way, Lagarde needs to firmly express the ECB’s commitment to meeting the inflation target, and say that cuts remain a distant prospect. It is a tough call, but to get that message across, actions would speak louder than just words. More

If the G20 did not exist, we would have to invent it. Some would counter that the world is so divided that this grouping is unworkable. Yet this fact merely makes the G20, or something like it, even more essential: one does not have to talk to people one already agrees with. A still stronger justification for its existence is that we are no longer able to live in isolated pockets: the health of our planet and our economy depends on our co-operation. Since global challenges are more pressing than ever, so is the need to work together in such a group. The question then is not whether we need the G20, but how best to use it. How well did the Indian government lead it? What lessons should we draw from this experience for its future?Understandably, the Indian government used the G20 as a celebration of India and its rising role in the world. It also succeeded in gaining acceptance for full membership of the African Union. The latter is indeed a step towards greater legitimacy for the G20. A more important issue, however, is whether the world has been brought closer to resolving some of its biggest challenges. Here there are three obvious concerns.

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The first is division. The absence of Vladimir Putin and Xi Jinping from the recent summit in New Delhi underlines that we live at a time of conflict. The existence of a rogue nuclear superpower is a huge threat to our future. Just as worrying is the apparent decision of the Chinese leader not to engage with global peers directly, except in institutions China dominates, such as the Brics. His absence, too, bodes ill for the management of our shared future.The second is overload. As I noted in May, the communiqué of the extremely successful G20 meeting in London in April 2009 was just over 3,000 words. It also focused on stabilising the financial system and rescuing the world economy. Crisis concentrated the mind. It is inevitable that the current approach of world leaders is more diffuse. But were all the 13,000 or so words of the Delhi summit’s declaration needed? It covers almost everything one could possibly include. How is progress on such a sprawling agenda to be monitored and assessed? The answer, as we know from previous G20 efforts, is that it cannot be: much of it will wither away.

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The third is hypocrisy. We all know that leaders do not mean what they promise. The declaration states, for example, that “We reaffirm our commitment to zero tolerance for corruption”. The reality, however, is that the G20 contains some of the world’s most corrupt countries. The declaration states, too, that “we . . . remain committed to enhancing women’s full, equal, effective, and meaningful participation as decision makers for addressing global challenges”. But remember that Saudi Arabia is a member.Hypocrisy, one might respond, is the homage vice pays to virtue. But that is no great comfort when it even concerns the most important global issues of today — rising temperatures and the combination of worsening poverty with unmanageable debts in many developing countries. The communiqué states, for example, that “We recognise the need for increased global investments to meet our climate goals of the Paris Agreement, and to rapidly and substantially scale up investment and climate finance from billions to trillions of dollars globally from all sources.” Yet does this mean they are going to do anything relevant about it? After all, the very next sentence promises to scale up “finance, capacity building and technology transfer on voluntary and mutually agreed terms” (my emphasis). That “voluntary and mutually agreed” already suggests that nothing much is going to happen.By far the most important contribution of the Indian presidency could still be the commissioned reports on strengthening finance for development and the environment, prepared by an expert group under Lawrence Summers of Harvard University and NK Singh, a distinguished Indian public servant. The first of these reports was published at the end of June. A second is supposedly due later.The reality behind these reports is that the world needs to increase investment massively if it is to meet its development and environmental goals, as it must. A huge part of all the new investment has to be in developing countries. But most of them lack the domestic resources, the knowhow, or both, to achieve what is needed. Moreover, they are also unable to access foreign capital on the scale and the terms needed. On the contrary, as interest rates have risen in global capital markets, their access has greatly worsened and many are in deep debt distress.We know the solutions. There needs to be far more official finance, in various forms. Much of this must stimulate considerably larger private flows, via risk-sharing. That in turn will require a mixture of substantial debt relief, orchestrated by the IMF, far bigger concessional flows to the poorest countries, substantially more equity capital in the multilateral development banks, notably the World Bank, and higher leverage ratios in those banks, as well. This in turn will demand governance reforms, including in voting shares.This agenda is radical, essential and urgent. If it is to be achieved in the relatively near future, it must become a dominant focus of global economic policymaking. The good news is that the decisions of western and leading emerging countries could make this happen. But they need to focus on what is urgent. They must concentrate their attention on transforming the scale and nature of finance for development and the environment. Nice words without a determination to act mean [email protected] Martin Wolf with myFT and on X More

