Aurelia Butler

Some grocery shops have restricted customers to single packs of items in short supply, while queues outside petrol stations have blocked traffic in parts of the capital. President Kais Saied and his government have not commented on the shortages except by announcing an intention to target commodities speculators and hoarders. However, Saied on Friday sacked the head of Tunisia’s petroleum distribution company. The government sells many imported goods at a highly subsidised rate and a global commodities squeeze has pushed up international prices. The government has received two tranches of international help this summer, from the World Bank and European Bank for Reconstruction and Development, to fund grain purchases, but is also seeking an IMF bailout to finance the budget and pay debt. “There’s no oil or sugar or butter and there is a big shortage of biscuits and snacks,” said Azzouz, a shopkeeper in the working class Ettadamon district of Tunis. Khadija, a woman shopping in the same area, said she could not find any subsidised cooking oil and could not afford other brands.”The situation gets more difficult day by day and we don’t know what we’re going to do,” she said. Even early on Friday morning queues were building at a petrol station in the La Marsa district of Tunis, including with cars lining the highway along a lane devoted to oncoming traffic. Silwan al-Samiri, an official in the UGTT labour union’s petrol workers’ department, told IFM radio on Thursday that the government needed to reach a solution to pay for imports. President Saied has given little indication of his preferred economic policy since seizing most powers in July 2021 in moves his foes call a coup, apart from public statements criticising corruption and speculators. More

A look at manufacturing activity in China is also due, while the euro is threatening to push decisively below the key $1-mark.Here’s a look at the week ahead in markets from Dhara Ranasinghe, Tommy Wilkes and Vincent Flasseur in London, Lewis Krauskopf in New York, Kevin Buckland in Tokyo and Sumanta Sen in Mumbai. 1/ JOBS CHECK-INMonthly U.S. jobs data on Sept. 2 will test the argument that the world’s biggest economy is in solid health, and indicate whether the Federal Reserve can engineer a “soft landing” even as it hikes interest rates to fight inflation that has been running at four-decade highs. Those arguing against the prospect of a recession, despite two straight quarters of shrinking U.S. gross domestic product, have been able to point to the strong labour market, at least so far. In July, nonfarm payrolls increased by 528,000 jobs, the largest gain since February. Early estimates for August are projecting an increase of 290,000, according to Reuters data. Graphic: U.S. unemployment rates – https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/zjvqkbbybvx/chart.png     2/ INFLATION SHOCK    Inflation in the euro area remains uncomfortably high, the flash August consumer price index on Wednesday is likely to show. That will only pile pressure on the European Central Bank to hike rates again in September even as recession risks mount.    Instead of peaking soon, as hoped just a few weeks ago, inflation could soon hit double digits. It was at an annual rate of 8.9% in July – well above the ECB’s 2% target.     The source of fresh inflation angst is clear: soaring gas prices, which lurched higher again as Russia signalled another squeeze on European gas supplies.     Gas prices are up 45% in August, and 300% this year. Where they go from here remains the key to when euro zone inflation will finally peak. As one economist put it, we’re all becoming gas watchers now.  Graphic: Mounting price pressure – https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/byprjywnape/chart.png 3/ FACTORY FUNK        China’s moribund economy may continue the lead from the U.S. and Europe in reporting manufacturing gloom in the coming week.    Official PMI data for this month is due on Wednesday, after a surprise contraction in July as COVID-19 flare-ups fuelled by the Omicron variant of the virus forced further clampdowns under China’s draconian zero-COVID policies. The Caixin private survey follows the next day, and is also at risk of dipping into contraction territory.    Consumer and business confidence continue to be hit by the ongoing property crisis. And now a searing heat wave is also hampering production.    