Aurelia Butler

“Certainly, last month’s inflation read was a good one and I hope it is a sign,” Barkin said in remarks prepared for a speech in Virginia.Barkin did not address the outlook for Fed policy in his prepared remarks other than to say “Inflation remains too high,” echoing a refrain heard from most U.S. central bank officials who are wary of being too quick to declare “job done” in their task of bringing inflation back to their 2% target.His remarks come just over a week after the Fed raised its benchmark short-term interest rate by a quarter percentage point to a range of 5.25% to 5.50%, the 11th increase in an aggressive policy tightening campaign it kicked off in March 2022. Recent inflation data has pointed to notable progress. The Fed’s preferred measure of inflation – the Personal Consumption Expenditures price index – was up 3% year-over-year in June, down from 7% a year earlier. Even more welcome for Fed officials, the rate stripped of food and energy costs, which they see as a better indicator of underlying inflation trends, came in at a lower-than-expected 4.1% after months of being stuck at 4.6%.Barkin’s prepared remarks focused largely on whether a recession is imminent. While not making an explicit prediction, he did say more slowing of economic activity “is almost certainly on the horizon.”That said, he argued that any downturn this time may be less severe than in the past and cause less loss of employment. More

One crew member died when the blaze broke out on the Fremantle Highway on July 26 as it was travelling from Germany to Egypt. Seven others who jumped overboard to escape the flames were injured.”Most of the ship has now been inspected and there are no indications that there is still fire on board,” the Dutch Ministry of Public Works and Water Management said in a statement. Safety experts remained on board the Panama-registered ship during the 64-km (40-mile) towing operation which started north of the islands of Ameland and Schiermonnikoog in difficult weather, the ministry added.Ship charter company “K” Line said on Friday there were 3,783 vehicles on board, including 498 electric vehicles.An investigation has been launched into the cause of the fire. An emergency responder was heard in a recording released by Dutch broadcaster RTL as saying “the fire started in the battery of an electric car.” But that has not been confirmed by authorities. More

HARARE (Reuters) – When Zimbabwe’s President Emmerson Mnangagwa came to power nearly six years ago after the military toppled long-time ruler Robert Mugabe, he promised to tackle the country’s economic woes “head on”.But for many, like 51-year-old widow Regina Ruona, the promised economic revival remains elusive.After braving a chilly morning to join a long queue at a bank in the capital Harare to withdraw her late husband’s pension, a distraught Ruona is told bank notes have run out. Bank note shortages are a symbol of the Mugabe-era financial ruin and have not been resolved under Mnangagwa, who is seeking a second term in the Aug. 23 general election.Ruona’s late husband’s monthly pension of 24,000 Zimbabwe dollars ($5.31) is barely enough to buy, for instance, 2 kilograms of sugar and 2 litres of cooking oil.Her predicament is shared by millions of Zimbabweans struggling with rising prices after the Zimdollar, which was reintroduced in 2019, weakened 85% this year and triggered another round of soaring inflation in a country that has regularly undergone bursts of price increases blamed on decades of economic mismanagement. At 101.3% year-on-year in July, Zimbabwe has one of the highest inflation rates in the world, keeping company with the likes of Venezuela, Lebanon and Syria.”The monthly pension should be in U.S. dollar because the local currency does not buy anything,” Ruona said.Unemployment remains high, with only 30% of Zimbabweans holding formal jobs. During working hours, Harare’s pool parlours and sports betting halls teem with unemployed youth hoping for instant wins.”There is nothing to do in the townships so we play pool for a living,” said Tendai Mubaiwa, a 33-year-old father of two. “We play three tournaments every week and winners can get up to $250. I am now able to take care of my family.” Independent economist Gift Mugano said Zimbabwe’s dire economic conditions could galvanise voters against the ruling party in a manner reminiscent of the 2008 election, when ZANU-PF lost its parliamentary majority for the first time and Mugabe suffered a first round defeat to Morgan Tsvangirai before retaining power in a run-off marred by violence.”It is only fair to mark ZANU-PF badly when it comes to the economy,” Mugano said. “We thought they had found a formula of how to run an economy, (but) the economy is not working.”A government spokesperson did not immediately respond to requests for comment.The government has insisted the economy is growing and projects a 6% expansion this year, more than double the International Monetary Fund and World Bank forecasts.DEBT WOESMnangagwa has played up strides in areas such as infrastructure development, including a government-funded project fixing a 580 kilometre (360.4 miles) road connecting Harare to the main border with major trading partner South Africa.The government funds such projects as Zimbabwe’s access to long-term international capital is blocked by its $14 billion debt owed to foreign lenders including the World Bank and African Development Bank (AfDB). Nearly half of that debt is in arrears.Zimbabwe has also leaned on Chinese lending for infrastructure projects, including a $1 billion 600 megawatt coal-fired power plant expansion to help ease crippling power cuts that have impacted businesses and households.AfDB president Akinwumi Adesina, who is leading Zimbabwe’s bid to restructure its debt, said in May that the restructuring efforts require the support of western governments and largely depend on the upcoming election being free and fair.Political analysts have warned that Zimbabwe could head for another disputed election, with the opposition being denied state media airtime and some of its rallies being blocked by the police.Citizens’ Coalition for Change leader Nelson Chamisa, Mnangagwa’s main challenger, has promised to grow Zimbabwe’s economy, fight corruption and end the country’s isolation by the west over allegations of human rights abuses and electoral fraud.Supporters of the ruling party say Chamisa has not explained how he would fund his election promises, including grand infrastructure projects.($1 = 4517.1359 Zimbabwe dollars) More

