Aurelia Butler

The consumer price index increased 1.0% last month after gaining 0.3% in April, the Labor Department said on Friday. Economists polled by Reuters had forecast the monthly CPI picking up 0.7%. Gasoline prices shot up in May, averaging around $4.37 per gallon, according to data from AAA. They were flirting with $5 per gallon on Friday, indicating that the monthly CPI would remain elevated in June.Inflation was last month also boosted by higher prices for other goods like food, which has surged in the aftermath of Russia’s unprovoked war against Ukraine. China’s zero COVID-19 policy, which dislocated supply chains, is also seen keeping goods prices strong. Prices for services like rents, hotel accommodation and airline travel were also high last month. There had been hope that the shift in spending from goods to services would help to cool inflation. But a tight labor market is driving up wages, contributing to higher prices for services. The inflation report was published ahead of an anticipated second 50 basis points rate hike from the Fed next Wednesday. The U.S. central bank is expected to raise its policy interest rate by an additional half a percentage point in July. It has hiked the overnight rate by 75 basis points since March. “Continued strong monthly inflation could suggest the Fed more explicitly guides towards policy rates continuing to rise by 50 basis points or more until realized inflation data is convincingly slowing,” said Veronica Clark, an economist at Citigroup (NYSE:C) in New York.In the 12 months through May, the CPI increased 8.6% after rising 8.3% in April. Economists had hoped that the annual CPI rate peaked in April.Underlying inflation was equally strong last month as rents and airline fares maintained their upward march.Excluding the volatile food and energy components, the CPI climbed 0.6% after advancing by the same margin in April. The so-called core CPI increased 6.0% in the 12-months through May. That followed a 6.2% rise in April. Inflation by all measures has far exceeded the Fed’s 2% target. More

Nabiullina spoke in Russian. The quotes below were translated by Reuters.ROUBLE “Despite the fact that monetary restrictions have been introduced, we adhere to a policy of a floating exchange rate … Its movement affects different groups of economic actors in different ways. Exporters are often interested in weakening the exchange rate, and importers in strengthening it.”SOVEREIGN DEBT”As a rule, the inability to pay sovereign debt leads to an outflow of investors, a decrease in the value of state assets. But in the case of Russia, this has already happened. No immediate consequences (from a default being declared) are expected. This situation has no effect on the state’s fulfilment of its obligations toward residents who have purchased OFZ treasury bonds.”OIL EMBARGO”The impact will depend on whether and to what extent it is possible to redirect flows to other markets. Secondly, it will depend on the price factor, which in turn will depend on the global situation overall and on the growth rate of the world economy.”INFLATION”The (inflationary) expectations of businesses and those of the population remain much higher than the levels they reached with inflation close to 4%.””As for the slowdown in price growth, we expect that it will continue to occur.””The very low rate at which prices are increasing in recent weeks cannot be considered as persistent low inflation. To a large extent, this can be explained by price correction after a sharp increase in March. Pro-inflationary risks remain strong.””A decrease in Russian exports could carry disinflationary risks if companies are forced to send goods to the domestic market.”RISKS OF STAGFLATION”We do not include them in our baseline forecast, and our policy is aimed at ensuring that such a risk does not materialise.”SANCTIONS”The risk of secondary sanctions remains.””We see that our exports have not declined as much as we initially expected. The effect of sanctions is probably less acute than we feared. This shows companies’ ability to adapt. But it is premature to say that the full effect of sanctions has manifested itself.””In the context of sanctions and restrictions, foreign currency transactions for banks and individuals carry certain risks. Banks are trying to reduce the volume of foreign exchange transactions and may even stop offering certain products denominated in foreign currency. But it is important that all this be done in compliance with the rights of bank customers.”CONSUMER ACTIVITY “We think that an improvement in the prospects for economic development, the indexation of pensions, will contribute to an increase in consumer activity.”FISCAL RULE”The budget for next year is now being discussed. We consider it very important to return in the future to one or another budget rule and an understanding of what the budget framework will be, because this affects monetary policy.”KEY RATE”The situation is uncertain, many things are changing rapidly. It is impossible to foresee our (key rate) move every time.” More

