Aurelia Butler

(Reuters) -A federal-state dispute over U.S. immigration policy heated up on Wednesday, as the White House lambasted Texas’ governor over state inspections that have snarled truck traffic from Mexico, while Texas chartered a bus to carry migrants from the border to Washington.White House press secretary Jen Psaki slammed the enhanced truck inspections ordered by Governor Greg Abbott last week, saying they are disrupting trade and leading to higher prices.The border slowdown comes as U.S. President Joe Biden’s administration is battling rising inflation and challenges to the movement of goods stemming from the COVID-19 pandemic.”Governor Abbott’s unnecessary and redundant inspections of trucks transiting ports of entry between Texas and Mexico are causing significant disruptions to the food and automobile supply chains, delaying manufacturing, impacting jobs, and raising prices for families in Texas and across the country,” Psaki said in a statement on Wednesday morning.Abbott and Samuel Alejandro Garcia Sepulveda, governor of the Mexican state of Nuevo Leon, announced on Wednesday that they had reached an agreement for increased security on the Mexican side of the border to combat illegal immigration.Abbott said the agreement would allow Texas to cease the stepped-up inspections for vehicles coming from Nuevo Leon, but that they would continue at other border crossings unless similar agreements are reached, adding that he expected to meet with more Mexican officials this week.”There are very real and very deadly consequences for Biden’s refusal to secure the border,” Abbott said.Earlier on Wednesday, a bus chartered by the Texas government arrived in Washington, dropping off Colombian, Cuban, Venezuelan and Nicaraguan migrants who had been encountered at the border and released in Texas by federal border officials, Abbott’s office said.Republicans across the country have made opposition to the Democratic president’s immigration policies a major focus in the run-up to Nov. 8 midterm elections where they hope to gain control of Congress and key state governorships.Abbott, a Republican seeking a third term in office, ordered the state’s Department of Public Safety last week to conduct “enhanced safety inspections” of vehicles as they cross from Mexico into Texas in order to uncover smuggling of people and contraband. The inspections were part of a broader effort to deter illegal immigration that included the busing of migrants to Washington and aimed to counter Biden’s “open borders” policies, Abbott said.By midday, the migrants arriving in Washington had dispersed from a dropoff point near the U.S. Capitol, with one local organization saying some Venezuelans had boarded another bus to Florida.An Abbott spokesperson earlier in the week declined to say whether the enhanced inspections had uncovered any smuggling attempts, although Texas authorities took more than 500 vehicles out of service for safety violations such as defective brakes, tires and lighting.A record number of migrants were caught at the U.S.-Mexico border during Biden’s first year in office, fueling Republican attacks and straining government resources.The Biden administration is preparing for even more arrivals in the coming months after U.S. health officials announced they would terminate a pandemic-era order that allowed asylum seekers and other migrants caught at the border to be rapidly expelled to Mexico to limit the spread of COVID-19.Mexican truck drivers blockaded bridges at the U.S. border earlier in the week to protest Abbott’s stepped-up inspections, which some drivers said caused waits that spanned more than half a day.On Wednesday, an international bridge connecting Reynosa, Mexico, with Pharr, Texas, remained blocked by Mexican truckers while other crossings reopened but still experienced long lines due to the inspections by Texas authorities, truckers and Mexican officials told Reuters. More

Inflation is a monetary phenomenon, but it is also much bigger than that. Price rises in the US, UK and EU are breaking decades-old records, and burning into wage packets. High inflation is a grim policy problem at the best of times, and these are not those. In the US this week, consumer price inflation was revealed to have hit 8.5 per cent. “Core” inflation, which excludes the most volatile items, rose by less than expected, but was still up 6.6 per cent on the year. Factory gate prices are up 11.2 per cent on last year.Part of this is a pandemic story. In the US, in particular, demand is outstripping supply as life resumes after Covid restrictions. Habits have changed, so there is greater demand for goods than before the pandemic and less for services. Meanwhile, the pandemic — particularly in China — still weighs on supply. Partly, inflation is also a war story. Food and energy prices have both soared as a result of Russia’s invasion of Ukraine.Market expectations are that US inflation may be near its peak: there were hints of deceleration in the price