Aurelia Butler

Central banks are raising rates rapidly in the most widespread tightening of monetary policy for more than two decades, according to a Financial Times analysis that lays bare the reversal of their previous historically loose stance. Policymakers around the world have announced more than 60 increases in current key interest rates in the past three months, according to an FT analysis of central banking data — the largest number since at least the start of 2000. The figures illustrate the sudden and geographically widespread reversal of the very accommodative monetary policies adopted since the global financial crisis in 2008 and boosted further during the coronavirus pandemic. Interest rates hovered near unprecedented lows in most advanced economies for the past decade, and in some cases went negative.

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The sudden shift in policy comes as inflation has reached multi-decade highs in many countries, fuelled by soaring energy and food costs since Russia invaded Ukraine in February. Jennifer McKeown, head of global economics service at Capital Economics, a research firm, said: “The world’s central banks have embarked on the most co-ordinated tightening cycle in decades.” Of 20 major central banks around the world, 16 are likely to raise interest rates over the next six months, says McKeown. Tightening is expected to be fastest in the US and UK.Happy Monday. Thanks for reading FirstFT Asia. Here’s the rest of today’s news. — SophiaFive more stories in the news1. China fails to work out a plan to ease its economic malaise After the country’s zero-Covid policy brought its commercial activity to a halt, premier Li Keqiang has urgently warned that China needs to boost growth, reduce unemployment, and stabilise agricultural production. But local officials have little faith that the government is willing or able to help. Meanwhile, industrials profits continue to fall.2. Ukraine forces hold out against Russian assault on key Donbas city Serhiy Haidai, governor of the Luhansk region that makes up half of the Donbas, said yesterday that Ukraine had driven Russian troops back from a highway, allowing Kyiv’s forces to supply the key city of Sievierodonetsk. Sievierodonetsk is the last big city in Luhansk still under Ukrainian control3. Qatar urges the west to engage with the Taliban Qatari foreign minister Sheikh Mohammed bin Abdulrahman al-Thani has warned that a failure to step up engagement with the Taliban would risk Afghanistan falling into deeper chaos, a rise in extremism, and further economic crisis, which has already begun since the US pulled out of the country nine months ago.4. South Korean IPO pipeline dries up on worries about global growth Initial public offerings in South Korea have slowed to a trickle after a record year in 2021. At least 10 Korean companies called off listings this year, citing difficulties in obtaining the valuations they wanted. Concerns about high inflation, slowing global growth and the war in Ukraine have caused investor sentiment to cool off.5. UN envoy ‘unable to assess’ scale of Xinjiang repression Undermining her landmark investigation of China’s crimes against Uyghur Muslims, UN human rights chief Michelle Bachelet said she had been “unable to assess the full scale” of the notorious system of mass internments, forced labour and re-education camps in Xinjiang. US secretary of state Antony Blinken criticised Beijing’s efforts to restrict her visit.

Michelle Bachelet’s efforts to investigate the treatment of Uyghur Muslims in China have been restricted © REUTERS

The day aheadWHO meeting The executive board of the World Health Organization holds its 151st session today in Geneva.Economic outlook The OECD releases its economic analysis and projects for member countries and other major economies today.Memorial Day The US observes Memorial Day today to commemorate military service members who have died. Financial markets are closed, and President Biden will attend an observance at Arlington National Cemetery.African writing The AKO Caine Prize for African Writing shortlist is announced today.What else we’re readingWhy EY’s break-up could radically reshape the Big Four After years of criticism over perceived conflicts of interest between its audit and advisory businesses, EY is weighing the separation of the two. Other professional service firms will reconsider their own structures — and might swoop for EY partners in the carve-up.What is America’s end-game for the war in Ukraine? The Biden administration is now trying to conduct a delicate balancing act between supporting both Ukraine and America’s allies who worry about a long conflict. And while the US has said it will continue supporting the Ukrainian war effort, there’s less clarity about what a strategic defeat for Russia would actually look like. Japan’s horrifying crop of data falsification is also encouraging Toyota, Japan Steel Works, and Mitsubishi Electric are among those that have recently acknowledged years of data falsification. As the search for some cultural explanation intensifies, one commonality between the scandals is that the whistleblowers have been given voice by companies’ ESG commitments.