A senior European Central Bank policymaker has said it can achieve its objective of bringing down inflation by committing to keep interest rates stable for longer, rather than raising them and risk crashing the economy.Fabio Panetta, an ECB executive board member, said persistence in keeping rates at current levels “for an extended period” could achieve a similar effect to raising borrowing costs further while avoiding “unnecessary costs to the economy”.However, he did not rule out the possibility of more policy tightening, saying: “Should the inflation outlook materially deteriorate, a further rate adjustment would be warranted.”The comments by Panetta, one of the ECB’s most “dovish” board members, underline how the debate is intensifying over whether it should raise rates for a 10th consecutive time at its meeting next month with price pressures cooling and the eurozone heading for a downturn.Investors are leaning towards a pause by the ECB in its rate rises in September, even though several economists still think a final increase of its deposit rate to a new all-time high of 4 per cent is likely to tackle persistent rises in services prices.Last week, the central bank opened the door to a pause in its monetary tightening after raising rates by a quarter-percentage point to 3.75 per cent while ditching language indicating it expected more rises.Speaking in Milan, Panetta said “relying solely on an aggressive approach to rate hikes might amplify the risk associated with overtightening, which could subsequently require rates to be cut hastily in a deteriorating economic environment”.Instead, he said: “Emphasising persistence may be particularly valuable in the current situation, where the policy rate is around the level necessary to deliver medium-term price stability, the risk of a de-anchoring of inflation expectations is low, inflation risks are balanced and economic activity is weak.”The eurozone economy grew 0.3 per cent in June from the last quarter, an improvement from a mild contraction over the previous six months but still weaker than the US, where gross domestic product grew 0.6 per cent.Eurozone inflation has fallen from a record high of 10.6 per cent last year to 5.3 per cent in July. However, that remains well above the ECB’s 2 per cent target and some policymakers worry rising profit margins, increasing wages and resilient demand are pushing up services prices, which rose at a record rate of 5.6 per cent in July.Panetta, however, said that “the process of disinflation has been set in motion”. He cited six consecutive months of falling eurozone producer prices, which dropped 0.4 per cent in June, a recent lowering of inflation expectations and a deteriorating economic outlook.“Demand conditions in the euro area are likely to remain weak as the impact of monetary policy strengthens, governments unwind the fiscal policy measures they adopted in response to the energy crisis and the consumption impulse from excess savings fades,” he added.Panetta is due to leave the ECB board in November but will remain on its governing council by becoming governor of Italy’s central bank, maintaining his vote on policy. More

