Aurelia Butler

The Kremlin released video of Putin welcoming the girl, Raisat Akipova, in the latest of a series of appearances since a brief armed mutiny last month that seem designed to show him as caring, concerned and in control.Finance Minister Anton Siluanov initially sounded bemused by the call and failed to respond to the girl’s greeting, but quickly agreed to the extra funding for her home region in southern Russia.”Excellent!” Putin responded, before telling the girl: “We’ve got 5 billion roubles for Dagestan” – a sum equivalent to $55.6 million.Putin chuckled with amusement during the conversation and a similar call that he made with Raisat to Prime Minister Mikhail Mishustin. The girl, holding a bouquet of flowers, thanked Siluanov when prompted by the president.The visit was a sequel to a visit by Putin to Dagestan last week when, unusually, he mingled with a large crowd of people.The Kremlin cited that as evidence of the president’s “astounding” support in Russian society, days after the brief mutiny by the Wagner mercenary group that had prompted him to warn of the risk of civil war in Russia.Putin told Raisat he had invited her and her parents to Moscow because he had been “upset” by seeing a picture of her in tears after failing to get to see him during his Dagestan trip. More

Rishi Sunak on Tuesday admitted that inflation was proving “more persistent than people anticipated”, as he pledged to bear down on public borrowing and to take a “responsible” approach to public sector pay.The prime minister said the Bank of England faced “difficult” decisions and that higher interest rates were taking longer to slow the economy because more people were protected by fixed-rate mortgages.Speaking to senior MPs, Sunak said it was vital the government backed the BoE by being “responsible” on borrowing and on public sector pay, warning: “If we get those things wrong that makes the inflation situation worse.”Sunak will in the next few weeks decide whether to endorse pay rises proposed by independent review bodies for public sector workers, with ministers hinting that expected increases — of typically about 6 per cent — may have to be curtailed to squeeze inflation.Speaking at the House of Commons liaison committee, Sunak was repeatedly pressed on whether he would hit his target of halving inflation to 5.4 per cent by the end of the year, but he declined to answer.Asked by Harriett Baldwin, Tory chair of the Commons Treasury select committee, what percentage chance he would put on achieving that inflation goal, he said: “I don’t have one. We are working 100 per cent to deliver it.”Sunak admitted the BoE’s task of cutting inflation to the central bank’s target of 2 per cent had been complicated by the higher proportion of people on fixed-rate mortgages, meaning they are sheltered temporarily from rising borrowing costs.He said the “transmission mechanism” through which higher BoE rates were passed through to households was “perhaps slower when it comes to mortgages than in the past”. According to BoE data, 95 per cent of residential mortgages advanced in 2022 involved fixed rates. That compares with 92 per cent in 2019 and 77 per cent in 2013. Sunak said the government had to support the BoE through tight fiscal policy and supply-side reforms intended to increase the capacity of the economy to grow without overheating.The prime minister, grilled by the cross-party group of MPs, also backed the financial regulator in trying to ensure that higher interest rates were passed on to savers.The Financial Conduct Authority will meet banks on Thursday to discuss the lag in passing on higher BoE rates to people with instant access savings accounts. Sunak agreed that “the issue needs resolving”.He said he “fully supports” the FCA’s work and said the watchdog would from August 1 have powers to pressurise banks through a new “consumer duty” placed on financial services companies.In evidence spanning numerous subjects and lasting 90 minutes, Sunak repeated his enthusiasm for artificial intelligence, saying developments in the field could help to cure cancer and dementia and boost economic growth.But he admitted if the technology went unchecked it could cause “large-scale societal shifts” and he wanted to see “guardrails” put in place. Britain will host an AI safety conference in the autumn but admitted that any talk of an international regulator — similar to the International Atomic Energy Authority — was a “long-distance” prospect.Sunak also played down the idea of the next King’s Speech — which is due to be the government’s final legislative programme of this parliament — containing AI measures. “We can do lots without legislation,” he said.Sunak defended civil servants from accusations by some Tory MPs that a Whitehall “blob” was frustrating the will of ministers. Asked if he recognised that expression, the prime minister, said: “No.”“I’ve always been supported by incredibly diligent and hard working civil servants,” he added.Meanwhile Sir Chris Bryant, chair of the Commons standards committee, challenged Sunak on why failed to turn up for a debate and vote by MPs about a report that condemned former premier Boris Johnson for lying to parliament. Bryant said Sunak was willing to “opine” on the rules of cricket following controversy in the second Ashes test between Australia and England, but “not about rule-breaking in parliament”.Sunak said he missed the Commons vote on the report about Johnson in order to attending a fundraising dinner for an “incredible charity”. More

