Aurelia Butler

(Reuters) – U.S. Federal Reserve officials on Tuesday reiterated their support for further interest-rate hikes to quell inflation, with the influential chief of the New York Fed saying the central bank will likely need to get its policy rate “somewhat above” 3.5% and keep it there through the end of 2023. “I see us needing to kind of hold a policy stance – pushing inflation down, bringing demand and supply into alignment – it’s going to take longer, will continue through next year,” New York Fed chief John Williams told the Wall Street Journal. “Based on what I’m seeing in the inflation data, and what I’m seeing in the economy, it’s going to take some time before I would expect to see adjustments of rates downward.” The Fed in March embarked on what’s become the sharpest round of rate hikes since the 1980s, and Fed Chair Jerome Powell last week made clear he and fellow monetary policymakers are prepared to raise borrowing costs as high as needed to restrict growth and reduce inflation that’s currently running at more than three times the Fed’s 2% target. Doing so, he said, will likely mean a softer labor market and pain for households and businesses; but allowing inflation to remain high would cause even worse damage, he said.Williams, who as vice chair of the Fed’s rate-setting panel plays a key role steering monetary policy, said that the central bank’s decision on whether to deliver a third straight 75-basis-point rate hike next month or a smaller half-point hike will depend on the incoming data, which includes Friday’s monthly jobs report and the consumer price index reading just days before the Sept. 20-21 meeting.But September’s decision will also, Williams said, depend on policymakers’ views of where they think interest rates will need to be by the end of the year.”If based on the data it’s clear that we need to get interest rates significantly higher by the end of the year, then obviously that informs a decision at any given meeting,” Williams said. “We’re going to need to have restrictive policy for some time – this is not something that we’re going do for a very short period of time and then change course; it’s really more about getting policies to the right place to get inflation down and keeping it in this position” to achieve the Fed’s 2% inflation goal.The Fed’s current target range for the benchmark Fed funds rate is 2.25-2.50%.In June, the last time the central bank published a summary of policymakers’ rate-path expectations, U.S. central bankers saw rates rising to 3.4% by year end.Financial markets are pricing in a steeper increase. Futures contracts tied to the Fed policy reflect trader bets that rates will rise 1.5 percentage points further by year end. There are three more policy-setting meetings this year, including next month’s. “I don’t think we are done tightening. Inflation remains too high,” Atlanta Fed President Raphael Bostic wrote in an essay published Tuesday on the regional bank’s website. “That said, incoming data – if they clearly show that inflation has begun slowing – might give us reason to dial back … We will have to see how those data come in.”Inflation by the Fed’s preferred measure slowed to 6.3% in July, down from 6.8% in June, but price pressures remain “stubbornly widespread,” Bostic said.Other data show key segments of the economy remain tight – including data released on Tuesday showing job openings remained high through July, a possible indication of continued wage pressuresBostic called the overall picture “fuzzy,” and said that while focused on the path of inflation, he was also sensitive that moving too aggressively to raise interest rates also carried risks.”Moving either too aggressively or too timidly has downsides,” Bostic wrote, with entrenched higher inflation looming if the Fed does not squeeze it from the economy, and lost growth and higher unemployment the outcome of “severe policy tightening.”To Richmond Fed President Thomas Barkin, it’s clear the Fed needs to raise interest rates, although exactly how much next month will hinge on the upcoming jobs and inflation reports. “I’m not going to prejudge it,” Barkin told Yahoo Finance, adding that the Fed does need to get rates “into restrictive territory” to bring inflation down.(This story refiles to fix typographical error in last paragraph) More

The carrier now has 185 days to reach an agreement with creditors, during which Interjet’s payments are suspended, according to the document.”This makes us all very happy,” said Carlos del Valle, son of Interjet owner Alejandro del Valle, saying the decision signaled a way of moving forward.”Once our mediator is assigned, we’re going to ask for the authorization to make essential payments,” the younger del Valle said in a message on Twitter (NYSE:TWTR). According to the document seen by Reuters, Mexico’s transportation ministry has five days to assign a mediator to the case. Interjet’s union has been on strike since January 2021, alleging employees went months without their salaries or benefits before the airline abruptly went offline.Thousands of customers were also affected by the flight cancellations, and some have launched a collective complaint through Mexico’s federal consumer protection office.”Soon we will announce the steps to follow for all those people left with the issue of tickets, vouchers and all of the customers who had any inconvenience,” del Valle said.Aguilar Amilpa Abogados, which according to local media reports was bringing the case against Interjet on the behalf of a group of creditors, did not immediately respond to a request for comment. More

