Aurelia Butler

MEXICO CITY (Reuters) – Brazil’s central bank will hike its key rate by 50 basis points next week, a Reuters poll showed on Friday, matching an increase at its last meeting following a year of aggressive moves to combat inflation still running in double digits.Of the 29 economists polled, 23 saw a 50 basis point hike to 13.75% next week. Only one surveyed July 25-29 forecast a smaller quarter-point move on Aug. 3 to 13.50%, while five expected no increase at all.So far this year the central bank has raised rates four times, by 150 basis points, then in two consecutive 100 basis point moves, and then by a smaller half-point in June. Next week’s move, if expectations are met, could reinforce the view an aggressive monetary tightening campaign that began in March 2021 is nearing an end. Rates will have risen by 1,175 basis points from 2.0% early last year.”We believe the committee should not close the door for another hike in the September meeting, and instead remain data dependent,” analysts from Morgan Stanley (NYSE:MS) stated in a note and pointed out that the latest relief in inflation numbers might not last.BCB’s decision next week will come after news Brazilian consumer prices increased slightly less than expected in the month to mid-July, marking the lowest monthly increase in two years following government anti-inflation measures such as fuel tax cuts.Brazil’s IPCA-15 consumer price index hit 11.39% in the 12 months to mid-July, well above the central bank’s 3.5% inflation target.But the BCB nonetheless is in a different spot from others around the world that are employing aggressive policy moves to tackle price pressures. The U.S. Federal Reserve and the Bank of Canada last raised rates by 75 basis points and 100 basis points, respectively. Fed Chair Jerome Powell said on Wednesday another “unusually large” increase in interest rates may be appropriate at the institution’s next meeting.Nonetheless, asked about the outlook for Brazil’s central bank policy for the next 12 months, 13 of 19 economists saw the outlook for rates still tilted to the upside, four saw the stance as neutral and two expected an easing.If inflation expectations for the next two years remain above target, there is a chance that the central bank might increase its rate to even higher levels, Mauricio Nakahodo from MUFG noted. More

The Employment Cost Index, the broadest measure of labor costs, rose 1.3% last quarter after accelerating 1.4% in the January-March period, the Labor Department said on Friday. Economists polled by Reuters had forecast the ECI would rise 1.2% in the second quarter. Labor costs surged 5.1% on a year-on-year basis after increasing 4.5% in the first quarter.The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack and a predictor of core inflation, as it adjusts for composition and job-quality changes. It is being closely watched for signs of whether wage growth has peaked as economists and investors try to gauge the pace of the Federal Reserve’s interest rate hikes.The U.S. central bank on Wednesday raised its policy rate by another three-quarters of a percentage point. It has now hiked that rate by 225 basis points since March.There have been mixed signals on wages. While annual growth in average hourly earnings in the Labor Department’s monthly employment report slowed in the first half of the year, the Atlanta Fed’s wage tracker accelerated. The Fed’s “Beige Book” report this month showed that “most districts continued to report wage growth,” and “a quarter of districts indicated wage growth will remain elevated for the next six months.”There were 11.3 million job openings at the end of May, with nearly two open positions for every unemployed person. More

Ukraine’s president Volodymyr Zelenskyy visited the port of Chornomorsk on Friday, as grain vessels prepared to set sail from the Black Sea a week after a UN-brokered deal.The return of large-scale grain exports from Ukraine to the global markets is crucial to alleviating the effect of a global food crisis exacerbated by the Russian invasion in February and its blockade of commercial sea routes.Zelenskyy’s office said the export of grain would begin with the departure of several ships that had already been loaded but had not been able to set sail “due to the start of the [Russian escalated] war”.More than 80 vessels have been marooned in Ukrainian waters since Russia launched a full-scale invasion of its neighbour on February 24, according to Kyiv officials.The first vessels to leave Ukraine will be closely watched amid hopes they will be a harbinger of more grain exports into the international markets.Known as the breadbasket of Europe, Ukraine is the world’s fifth-largest exporter of wheat. It accounts for 80 per cent of Lebanon’s wheat imports and is a major supplier for countries such as Somalia, Syria and Libya.The imminent shipments come as insurers at Lloyd’s of London have agreed an insurance facility to cover grain and other foods shipped out of Ukraine. The policies agreed by Lloyd’s for Ukrainian exports cover $50mn per vessel, per voyage.Insurers will be watching how the vessels navigate the Ukrainian ports, which have not been demined. Ukrainian “pilots” will guide the vessels from the ports before handing over to the crew.Some grain traders are sceptical that the exports will continue to flow beyond the initial “showcase” cargoes. “A lot of ship owners are reluctant to bring their vessels into Ukraine as they are concerned that they may not be able to get out,” said one international trader. Many ships have been unable to leave Ukraine’s ports since the war broke out.However, Chris McGill, head of marine cargo underwriting at Ascot, which is leading the insurance consortium, said insurers were pricing the deal on the basis that the agreement will hold. “We are desperately hoping that it will hold and there won’t be any attacks on the vessels. We can’t really price for something like that.”Additional reporting by Oliver Ralph More