rises, and more rapid rate rises are now expected as the Fed disengages its support from the economy and moves policy into neutral. President Joe Biden is attempting to reduce fuel prices through a huge release of oil from the US strategic reserve.Closer to the front line of the Ukraine conflict, life is more complex. Eurozone inflation stood at 7.5 per cent in March. In the UK, consumer price inflation hit 7 per cent this week as surging energy prices rippled through the economy. But central banks in Britain and the EU are more likely to find themselves pressing down on demand that is already dropping away.The scale of the conundrum they face will depend, in particular, on the measures taken to help Ukraine — notably, on further sanctions. German economists have warned that a full energy embargo on Russia would knock German growth this year and cause recession next. In their model, inflation stays above 5 per cent throughout. We are in a time of terrible choices.That makes it worth returning to first principles. Avoiding a defeat of Ukraine must be a critical objective, and one that the continent should be willing to pay great costs to achieve. Part of that price may come in the form of higher inflation and slower growth. And the most needy who are being hurt by the rising cost of living should be provided with rapid and effective support. These issues are related. Further recent surges in energy costs, in particular, are a consequence of the war, and those on modest incomes should not be asked to bear them unaided. Voters may be willing to bear some pain, but politicians cannot afford to risk fuelling new gilets jaunes-type movements that want to sue for peace at all costs. The cost of living crisis is a factor in the French electorate’s taste for the far-right Marine Le Pen. This will have ramifications for monetary policy. Shielding people from the price rises could fuel demand that might require higher rate raises than otherwise. There will be a fiscal cost, too. But finance ministries get help from inflation with tax revenues and debt levels: they will have to share it. The economic battle for Ukraine may mean looser fiscal and tighter monetary policy.Governments must maintain popular support for supporting Ukraine by sheltering households from the worst of the economic pain. The war is being fought in the Ukraine, but politicians must tend to the home front as well. More

Good evening,Today’s data showing UK CPI at its highest rate in 30 years and US producer prices rising at record levels are the latest reminder that inflationary pressures around the world show little sign of abating.The higher than expected jump in UK inflation to 7 per cent in March, up from 6.2 per cent the previous month, was driven by surging fuel prices that leapt 9.9 per cent, resulting in an annual rate of increase of 30.7 per cent. The pain felt by consumers was highlighted by an academic study yesterday that showed Britons were now more worried by the cost of living than catching Covid-19.British companies are also feeling the strain. Tesco, the country’s biggest supermarket group, said this morning that its earnings would suffer as it tried to remain competitive in the face of soaring costs and squeezed household budgets. US producer prices rose a more than expected 11.2 per cent in March — the quickest pace since the year-on-year rate was first calculated in 2010 — as the war in Ukraine begins to affect the world’s largest economy, piling pressure on American businesses.The US PPI reading comes hot on the heels of yesterday’s announcement that CPI had hit 8.5 per cent, the fastest rate of increase since 1981, and — as in the UK — adds more pressure on the country’s central bank to take action against rising prices. Although the monthly rise of 1.2 per cent was the fastest since September 2005, there was some better news in that “core” CPI (stripping out volatile items such as food energy) was up just 0.3 per cent, the slowest increase since September.US Federal Reserve official James Bullard told the Financial Times it was a “fantasy” to think the bank could bring down inflation without raising interest rates to the point where they could constrain the economy, as he called for an increase to put the brakes on growth.US president Joe Biden’s latest ploy to ease the squeeze on consumers involves temporarily relaxing restrictions on the amount of ethanol in petrol, which could save motorists 10 cents a gallon, albeit at the risk of causing smog.Concerns are also intensifying elsewhere. New Zealand today raised interest rates by the biggest amount in 22 years. In mainland Europe, Otmar Issing, one of the founding fathers of the euro, criticised the “misguided” response of the European Central Bank, which he said had “lived in a fantasy” and suffered from a “misdiagnosis” of the reasons for the rise in inflation and now risked the prospect of stagflation.The ECB announces its latest policy moves tomorrow.Browse our inflation tracker to compare the latest figures