Aurelia Butler

“We think that underlying inflation is still a bit below our target,” Ueda said. “This is why we are sticking with our current monetary easing framework.”Japan’s core consumer inflation hit 3.1% in July, staying above the central bank’s 2% inflation target for the 16th straight month, as companies continued to pass on higher costs to households.Ueda said domestic demand was “still at a healthy trend” and business fixed-investment was “supported by record high profits.”Nevertheless, inflation “is expected to decline” from here, he said, with the underlying trend still less than the target.The BOJ has said it needs to maintain ultra-low rates until it is clear that robust domestic demand and higher wages replace cost-push factors as key drivers of price gains, and keep inflation sustainably around its target.Investors have been waiting for hints of when the BOJ may change its policy of yield curve control, under which the bank holds short-term interest rates at -0.1% and the 10-year bond yield around 0% as part of efforts to prop up growth and sustainably achieve its 2% inflation target. It also sets an allowance band of 50 basis point around the 10-year yield target. The BOJ nominally kept the band unchanged last month but said it would now allow the 10-year yield to rise to as much as 1.0%. More

“Recently, we even had a slightly worse inflation number, very loaded with volatile elements,” he said at an event hosted by think tank EsferaBR.”But we don’t behave with real-time data. We look at it (inflation) as a trend.”Inflation hit 4.24% in the 12 months through mid-August, accelerating for the third fortnight in a row and beating market forecasts. Earlier this month, the central bank kicked off an easing cycle with a 50-basis-point rate cut to 13.25%, signaling more of the same for future meetings as board members have called the pace “appropriate.”After Congress greenlit new fiscal rules proposed by President Luiz Inacio Lula da Silva to curb unbridled public debt growth, Campos Neto stressed the need for tax revenue to expand through sustainable means, thereby enhancing the outlook for public accounts and interest rates.”Government is making a big effort, it doesn’t depend solely on it,” he said.Regarding proposed measures aimed at taxing offshore and closed-end investment funds, which the government intends to submit to lawmakers, Campos Neto refrained from offering a direct opinion. But, generally speaking, he said that measures should seek to safeguard the revenue base, ensuring the efficiency and continuity of the collection processes. More

Broadbent said in a speech that the knock-on effects of the surge in prices – such as pressure on employers to push up wages, which has led to record growth in pay – were unlikely to fade away as rapidly as they emerged. “As such, monetary policy may well have to remain in restrictive territory for some time yet,” Broadbent said in a text of remarks he was due to make at the annual Jackson Hole Economic Policy Symposium in the United States.The BoE said earlier this month that borrowing costs were likely to stay high for some time as it raised rates for the 14th time in a row.Hit by the impact of Brexit, the COVID-19 pandemic and then Russia’s invasion of Ukraine, the BoE has struggled to tackle an inflation rate that peaked at 11.1% last October and which, at 6.8% in July, remains more than three times its 2% target.Investors expect another increase in the BoE’s Bank Rate to 5.5% from its current level of 5.25% on Sept. 21, after the next scheduled meeting of the Monetary Policy Committee.But this week financial markets scaled back their bets on Bank Rate hitting a peak of 6% after a survey showed signs of a slowdown in Britain’s economy.Broadbent said the BoE’s stance on interest rates would respond to “the evidence on spare capacity, and to indicators of domestic inflation, as and when it comes through.”It was reasonable to expect a decline in energy and core goods prices over next few months but “one can only be cautious” about how quickly the pressure on wages will ease off, he added.It is not just the BoE that is worried about the risks posed by inflation.The chair of the Federal Reserve, Jay Powell, told the Jackson Hole gathering of central bankers on Friday that the Fed may need to interest rates further. Broadbent said the shocks that had buffeted Britain’s open economy, with its reliance on imports, provided a stark illustration of how a sudden contraction in the supply of imported goods could hurt incomes and turn up the pressure on domestic inflation, chiefly via wage increases.He said it was reasonable to argue that trade had been over-concentrated – mainly Europe’s reliance on gas from Russia – and that governments had a role in addressing the problem. More

