Aurelia Butler

The Fed’s current plan for half point increases is “a good benchmark for now,” Bullard said on Yahoo Finance. Large increases are “not my base case … I think we have a good plan in place,” Bullard said. The comments from one of the Fed’s most vocal advocates of faster rate hikes show how tightly U.S. central bankers have coalesced around the plan outlined by Fed Chair Jerome Powell last week to raise rates by half a point at the next two Fed meetings, and take stock along the way of how inflation is behaving and what more might need to be done.Bullard, however, repeated on Wednesday that he feels the Fed will need to keep moving in those half-point increments for the remainder of 2022, pushing the federal funds rate to a range of between 3.25% and 3.5% by the end of the year.That’s higher than the level many other Fed officials have projected so far.But Bullard said data could push the Fed in either direction still.”I think it is more state contingent … We want to take it one meeting at a time. It is possible inflation could moderate a lot,” he said. It is possible the real economy could take twists and turns … We don’t want to be promising today what we will do in December.” More

US stocks resumed their slide on Wednesday after unexpectedly hot “core” inflation data raised expectations for aggressive policy tightening, pushing the tech-heavy Nasdaq Composite down nearly 30 per cent from its record high.Growth stocks that are seen as particularly sensitive to rising rates led the declines, with the Nasdaq falling 3.2 per cent. The blue-chip S&P 500, which had rallied as much as 1.2 per cent earlier in the trading session, ended the day 1.6 per cent lower.Consumer prices in the world’s largest economy rose at an annual rate of 8.3 per cent in April, down from 8.5 per cent in March but remaining at a historically elevated level. The figure surpassed economists’ expectations for a cool-down to 8.1 per cent. The month-on-month change in core inflation — which excludes food and energy prices and is closely watched by economists — also exceeded forecasts at 0.6 per cent. Rising costs of new cars, food, airline fares and housing were the biggest drivers of the increase in consumer prices, the US labour department said. “The report should be of concern for the Fed given price gains in the core segment appear to be spreading,” TD Securities said in a note to clients. As consumer prices have surged, traders expect the Fed to raise interest rates aggressively for the rest of this year, which has placed short-term US government debt under pressure. The yield on the two-year Treasury note, which is particularly sensitive to monetary policy, rose 0.03 percentage points to 2.64 per cent, from below 0.2 per cent a year ago. Yields rise when prices fall.In contrast, the 10-year Treasury yield, which is driven by longer-term economic trends, shed 0.06 percentage points to 2.93 per cent. “Today’s report will strengthen the Fed’s resolve to tighten aggressively at its coming meetings, crystallising expectations of [half percentage point] hikes in June and July,” said Silvia Dall’Angelo, senior economist at Federated Hermes. Futures markets indicate investors expect the Fed’s main interest rate, currently set at between 0.75 per cent and 1 per cent, to reach 2.75 per cent by the end of this year. Investors strengthened their bets on the pace of rate rises after Wednesday’s inflation data, though the expected end-of- year rate remained slightly below the peak hit last week.European stocks and US equity futures had rallied before the inflation report as investors assumed that price rises would show more signs of peaking as higher energy costs, driven by Russia’s invasion of Ukraine, depressed consumer spending. “There was a sense that people were cutting back on spending in order to fill up their gas tanks and heat their homes,” said Brian Nick, chief investment strategist at Nuveen. “That clearly wasn’t the case last month.” Investors and analysts on Wednesday cautioned that even if inflation had now peaked, it could remain elevated for some time, pushing central banks to continue raising borrowing costs. The Fed, which raised its main interest rate by 0.5 percentage points last week and signalled more hikes to come, targets an average inflation rate of 2 per cent over time. “It is not just about inflation peaking, but also the trajectory going forward,” said Aneeka Gupta, research director at exchange traded fund provider WisdomTree. “We believe it is going to be a long, drawn-out process back to levels where central banks are comfortable.”Elsewhere in markets, Europe’s Stoxx 600 share index rose 1.7 per cent. Brent crude, the international oil marker, climbed 4.9 per cent to $107.51 a barrel. More

Chancellor Rishi Sunak is preparing to announce in the summer a major new support package for UK households struggling with soaring energy bills, as he seeks to head off criticism he is not doing enough to tackle the cost of living crisis.Sunak’s colleagues said he is looking to make the announcement in August, around the same time as the regulator Ofgem unveils a new UK energy price cap, which could increase to as much as an average £2,900 a year per household.The revised price cap would take effect in October, but Sunak is under huge pressure to bring forward an announcement on what he intends to do to reassure households that state help will be on hand when energy bills go up.Boris Johnson said on Tuesday that he and Sunak would be saying more about how they would use their “ingenuity and compassion” to tackle the problem and would outline more “in the days to come”.Ministers later clarified this did not mean there would be an immediate emergency Budget, but Sunak is now looking at making a statement in the summer.“Once we have a good sense of where the price cap will go, we will come forward with what we can do to help people,” said one ally of Sunak. “The regulator will say what the increase will be in August.”Sunak is also “leaving open the door” to partly funding a support package through a windfall tax on the UK energy sector, according to his allies, unless oil companies bring forward new investment plans soon.The chancellor was bruised by comments by BP chief executive Bernard Looney that a windfall tax would not affect his company’s investment plans.“If their own CEOs are saying they don’t mind, it makes our lives very easy,” said one ally of the chancellor, adding that Sunak’s preference was to see companies investing more, not taxed more.

Final timing and details of the support package have not been nailed down but Sunak used cuts to council tax bills in February to help families contending with markedly higher electricity and gas bills from April, when the energy price cap was last raised.A one-off repayable £200 discount on energy bills was also included in the £9bn package in February, alongside a rebate of £150 for council taxpayers in bands A to D in England. Sunak said 80 per cent of households would receive £350 in support.Analysts and power suppliers are expecting the energy price cap to increase to an average of between £2,600 and £2,900 a year per household in October given wholesale markets have remained volatile since Russia’s invasion of Ukraine. Ofgem chief executive Jonathan Brearley prepared households for a further increase by telling a conference on Wednesday that “the market remains highly volatile and as a result we do expect further price increases later this year”.The price cap is at an average of £1,971 a year per household, after it increased by 54 per cent in April.Sunak, criticised for his supposedly underpowered response to the cost of living crisis in his Spring Statement, is under pressure to come up with a better package in the summer.Johnson is also working on a package of “non-fiscal” measures to help households. Ideas include the removal of tariffs on certain food imports. More