worldwide.Disrupted Times is taking a short Easter break — we’ll be back on Wednesday April 20Latest newsBritish travellers warned to prepare for extensive Easter delaysJersey freezes $7bn worth of assets linked to Roman Abramovich Biden to announce $800mn in new military aid to UkraineFor up-to-the-minute news updates, visit our live blogNeed to know: the economyThe Shanghai lockdown has hit production in Kunshan, one of the world’s largest electronics manufacturing hubs, exacerbating strains on global supply chains. Asia editor Robin Harding says the economic consequences for the rest of the world of locking down China’s largest onshore financial hub and biggest city are huge. The US has ordered non-essential consulate staff to leave.An EU ban on Russian energy would ignite a “sharp recession” in Germany and send output down 2.2 per cent next year with the loss of 400,000 jobs, according to the country’s top economists. Kyiv however is urging Brussels to go ahead with an embargo. German investors are also becoming more pessimistic about their country’s future.Russia said it would it sue if sanctions forced it to default on its bonds but academics and lawyers have dismissed the threat as “payments theatre”. Robert Armstrong in his (award-winning) Unhedged newsletter says sanctions are hurting the country badly. Moscow forecasts economic output will fall 10 per cent this year, according to a former finance minister.Latest for the UK and EuropeUK unemployment fell back to its pre-pandemic level of 3.8 per cent at the start of this year, according to official data, but the employment rate remained flat at 75.5 per cent. Vacancies remain high and the inactivity rate has risen as people left the workforce for family reasons, retirement or sickness.The UK is to become the first country in the world to pay pharma companies a fixed fee for antibiotics to tackle the growing problem of antimicrobial resistance, which kills more than 1mn people a year. The “subscription” model aims to incentivise companies to develop new drugs and stop overprescribing.Ukraine finance minister Sergii Marchenko appealed in an FT interview for immediate financial support for his country, with the gap between spending and revenues expected to hit $7bn a month in April and May. Global latestThe International Energy Agency cut its global oil demand forecast from 99.7mn barrels a day this year to 99.4mn, but it said the market would avoid a “sharp” deficit as emergency reserves and slower demand from China offset lower production from Russia.The war will cut growth in goods trade this year by a third from 4.7 per cent to 3 per cent, according to new World Trade Organization forecasts. It also cut economic growth forecasts from 4.1 per cent to 2.8 per cent, with 3.2 per cent estimated for 2023. WTO chief Ngozi Okonjo-Iweala wrote in the FT that policymakers should fix structural weaknesses in a co-ordinated response to global supply chain problems.Sri Lanka’s economic and currency crisis intensified as the country’s finance ministry suspended payments on its government bonds. It has turned to the IMF to formulate a recovery plan and receive financial assistance. The Lex column warned that a bailout could create a blueprint for similar situations elsewhere. The turmoil is a blow to the Rajapaksa family, which has dominated the country’s politics for years.Need to know: businessStockpiles of some of the world’s most important industrial metals have dropped to critically low levels because of surging power prices and the war in Ukraine. Aluminium, copper, nickel and zinc inventories have plunged by as much as 70 per cent over the past year.BlackRock, the world’s largest money manager, announced better than expected profits of $1.46bn in the first quarter, as inflows from investors held up despite the turmoil in financial markets. However, JPMorgan’s profits have fallen 42 per cent to $8.28bn as dealmaking slowed and the bank set aside $1bn in loan-loss reserves. Here’s what to watch as US earnings season gets under way.Fund managers have been caught out by the rare event of global stocks and bonds falling at the same time in the first quarter. The two key markets underpin global finance and the synchronised decline makes investors attempts to balance risks that much more difficult. Almost three-quarters of large institutional investors were pessimistic about global economic growth, according to a Bank of America survey, the biggest proportion since 1995.Finish telecom giant Nokia has followed rival Ericsson and quit Russia. The two companies, along with Chinese groups Huawei and ZTE, are the dominant players in the Russian radio network equipment market. The former deputy chief of Aeroflot wrote in the FT that the Russian business community should stand up against President Vladimir Putin.As we highlighted in Monday’s Disrupted Times, airlines are having a tough time meeting surging customer demand while losing waves of staff to Covid-19. British Airways is reeling from the