Aurelia Butler

Jay Powell assured financial markets and the American public a little more than two weeks ago that the Federal Reserve would be “humble and nimble” as it trained its sights on fighting inflation.But the chair of the US central bank is already facing doubts about whether he is adapting quickly enough and communicating effectively regarding the Fed’s response to stubbornly elevated prices.After another higher-than-expected consumer price index reading last Thursday, investors started betting on an earlier and more aggressive run of interest rate increases than signalled by the Fed so far.Some traders and economists even started speculating that the central bank might be forced to act on an emergency basis to introduce the first interest rate rise before its next scheduled meeting in mid-March.The Fed is highly unlikely to take such a step, which is reserved for urgent course corrections in extreme circumstances, but even the discussion of it among some followers of the central bank and market participants has highlighted the pressure on Powell.“I think Powell has to regain the reins of monetary policy and clarify what his position is in terms of tightening,” said Gregory Daco, chief economist at EY-Parthenon.Ellen Zentner, chief US economist at Morgan Stanley, wrote in a note to clients on Friday: “The Fed’s job has gotten harder, not easier, as it approaches lift-off.”At the end of the last Federal Open Market Committee meeting in January, Powell stressed that the central bank would rely on incoming data to judge how forcefully it would move to raise rates.He has already shifted to a more hawkish position: whereas in the tightening cycle that followed the financial crisis the Fed moved very gradually to raise rates, Powell has made clear that he is open to moving faster if necessary. This could potentially mean interest rate increases of 50 basis points rather than 25bp in the first part of this year.But while some particularly hawkish members of the FOMC such as James Bullard, president of the Saint Louis Fed, are inclined to go bigger and earlier, there is not a clear consensus across the Fed to set policy along those lines.Mary Daly, president of the San Francisco Fed, struck a more cautious note in an interview with CBS on Sunday. “The most important thing is to be measured in our pace and, importantly, data-dependent,” Daly said. The most recent data — including the latest CPI report and a strong jobs report, which showed the labour market recovery withstanding the hit from the Omicron coronavirus variant — have bolstered the case for more aggressive tightening, but probably only on the margins.Between now and the two-day meeting starting on March 15, the economic picture, and the potential case for steeper tightening, might become more apparent with the release of one additional monthly jobs report and an additional CPI reading. Meanwhile, on the international front, Fed officials will be weighing the effect of a possible armed conflict in Ukraine, if Russia decides to launch an invasion of its neighbour.

At the heart of Powell’s calculations, and those of the rest of Fed officials, will be the best route to stamp out inflation in a way that does not jeopardise the recovery. To some economists and Fed-watchers, Powell and the central bank are still playing catch-up on inflation and need to cool the economy rapidly in order to prevent more dramatic interventions in the future.“Once inflation becomes entrenched at a high level, it is difficult if not impossible to bring [it] back to target without pushing rates above neutral and setting the stage for a recession,” said Tim Duy, chief US economist at SGH Macro Advisors and a professor at the University of Oregon.But other economists warn that if the Fed steps in with too much tightening early on, it risks inflicting unnecessary damage to the economy, particularly because fiscal support has faded and forecasters are generally expecting inflation to ease over the course of the year.“It’s extremely hard to slow an economy without excessively slamming the brakes, and doing too much — and risking a slowdown that was not initially desired,” said Daco at EY-Parthenon. One of the biggest sources of policy uncertainty and market volatility around the Fed’s intentions is that Powell and the central bank’s top brass have not spoken publicly since the press conference after the last FOMC meeting.Nor are there any plans to do so early this week: the most weighty comments may come from John Williams, president of the New York Fed, but he is not due to speak until Friday.Powell himself is still awaiting Senate confirmation for his second term as chair, and is technically leading the Fed on a “pro tempore” basis. He is likely to testify before Congress at some point in the coming weeks, but nothing is on the calendar.For now, Powell’s decision to keep investors guessing about how he views the Fed’s tightening route has seemed to have left both sides of the inflation debate unhappy. Economists championing a robust intervention say he is still too vague and hesitant about his commitment to curtailing price rises — while those worried that the Fed might overreact say the silence from top officials implies consent for the market pricing of aggressive action.But for Powell and many Fed officials, keeping their options open seems like the preferred stance. “I see risks on both sides. If we act too aggressively, then we could actually add to American’s uncertainty,” said Daly. “If we act too slowly, we have accommodation that is too much for the economy.” More