Geopolitical tensions are changing trade flows as countries switch supply chains to allies rather than the most efficient exporter, the World Trade Organization has said.The value of traded goods and services continues to rise, but it is growing faster within allied blocs than as a whole, the Geneva-based organisation said in its annual world trade report, warning this would lead to higher costs and more conflict.“The post-1945 international economic order was built on the idea that interdependence among nations through increased trade and economic ties would foster peace and shared prosperity,” WTO director-general Ngozi Okonjo-Iweala said in the report, published on Tuesday.“Today this vision is under threat, as is the future of an open and predictable global economy,” she warned.The WTO calculated that goods trade flows between two hypothetical geopolitical blocs — based on countries’ foreign policies according to voting patterns at the UN General Assembly — have grown 4-6 per cent more slowly than trade within these blocs since Russia’s full-scale invasion of Ukraine in February 2022. There has also been an increase in countries such as the US invoking national security risks to ban trade in strategically important goods and services, especially with China. These include export controls on silicon chipmaking technology. Between 2017-22 there were 38 complaints about such measures raised with the WTO, twice as many as between 2011-16.Complaints about barriers to goods trade have also been rising, with the number of cases in which duties were levied on subsidised imports doubling from 2011-16 to 164 in 2017-22.However, the report said talk of “deglobalisation” was premature. The value of world merchandise trade rose 12 per cent to $25.3tn in 2022, partly because of inflation linked to rising commodity and fuel prices sparked by the Ukraine war. The value of world commercial services trade was $6.8tn in 2022, up 15 per cent from a year earlier.The report noted that developing economies had increased their share of digital services exports by 3 percentage points in 2022, while trade in environmental goods had quadrupled since 2000, outpacing the growth of total goods over the same period.Okonjo-Iweala said “re-globalisation” — a renewed drive towards integrating more economies and sectors into world trade flows — would help cut poverty, fight climate change by spreading green technologies and help bolster security because countries with close trading relationships were less likely to wage war with each other.Trade ministers from WTO member states meet in Abu Dhabi next February in an attempt to reinvigorate the global trade body. “The WTO is not perfect — far from it. But the case for strengthening the trading system is far stronger than the case for walking away from it,” Okonjo-Iweala added.  More

The SEC said Alfonse Gregory Giugliano, a certified public accountant and former National Assurance Services Leader at Marcum, failed to sufficiently address and remediate deficiencies in the firm’s quality control system. He agreed to a censure and a civil penalty of $75,000, the SEC said.A lawyer for Giugliano, who did not admit or deny the SEC’s findings, did not respond immediately to requests for comment. More