LONDON/PARIS (Reuters) – While millions are fretting whether they can afford another $1,000 on energy this year, others are still splashing out on $10,000 Hermes handbags as soaring prices leave wealthier people relatively unscathed.A string of consumer companies, from spirits group Diageo (LON:DGE) to Birkin bag maker Hermes, have this week reported they’re making money from their most expensive products and expect to continue to do so, despite a cost of living crisis that shows no signs of abating.Sharply higher interest rates, surging inflation and a prolonged energy crisis are leading to the conclusion that the global economy is headed towards recession.But millions of wealthier consumers are still sitting on a cushion of savings built up during the COVID-19 pandemic and keen to treat themselves after two years of restrictions. Hermes reported a record quarterly profit margin on Friday, as sales rose sharply amid strong growth in Europe and the United States, and a rebound in China in June.Chairman Axel Dumas said he saw no sign of a slowdown in any region, even though the company has raised prices 4% this year.Carmaker Renault (EPA:RENA) also said its turnaround strategy of focusing on selling fewer but more profitable cars was paying off, and upgraded its forecast for full-year margins. The most expensive Renault cars can cost over $100,000.”The surprising resilience of European consumers can also be seen in the strong results of luxury brands owner, Louis Vuitton, particularly in their fashion and leather goods, such as Fendi and Christian Dior,” Rebecca Chesworth, senior equities strategist at investor State Street (NYSE:STT) SPDR ETFs, said.”Consumers enjoying travel reopening have been boosting sales of wines and spirits.”COME FLY WITH MEMany consumers are bracing for the economy to deteriorate rapidly this winter. In Britain, for example, a price cap on typical household energy bills is expected to jump from 1,277 pounds ($1,552)earlier this year to more than 3,500 pounds by October, while the cost of food has leapt by 10% year-on-year. That will plunge hundreds of thousands into financial jeopardy, unable to spend on anything but the absolute basics.Food and personal goods companies such as Nestle and Unilever (NYSE:UL) have been locked in hard negotiations with retailers since late last year, with supermarkets reluctant to raise prices of basic necessities and risk alienating shoppers struggling to get by.”Not all companies can (raise prices), only companies that have pricing power that are doing relatively well – that have the dominant positions in their respective sectors – will be able to do that,” BlackRock (NYSE:BLK) Investment Institute’s global chief investment strategist Wei Li told Reuters. “Focusing on the quality players within the sector is important.”While wealthier consumers’ savings are still being eroded by inflation, they currently seem focused on enjoying the freedoms that have returned with the easing of COVID-19 restrictions. British Airways-owner IAG (LON:ICAG) on Friday returned to profit for the first time since the pandemic, as more people flew around Europe between April and June.”Commentary suggesting forward bookings show no sign of weakness supports the argument that pent up demand for travel still far outweighs the impact of a cost-of-living crisis,” Matt Britzman, equity analyst at Hargreaves Lansdown, said.IAG sales, on trips mostly booked out of Britain, Spain and the United States, more than quadrupled to 9.35 billion euros ($9.55 billion) in the first half of the year versus last year.”We’ve had fast growth in the recovery (in travel retail) as you see travel pick up,” Diageo CEO Ivan Menezes told analysts on Thursday after the Don Julio tequila and Johnnie Walker whisky maker beat full-year sales expectations.To be sure, Menezes cautioned: “To get back to where we were, it’s probably another two years, maybe a bit longer.”Europe’s lenders this week also offered some positive surprises on profits, but investors are watching for signs a weaker economy, surging inflation and the war in Ukraine could hit their prospects.Euro zone inflation rose to another record high in July and its peak could still be months away, keeping pressure on the European Central Bank to opt for another big interest rate increase in September. For now, however, French bank BNP Paribas (OTC:BNPQY) reported better than expected quarterly profit on Friday, after bad loan provisions dipped and business remained buoyant in both investment and retail banking.($1 = 0.8211 pounds)($1 = 0.9792 euros) More