ISLAMABAD (Reuters) -Pakistan Finance Minister Miftah Ismail said on Friday the government would raise taxes on the rich and ban government officials from buying new cars, amid pressure to control the fiscal deficit and secure International Monetary Fund (IMF) bailout money.The nation of 220 million people is facing a balance of payments crisis, with foreign reserves falling below $10 billion, hardly enough for 45 days of imports, and a widening current account and ballooning fiscal deficits.Ismail, unveiling the budget for the 2022/23 fiscal year that starts in July, said that it would raise taxes on the rich, ban the import of cars and the buying of new vehicles by government officials. It was not immediately clear if the ban related just to official vehicles or those for personal use.”We have started difficult decisions… but it is not the end of taking difficult decisions,” Ismail said.The IMF had asked the South Asian country to address its elevated fiscal and current account deficits before releasing a bailout package, as Pakistan had deviated from policies agreed in the last review under the multilateral agency’s Extended Fund Facility programme.Ismail said the government would prevent tax evasion that would help increase revenue to 7 trillion Pakistani rupees ($34.65 billion) in 2022/23 and bring down the deficit.The government would target a fiscal deficit of 4.9% of gross domestic output for 2022/23, sharply lower from 8.6% in the current year, Ismail said.He said the government would target raising 96 billion Pakistani rupees from privatisation.One of the key steps towards meeting the IMF’s conditions, the removal of costly fuel subsidies, has already been implemented by the government, with fuel prices being raised by 40%.Ismail said the government would aim for economic growth of 5% in 2022/23, down from 5.97% for the current fiscal year that ends on June 30. The government set the total expenditure target at 9.5 trillion Pakistani rupees for 2022/23. Ismail said he expected inflation to average around 11.5% for 2022/23.($1 = 202.0000 Pakistani rupees) More

Public satisfaction with how the Bank of England is tackling inflation fell to the lowest on record as most Britons expect prices to continue to rise steeply over the next five years, according to official data published on Friday.In May, 28 per cent of the UK population was dissatisfied with how the central bank was handling inflation, its own survey found. In April, UK consumer price growth soared to a 40-year high of 9 per cent, the highest among the G7 countries.With 25 per cent satisfied with the BoE’s performance, net satisfaction dropped to minus 3 per cent, down from 6 per cent when the question was last asked in February, and the lowest since records began more than two decades ago.The BoE figures also showed that 59 per cent of the UK population expected inflation to remain above 2 per cent over the long term, with more than one-third expecting longer-term inflation to be above 4 per cent. This is the highest proportion since records began in 2009.Adrian Lowery, financial analyst at investing platform Bestinvest, said the data meant that “people don’t believe the Bank of England will succeed in its forecast of bringing inflation back down to its 2 per cent target in a couple of years”.The findings also provide an indicator of how entrenched inflation might become, adding to the case for a further interest rate rise at the BoE monetary policy meeting next week. Markets expect the central bank to raise rates for the fifth consecutive time, by 25 basis points.

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This is because elevated inflation expectations among workers can fuel higher wage demands and therefore potentially aggravate the inflationary spiral, especially in a tight labour market. High inflation has already resulted in transport workers announcing strikes and public sector unions threatening action. The BoE said it was unable to comment because it was in its “quiet period” ahead of the MPC decision. Last month, however, governor Andrew Bailey told MPs he was unable to stop inflation reaching double digits this year. “To forecast 10 per cent inflation and to say there isn’t a lot we can do about it is an extremely difficult place to be,” he said. “This is a bad situation to be in.”Separate figures published on Friday showed that the vast majority of consumers are worried about the cost of living crisis, resulting in spending cuts and higher levels of anxiety and lower wellbeing. In the month to May 22, 77 per cent of the UK population reported feeling very or somewhat worried about the rising costs of living, according to data published by the Office for National Statistics on Friday.The proportion rises to 90 per cent for parents with young children, with similar shares reported among ethnic minorities and house renters. People worried about the cost of living crisis reported much higher levels of anxiety and generally lower wellbeing, including lower happiness, life satisfaction and feeling that life is worthwhile. Nearly two in three people said they were cutting back on non-essentials and two in five said they spent less on food, the ONS data showed. Another 40 per cent had reduced non-essential journeys and the majority of the population said they were using less gas and electricity at home.This reinforces expectations of a new economic slowdown as forecast by the OECD, which this week slashed its UK growth forecast for 2023 to zero, the lowest in the G20 excluding Russia. Official data to be released on Monday are expected to show that the economy barely grew in April, after stagnating in February and March. More