impact of the virus on top of IT problems and the cancellation of 1,200 flights so far this year. EasyJet has been one of the worst hit but still hopes to report a narrowing of losses for the six months to the end of March.The outlook is rosier for US carriers. American Airlines, the largest in the US, revised up its revenue outlook for the first quarter, while Delta told the FT it had “never sold more tickets” than in the past five weeks. US airlines are lobbying to make sure the end of mandatory mask wearing on board proceeds as planned next Monday.The coronavirus crisis has brought home the extent to which global pharmaceutical supplies depend on Asia, even for the most basic ingredients. Our colleagues at Nikkei Asia conclude their series on China’s role in the global health supply chain and how it might affect the next pandemic. The World of WorkFlexible working helped many workers with disabilities prosper during the pandemic, but how can we make these improvements permanent? Isabel Berwick talks to a campaigner and an FT staff member about disability inclusion in the latest Working It podcast.Get the latest worldwide picture with our vaccine trackerAnd finally . . . Air quality is becoming an ever more important factor for homebuyers seeking a new property, writes health and science reporter Oliver Barnes. Cleaner air is now on a par with closeness to family and friends and access to public transport as a motivation for moving house. More

Ukraine’s finance minister recently sent out an SOS to the west asking for emergency funding. The Institute of International Finance has had a stab at estimating just how bad the situation is.Its economists stress that there is obviously “an extraordinary level of uncertainty”, with the brutal war still ongoing, but reckon that Ukraine’s gross domestic product will shrink by at least 35 per cent this year, even assuming that the active fighting mostly stays in the country’s east. Government revenues have obviously been shredded. Ukraine’s finance minister Sergii Marchenko told the FT the budget deficit was $2.7bn in March, and expects the gap to expand to $5bn to $7bn a month in April and May. The IIF thinks it could get worse than that (our emphasis below):As a result of the severe drop in economic activity as well as war-related tax cuts and additional expenditures for the military campaign, we expect government revenue to fall by roughly 50%, resulting in a fiscal gap of $3-10bn per month. Thus, the international community’s commitments of $6bn to date will certainly fall short . . . Even under the most optimistic assumption of a $3bn financing gap per month, currently-committed external funding would only last until the end of April.Get your cheque books out, in other words. More

UK inflation, at a 30-year high of 7 per cent, is bad news for consumers. Bad for shops too, reckons the nation’s biggest grocery store. Tesco is guiding for flat or falling retail operating profits this year — from £2.65bn to between £2.4bn and £2.6bn — as the consumer squeeze hits.Tesco, with a 27 per cent share of the UK grocery market, is rightly cautious but mildly disingenuous too. Historically, inflation boosts supermarket profits. Food staples are Giffen goods of sorts — higher prices boost rather than dent spending for these. As the market leader, with a share almost the size of the next two biggest stores, Sainsbury and Asda combined, Tesco has leverage with suppliers. It has learnt from the last crisis. Back then, it protected profit margins and sent customers to discounters.Still, shopping behaviour will change — fewer treats as well as shifts to cheaper own-brands and discounters such as Aldi and Lidl. Tesco faces its own rising bills from suppliers, transport and labour. Higher heating costs impact everything from chicken to cucumbers.It cuts where it can: shifting almost 90,000 containers off gas-guzzling lorries and on to trains and trialling fully electric HGVs. But some inputs are harder to pare back. The “substantial new pay deals” agreed with workers will add £200mn to labour costs. These have climbed £400mn over four years to £6.4bn in fiscal 2021, even after shedding a quarter of the full-time equivalent staff — partly reflecting the sale of its Thai operation.For Tesco, inflation is a political hot potato; minting big profits during a cost of living crisis is not a good look. Campaigners are gaining sway, pointing out the disproportionate impact on poorer households. Even plugging average spends on food, energy and the rest into the Office for National Statistics’ newly launched DIY inflation calculator generates a rate 0.4 percentage points above the current level. Tesco tackles this with discount ranges and price-matching with discounter peer Aldi. Inflation notwithstanding, Tesco brags that some items are cheaper than a decade ago: two litres of milk now costs £1.25 versus £1.58 in 2010.Tesco’s wariness makes sense. But the odds are that inflation causes less pain to shops than shoppers. More