The Bank of England has raised interest rates by 0.25 percentage points to 5.25 per cent, slowing the pace of increases amid signs persistently high inflation is beginning to ease.The central bank’s Monetary Policy Committee voted by six to three on Thursday to take interest rates to a 15-year high, with two members preferring a larger 0.5 percentage point move and one voting to pause. The MPC warned that borrowing costs were likely to need to remain elevated, judging that “it was too early to conclude that the economy was at or very close to a significant turning point”.Inflation fell to 7.9 per cent in June and most economists had forecast a quarter-point increase after the central bank had raised rates by half a point at its last meeting.Despite the decline in inflation, prices in the UK are rising at a faster pace than in other advanced economies such as the US, Japan and the eurozone, where hopes are rising that interest rates are close to a peak.Sterling slipped and UK government bond yields fell after the BoE move. The pound fell slightly, extending earlier losses, to trade at a five-week low of $1.2623 against the dollar, down 0.7 per cent on the day. Two-year UK government bond yields, which are highly sensitive to short-term interest rates, fell to 4.92 per cent from 4.94 per cent before the announcement. The bank’s updated forecasts suggested that even if interest rates rise further, in line with recent market expectations, it will still take until mid-2025 for inflation to fall from its current level of 7.9 per cent to the BoE’s 2 per cent target.The MPC said this was because it now saw evidence of a feedback loop developing between wages and prices, meaning that “some of the risks of greater persistence . . . had crystallised”.Reiterating its previous guidance, the bank said further tightening of monetary policy would be needed if it saw evidence of more persistent inflationary pressures. But in new wording, it also said it “would ensure that bank rate was sufficiently restrictive for sufficiently long to return inflation to the 2 per cent target”.It said that while the economy had shown “surprising resilience”, higher borrowing costs were now starting to take their toll on activity, with more definite signs emerging of the job market cooling and unemployment starting to rise.The MPC’s new forecasts — based on higher interest rates and a stronger exchange rate than its May projections — show a weaker path for economic activity, with consumer spending slowing, business investment swinging from growth to contraction in 2024 and housing investment falling sharply.The BoE said it expected GDP growth to remain steady at a quarterly pace of 0.2 per cent in the near term, but to weaken as the effects of higher interest rates add up.However, it said the UK was likely to avoid a recession. It also expects inflation to continue falling in the near term, averaging 6.9 per cent in the third quarter of 2023 and 4.9 per cent over the fourth quarter. This implies the government narrowly meeting its target to halve inflation within the year.The BoE’s forecast that inflation will fall below 5 per cent in the fourth quarter is good news for UK prime minister Rishi Sunak, who had promised to “halve inflation” to 5.4 per cent by the end of the year.Jeremy Hunt, chancellor, said: “If we stick to the plan, the bank forecasts inflation will be below 3 per cent in a year’s time without the economy falling into a recession.”“But that doesn’t mean it’s easy for families facing higher mortgage bills so we will continue to do what we can to help households,” he added.Sunak and Hunt are eager to avoid a recession, particularly one that comes in a general election year.However, as Hunt acknowledged, the likelihood of interest rates staying at high levels for some time will hit voters with mortgages in the run-up to next year’s expected vote.Shadow chancellor Rachel Reeves said: “This latest rise in interest rates will be incredibly worrying for households across Britain already struggling to make ends meet.“The Tory mortgage bombshell is hitting families hard, with a typical mortgage-holder now paying an extra £220 a month when they go to remortgage.”Additional reporting by Tommy Stubbington in London More