China’s authorities are trying to salvage growth this year, with the central bank cutting additional lending rates on Monday after slashing others the week before. On Thursday, the government announced it would take steps to strengthen the labour market, providing the stock market with a bit of cheer. Graphic: Chinese business activity – https://graphics.reuters.com/GLOBAL-MARKETS/THEMES/mopanggqnva/chart.png 4/BACK BELOW PARITY Once again in recent days, one euro became worth less than a U.S. dollar. The currency’s tumble to new 20-year lows near $0.99 is emblematic of the scale of the challenges facing the bloc, not least an energy crisis hitting the euro zone harder than elsewhere.Another dramatic jump in natural gas prices ahead of peak winter demand in a region still dependent on Russian supplies is fanning inflation fears, as well as expectations the ECB will hike rates faster even as the economy slides towards recession. Euro/dollar is increasingly correlated with gas prices, and investors and analysts predict further weakness as Russia continues curtailing its exports. On a trade-weighted basis, the euro is falling fast too, and recently reached its lowest level since February 2020, when the start of the COVID-19 pandemic rattled world markets. Graphic: To parity and beyond – https://graphics.reuters.com/GLOBAL-FOREX/EURO/dwvkrwbmgpm/chart.png 5/STOCKS’ CRUELEST MONTHThe U.S. stock market’s rebound has lost some steam, just as it is entering what has been on average its most treacherous month.Since 1950, the benchmark S&P 500 has fallen an average of 0.5% in September, the worst monthly performance for the index and one of only two months to register an average decline, according to the Stock Trader’s Almanac, which notes that fund managers tend to sell underperforming positions as the end of the third quarter nears.This September, a number of factors could set investors on edge. Following the Jackson Hole central banking symposium in Wyoming, the Fed will hold its next policy meeting on Sept. 20-21. Ahead of that comes the latest reading on consumer prices that will indicate if inflation has peaked and is likely to cause volatility no matter where it lands. Graphic: S&P 500 performance, by month – https://graphics.reuters.com/USA-STOCKS/MONTH/xmvjomwwepr/chart.png More

JACKSON HOLE, Wyo. (Reuters) -Americans are headed for a painful period of slow economic growth and possibly rising joblessness as the Federal Reserve raises interest rates to fight high inflation, U.S. central bank chief Jerome Powell warned on Friday in his bluntest language yet about what is in store for the world’s biggest economy.In a speech kicking off the Jackson Hole central banking conference in Wyoming, Powell said the Fed will raise rates as high as needed to restrict growth, and would keep them there “for some time” to bring down inflation that is running at more than three times the Fed’s 2% goal. “Reducing inflation is likely to require a sustained period of below-trend growth,” Powell said. “While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”As that pain increases, Powell said, people should not expect the Fed to dial back its monetary policy quickly until the inflation problem is fixed. “I thought the message was strong and right,” Cleveland Fed President Loretta Mester said in an interview with Bloomberg TV after the speech. “I think we’re going to have to move (short-term interest rates) up … above 4% and probably need to hold them there next year.”Indeed, Powell’s remarks summed up the momentous challenge facing not just Fed policymakers but also most of the other dozens of central bankers from abroad at Jackson Hole who are frantically trying to contain the worst outbreak of inflation in four decades or more.Some investors anticipate the Fed will flinch if unemployment rises too fast, with some even penciling in interest rate cuts next year.To the contrary, Powell and other policymakers are signaling that even a recession would not budge them if inflation is not convincingly heading back to the Fed’s target. Powell gave no indication on Friday of how high rates might rise before the Fed is finished, only that they will go as high as needed.”The historical record cautions strongly against prematurely loosening policy,” Powell said. “We must keep at it until the job is done. History shows that the employment costs of bringing down inflation are likely to increase with delay.”Underscoring the same “raise-and-hold” message on interest rates, Atlanta Fed President Raphael Bostic told Bloomberg TV that once the central bank’s policy rate is 100 to 125 basis points higher than the current 2.25%-2.50% range, “we should stay there for a long time.”After Powell’s remarks, interest rate futures traders beefed up bets on a third straight 75-basis-point rate hike at the Fed’s Sept. 20-21 policy meeting and priced in expectations the policy rate will get to the 3.75%-4.00% range by next March. Powell’s frank acknowledgment of coming pain to households “took investors by surprise and hammers home how serious they are about raising rates to fight inflation,” said Ryan Detrick, chief market strategist at Carson Group. “The hope of a dovish pivot was squashed, at least for now.”But rate futures trading continued to reflect expectations for such a pivot later next year, with the Fed seen cutting its policy rate by about 40 basis points by the end of 2023 and further in 2024. The Fed will get another chance to reset those expectations in September, when its 19 policymakers release a fresh set of economic forecasts, including for their own rate hikes.INCOMING DATAPowell did not hint at whether the Fed would stick with a 75-basis-point hike or downshift to a half-percentage-point move at its policy meeting next month, except to say the decision