Aurelia Butler

The Federal Reserve will face more urgency in its fight to cool down the US economy with steep interest rate increases after the latest batch of labour market data showed an unexpected acceleration in jobs gains and strong wage growth. The figures released on Friday eased concerns that the American economy was sharply slowing down or already in recession after two consecutive quarters of contraction in output this year. However, it will increase worries that high inflation may become entrenched as wages keep rising, requiring even more intervention by the central bank. The Fed has already moved its main interest rate up from the rock-bottom levels of the coronavirus pandemic to a target range of 2.25 per cent to 2.5 per cent this year, including two consecutive 0.75 percentage point increases in June and July. On the back of the latest jobs report, economists and Fed watchers say the likelihood of another aggressive upward move next month has risen, although the central bank will still be examining upcoming economic data closely, including inflation figures due next week. “Today’s numbers should mollify recession fears but amplify concerns that the Fed has a lot more work to do, and we now think a 75 basis point hike in September looks likely. The inflation worries motivating the Fed will only be heightened by this jobs report,” Michael Feroli, a senior economist at JPMorgan, wrote in a note on Friday. “Jobs haven’t slowed at all in response to Federal Reserve tightening. This is a double-edged sword,” added Michael Gapen, chief US economist at Bank of America, noting that while the chance of a “near-term recession is lower”, the “risk of a hard landing is rising”. David Mericle, chief US economist at Goldman Sachs, said the report cleared up some “ambiguity” over the strength of wage growth in the US economy, suggesting it was not easing as much as the Fed might hope. “The overall message is that wage growth is going sideways at a rate that is probably a couple of percentage points stronger than what would be compatible with achieving 2 per cent inflation”, which is the Fed’s long-held inflation target, he said. “The Fed has even further to go than we thought before today.” Fed chair Jay Powell is expected to lay out his latest thinking on the path of US interest rates and the central bank’s strategy to bring down inflation at the annual Jackson Hole, Wyoming, conference set for late August. During his last press conference in July, Powell said that “another unusually large increase” in interest rates in September “could be appropriate” but that decision had not been made. “It’s one that we’ll make based on the data we see. And we’re going to be making decisions meeting by meeting,” he added. Financial market moves may also be a factor in the Fed’s next step. Traders began pricing in expectations of higher interest rate increases after the jobs data, predicting that rates will peak in March at 3.64 per cent, compared with the 3.46 per cent expected prior to the report. Fed fund futures show the chances of a 0.75 percentage point increase in September have risen to 67 per cent, versus 33 per cent on Thursday. While the strong jobs number increases pressure on the Fed, it was welcomed by the Biden administration, since it means a sharp economic downturn is less likely ahead of the November midterm elections.

It comes as Congress is preparing to vote on a $700bn package of measures designed to curb inflation by raising taxes on large corporations, reducing the cost of prescription drugs and bringing down the budget deficit — even though it would also boost spending on clean energy incentives in order to fight climate change. “This bill is a gamechanger for working families and our economy. I look forward to the Senate taking up this legislation and passing it as soon as possible,” Biden said on Friday. More

Total credit increased $40.2 billion from the prior month, second only to March’s $47.1 billion spike, Federal Reserve figures showed Friday. The median forecast in a Bloomberg survey of economists called for a $27 billion advance. The figures aren’t adjusted for inflation.Revolving credit outstanding, which includes credit cards, increased $14.8 billion. Non-revolving credit increased $25.4 billion.The June figures wrap up a quarter in which borrowing rose an annualized 8.7%. Motor vehicle loans at the end of the second quarter increased about $32 billion, while student loans was up less than $1 billion.With inflation at a 40-year high, Americans are having to spend more to buy the same goods and services as before. Consumers, however, have so far proved resilient, with outlays growing on an inflation-adjusted basis in June — even if just slightly.That’s certainly not true of all workers though. The rapid price gains have left others struggling to pay their bills. A Census Bureau survey conducted in late June and early July found four in 10 adults said it has been somewhat or very difficult to cover usual household expenses.(Adds graphic)©2022 Bloomberg L.P. More