Turkey’s inflation rate jumped to almost 50 per cent in July, halting an eight-month streak of slowing price growth as the weak lira, an overheating economy and higher taxes put consumers under strain. Consumer prices rose 47.8 per cent in July compared with the same month in 2022, a pick-up from the annual pace of 38.2 per cent recorded in June, the Turkish Statistical Institute said on Thursday. Economists polled by FactSet had forecast a slightly lower reading of 45.8 per cent. The stronger than expected increase in the inflation rate underscores how Turkey is still in the throes of a deep cost of living crisis, even as the new economic team that President Recep Tayyip Erdoğan appointed in June continues to unwind unconventional policies that were in place for years. Under the direction of new finance minister Mehmet Şimşek, Turkey has abandoned its costly defence of the lira and allowed the currency to plummet by a quarter against the euro since the end of May. The weak lira makes imports more expensive, an increase that typically gets passed on to consumers and businesses through higher prices. At the same time, the stimulus programme that Erdoğan launched before May’s election win is still filtering through Turkey’s $900bn economy. Big increases in the minimum wage and public sector salaries are expected to push inflation higher for much of this year, central bank chief Hafize Gaye Erkan said last week. Şimşek has also boosted taxes on a broad range of goods and services, including a 200 per cent increase in petrol taxes. These measures, which are aimed both at cooling demand and refilling government coffers after the pre-election spending binge, are expected to be inflationary. “We are in a transition period where disinflation and price stability are targeted,” Şimşek said on Thursday in response to the inflation figures, adding that “the main objective of our policies is to permanently reduce inflation to single digits in the medium term”.

Cafes, restaurants and hotels posted the biggest annual price rises in July, the peak of the summer tourism season, with an 82.6 per cent increase. The cost of basic necessities has also continued climbing rapidly: food costs jumped 60.7 per cent while clothing and housing costs climbed about 20 per cent. The central bank has more than doubled interest rates since June, with further increases expected in the coming months in an attempt to tame inflation. Policymakers have also taken other steps that they hope will slow retail loan growth as part of a “holistic” approach to tightening monetary policy. Erkan forecast last week that inflation would reach 58 per cent by the end of the year before falling to 33 per cent by the end of 2024 and 15 per cent the following year. However, many economists worry that Erdoğan, a long-term opponent of high borrowing costs, will not allow the central bank to raise rates to a sufficient level to cool down inflation. More

Explaining his rationale, Ackman said he expects a world with ~3% inflation to persist.”I have been surprised how low US long-term rates have remained in light of structural changes that are likely to lead to higher levels of long-term inflation including de-globalization, higher defense costs, the energy transition, growing entitlements, and the greater bargaining power of workers,” Ackman said. “As a result, I would be very surprised if we don’t find ourselves in a world with persistent ~3% inflation.”Further, Ackman said long-term Treasuries seem overbought due to a $32 trillion debt burden and large deficits. With higher refi rates and increased T-bond supply from new issuance and QT, absorbing this surplus without considerably higher rates becomes challenging, he explains.Ackman also said he is puzzled as to why the U.S. Treasury is not utilizing lower long-term rates to finance the government. “This does not look like prudent term management in my opinion,” he commented.Also, he said you have to consider factors like China’s aim to financially decouple from the U.S., YCC ending in Japan boosting the appeal of Yen bonds compared to T-bonds for the largest foreign holder, and increasing concerns about U.S. governance, fiscal responsibility, and political divisiveness highlighted in Fitch’s recent downgrade.”So if long-term inflation is 3% instead of 2% and history holds, then we could see the 30-year T yield = 3% + 0.5% (the real rate) + 2% (term premium) or 5.5%, and it can happen soon,” he commented. “There are many times in history where the bond market reprices the long end of the curve in a matter of weeks, and this seems like one of those times.”Ackman said his firm now has a significant short position on the 30-year T-bond for two reasons: firstly, as a hedge against the potential impact of higher long-term rates on stocks, and secondly, because they consider it a high-probability standalone bet. There are only a few macro investments left that offer reasonably probable asymmetric payoffs, and this is one of them, he added.”The best hedges are the ones you would invest in anyway even if you didn’t need the hedge,” he concludes. “This fits that bill, and also I think we need the hedge.” More