would depend on the “totality” of the data by that time.Recent data have shown some small decline in inflation, with the Fed’s closely watched personal consumption expenditures price index falling in July to 6.3% on an annual basis, from 6.8% in June. Inflation expectations based on the University of Michigan’s measures also have eased.But “a single month’s improvement falls far short of what the Committee will need to see before we are confident that inflation is moving down,” Powell said, referring to the central bank’s policy-setting Federal Open Market Committee.Other statistics have shown what Powell said was “strong underlying momentum,” with the job market “clearly out of balance” given job openings are far in excess of the number of unemployed.The decision of how much to increase rates “will depend on the totality of the incoming data and the evolving outlook,” Powell said, with further jobs and inflation reports to come.The Fed has become increasingly open that its policies may lead to a rise in the U.S. unemployment rate, currently at 3.5%, a level that has not been stronger in more than 50 years.To quell inflation, though, Fed policymakers have said they need to curb demand for goods and services by raising borrowing costs and making it more costly to finance homes, cars and business investment. As the process bites, as it is beginning to do, particularly in the housing market, companies may adjust their hiring plans or even resort to layoffs.Philadelphia Fed President Patrick Harker, speaking to Bloomberg TV, said the Fed wants to avoid squashing the job market and sought to reassure Americans facing a possible double-whammy of rising unemployment and still-high inflation.”If there is a recession, it would be shallow,” Harker said.MORE GROUNDED APPROACHPowell delivered his speech to a roomful of international policymakers and economists gathered at a mountain lodge to discuss how the COVID-19 pandemic put new constraints on the world economy, and the implications of that for central banks.Inflation is now their chief concern, and Powell’s remarks at the symposium, hosted by the Kansas City Fed, set a tone likely to register on global markets. It also dovetailed with the message being preached by other major central banks: higher interest rates are meant to slow economies and the commitment to raise them won’t waiver until inflation falls.Indeed, some European Central Bank policymakers want to discuss a 75-basis-point interest rate hike at a policy meeting next month even if doing so increases the risk of a recession, sources with direct knowledge of the process told Reuters.”Central banks must act decisively to bring inflation back to target and anchor inflation expectations,” Gita Gopinath, the International Monetary Fund’s first deputy managing director, told conference attendees on Friday.In prior appearances at the Jackson Hole conference, Powell’s remarks have involved high-level discussions of Fed strategy and analysis.He acknowledged that in his opening remarks. But with the Fed trying to keep markets and the general public apprised of what is coming in the future, he said the intensity of the moment required a more grounded approach. “Today, my remarks will be shorter, my focus narrower, and my message more direct,” Powell said. More

Many of the world’s top economies are struggling with inflation levels not seen in half a century and post-pandemic supply disruptions are accounting for a large chunk of this price surge. While the disruptions were expected to last just months, Carstens argued that a host of factors from deglobalisation and demographic changes to more expensive production in emerging markets could make supply constraints more permanent. “The global economy seems to be on the cusp of a historic change as many of the aggregate supply tailwinds that have kept a lid on inflation look set to turn into headwinds,” said Carstens, who heads a group often called the central bank of the world’s central banks. “If so, the recent pickup in inflationary pressures may prove to be more persistent,” Carstens told the U.S. Federal Reserve’s Jackson Hole Economic Symposium.The realignment of global alliances, a factor of Russia’s war in Ukraine, is also disrupting supplies and access to global value chains or financial markets can no longer be taken for granted, he said. Central banks have been raising interest rates to ward off the threat of persistent inflation but nearly all, including the U.S. Federal Reserve, have been criticised for recognising the price pressure too late. Still, others have been far behind the Fed. The European Central Bank has only raised rates once and at zero, its main rate is still providing exceptional stimulus. Carstens argued that central bank policy has little power over supply side disruptions so policymakers should simply focus on inflation. “Central banks cannot hope to smooth out all economic air pockets, and must instead focus first and foremost on keeping inflation low and stable,” Carstens said. “Monetary policy needs to meet the urgent challenge of dealing with the current inflation threat.” More