Big, bulky and heavy. Furniture has been one of the biggest casualties of the global shipping and supply chain crisis as costs to transport a sofa or table are much higher than a pocket-sized iPhone or a pair of trainers. In some instances, container costs for sofas, tables and chairs have risen as much as 1,200 per cent since the start of the pandemic, forcing furniture retailers to raise prices. “If you think about the size of an iPhone and how many of those you could fit in a container and you think of the size of our things, the cost per product really does shoot up,” said Steve Carson, chief executive of UK-based sofa retailer ScS.His company has paid as much as $20,000 per container to ship sofas from Asia to the UK during the pandemic compared with $1,500 before.It means companies largely face an unenviable choice — absorb the extra costs and take a hit to profit margins or increase prices, which could weaken demand for their products.

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So far, data shows the latter is happening with the price of home furniture in the UK rising 12.5 per cent in December on an annual basis, according to the Office for National Statistics. The main problem for European and US retailers has been their reliance on China, which manufactures everything from cheap sofas and garden tables to flat-pack items made from chipboard. In the UK, furniture imports from China grew from $50mn in 1993 to $4.3bn in 2020, according to UN trade data.The rocketing transport costs have prompted some European and US retailers to move some of their manufacturing operations closer to home and their customers, known as “nearshoring” or “reshoring”. Sunderland-based ScS has increased its UK manufacturing from 50 per cent to more than 60 per cent of production in the past year.

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“We’ve manufactured more from the UK because of the supply chain issues, the cost it drags in and because the lead times have been extended,” Carson said. “We’ll certainly continue looking at what more production we can move closer to home in the UK or Europe.”UK-based furniture retailer DFS, which makes 40 per cent of its sofas in Britain, is also increasing the amount of automation in its domestic factories, citing benefits of higher quality, greater control over the supply chain and lower lead times.Other European retailers, hit by long delivery times from Asia, have relocated production to countries nearer home such as Poland, Lithuania and Latvia, which have advantages because of the low cost of labour and access to raw materials such as wood.“If you’re looking at nearshoring of wood products, then you’re looking at countries with a lot of forests,” said Aidan Conaty, a furniture sourcing agent. Sweden’s Ikea, the world’s biggest furniture retailer, sources many of its goods from Poland, where a fifth of its products are made, and other countries nearby.However, even Ikea has been forced to plug gaps in the availability of some of products by using trains and chartering ships from China. Increasing geopolitical tensions because of the dispute between Russia and Ukraine has also made eastern Europe and the Baltics less appealing. In addition, in Poland there are concerns over product quality, said Conaty.

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Denmark’s giant retail chain Jysk uses large distribution centres to stock goods close to its European customers, although it still maintains half of its production in China. Peter Andsager, executive vice-president of purchasing at Jysk, said: “Our model is stronger in a volatile market thanks to our big distribution centres. We have something to absorb difficulties.”UK-listed sofa retailer Made.com, hit by Vietnamese factory closures in last summer’s lockdowns, is another group using its domestic warehouses to tackle long lead times from orders to delivery.The company, which makes 75 per cent of its products outside of Europe, is stocking up extra sofas in advance of orders to process deliveries within four weeks, rather than the six-to-seven week wait before the pandemic.Reliance on warehousing also makes sense as shortages of skilled workers in areas such as upholstery in countries such as the UK can undermine attempts to move operations closer to home. Already an estimated 50,000 UK jobs need filling against the 360,000 employed in the industry, according to Jonathan Hindle, chair of the British Furniture Confederation.Other pressures include a reliance on imported materials, which can lead to supply problems, added Hindle. “We are in a very inflationary environment, with price increases across the board on steel, timber, fabric, particle board and foam,” he said.However, the nearshoring trend has a long way to go, if it is to reduce its reliance on China, which enjoyed a 30 per cent surge in global furniture exports last year, according to Centre for Industrial Studies, a consultancy.Sofa retailer Made.com was hit by Vietnamese factory closures © Chris Ratcliffe/BloombergMindaugas Morkunas, a former Ikea employee and head of sales in eastern Europe and the Commonwealth of Independent States at Henkel, the German chemicals group that supplies adhesive to furniture makers, fears the £500bn-plus industry is reaching a “tipping point” with rising prices at companies such as Ikea a potential threat to customer demand.The Swedish group raised prices 9 per cent on average globally at the end of last year as it passed on some of its higher transport costs to the consumer.“The challenge is how much more the customer can pay for furniture,” said Morkunas. More price increases could lead to less investment, financial losses and bankrupt smaller producers, he warned. More