(Reuters) – U.S. stocks were set to open sharply lower on Friday as consumer prices rose more than expected in May, dashing hopes that inflation is peaking and fanning worries about more aggressive steps by the Federal Reserve to tame it.The Labor Department’s report showed U.S. consumer price index (CPI) accelerated to 1% in May from 0.3% in April, while on an annual basis it surged 8.6% as gasoline prices hit a record high and the cost of services rose further.Economists polled by Reuters had forecast the monthly CPI picking up 0.7%. Core CPI prices, which exclude volatile food and energy products, climbed 6% after a 6.2% rise in April on an annual basis. “Many hopes for a peak in inflation are now dashed and a peak will just have to wait,” said Ryan Detrick, chief market strategist at LPL Financial (NASDAQ:LPLA).”This does little to give the Fed cover to not be as aggressive and likely suggests it will continue to be quite hawkish to combat the seemingly never ending string of higher inflation.”All eyes are now on the U.S. Federal Reserve’s policy meeting next week. Investors fear a tight labor market coupled with persistently high inflation could force the Fed to quicken the pace of its pandemic-era policy support withdrawal.The U.S central bank was likely to raise its key interest rate by 50 basis points next week and July, with rising chances of a similar move in September, according to a Reuters poll of economists who see no pause in rate rises until next year.U.S. stocks have sold off sharply this year amid heightened uncertainty around the outlook of Fed’s policy moves, a war in Ukraine, prolonged supply-chain snarls and pandemic-related lockdowns in China.The blue-chip Dow has fallen 11.2% so far this year, while the benchmark S&P 500 index has dropped 15.7% and the tech-heavy Nasdaq has shed 24.9%, respectively.For the week, all the three major indexes are down between 1.9% and 2.2% as rate-sensitive growth stocks came under pressure from elevated Treasury yields.”We are at a very interesting spot right here where inflation remains high, there are significant concerns around the growth outlook and at the same time, people are trying to figure out exactly how this will ultimately impact corporate earnings,” said Eric Johnston, head of equity derivatives and cross asset at Cantor Fitzgerald.”We are quite bearish on equities…our view is that earnings estimates are going to get revised lower and so ultimately, stock prices are going to be valued off of the earnings outlook.”At 8:51 a.m. ET, Dow e-minis were down 364 points, or 1.13%, S&P 500 e-minis were down 53.25 points, or 1.33%, and Nasdaq 100 e-minis were down 193.25 points, or 1.57%.Among stocks, Netflix Inc (NASDAQ:NFLX) slid 5.4% in premarket trading after Goldman Sachs (NYSE:GS) downgraded the streaming giant’s stock to “sell” from “neutral” due to a possibly weaker macro environment. More

ISTANBUL (Reuters) -Turkey’s Treasury said on Friday fighting inflation remained its top priority after authorities announced fresh measures to shore up an economy beleaguered by surging prices and a sliding lira, though analysts expected the latest steps to have little effect. The Treasury said it would issue domestic bonds indexed to the revenues of state enterprises to encourage lira asset savings, the central bank raised the required reserves ratio for lira commercial cash loans to 20% from 10%, and the banking watchdog tweaked a maturity limit for consumer loans.”The fight against inflation remains top priority. In this struggle the importance of coordination between institutions is clear and all our institutions are acting with the understanding of a joint struggle,” a Treasury statement said.The steps prompted volatile trade in the lira. It firmed as far as 16.8 to the U.S. dollar ahead of the announcements before sliding back to 17.3 after they were unveiled. It traded at 17.21 at 0800 GMT after the Treasury’s latest statement.The lira has slid 23% this year after last year’s 44% tumble, which was precipitated by a series of unorthodox central bank rate cuts carried out under pressure from President Tayyip Erdogan despite surging inflation.The lira crisis meanwhile aggravates inflation, especially this year as Russia’s war in Ukraine has driven up energy and food prices.Analysts were sceptical how much the latest steps could move the needle, saying the measures failed to tackle the core issue of rampant inflation and low interest rates.”As far as I see, there isn’t any policy change available to take inflation under control,” said Arda Tunca, Istanbul-based economist and columnist at PolitikYol. Sources told Reuters the government was considering pushing a supplementary budget through parliament before a recess next month to cover possible summer payments.”I always wonder what kind of rabbit they will pull out of the hat next time – so far I have not seen anything that would help stabilise the lira,” said Per Hammarlund, chief EM strategist at SEB. Turkey is suffering economic and market headwinds as Erdogan faces tough elections by mid-2023, with his approval ratings already hit by rocketing inflation, which hit 73.5% in May. Turks like Onder Ozturk, 42, a barber in Istanbul, have borne the brunt of the pain from soaring prices.”We never go out to eat anymore,” said Ozturk, who has cut discretionary spending by half, including visits to his home town. “We’ve limited our spending to clothes and personal needs.” REAL PERSONSCommenting on the move to issue revenue-index lira bonds this month, Spinn Consulting’s Ozlem Derici Sengul noted that such bonds were issued in 2009. “Not corporates but only real persons are targeted this time, but according to my humble view it is difficult to attract deposit holders who do not have equity investing experience,” she said.The Treasury said the use of the lira and practices to increase its appeal will continue without compromising free market rules.Separately, banks will have to hold between 3% and 10% of fixed-rate bonds for foreign currency deposit accounts, the central bank said, in a move boosting demand for fixed-rate bonds and effectively lowering treasury’s borrowing costs, a senior banker told Reuters.In other moves, the banking watchdog reduced the maximum maturity for consumer loans over 100,000 lira ($5,814) to 12 months from 24, and plans to ease restrictions imposed on foreigner investors’ access to the lira via the swap facility.The capital markets board said it had reduced its fees in order to encourage foreign funding for public offerings held in Turkey, and to encourage companies to obtain funds by issuing capital market instruments abroad.Local bond yields slipped on the latest announcements with the yield on the 10-year benchmark bond easing to just over 21% after ending the day at 25.72% on Thursday. Borsa Istanbul’s main banking index climbed 4%. More