BUENOS AIRES (Reuters) – Asked about Sergio Massa, Argentina’s new “superminister” for the economy, many Argentines perceive him as an opportunistic politician with limitless ambition.But Massa’s political acumen, honed over four decades of party-hopping activism, is also widely seen as key to rescuing Argentina’s economy, which has been ravaged by sky-high inflation, crippling debt as well as chronic overspending.Earlier this week, the 50-year-old lawyer and former congressional leader for the ruling center-left Peronist coalition was sworn in as economy chief by President Alberto Fernandez. Massa’s move is widely seen as a stepping stone to a future presidential run, but only if he can quickly show results.To do just that, the newly dubbed “superminister” insisted on broad powers before accepting the daunting task, including control over the agriculture, production and trade secretariats, which have previously acted independently.”He’s a very capable person, exceptionally prepared. But he’s also a huge pragmatist, and that’s why he decided to form an alliance with the government,” said legislator Margarita Stolbizer.In 2017, Stolbizer joined forces with Massa in a Senate run against leftist Cristina Fernandez de Kirchner, the country’s powerful vice president and former president, who is now a key Massa backer.His resourcefulness gave him what his predecessors were unable to obtain: the thumbs-up from the vice president to carry out more orthodox cost-cutting policies, which Fernandez de Kirchner had spurned when proposed by others in the past.His resourcefulness gave him what his predecessors were unable to obtain: the thumbs-up from the vice president to carry out more orthodox cost-cutting policies, which Fernandez de Kirchner had spurned when proposed by others in the past.Massa’s backing by all the ruling coalition’s warring factions gives him a leg up compared with his immediate predecessors, longtime Economy Minister Martin Guzman as well as his short-lived successor, Silvina Batakis, according to political analyst Carlos Fara.”The crisis has made everyone more pragmatic, and that allows Massa to propose things that surely wouldn’t have been accepted from Batakis and even less so from Guzman,” said Fara.On Wednesday, Massa announced a series of austerity measures, plus moves designed to boost dwindling foreign reserves, during his first day on the job.SUPERHERO?Massa began his political career in the late 1980s in the conservative Union of the Democratic Center party.From 2002 to 2007 he was a Peronist government official and later mayor of Tigre, a suburban area outside Buenos Aires where he lives. He then became chief of staff of then-President Fernandez de Kirchner, but resigned after less than a year.In 2013, Massa founded a new party called the Renewal Front, which eventually joined forces with other Peronist factions to create a center-left group that went on to defeat ex-President Mauricio Macri’s coalition in the 2019 election.Over the past decade, Argentina’s rough and tumble politics, amplified by the deepening economic crisis, have taken a toll on Massa’s popularity.Nearly 55% of people hold a negative view of Massa, while about 63% say they would never vote for him if he ran for president, according to a recent survey from Management & Fit image consultancy. As the country limps to next year’s presidential election, Massa will be put to the ultimate test. A successful performance as superminister will be crucial for his own future political prospects – not to mention vital for the near-term health of South America’s second-biggest economy.”Massa is so ambitious. He’s dreamed all his life of being president,” said businessman Gregorio Feldman. “He’ll end up either a superhero or get eaten alive.” More

Recep Tayyip Erdoğan and Vladimir Putin have pledged to deepen economic ties between their countries as Moscow seeks to soften the blow of western sanctions imposed over its invasion of Ukraine.After a four-hour meeting at Putin’s residence in Sochi on Friday, the Russian and Turkish presidents released a joint statement pledging to raise their bilateral trade volumes and deepen their economic and energy ties. Deputy prime minister Alexander Novak, Moscow’s top energy official, told reporters that Turkey had agreed to begin paying for Russia’s gas in roubles, according to Interfax. Putin and Erdoğan had discussed further developing banking ties and settlements in roubles and lira, he added.Novak said the deals would “take our trade and economic relations to a new level in basically every area”, including transport, industry, agriculture, tourism and IT. Though both leaders nodded to tensions between them, including the conflict in Syria, the economic fallout of the war in Ukraine has provided reasons for rapprochement. Western sanctions have largely cut the Russian economy out of the global financial system and left it struggling to replace banned imported goods or to find markets for its energy exports.Turkey is suffering from a gaping trade imbalance caused by soaring global energy prices — themselves caused in large part by how Russia’s invasion has disrupted markets. Ankara is on the hunt for foreign capital to plug the gap.The US and other western allies have been worried about Erdoğan’s ambivalent stance on the invasion of Ukraine. The US deputy Treasury secretary met Turkish officials and Istanbul bankers in June to warn them not to become a conduit for Russian sanctions evasion.The Sochi meeting comes as Ukrainian intelligence services recently shared with Nato countries a document they say they intercepted from Moscow that contained proposals for Turkish-Russian co-operation, according to a Ukrainian intelligence official and a western diplomat. The latter said he believed the document was genuine.The proposals include ways to help Russia evade sanctions with the help of Turkish banks and co-operation in other areas including energy and industry, the people said. The Washington Post was first to report that Moscow was seeking Ankara’s help to circumvent western sanctions. It is unclear whether Turkey, a Nato member, will accept those proposals.Putin and Erdoğan have previously suggested the countries could use their own currencies in commercial exchanges. Such a move would allow Russia to avoid the US-denominated global oil market while enabling Turkey to limit the damage to its dwindling foreign currency reserves by paying for energy in Turkish lira.Erdoğan has attempted to carve out a role as mediator between Ukraine and Russia. Ankara has supplied Kyiv with armed drones and was instrumental in securing a UN deal to lift a Russian naval blockade and allow Ukraine to resume grain exports from its Black Sea ports.

But Turkey has also refused to join the west’s sanctions against Moscow, has threatened to veto Sweden and Finland’s Nato membership and has allowed vessels carrying wheat and corn from Russian-occupied parts of Ukraine to deliver their cargos to Turkish ports.Putin and Erdoğan said the grain deal “must be implemented in full accordance with its spirit and letter”, including allowing the resumption of Russian grain and fertiliser exports that Moscow said had been hampered by the sanctions.The US and EU never sanctioned Russia’s agriculture directly, but issued clarifications that effectively rolled back restrictions against it last month in tandem with the deal on Ukraine’s Black Sea ports. More