A campaign group representing pubgoers has criticised the move by Stonegate, Britain’s largest pub company, to raise the price of pints during its busiest trading hours in some of its venues by 20p to offset high costs.The owner of the Slug and Lettuce and Craft Union chains said it had introduced a “dynamic pricing” system on drinks in about 800 of its venues during evenings and weekends to help cover the cost of extra staffing, licensing requirements and additional security. The pub group, which has 4,000 managed, leased and tenanted pubs across the UK, previously introduced surge pricing in some of its venues during the 2018 and 2022 football World Cup tournaments, but it has now made the move permanent. An online review posted by a customer showed how punters were informed by a “polite notice” on their tables explaining that “dynamic pricing is currently live in this venue during this peak trading session”. Stonegate’s new policy was first reported by the Telegraph.Tom Stainer, chief executive of the Campaign for Real Ale, a consumer group, called the move “troubling”, adding that it could undermine transparency on price for pubgoers if the message was not clearly displayed.“We know pubs and brewers are having a difficult time at the moment, but we don’t think an extra charge penalising customers that want to support the industry is the right solution,” said Stainer. “Our fear is that it could convince people to stay away.”Dynamic pricing, whereby businesses flex prices dependent on demand levels at certain times, has been commonly used in other industries, notably by airlines and hotel groups, ride-hailing app Uber and ticketing platform Ticketmaster. For live events, the pricing model has proved deeply unpopular with fans, with 71 per cent of Britons opposing dynamic ticket pricing, according to a YouGov poll published in December last year.“Like all retail businesses, we regularly review pricing to manage costs but also to ensure we offer great value for money to our guests,” Stonegate said. “This flexibility may mean that on occasions pricing may marginally increase in selective pubs and bars due to the increased cost demands on the business with additional staffing or licensing requirements such as additional door team members.”Stonegate added that the use of dynamic pricing also allowed it to offer deals to customers during less busy trading hours, including 2-for-1 cocktails and discounts on food and drink. A rival pub chief executive said the move by Stonegate set a dangerous precedent over pricing transparency, describing the use of dynamic pricing as “not good in so many ways”. “Pubs should be transparent with their customers and not rip them off when it’s busy,” they added. Steven Alton, chief executive of the British Institute of Innkeeping, which represents the independent pub sector, said the move was “indicative of the reality of operating costs right now where pubs are trying to find any opportunity to deliver decent margins”. More

BANGKOK (Reuters) – Thailand’s Prime Minister Srettha Thavisin on Tuesday said his cabinet would this week issue a raft of policies to lower the cost of living, suspend farmers’ debts, draw more tourists and boost incomes. Srettha and his 11-party government is presenting its largely populist policy agenda to the new legislature and inherits an underperforming economy struggling from weak demand for Thai exports and lower investor confidence. Srettha, a real estate mogul and political newcomer, has come under fire in parliament for policies the opposition say are vague and lack clear direction. He said cabinet would formalise the plans on Wednesday and introduce them as soon as possible. “I am not sure whether it will be a surprise or not but there are lots of policies that match the challenges,” he told reporters.Industrial sentiment hit a one-year low in August, despite the end of months of post-election deadlock, with concerns over weak exports and the slow recovery.Deputy Commerce Minister Napintorn Srisanpang told parliament exports might shrink up to 1% to 2% this year amid slowing global demand. The government, led by the populist Pheu Thai Party, plans to kickstart the economy with handouts, subsidies and a raising of wages, causing some concern among economists and commerce groups about how it will be financed and that it could increase costs for businesses. Srettha said he would negotiate with workers and employers to raise the daily minimum wage as soon as possible to an “appropriate level” of 400 baht ($11.25), up from an average 337 baht.The 400 baht wage is expected early next year, Labour Minister Pipat Ratchakitprakarn told parliament. “We must try to upskill workers to get a daily wage of 600 baht as soon as possible,” he added.Srettha said the government plans to imminently lower electricity and fuel costs for consumers and allow visa free entry to visitors from China, a major source of tourists for Thailand. A moratorium on debt for farmers is planned for the fourth quarter, he added.”We have short-term economic stimulus measures such as tourism to bring money into the service sector, making wages increase in line with demand for workers, and to reduce energy costs for people and logistics operators,” he told parliament.Kriengkrai Theinnukul, chair of the Federation of Thai Industries, said an imminent wage hike “will aggravate an already bad situation for some smaller businesses”, adding hikes would be better next year when the economy recovers. More