© Maria Hergueta

Business flights are in trouble in the world of net zero From factoring flights into company bonuses to incorporating nudge theory in internal travel booking systems, companies have started to launch ever more inventive ways to cut back on air travel.Bull market rhymes lead to a turn in the investing cycle Bitcoin and FAAMGs (Facebook, Apple, Amazon, Microsoft and Google) are the latest example of a bull market — something new that history can’t be used to discount. Stock market boom and busts occur and recur, abetted by the willing suspension of disbelief, writes co-founder and co-chair of Oaktree Capital Management Howard Marks.FashionOne way to get a summer print fix without going full frock is to style a pair of patterned trousers. Statement slacks capture fashion’s new maximal mood and offer a bohemian alternative to the summer dress. Plus, they are a breezy, comfortable option that still looks put together.

Silk trousers from Pucci’s La Grotta Azzurra collection, £870, pucci.com, available late summer More

US petrol prices hit fresh records this weekend but, despite the soaring cost, millions of American motorists took to the roads for the unofficial start of summer.Even as the average cost of a gallon of gasoline broke $4.60 for the first time, around 35mn people were expected to take to the roads over the Memorial day weekend, which traditionally marks the start of America’s summer driving season, according to the AAA, a motoring group.That would mark a 5 per cent increase on last year’s numbers as holidaymakers indulge in post-pandemic freedom.“I think it’s all systems go this weekend,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. “There’s an attitude among the public where it’s like: ‘I deserve this’.”But despite the early summer rush, high prices are beginning to take their toll on motorists. While drivers might be willing to splurge on holidays, they have cut back on day-to-day spending for commuting and social travel. “We’re starting to see that term ‘demand destruction’ return,” said Kloza.Petrol prices have climbed rapidly over the past two years as the reopening of the US economy pushed demand to outpace supply. Russia’s invasion of Ukraine in February shook crude markets and accelerated the rise in fuel costs.With the national average sitting at $4.61 a gallon on Saturday, prices are more than 50 per cent higher than a year ago. In California, they have surpassed $6 a gallon. Diesel is even more expensive. That has begun to force the US’s gasoline-guzzling drivers to rethink their car usage. The average American family burns through 90 gallons of petrol a month — far more than any in other major economy — which translates to an outlay of $414 at current prices. Petrol demand in the four weeks to May 20, the most recent data provided by the Energy Information Administration, was 8.8mn barrels a day. That was a 3 per cent slide on the previous week and almost 700,000 barrels below the same period a year ago.“It definitely appears that high prices are causing what I would say is a low level of demand destruction,” said Patrick DeHaan, head of petroleum analysis at pricing app GasBuddy. He suggested demand over the holiday weekend could be 7-13 per cent lower than 2019. Rising fuel costs have fed into rampant economy-wide inflation, which has become a serious problem for President Joe Biden, who has been blamed for the high prices by many voters despite a limited ability to influence them.With midterm elections looming, the Biden administration has taken steps to lower prices, including releasing unprecedented volumes of crude from strategic reserves, lifting restrictions on ethanol blends and leaning on US oil companies and foreign producers to open the taps. Other options have also been floated, including cutting the 18.3 cent federal gasoline tax or waiving summer pollution rules. Bloomberg reported last week that the administration was in talks with US refiners about supporting a reopening of some closed refineries. The White House did not respond to a request for comment.“I do expect him to pull one of these levers at some point,” said Kloza. “They want to be perceived as doing something.” More