Olaf Scholz, German chancellor, is preparing to launch a fresh attempt to deter Vladimir Putin from further invading Ukraine, as US officials warned Russia was on the brink of launching a major attack on its western neighbour. His preparations came as western nations continued to withdraw diplomatic and military personnel from Ukraine and some airlines cancelled flights to the country. Some European countries are preparing to receive a flood of refugees in the event of military action. Scholz will travel to Kyiv today before arriving in Moscow on Tuesday. The German leader is expected to urge Putin to de-escalate the situation on the Ukraine border, a senior government official said. He would also convey “how grave the consequences of an attack would be” in terms of sanctions on Russia, and stress “that one should not underestimate the unity of the EU, US and UK”. Scholz’s aides say he has not given up hope that diplomacy can avert a war, although they are playing down expectations of a breakthrough. “I don’t assume that we’ll come out of this with some kind of concrete result,” said the official. But he insisted that “now is not the time for resignation”.Sign up to receive Valentina Pop’s Europe Express newsletter for the latest news driving the European agenda.Further reading on the Ukraine-Russia conflict: Energy: Brussels regulators have halted an antitrust probe into QatarEnergy amid concerns that gas supplies from Russia to Europe could be disrupted if the Kremlin decides to invade Ukraine.Cyber security: The Kyiv government and independent experts expect hostile cyber activity to increase in an effort to destabilise the country before or during any attack.Explainer: How have relations soured since the fall of the Soviet Union? FT’s Polina Ivanova and Roman Olearchyk break down what you need to know. Five more stories in the news1. Investors rush to US oil and gas bonds Investors are loading up on the debt of US oil and gas companies, lured by their ability to generate cash again as energy prices soar. Funds now hold overweight positions in high-yield energy bonds compared with a benchmark index, according to Bank of America Global Research.2. Dubai ruler steps in over retail empire’s inheritance dispute Sheikh Mohammed bin Rashid al-Maktoum has appointed a judicial committee to resolve a family dispute among the heirs of the late Majid Al Futtaim, founder of one of the emirate’s largest private companies.3. Widespread global commodity crunch Stockpiles of some of the global economy’s most important commodities are at historically low levels, as booming demand and supply shortages threaten to fuel inflationary pressures around the world.4. SoftBank’s Arm IPO plan hit by legal battle SoftBank’s planned listing of the UK chip designer is being jeopardised by a battle at its renegade China unit following the failed $66bn sale to Nvidia. The head of the joint venture, Allen Wu, has launched a third legal case against Arm China.5. Boris Johnson seeks to forge closer economic ties with China British officials said the prime minister has authorised a restart of the annual UK-China Joint Economic and Trade Committee, which has not met for four years amid increasing tensions between the two sides. The news angered some Conservative MPs.Coronavirus digestThe pandemic has forced the Games to be held within a carefully managed “bubble”. But there is a palpable sense of pride as Chinese athletes exceed expectations and Beijing’s genius for managing big events is put on display.Canadian police have made progress clearing a week-long blockade by anti-lockdown demonstrators at a crucial border crossing with the US, as large trucks left the area peacefully and authorities arrested holdouts.As employees complain about burnout and grapple with navigating hybrid work, some employers are trying to cut back on meeting bloat.Beijing will help “formulate and implement” epidemic-control policies to contain Hong Kong’s largest coronavirus outbreak yet, China’s State Council said.The flurry of announcements from Europe and North America this week crystallised hopes that the worst of the Omicron variant wave has passed. Is a return to normal life within grasp?