US consumer price growth resumed its rapid rise in May, accelerating 1 per cent during the month as rising inflation in the services sector added urgency to the Federal Reserve’s plans to aggressively tighten monetary policy. The monthly rise in the consumer price index, published by the Bureau of Labor Statistics on Friday, was significantly faster than the 0.3 per cent increase recorded in April and above economists’ expectations for a 0.7 per cent increase.At that pace, the year-over-year increase rose to 8.6 per cent, the highest level since December 1981. Economists have previously said headline annual inflation should start to retreat as it starts lapping very elevated levels logged last year, but the recent run-up in prices has so far defied that trend.Once volatile items such as food and energy are stripped out, “core” CPI rose 0.6 per cent, maintaining the same momentum as the previous month. However, the annual rate moderated slightly to 6 per cent, compared to the 6.2 per cent pace in April. Services inflation, once energy-related expenses were stripped out, rose 0.6 per cent for the month, and are up 5.2 per cent on the year.The peak in inflation has been delayed primarily by a further climb in energy prices, with national petrol prices approaching $5 a gallon as a result of the prolonged conflict between Russia and Ukraine, and a steady rise in services-related costs — such as those linked to the travel industry. These gains have offset a moderation in expenses for certain goods. The Biden administration has sought to pin the blame on Russian president Vladimir Putin, linking the run-up in commodity prices to the war. A senior White House official on Thursday said supply chain disruptions stemming from China’s Covid-19 lockdowns also maintained upward pressure on inflation in May.Short-dated US government bonds, which are more sensitive to changes in monetary policy, sold off sharply after the report’s release, with the two-year Treasury yield up 0.09 percentage points to 2.9 per cent as investors anticipated the US central bank will need to ramp up its efforts to bring down inflation.The Fed has already committed to moving monetary policy “expeditiously” to a more “neutral” level that no longer stimulates the economy, but further evidence that inflation is becoming more entrenched could compel top officials to lift interest rates even more forcefully than financial markets expect. Policymakers have already signalled that at a minimum, the Fed will deliver a string of half-point rate rises, having delivered the first adjustment of that size since 2000 in May. The Fed is all but guaranteed to implement another increase of half a percentage point at its policy meeting next week, and traders have priced in the federal funds rate rising to roughly 2.9 per cent by the end of the year from its current target range of 0.75 per cent to 1 per cent. Lael Brainard, the vice-chair, recently made clear that the Fed could continue the half-point pace through September and would only consider reverting to more typical quarter-point increments following a “deceleration” in monthly inflation prints.Elevated inflation has become the biggest economic challenge for the Biden administration, whose efforts to engineer one of the fastest labour market recoveries in US history have been overshadowed by the toll that soaring prices have taken on American households.

Treasury secretary Janet Yellen recently admitted she was “wrong” about the extent to which inflation would become a persistent problem. A new biography also alleged she had initially wanted to scale back President Joe Biden’s landmark $1.9tn stimulus package that passed last year.In congressional testimonies this week, Yellen defended the actions undertaken by the White House at a time of extreme economic uncertainty, but acknowledged that inflation is running at an “unacceptable” level. Fighting inflation is the administration’s top priority, she said, calling on Congress to also do more to aid in those efforts. More