LONDON (Reuters) -The remaining insurers in a United Nations-backed coalition aimed at tackling climate change are poised to loosen the alliance’s membership requirements, after a recent exodus of members, according to two people familiar with the discussions. The U.N.-convened Net-Zero Insurance Alliance (NZIA) is set to remove a six-month deadline for members to publish greenhouse gas emissions targets alongside other changes to make membership less prescriptive, the sources said.The hope is to “steady the ship” and create space for ex-members to consider returning later, they said. The NZIA has lost more than half its members including AXA, Lloyd’s of London and Tokio Marine since attorneys general from 23 Republican-run U.S. states sent a May 15 letter seeking information about insurers’ membership and threatening legal action. The attorneys general said the NZIA’s requirements for members to publish and meet greenhouse gas emission-reduction targets appeared to violate antitrust laws, and that the alliance’s actions had pushed up insurance and other costs for consumers. Launched in 2021 to drive insurers’ efforts to hit zero emissions on a net basis by 2050 in their underwriting portfolios, the NZIA is one of several industry coalitions under the Glasgow Financial Alliance for Net Zero (GFANZ) umbrella group.The NZIA now has 12 members, down from a peak of 30. Other GFANZ alliances have also faced U.S. political pressure but have not seen many members leave.CONCERN FROM CAMPAIGNERS The NZIA’s ‘target-setting protocol’ published in January required insurers to publish their initial 2030 targets for reducing emissions by end-July, or within six months of joining for newer entrants, and then report their progress against the targets annually. But remaining members, among them Britain’s Aviva (LON:AV), Italy’s Generali (BIT:GASI) and South Korea’s Shinhan Life, want to avoid insurers publishing targets simultaneously, which could invite fresh accusations of anti-competitive collaboration, the first source said, speaking on condition of anonymity because of the sensitivity of the matter.An NZIA spokesperson declined to comment.The potential for looser rules was met with concern by environmental campaigners, who say insurers are already doing too little to curb emissions and that aggressive collective action is needed.”The NZIA has had very minimal requirements and expectations of membership from the start,” said Peter Bosshard, coordinator of the Insure our Future campaign. The alliance, Bosshard said, developed less stringent requirements – such as not restricting fossil fuel underwriting – than another investor coalition, the Net Zero Asset Owners Alliance, precisely to avoid accusations it was breaching anti-trust laws. “The target-setting is the only thing left,” he added. Without such requirements “the NZIA would just become another industry talking shop”.Other proposals being discussed include making the alliance a broader forum where insurance industry bodies participate in areas like target-setting best practice, the first source said.The changes under discussion have not been finalised, the sources said, and it’s not clear how the alliance would deal with insurers that drag their feet in publishing targets.U.S. EXPOSUREInsurers inside and outside the NZIA say they remain committed to their net-zero pledges despite the backlash in the United States. They are convinced they are not violating antitrust rules, but companies departing the coalition were concerned about their exposure to regulatory and litigation risks, given U.S. states are the industry’s primary regulator. Insurers with little U.S. exposure have also been quitting, threatening the alliance’s viability. Insurance Australia Group declined to explain its exit last month. Canada’s Beneva said the U.S. political debate around environmental, social and governance (ESG) criteria was “a distraction from the actions around which the company wishes to rally”.Remaining members believe the NZIA still has a valuable role, and point to methodologies it developed for assessing and reporting on underwriting-linked emissions. France’s AXA, which chaired the NZIA before quitting in May, last week published its first emissions goals for its insurance portfolio. More

Two years ago, the government said it would try to anchor expenditure growth to the growth rate of the economy, at around 5% per year, but suspended that policy this year with a 6.5% increase.Finance Minister Michael McGrath said the proposed spending increases “will allow the government to provide the level of investment that we believe is necessary to maintain public services and protect incomes, without adding unduly to inflationary pressures”. “The rule has to be flexible, it has to be adapted to meet the circumstances of the time”, he said.The finance ministry estimated in April that one of the few current budget surpluses in Europe would reach 6.3% of national income by 2026 thanks to soaring corporate tax receipts, meaning the state’s finances can easily fund additional budget spending.However Ireland’s central bank and independent fiscal watchdog had both urged the government to stick to the 5% spending rule, with the central bank warning that it risked “significantly” adding to inflation and overheating the economy.While Irish inflation has halved in the last nine months to 4.8%, according to preliminary data last week, core inflation is stuck at 5.7% and the central bank only expects the closely watched underlying measure to peak later this year.The Irish economy is also expected to expand strongly again this year after being the fastest growing across the EU in 2022, with unemployment recently falling to a record low of 3.8%.($1 = 0.9175 euros) More