Anti-vaccine protesters block a roadway at the Ambassador Bridge, a critical crossing between the US and Canada that typically carries about $300mn in goods a day © Geoff Robins/AFP/Getty Images

The day aheadUS Super Bowl The Los Angeles Rams and Cincinnati Bengals will kick off in the National Football League’s Super Bowl at 6:30pm ET/7:30am HKT. Digital currency platforms are set to join the typical line-up of beer and car advertisements during the biggest game in American football.Kamila Valieva hearing The Court of Arbitration for Sport is set to hold a hearing for Russia’s teenage Olympic figure skating prodigy, who tested positive for the banned heart drug trimetazidine prior to the Games. (CNN, FT) India consumer price index figures January CPI figures due today will shed light on inflation. Rising prices are a growing concern, although governor Shaktikanta Das last week projected retail inflation for the coming year at 4.5 per cent, within the central bank’s target range.Japan GDP data Economists expect the world’s third-biggest economy to have rebounded in the fourth quarter when figures are released today, according to a Reuters poll. (Reuters) What else we’re reading Tales from the Winter Olympics bubble The gate that seals off the FT’s Olympic hotel from the rest of Beijing is padlocked not once but twice. The simple aim of the “closed loop” system: to stop Covid-19 spreading from the rest of the world — through athletes and journalists — into the real China. Shanghai correspondent Tom Hale reports on an extraordinary week inside the Beijing Olympic bubble.

The Beijing Winter Olympics is the culmination of the most awesome anti-pandemic machine ever assembled

FT Global MBA Ranking 2022 High salaries for American MBA graduates helped US business schools to the top places in the FT’s 2022 ranking after a year that brought strong demand for the degree amid the disruption of the pandemic. See the full ranking here.Lithuania tests the EU’s resolve on Chinese economic coercion Beijing is targeting the Baltic nation after it allowed Taiwan to open a de facto embassy. For many policymakers in Europe, Asia and the US, the tactics that China is deploying in the dispute with Lithuania mark a watershed moment for the global economy.New York crypto couple implicated in ‘heist of the century’ In 2020, Heather Morgan wrote a column for Forbes that was headlined, “Experts Share Tips To Protect Your Business From Cybercriminals”. Now US authorities are alleging Morgan, who has called herself the “Crocodile of Wall Street”, was more of an expert than she let on.Nixon in China: are there lessons for today’s leaders? Jane Perlez, a foreign correspondent for the New York Times, beat Richard Nixon to China by five years. She charts the tale of a historic rapprochement — and its unravelling.House & home“I am looking for bedside tables for my new home. Any ideas?” asks a reader. Designer and FT columnist Luke Edward Hall shares his tips on how to style this overlooked essential item.

The elegant London Plane Bedside designed by Beata Heuman © London Plane Bedside designed by Beata Heuman More