Jackson Hole, Wyoming (Reuters) – The steep jump in public debt loads over the past decade and a half, as governments borrowed large amounts of money to battle the Global Financial Crisis and the fallout from the COVID-19 pandemic, is probably irreversible.That’s the unhappy conclusion of a research paper being presented on Saturday to some of the world’s most influential economic policymakers at the Kansas City Federal Reserve’s annual central banking symposium in Jackson Hole, Wyoming. Since 2007, worldwide public debt has ballooned from 40% to 60% of GDP, on average, with debt-to-GDP ratios even higher in the advanced countries. That includes the United States, the world’s biggest economy, where government debt is now more than equal to the nation’s yearly economic output. U.S. debt was about 70% of GDP 15 years ago. Despite mounting worries about the growth-crimping implications of high debt, “debt reduction, while desirable in principle, is unlikely in practice,” Serkan Arslanalp, an economist at the International Monetary Fund, and Barry Eichengreen, an economics professor at the University of California, Berkeley, wrote in a paper. That’s a change from the past, when countries have successfully reduced debt-to-GDP ratios.But many economies will not be able to outgrow their debt burdens because of population aging, and will in fact require fresh public financing for needs like healthcare and pensions, the authors argued.A sharp rise in interest rates from historically low levels is adding to the cost of debt service, while political divisions are making budget surpluses difficult to achieve and more so to sustain.Inflation, unless it surprises to the upside over an extended period, does little to reduce debt ratios, and debt restructuring for developing countries has become more elusive as the pool of creditors has broadened, Arslanalp and Eichengreen wrote.”High public debts are here to stay,” they wrote. “Like it or not, then, governments are going to have to live with high inherited debts.”Doing so will require limits on spending, consideration of tax hikes, and improved regulation of banks to avoid costly blow-ups, they wrote. “This modest medicine does not make for a happy diagnosis,” they wrote. “But it makes for a realistic one.” (This story has been corrected to clarify that the size of U.S. debt is more than equal to U.S. GDP, not more than double,in paragraph 3) More

LONDON/NEW YORK (Reuters) – (This Aug. 18 story has been corrected to clarify that Europe has seen chocolate price increases of 13%, not 20%, over past two years, while the United States, not North America, has seen price increases of 20% in paragraph 3; sourced data to Nielsen IQ, not Nielsen, in paragraphs 3 and 12)Chocolate makers like Hershey and Mondelez (NASDAQ:MDLZ) face tougher trading conditions over the next year as they attempt to pass on soaring cocoa costs to cash-strapped consumers who are cutting back.The industry has enjoyed bumper profits over the past couple of years as demand for chocolate held up despite price hikes, but data seen by Reuters shows this trend may be breaking just as prices for cocoa hit 46-year-highs and sugar prices are near their highest in more than a decade.Consumers in Europe and the United States have already seen price increases of 13% and 20%, respectively, over the past two years and are starting to cut back on the amount of chocolate they buy, data pulled for Reuters by market researchers Nielsen IQ shows. Consumers are “shopping around more, hoping to find deals,” Mondelez CEO Dirk Van de Put said last month. Cadbury-maker Mondelez expects inflation in cocoa and sugar to continue. In response, the company said it is ensuring it is significantly hedged and continuing to drive productivity.”The increase in sugar and cocoa specifically is material,” Mondelez CFO Luca Zaramella said in July. “We are talking about most likely a 30-plus percent (increase) if you look at the last 12 months, or even more, particularly in cocoa.”But after more than two years of higher prices, retailers are pushing back, analysts said, resulting in a battle that puts chocolatiers’ margins and profitability at risk.One such battle resulted in Mondelez previously pulling Cadbury and Milka bars from Belgian supermarket chain Colruyt’s shelves after failing to agree on prices.”I don’t know if it’s going to be as clear cut as being able to take pricing wherever they want,” Barclays (LON:BARC) analyst Patrick Folan said.STARTING TO TRADE DOWNChocolate makers are banking on the traditional resilience of their product to price increases. Mondelez raised its annual revenue growth forecasts last month while Hershey hiked its profit forecast.”Now that pricing is 100% secured, we expect volume and revenue growth, as well as margin improvement for Europe,” Zaramella said, after Mondelez resolved its spat with Colruyt.However, Mondelez’ chocolate sales volume growth has weakened substantially this year – from 14.8% in the 4 weeks to Feb. 25 to 3.2% in the 4 weeks to July 15 year-on-year – even as it kept its price rises in the low double digits, according to a Bernstein analysis of Nielsen IQ data seen by Reuters. The data showed Hershey’s sales volumes increasingly declined during the period as the company hiked prices. “We are seeing consumers starting to react more than before, I’d be very cautious with price increases,” said Dan Sadler, a candy expert at U.S.-based market researcher IRI. “We’re seeing consumers starting to trade down.”Barry Callebaut, the world’s biggest chocolate maker supplying most major brands including Nestle, doesn’t expect any growth in sales volumes this year. It reported last month that volumes fell 2.7% in the nine months ended May 31.Meanwhile, lower priced ‘private label’ chocolate continues to pick up market share. In the U.S., private label sales volumes grew nearly 9% in the year to mid-June despite near double-digit price rises, IRI data shows.Hershey’s already-announced price hikes for the rest of 2023 are in the “high single digits,” while those for next year are “low single digits,” CEO Michele Buck said in July.Pennsylvania-based Hershey, is hoping that as it eases off the rate of price hikes, its sales volumes will reverse their current downtrend. It is planning to lean on automation to keep its costs of production down, it said.Rabobank says those cost pressures could continue into next year due to the El Nino weather event in West Africa and the lack of alternate producers who can ramp up output quickly.Top cocoa producers Ivory Coast and Ghana have faced drought, excess rains and disease for the past two years. They produce two thirds of the world’s cocoa and officials are struggling to help farmers cope with climate conditions. A 2019 ‘living income’ scheme has been largely ineffective. More