The Future Fund, which was set up in 2006 to cover escalating pension liabilities for public servants, said it made a negative return of 1.2% in the year to end-June, compared to a decline of more than 10% in global equities and bonds.It also noted that it returned 22.2% the year before, amid ultra-low interest rates and rallying investment markets, meaning its 10-year target of returning an average of 6.6% a year was relatively unaffected.”Not unexpectedly we now have significant global and domestic inflation,” said fund Chairman Peter Costello, a former Australian treasurer.”It is likely that further interest rate rises will be needed to achieve … inflation objectives. We expect deglobalisation, geopolitical tensions, trade barriers and high inflation to be a feature of the investment climate going forward,” Costello added in a statement.After reporting in early 2022 that it had surpassed A$200 billion ($137 billion) under management, the Future Fund said it now has A$194 billion. A year ago, it managed A$197 billion.Fund CEO Raphael Arndt said the organisation had benefited from a project to adjust its portfolio for an environment of higher inflation, increased volatility and lower returns.Since a year ago, the fund said it upped its exposure to “alternatives” to 17.8% of total funds under management, from 13.2%, without specifying what it meant by alternatives. It said it cut its equity exposure to developed markets to 15% from 18.2% and cut its equity exposure to emerging markets to 5.4% from 9.1%.In February the fund said it was winding down a small exposure to Russian-listed companies in response to Russia’s invasion of Ukraine.($1 = 1.4586 Australian dollars) More

Lloyds (LON:LLOY) Bank said its monthly business barometer dropped to 16% in August from 25% in July, with companies more worried about rising prices than economic slowdown.”Business confidence declined for a third consecutive month as firms continue to face economic challenges in the period ahead and as inflation concerns intensify,” Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said.Wage and price pressures remained elevated but there were some brighter points as demand for staff held up and firms reported less concern about staffing and the coronavirus pandemic, Ho said.While 38% of firms expected to increase headcount in the year ahead, the proportion thinking of raising pay by at least 3% fell slightly to 26% from 28% in July.The Bank of England is monitoring pay pressures closely as it considers how much further it needs to raise interest rates to snuff out the risk that the recent 40-year high in inflation will fundamentally alter the public’s assessment of the long-term path for prices. More

Food prices leapt by 9.3% after a 7.0% increase in July, driven by increases in products such as milk, margarine and crisps as the war pushed up the costs of animal feed, fertiliser, wheat and vegetable oils, the BRC said.”We can expect this level of food inflation to be with us for at least another six months but hopefully some of the input cost pressures in the supply chain will eventually start to ease,” said Mike Watkins, head of retailer and business insight, NielsenIQ, who co-produces the data.”However, with further falls in disposable incomes coming this autumn as energy costs rocket again, retail spend will come under pressure in the all-important final quarter of the year.”The Bank of England, which has raised interest rates six times since December, is watching how persistent the surge in inflation is likely to be.Britain’s consumer price index, which measures a broader range of prices than the BRC’s data, hit a 40-year high of 10.1% in July. More

Ministers are planning to introduce a rent cap for tenants in the social rented sector as part of efforts to ensure that some of the most vulnerable renters in England are not overwhelmed by the cost of living crisis this winter. Housing secretary Greg Clark on Wednesday launched a consultation looking at how best to support the 4mn households in the social rented sector, as investment bank Goldman Sachs said inflation could exceed 20 per cent by the start of next year. The government is considering capping rent rises for the coming financial year at 3, 5 or 7 per cent for tenants in the social sector to insulate them from the rising cost of living.“We must protect the most vulnerable households in these exceptional circumstances during the year ahead. Putting a cap on rent increases for social tenants offers security and stability to families across England,” Clark said. About 17 per cent of England’s households rent their homes from councils or housing associations, according to official data. Tenants in the social rented sector typically pay less and are afforded more protections from eviction than those in the private sector. The six-week government consultation comes alongside measures such as a £400 discount on energy bills and a £150 council tax rebate. These have been welcomed by campaigners but are dwarfed by the rising costs of energy and food. Energy regulator Ofgem last week said gas and electricity bills for an average British household would increase by 80 per cent to £3,549 from October. Geeta Nanda, chair of the G15 group of housing associations, said government support was welcome but that a rent cap would affect the ability of housing associations to deliver more affordable housing.“To maintain and improve existing residents’ homes, as well as continuing to build much needed new affordable homes, significant investment each year is essential. Rental income is critical to supporting this work,” she said.The consultation does not include measures to protect the 4.4mn households in the private rental sector from rent rises.Government guidance states that landlords in the private rented sector may increase rents provided they are “fair and realistic, which means in line with average local rents”. But according to estate agent Hamptons, average rents on new leases are up 10 per cent over the past 12 months. Renters across the UK have also complained that their landlords have attempted to push through bigger increases, leaving them at risk of homelessness. Dan Wilson Craw, deputy director of Generation Rent, a tenant campaign group, said that “any action to protect the most vulnerable households must also protect private tenants from unaffordable rent increases”.“With energy bills set to rise further, private renters desperately need government intervention to help them to keep their homes warm this winter.” More