Hello and welcome to the working week.Or perhaps not. It has often been said that Christmas comes earlier every year. Well, this week many of us will be getting an early holiday season as a bulge in anniversaries means an uptick in public rest days across the world.If you are reading this in the US, you are already immersed in the long Memorial day weekend with tomorrow’s commemoration of those who have given their life in military service. On other years, the last Monday of May would also be a day off in the UK, linked to the Christian festival of Pentecost, or Whitsun as the Church of England calls it. But this year, the day off has been moved to Thursday and Brits have been handed an extra public holiday on Friday to commemorate Queen Elizabeth’s 70 years as British head of state — perhaps by heading to the cinema.On Thursday, Italians will commemorate the founding of their modern state with fireworks and parades on National Republic day. Then there is the Dragon Boat Festival, the traditional Chinese holiday held on the fifth day of the fifth month of the Chinese calendar — this year that will be this Friday.Whatever you feel about the point of these public holidays, they have an additional poignancy this year given the debate about working hours. The greater flexibility needed to get things done during pandemic lockdowns has led many to question the rigidity of nine-to-five working, five days a week, about whether we need to blend our home and work life better or move to a four-day week — as tech business WANdisco has already done. Could this shortened week be a taste of things to come? I am interested in your views. Email me at [email protected] dataIt is a fairly full week for economic data with both inflation and unemployment data for the eurozone countries, on Tuesday and Wednesday respectively, plus the Federal Reserve’s Beige Book on US economic conditions on Wednesday, and US unemployment data on Friday.CompaniesIt’s a thin week for earnings calls. Again the theme is retail.So-called dollar stores in the US have tended to trade resiliently during economic downturns and that will probably be the message from variety discounter B&M this week.Analysts expect sales and profits for the year to the end of March to be below last year’s record levels as shopping habits normalise and costs rise. But, as my colleague Jonathan Eley notes, the company’s scale and its direct-sourcing operation in Asia will help it keep prices below those of more conventional rivals as incomes come under pressure.These are likely to be the last set of full-year results for chief executive Simon Arora, who together with brother Bobby took B&M from a small chain of tatty shops in north-west England to an estate of almost 700 UK stores and a place in the FTSE 100. He surprised the market in April by announcing plans to retire. Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayEU, consumer and business sentiment surveysGermany, preliminary May consumer price index (CPI) dataItaly, April producer price index (PPI) dataSpain, May inflation figuresUK, official data on youth unemployment by socio-economic background 2014-21 plus analysis tracking the lowest-cost grocery itemsTuesdayCanada, March GDP dataEU, May flash eurozone inflation figuresFrance, flash May CPI figures plus final April PPI data and Q1 GDP figuresGermany, May unemployment dataIndia, Q1 GDP figuresItaly, preliminary May CPI data, March unemployment figures and final Q1 GDP dataJapan, April unemployment rate, retail spending figures and flash industrial production dataRussia, central bank publishes financial stability reviewSwitzerland, Q1 GDP figuresUK, British Retail Consortium monthly economic briefing plus official quarterly economic activity measures for England, Wales, Scotland and Northern Ireland and the nine English regionsUS, monthly consumer confidence figuresResults: B&M FY, HP Q2, Pennon Group FYWednesdayAlphabet AGMCanada, Bank of Canada interest rate announcementChina, Eurozone, France, Germany, Italy, UK, US: S&P/Caixan manufacturing purchasing managers’ index (PMI) dataEU, April unemployment figuresGermany, April retail trade figuresUK, Nationwide Building Society’s May house price indexUS, Federal Reserve issues Beige Book of economic conditionsResults: Dr Martens FYThursdayEU, April PPI figuresUS, April factory orders dataResults: Hormel Food Q2, Lululemon Athletica Q1FridayEU, April retail trade dataFrance, April industrial production index figuresGermany, April trade balance dataEurozone, France, Germany, Japan, US: S&P Global services sector PMI dataUK, deadline set by the Bank of England for UK banks to present crypto plansUS, May unemployment figuresWorld eventsFinally, here is a rundown of other events and milestones this week. MondaySwitzerland, the executive board of the World Health Organization holds its 151st session in GenevaUS, Memorial dayTuesdayEU, the term of the European Council president Charles Michel endsThe World Trade Organization’s dispute settlement body holds its monthly meetingUK, deadline for home secretary Priti Patel to decide on the extradition to the US of WikiLeaks founder Julian Assange.WednesdayThe first day of meteorological summer in the northern hemisphereAlbania assumes the revolving presidency of the UN Security CouncilChina, Shanghai moves into next phase of its lockdown-lifting programmeDenmark, country holds a referendum on joining the EU’s defence pact, increasing military spending and weaning itself off Russian gasEuropean Central Bank chief economist Philip Lane speaks at the CEPR Paris Symposium hosted by Sciences Po in ParisSouth Korea, local electionsUK, Scotland play Ukraine in a Fifa World Cup play-off football match postponed owing to Russia’s invasion of its neighbourUS removes Trump-era tariffs of 25 per cent on British steel and aluminium exports, replacing them with quotas. In return, the UK will suspend extra taxes it had put on US products, such as bourbon and Levi’s jeans.ThursdayItaly, Festa della Repubblica commemorating the referendum to set the country’s form of government after the second world war.UK, the Trooping of the Colour military parade to celebrate the Queen’s official 96th birthdayFridayChina, Hong Kong, Taiwan: annual dragon boat racing festivalsUK, the 73rd Aldeburgh classical music and opera festival, considered part of “the Season” of social events, begins plus St Paul’s Cathedral in London hosts a service of thanksgiving for the Queen’s Platinum JubileeSaturdayJewish festival of Shavuot, or Feast of Weeks, begins this eveningChina, 33rd anniversary of the Tiananmen Square events in BeijingFrance, women’s final of the French Open tennis tournamentIran, national holiday commemorating the anniversary of the death of former Iranian leader Ayatollah KhomeiniUkraine, today marks 100 days since Russia’s invasion startedSundayPentecost celebrated by western churches, commemorating the descent of the Holy Spirit on the disciples of Jesus after his ascension. Whit Sunday in the UK.France, men’s final of the French Open tennis tournamentUK, the Epsom Derby, British flat racing’s showpiece event, will be run at the eponymous Surrey racetrack, plus the culmination of four days of Jubilee celebrations that include local street parties, a star-studded pageant along London’s Mall and the Platinum Party at the Palace, a concert outside the Queen’s official residence More