Hello and welcome to the working week.It is a bold commentator that tries to predict the conclusion of the diplomatic game of chess that is the Ukraine-Russia border crisis. But the next seven days will produce some significant moves, if not an attempt at checkmate.Perhaps the strangest event of the week will be on Thursday, when Russia, as current head of the UN Security Council, is due to chair a discussion at the body’s global headquarters in New York about the Ukraine crisis.But before then we have the new German chancellor Olaf Scholz travelling to Moscow and Kyiv to try to ease the tension. He follows in the footsteps of France’s Emmanuel Macron and UK prime minister Boris Johnson — and the stakes are high for all European economies — but Scholz’s meetings have a particular significance given Germany’s need for a new Ostpolitik, or eastern policy, as Timothy Garton Ash explained in his FT opinion piece this week.On Wednesday, attention will switch to Nato, where defence chiefs from the member nations are gathering in Brussels. It’s then back to Germany on Friday as the Munich Security Conference begins. Speakers include Kamala Harris, US vice-president. She is expected to use her trip to meet US allies and partners to deter Russian aggression. It will therefore be a test of her diplomatic skills.But perhaps this week will not be the catalyst for action. Mindy Kotler, a director of Asia Policy Point, and a loyal Week Ahead subscriber, got in touch — at [email protected] — to say that next week features Defender of the Fatherland Day (Soviet Army Day), a national holiday in Russia, noting that it “looks like a good day for an invasion.” Hmm. Perhaps, Mindy.Economic dataThe story of 2022, inflation, will be back with another instalment this week as India, China, Japan, the US, the UK and Canada all report data in one form or another — consumer price index or producer price index figures. Employment data are also due from the UK and the EU. Elsewhere, Japan updates us on its quarterly GDP plus the Fed and Reserve Bank of Australia publish their policy meeting minutes.CompaniesFood is a theme for this week’s corporate earnings, with analyst calls for the heavyweights of supermarket retailing on either side of the Atlantic — Carrefour and Walmart — as well as consumer goods companies. Investors in the former will be looking for signs of progress in chief executive Alexandre Bompard’s turnround strategy. Expectations are higher for Walmart, the world’s largest bricks-and-mortar retailer, which has already raised guidance for the full-year earnings it will report on Thursday. However, both companies are under pressure from the global forces of supply chain snarl-ups and rising inflation.Nestlé has been one of the market’s favourite consumer goods companies under chief executive Mark Schneider. He has shifted its portfolio into fast-growing areas such as plant-based foods, meal kits and pet food. But its 2021 figures, due on Thursday, will reflect a tough comparison with a year earlier, when coronavirus lockdowns boosted sales of items such as coffee. Investors will also be scrutinising how the world’s largest food company expects to deal with rampant cost inflation that has cut into rivals’ margins.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayIndia, January consumer price index (CPI) figuresJapan, Q4 GDP dataUK, Office for National Statistics report into homeworking and spending during the pandemicResults: Michelin FY, Raizen Q3, Toshiba Q3TuesdayEU, Q4 GDP and employment data plus December goods trade figuresGermany, ZEW economic sentiment surveyHungary, Poland: Q4 GDPIndia, trade dataJapan, December industrial production figuresUK, employment data plus quarterly productivity estimateUS, January producer price index (PPI) figuresResults: Airbnb Q4, BHP Billiton H1, Randstad Q4, ViacomCBS Q4WednesdayCanada, China, UK: January CPI figuresEU, industrial production dataJapan, January trade balance figuresUK, December house price dataUS, Federal Open Market Committee releases minutes of its January meeting plus retail sales and industrial production dataResults: Barrick Gold Q4, Carrefour FY, Cisco Systems Q2, Heineken FY, Kraft Heinz Q4, Nvidia Q4, Schindler FY, Standard Chartered FYThursdayEU, European Central Bank monthly economic bulletinItaly, December trade balance figuresJapan, monthly inflation dataUS, residential construction figuresResults: Air France-KLM Q4, Airbus FY, AutoStore Q4, Commerzbank FY, Kering FY, Moneysupermarket.com FY, Nestlé FY, Reckitt Benckiser FY, Repsol Q4, Walmart FYFridayCanada, December retail trade figuresEU, consumer confidence dataFrance, Q4 employment figures plus January CPI dataUK, January retail sales figuresResults: Allianz FY, EDF FY, Eni FY, John Deere Q1, NatWest FY, Norwegian Air Q4, Renault Q4, Segro FY World eventsFinally, here is a rundown of other events and milestones this week. MondayBrazil’s president Jair Bolsonaro to visit RussiaGerman chancellor, Olaf Scholz, to visit Ukraine in an effort to ease tensions over the build-up of Russian forces on the border. He visits Moscow on Tuesday.Valentine’s DayTuesdayEightieth anniversary of Singapore falling to Japan in the second world warChinese Lantern Festival marks end of the Lunar New Year celebrationsUK, anniversary of Decimal Day in 1971 when British currency finally moved to a system based on units of 10WednesdayNato defence ministers gather for a meeting in BrusselsNorth Koreans mark the birthday of the late leader Kim Jong-ilThursdayRussia, as the current head of the UN Security Council, plans to hold a meeting on Ukraine at UN headquarters in New YorkFridayGermany, 58th Munich Security Conference begins, with attendees due to include US vice-president Kamala Harris and German chancellor Olaf ScholzLondon Fashion Week beginsUK, latest deadline for the government to agree a funding deal for Transport for London following the pandemic hit to the Tube operator’s financesUS, self-imposed deadline for Congress to pass legislation to avoid a partial federal government shutdownSaturday80th anniversary of the Australian city of Darwin being attacked during two air raids by Japanese aircraftSundayChina, closing ceremony for the Beijing 2022 Winter Olympics More