Aurelia Butler

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Save over 65%$99 for your first yearFT newspaper delivered Monday-Saturday, plus FT Digital Edition delivered to your device Monday-Saturday.What’s included Weekday Print EditionFT WeekendFT Digital EditionGlobal news & analysisExpert opinionSpecial featuresExclusive FT analysis More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Inflation in September fell below target in the UK and the eurozone, and dropped to the lowest since early 2021 in the US, hurray!Yet, another common trend that matters a lot for households went largely unnoticed: food inflation ended its steady decline and ticked up.In the UK, inflation of food and non-alcoholic beverages rose to 1.9 per cent from 1.3 per cent in September, marking the first increase since March 2023, according to official data published this week. Eurozone food inflation for the same period increased 0.1 percentage point to 1.6 per cent, following no change in August and 16 months of almost uninterrupted decline, official data showed on Thursday.And in the US, annual food inflation in September rose to 2.3 per cent per cent from 2.1 per cent in the previous month, the largest increase since August 2022. Some content could not load. Check your internet connection or browser settings.This comes as wholesale food prices stopped declining at the start of the year and started rising again, according to the FAO index. Trends in food wholesale prices lag consumer prices by a few months as items flow through the supply chain, so what’s coming is not encouraging.In September, the FAO Food Price Index rose to 124.4 in September 2024, up 3 per cent from August, which marked the largest month-on-month increase since March 2022. Price quotations for all commodities included in the index strengthened, with the increases ranging from 0.4 per cent for the meat price index to 10.4 per cent for sugar, it explained.“The reasons that food prices are rising again are mainly climate related,” said Tomasz Wieladek, chief European economist at T Rowe Price.Some content could not load. Check your internet connection or browser settings.The FAO goes into more detail, quoting worsening crop prospects in Brazil following prolonged dry weather and fires that damaged sugarcane fields in late August, as the main drivers of the increase in global sugar prices. Concerns over lower-than-expected production in major Southeast Asian producing countries were behind the rise in international palm oil price increases. Excessively wet conditions in Canada and the EU caused wheat harvest delays and a sizeable cut to production, pushing up wheat prices.  For policymakers the rise in food inflation matters as “consumers form their inflation expectations based on food price inflation because this is a repeated transaction they face every week,” said Wieladek. This is in line with a paper published by the Bank of England last week that found “over 60 per cent of households report that their inflation perceptions are heavily influenced by food prices”. Inflation expectations matter for spending behaviour and wage demand. Higher food prices have a disproportionate effect on households because there is little scope to avoid buying groceries, and because what you spend on subsistence comes out of what you can spend on other things.Admittedly, September’s food inflation was small and barely visible in a chart where food inflation dropped from double-digit heights. However, it will add to much higher price levels than three years ago. In the UK, food prices are about one-third higher than at the start of 2021, they are nearly 30 per cent above that level in the eurozone and 23 per cent up in the US.Some content could not load. Check your internet connection or browser settings.A bottle of olive oil in the UK, for example, cost on average £3.50 in early 2021, but now costs £9.20, according to the ONS. These are increases that many people have not experienced before.And now the trend could be up. Claus Vistesen, economist at the consultancy Pantheon Macroeconomics thinks that eurozone food inflation “is now likely rising slightly consistent with a lagged response to surveyed selling price expectations.”“We think food inflation will rise gradually from here on, but slowly.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Bondholders stand to make profits of $14bn on resolutions of sovereign debt crises that broke out from Ukraine to Zambia in recent years, according to calculations by a UK debt campaigner.Restructurings under way or recently concluded in Ghana, Sri Lanka, Suriname, Ukraine and Zambia will provide more than $30bn in debt relief for the countries in the years ahead. They will also deliver sizeable gains to investors over time, if governments avoid further defaults, Debt Justice said.These profits could be worth more than a third of bondholders’ original outlay and are a sign that troubled economies are not being granted sufficient reductions in their borrowing, according to the campaign group.“Debtors, for whatever reason, do not have enough power in negotiations, and are not getting enough relief to avoid restructurings in future,” said Tim Jones, policy director at Debt Justice.The calculations will add to the debate on the success of initiatives in the past year to end a logjam in resolving a spate of sovereign defaults and Ukraine’s war financing in response to Russia’s invasion.In recent months Ghana and Zambia have exited lengthy bond defaults, and Ukraine replaced a wartime payment suspension, after holders of Kyiv’s US dollar debt agreed to cuts in the value of their holdings.Sri Lanka is also close to completing a long-delayed bond restructuring, while Suriname resolved a default last year.These countries have also been doing deals with official creditors and other private lenders, but unlike bondholders the terms have generally not been fully disclosed, making it difficult to assess what returns they will make.To arrive at the $14bn figure, Debt Justice assumed that investors bought half of their bonds when they were originally sold by governments, usually at face value, and half at market prices, which collapsed as defaults loomed and then in some cases took years to be resolved.The profits are compared to the returns investors would have made buying US government debt over the same period, as a safe asset, and reflect both high interest payments on bonds before defaults, and the benefit of buying defaulted debt at low prices, Debt Justice said.Theoretical profits would be as low as $1.9bn if all bonds were bought at face value and none of the upside payments were triggered, and as high as $26bn if all bonds were instead bought at low prices and attracted the maximum possible upside, according to the estimates.“The caveat is that the calculations assume that the restructured debt will be repaid. It’s not that they’ve realised the profit yet. We think there are dangers of countries having to restructure again in the future,” Jones said.The Debt Justice calculations underscore that “bondholders have got substantial upside” from Sri Lanka’s proposed restructuring and Zambia’s deal, said Brad Setser, senior fellow at the Council on Foreign Relations.Several of the recent restructurings outside Ghana contain provisions that will reward bondholders with higher payouts if their economies outperform targets in the years ahead.Triggers for these payments will typically be assessed at the point the countries are due to exit IMF bailouts in the next few years. That risks “debt levels that ironically create very real risks of distress, immediately after the programme periods”, Setser said. While some of the restructurings such as Sri Lanka’s also have downside provisions to reduce payments in the event of future economic trouble, they do not go far enough, he added.Investors and advisers to governments have nevertheless said that these so-called “contingent” payments have been needed in order to bridge deep disagreements over official projections of the post-default path of countries, and get negotiations over the line. More

The People’s Bank of China (PBOC) said in a statement on its website on Friday that it urged participants to boost credit support for the real economy, and maintain reasonable growth in the total amount of money and credit.It also urged solid implementation of interest rate adjustments, as well as two funding schemes created to support the stock market.China’s banking and securities regulators also chaired the meeting, and participants included banks, brokerages and fund companies. More

TOKYO (Reuters) – Japan’s top currency diplomat, Atsushi Mimura, said on Friday that recent currency moves are “somewhat one-sided and rapid,” in a fresh warning against speculative trading as the yen fell past the key 150 line against the dollar. “We as Japanese authorities are closely watching foreign exchange moves, including speculative ones, with a high sense of urgency,” Mimura told reporters.The dollar touched 150 yen for the first time since Aug. 1 after solid U.S. retail sales data reinforced expectations that the Federal Reserve will pursue modest interest rate cuts over the next year-and-a-half as the world’s largest economy remained resilient. More