Central banks are raising rates rapidly in the most widespread tightening of monetary policy for more than two decades, according to a Financial Times analysis that lays bare the reversal of their previous historically loose stance. Policymakers around the world have announced more than 60 increases in current key interest rates in the past three months, according to an FT analysis of central banking data — the largest number since at least the start of 2000. The figures illustrate the sudden and geographically widespread reversal of the very accommodative monetary policies adopted since the global financial crisis in 2008 and boosted further during the coronavirus pandemic. Interest rates hovered near unprecedented lows in most advanced economies for the past decade, and in some cases went negative.The sudden shift in policy comes as inflation has reached multi-decade highs in many countries, fuelled by soaring energy and food costs since Russia invaded Ukraine in February.Jennifer McKeown, head of global economics service at Capital Economics, a research firm, said: “The world’s central banks have embarked on the most co-ordinated tightening cycle in decades.” 

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Among the 55 key policy rates that have recently increased are those of the Federal Reserve and the Bank of England, which have both called time on decades of ultra-loose monetary policy and responded to surging prices with rate rises at successive meetings. Christian Keller, economist at Barclays, said: “The tightening cycle is truly a global phenomenon.”In early May the Fed raised its benchmark policy rate by 50 basis points to a range of 0.75 per cent to 1 per cent, the largest increase since 2000. The Bank of England has raised rates at the past four meetings, with May’s increase taking the main rate to 1 per cent. The European Central Bank looks set to raise borrowing costs for the first time since 2011 in July and end its eight-year experiment with negative rates in September. The Canadian, Australian, Polish and Indian central banks are all expected to raise rates in the coming weeks. Despite this, rates are still low by historical standards and economists warned that the recent increases are just the beginning of a global tightening cycle.

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McKeown said that of 20 major central banks around the world, 16 are likely to raise interest rates over the next six months. Tightening is expected to be fastest in the US and UK. Markets expect an increase in policy rates by at least 100 basis points by the end of this year or early next year in the eurozone, Canada, Australia and New Zealand. Keller said the widespread trend made it more likely policymakers would consider more substantial moves: “Announcing unexpectedly larger or earlier policy steps feels easier if everyone else is doing them.”Emerging markets in Latin America embarked on tightening cycles last year, as their economies were damaged by the pandemic. Brazil has raised rates 10 times in just over one year to 12.75 per cent, up from only 2 per cent in March last year. Mexico, Peru, Colombia and Chile have also raised borrowing costs.Silvia Dall’Angelo, economist at the investment management company Federated Hermes, said central banks in emerging markets “have been more reactive to the appearance of elevated inflation”. In Africa, Ghana, Egypt and South Africa have all increased their rates.