LONDON (Reuters) – Britain’s labour market has been cooling in recent months, with rising unemployment, less hiring and fewer job vacancies – but wage growth has shown much less sign of following suit.This is a problem for the Bank of England, which has said that slower wage growth is needed for it to be confident inflation will return to its 2% target from a current level of 6.8%, the highest of any major economy.New official data on Tuesday showed the joint-fastest growth in regular pay on record, twinned with the biggest slump in employment since 2020 and a rise in the jobless rate to its highest since 2021.Financial markets widely expect the BoE to raise interest rates next week to 5.5% from 5.25%, but are split over whether that will mark the end of a tightening cycle which began in December 2021.Four graphics below illustrate where Britain’s labour market is at.UNEMPLOYMENTBritain’s unemployment rate rose to 4.3% in the three months to July, up from 4.2% in the second quarter and 3.5% in August 2022 – its lowest in nearly 50 years.Unemployment is already above the level which the Bank of England forecast last month. Those forecasts saw inflation rising slowly over the next three years to 5%. Britain’s jobless rate now exceeds that in the United States, where unemployment has also started to rise. British joblessness tracked the U.S. rate closely over the past decade, except during the COVID-19 pandemic when furlough payments to employers kept the jobless rate much lower in Britain.Euro zone unemployment is above Britain’s, although it continues to decline.EMPLOYMENTBritain’s labour market lost more than 200,000 jobs in the three months to July, the sharpest drop in employment since the three months to October 2020 when many businesses were slashing staff due to COVID-19 lockdown restrictions.Hannah Slaughter, senior economist at the Resolution Foundation think tank, said this was the biggest drop in employment ever seen in Britain outside of a recession.”This is the clearest sign yet that the Bank of England’s rate rising cycle is starting to cool the jobs market,” she said.Until recently, employment was growing strongly with a quarter of a million jobs created in the three months to April, returning employment to its pre-pandemic levels.Most of the latest fall reflects a drop in the number of self-employed workers, while employment held stable. Business surveys from the Recruitment and Employment Confederation (REC) and the S&P Purchasing Managers’ Index (PMI) had pointed to a steady cooling in hiring over the past year, and now show flat or negative demand.VACANCIESJob vacancies hit a record 1.3 million in early 2022, and have been declining steadily since, dropping below 1 million for the first time in two years during the three months to the end of August.However, the number of vacancies is still more than 20% higher than before the pandemic, and there remain fewer unemployed people per vacancy than any time in 2020 or earlier.Most businesses report difficulties hiring, accounting for some of the slowdown in employment in recent surveys.”While there is a rebalancing, it’s a gradual change, meaning employers still often need to offer salaries at elevated rates to attract staff and fill open roles that compensate for the cost-of-living crisis,” said Jack Kennedy, senior economist at recruitment website Indeed.WAGESAt odds with the trend in unemployment, hiring and vacancies is wage growth, which rose to an annual rate of 8.5% in the three months to July. This was a bigger increase than economists had forecast in a Reuters poll, and the largest since modern records began in 2001, excluding a spike in June 2021 due to furlough-related distortions.The rise partly reflected backdated pay settlements for public-sector workers, and the BoE focuses more on underlying measures. However, the news for the central bank was little better here.Pay growth excluding bonuses held at a record 7.8%, while pay growth excluding bonuses in the private sector alone fell only slightly, to 8.1% from 8.2%.The BoE will be hoping that the businesses it surveys are accurate in expecting pay growth to slow to 5% in a year’s time – although this is still higher than 3-4% seen before the pandemic when inflation was near target.Consumer price inflation peaked in October 2022 at 11.1%, but wage growth has yet to follow suit. July was the first time since the first quarter of 2022 – when Russia invaded Ukraine – that pay rose faster than CPI inflation.REC surveys have pointed to gently slowing pay growth for new hires and temporary workers for more than a year, without a similar move in the official data which covers all employees.Advertised salaries for new workers were also 7.4% higher in August than a year earlier, up slightly from 7.1% in July, according to figures from recruitment website Indeed. More