JACKSON HOLE, WYOMING (Reuters) – Beating inflation will probably require one more U.S. interest-rate hike and then going on hold for “a while,” Cleveland Federal Reserve Bank Loretta Mester said on Saturday, adding that she may reassess her earlier view that rate cuts could start in late 2024.While she does not want policy so tight that the economy collapses, she told Reuters in an interview on the sidelines of a Fed conference in Jackson Hole, Wyoming, she wants to set it so that inflation reaches the Fed’s 2% goal by the end of 2025. “We just don’t want it to keep drifting farther out,” she said. Not only do fast-rising prices impose a high cost on Americans, she said; allowing inflation to fester also leaves the economy more vulnerable to future shock. “The longer we let inflation remain above 2%, we’re building in a higher and higher price level,” she said, and that hurts American households. “And I think that’s why timely matters to me.”Most Fed policymakers, including Mester, thought in June that they will probably be able to stop hiking once they get the policy rate to the 5.5%-5.75% range, which is one quarter-point higher than it is today. They also thought that by next year the Fed will likely begin cutting rates so that as inflation falls, they do not end up restricting the economy more than is needed. Mester said on Saturday that in June she also had penciled in rate cuts in the second half of 2024, but that when she and other Fed policymakers submit fresh forecasts ahead of their September rate-setting meeting, that might change. “I’m going to have to reassess that because, again, it’s going to be, how quickly do you think inflation is moving down?” she said. Economic growth has been more robust than many have expected, and the labor market is still tight, and Mester does believe that the Fed’s rate hikes so far will moderate the strength of both. Still, she is wary of assuming that inflation, having dropped to 3% from its peak last year of 7%, will get back down to 2% in a timely enough manner. “I do not want to be in a position of prematurely loosening policy,” Mester said. Fed projections submitted in June show a median forecast for 2.1% inflation by the end of 2025; Mester said hers was for 2% inflation. Forecasts submitted in September will show what they expect through 2026.As she runs the numbers for her own September forecasts, she said, getting to 2% inflation by the end of 2025 is not a “hard stop” and she could conceivably push it out if looks like doing so would hurt the economy too much. But that is not what she expects at this point. “Given where we are and given where inflation is, I think we have a good shot about bringing inflation down to 2% without doing damage to the real side of the economy,” Mester said. “I’m going to calibrate my policy to make sure that we’re back in that time frame (of 2% inflation by 2025).” The Fed’s next and possibly last rate hike “doesn’t necessarily have to be September, but I think this year,” she said. More

JACKSON HOLE, Wyoming (Reuters) – It may be too early for the European Central Bank to pause interest rate hikes now as an early stop in the fight against inflation could force the bank to exert even more pain on the economy later, Latvian policymaker Martins Kazaks said on Saturday.The ECB has raised rates at each of its past nine meetings to arrest runaway inflation but policymakers are now contemplating a pause as recession risks loom, inflation slows and wage growth remains moderate. “Given the information that we have now – and there is of course more data to come – I would say that another modest increase would be playing it safer, rather than delaying it and then risking having to do much more later in the year or early next year,” Kazaks told Reuters on the sidelines of the annual gathering of central bankers and economists in Jackson Hole, Wyoming. Markets see a roughly 50% chance of another hike in September but a move by the end of the year is seen as very likely. “We can cut rates if we raise them too much and we can cut quite soon,” he said, “But if we’ve done too little, then we may have to raise them even more, so it’s cheaper to do it sooner than later.” Still, the Latvian central bank governor added that he will go into the Sept. 14 policy meeting with an open mind and needs to see new staff projections before committing. Even if the ECB opts for a hold, it needs to make clear that its job is not yet done and more policy tightening could be on the cards, Kazaks added. ECB projections currently see inflation returning to its 2% target only in late 2025 and Kazaks argued this was too late.A key reason why some are contemplating a pause is that economic growth indicators are now pointing to a contraction in the third quarter, despite what could be a record-breaking tourism season. Industry is already in recession and services are also softening, with both survey and hard indicators coming below expectations. While growth will be flat over the rest of the year, Kazaks said a deep recession was not on the cards as the bloc is still displaying resilience and some softening of the labour market was actually desirable to tame inflation. Once rates peak, a plateau should be held for some time and the ECB should only start cutting rates when projections start showing inflation was at risk of coming back below 2%.”I would be happy to start cutting the rates when the inflation projection – so the outlook and not actual data – starts to undershoot our 2% target in a consistent manner,” he said.Markets see a rate cut only in the second half of 2024 and Kazaks said he did not consider this inconsistent with the macroeconomic outlook. More