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While inflation has been lower in East Asia, the Bank of Korea last Thursday raised its benchmark rate for the second consecutive month, and Bank Negara Malaysia surprised markets with a 25 basis point rise earlier this month.One major economy bucking the trend is China, where mounting economic damage from widespread virus restrictions and troubles in the property sector prompted officials to cut the one-year loan prime rate by 10 basis points from 3.8 per cent to 3.7 per cent. Private lenders have also lowered their mortgage rates. The Bank of Japan has maintained its pledge to keep yields at zero, including by expanding its balance sheet if necessary. The Bank of Russia, which aggressively raised rates last year and at the start of its invasion of Ukraine, has cut them three times in recent months, reflecting the stabilisation of the rouble. More

Egypt had been increasing its borrowing to plug current account and budget deficits even before Russia’s invasion of Ukraine in February and the first U.S. Federal Reserve rate hike in March, analysts say.Fed hikes have put pressure on Egypt to raise its own interest rates, pushing borrowing costs higher, and the Ukrainian crisis has increased the cost of imported commodities and cut into tourism revenue.Egypt has raised its benchmark overnight interest rates by three percentage points since March.Egypt’s total external debt rose to $145.5 billion at the end of December from $137.4 billion as of the end of September, the central bank data showed.Foreign debt was equivalent to 33.2% of gross domestic product at the end of December, up from 32.6% at the end of September, the data showed. More

UK employers who commit to pay the voluntary “living wage” are being urged to bring forward a bumper pay rise to match soaring prices and utility bills, as inflation is expected to reach double digits in the autumn.The Living Wage Foundation, a charity that campaigns for fair pay, said on Sunday it would bring forward its announcement of the 2022-23 living wage rate from November to September because prices were rising at a rate “unprecedented” in the campaign’s 20-year history. It will encourage employers to pay the new rate as soon as possible.“Rising prices are eating away at all of us, but nobody is feeling the pinch more than the 4.8mn low paid workers across the UK,” said Katherine Chapman, the foundation’s director. “It’s never been more important that employers who can afford it protect those who will be most affected by price rises.”More than 10,000 employers, including large companies such as Google and more than half the FTSE 100, are now accredited with the foundation, meaning they have committed to pay all employees and contractors in their supply chain at an hourly rate that is higher than the statutory minimum, and recalculated each year to reflect everyday living costs.The announcement could boost pay for a significant proportion of the UK’s workforce — helping to ease the squeeze on low income households, but adding to the difficulties the Bank of England faces as it battles to bring inflation under control. The BoE has made it clear it thinks wages are already rising at an unsustainable pace­­; and now also has to determine whether the £15bn of government support for households announced last week, which is targeted on the most vulnerable, will add to inflationary pressures.Research by Cardiff Business School has found that one in 13 employees now works for a living wage employer, with 300,000 benefiting directly. The living wage is also often used as a benchmark by large employers even if they do not seek formal accreditation.The rate currently stands as £9.90 an hour across the UK, with a London rate of £11.05 to reflect the higher costs of living in the capital. The statutory minimum, which is set by government with advice from the independent Low Pay Commission, rose by 6.6 per cent to £9.50 in April.

The BoE said this month it expected inflation to reach 10 per cent in the autumn, but the new living wage rate will not necessarily match consumer price inflation, because it is based on a basket of goods and services chosen to represent a “minimum income standard”, and also factors in changes in the tax and benefits system. Two-thirds of the £15bn support announced by chancellor Rishi Sunak last week will flow to the 8mn households in receipt of benefits.The worry for the BoE is that companies say they are currently finding it easier than normal to pass on higher costs to their consumers — so that higher wages and government help for households could simply drive up prices again, leaving people no better off.Reflecting ministers’ frustration with this dynamic, the Sunday Telegraph reported that Prime Minister Boris Johnson had ordered officials to draw up proposals to name and shame petrol stations that failed to pass on the 5p cut in fuel duty fully to customers. More