In high-income countries, consumer price inflation is running at rates not seen in four decades. With inflation no longer low, neither are interest rates. The era of “low for long” is over, at least for now. So, why did this happen? Will it be a lasting change? What should the policy response be?Over the past two decades, the Bank for International Settlements has provided a different perspective from those of most other international organisations and leading central banks. In particular, it has stressed the dangers of ultra-easy monetary policy, high debt and financial fragility. I have agreed with some parts of this analysis and disagreed with others. But its Cassandra-like stance has always been worth considering. This time, too, its Annual Economic Report provides a valuable analysis of the macroeconomic environment.

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The report summarises recent experience as “high inflation, surprising resilience in economic activity and the first signs of serious stress in the financial system”. It notes the widely held view that inflation will melt away. Against this, it points out that the proportion of items in the consumption basket with annual price rises of more than 5 per cent has reached over 60 per cent in high-income countries. It notes, too, that real wages have fallen substantially in this inflation episode. “It would be unreasonable to expect that wage earners would not try to catch up, not least since labour markets remain very tight,” it asserts. Workers could recoup some of these losses, without keeping inflation up, provided profits were squeezed. In today’s resilient economies, however, a distributional struggle seems far more likely.

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Financial fragility makes the policy responses even harder to calibrate. According to the Institute of International Finance, the ratio of global gross debt to GDP was 17 per cent higher in early 2023 than just before Lehman collapsed in 2008, despite the post-Covid declines (helped by inflation). Already rising interest rates and bank runs have caused disruption. Further problems are likely, as losses build up in institutions most exposed to property, interest rate and maturity risks. Over time, too, households are likely to suffer from higher borrowing costs. Banks whose equity prices are below book value will find it hard to raise more capital. The state of non-bank financial institutions is even less transparent.Such a combination of inflationary pressure with financial fragility did not exist in the 1970s. Partly for this reason, “the last mile” of the disinflationary journey could be the hardest, suggests the BIS. That is plausible, not just on economic grounds, but on political ones. Naturally, the BIS does not add populism to its list of worries. But it should be on it.So, how did we get into this mess? We all know about the post-Covid supply shocks and the war in Ukraine. But, notes the BIS, “the extraordinary monetary and fiscal stimulus deployed during the pandemic, while justified at the time as an insurance policy, appears too large, too broad and too long-lasting”. I would agree on this. Meanwhile, financial fragility clearly built up over the long period of low interest rates. Where I disagree with the BIS is over whether “low for long” could have been avoided. The Bank of Japan tried in the early 1990s and the European Central Bank in 2011. Both failed.Will what we are now experiencing prove an enduring shift in the monetary environment or just a temporary one? We just do not know. It depends on how far high inflation has been just the product of supply shocks. It depends, too, on whether societies long unused to inflation decide that bringing it back down is too painful, as happened in so many countries in the 1970s. It depends, as well, on how far the fragmentation of the world economy has permanently lowered elasticities of supply. It depends not least on whether the era of ultra-low real interest rates is over. If it is not, this could indeed be a blip. If it is, then significant stresses lie ahead, as higher real interest rates make current levels of indebtedness hard to sustain.Finally, what is to be done? The BIS believes in the old-time religion. It argues that we have put too much trust in fiscal and monetary policies and too little in structural ones. Partly as a result, we have pushed our economies out of what it calls “the region of stability”, in which expectations (not least of inflation) are largely self-stabilising. Its distinction between how people behave in low inflation and high inflation environments is valuable. We are now at risk of moving durably from one to the other. Developments over the next few years will be decisive. This is why central banks must be rather brave.

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Yet I remain unpersuaded by all tenets of this faith. The BIS argues, for example, that policymakers should have been more relaxed about persistently low inflation. But that would have significantly increased the chances that monetary policy would be impotent in a severe recession. It argues, too, that macroeconomic stabilisation is not all that important. But prolonged recessions and high inflation are at least equally intolerable. Moreover, a stable macroeconomic environment is at the least helpful to growth, since it makes planning by business so much easier.Above all, I remain unconvinced that the dominant aim of monetary policy should be financial stability. How can one argue that economies must be kept permanently feeble in order to stop the financial sector from blowing them up? If that is the danger, then let us target it directly. We should start by eliminating the tax deductibility of interest, increasing penalties on people who run financial businesses into the ground and making resolution of failed financial institutions work.Yet the BIS always raises big issues. This is invaluable, even if one does not [email protected] Martin Wolf with myFT and on Twitter More