Economy

NEW YORK (Reuters) – Federal Reserve Bank of Dallas President Lorie Logan said Thursday that there was a case for a rate rise at the June policy meeting, in comments that affirmed her view that more rate increases will be needed to cool off a still strong economy. “It would have been entirely appropriate to raise the federal funds target range at the (Federal Open Market Committee)’s June meeting, consistent with the data we had seen in recent months and the Fed’s dual-mandate goals,” Logan said. But noting “a challenging and uncertain environment,” Logan said “it can make sense to skip a meeting and move more gradually.”Logan noted that forecasts released at the June FOMC meeting showed an expectation of more increases, and said “it is important for the FOMC to follow through on the signal we sent in June,” adding “two-thirds of FOMC participants projected at least two more rate increases this year.” “I remain very concerned about whether inflation will return to target in a sustainable and timely way,” Logan said, adding “the continuing outlook for above-target inflation and a stronger-than-expected labor market calls for more-restrictive monetary policy,” the policymaker said. Logan’s comments came from the text of a speech prepared for delivery before a conference at Columbia University. She is a voting member of the rate-setting Federal Open Market Committee this year. Logan spoke a day after the release of minutes from the central bank’s June meeting, which offered fresh details on the Fed’s decision to hold rates steady at its policy meeting last month, pausing what had been an aggressive campaign aimed at lowering high levels of inflation. The meeting minutes showed almost all central bankers favored holding the overnight target rate fixed at between 5% and 5.25% in a bid to see how the cumulative impact of past rate increase were feeding through the economy. Officials were still worried about inflation and flagged a still strong job market, while a minority of policymakers expressed interest in raising rates at the June meeting. Forecasts from the June FOMC pointed to the possibility of a half percentage point more in rate hikes later this year and Fed officials like central bank chairman Jerome Powell have noted in recent comments the very real prospect that the tightening campaign is not done. Speaking on Wednesday, New York Fed leader John Williams also said it’s likely the Fed will have to raise rates again but he did not say if he favored a hike at the July FOMC meeting. In her speech, Logan noted that the economy, as shown by the job market and inflation, was stronger than expected in the first half of the year and added, “while labor market indicators have eased, the overall pace of rebalancing remains slower than previously expected.” Logan also cast doubt on the idea that there’s some wave of past policy action waiting to flow through the economy, saying “I’m skeptical about the potential for large additional effects from this channel.” The official also said that she’s watching commercial real estate risks but does not see them as particularly threatening. She said that the broader housing market appears to have bottomed out. Logan also said that she doesn’t see anything tied to the Fed’s balance sheet drawdown affecting the Fed’s rate choices right now, and said the Treasury’s work to rebuild its cash account is unlikely to hit bank reserves, with the cash instead drawn from the Fed’s reverse repo facility. More

UK businesses expect to raise their prices at a fast pace in the coming year in response to workers’ demands for higher wages, according to a survey by the Bank of England that reinforces concerns about high inflation.The BoE decision maker panel, a regular survey of chief financial officers at UK companies, showed that in the three months to June businesses expect output price inflation to be 5.3 per cent in the next year. This was only marginally down from the 5.4 per cent recorded in the poll in the three months to May.The new survey published on Thursday also found that chief financial officers expect workers’ wages to grow by 5.3 per cent in the coming year. That compares to growth of 5.2 per cent recorded in the previous poll. Actual wage growth reported by chief financial officers increased to 7.1 per cent in June, from 6.7 per cent in May.The BoE survey findings suggest “that optimism that wage growth is easing towards normal levels soon may be misplaced”, said George Moran, economist at Nomura. He added the wage growth showed “only a marginal rise, but the fact that it didn’t fall is significant”.Ruth Gregory, economist at Capital Economics, said: “With wage expectations of businesses remaining elevated, higher wages are becoming embedded in businesses’ future budgets.”The survey of chief financial officers is an important source of price and wage information when the central bank takes decisions on interest rates.The central bank has raised rates 13 times since late 2021 as it tries to tackle high inflation and bring it down to the BoE target of 2 per cent.After official data showed inflation remained stuck at 8.7 per cent in May, the BoE last month increased rates by a larger than expected half percentage point to 5 per cent. Rates are at their highest in 15 years.The survey provided better news on recruitment as the share of businesses saying that hiring was more difficult than usual continued to decline from a record high of about 90 per cent in the summer of last year.Despite the fall, 58 per cent of companies were still struggling to find workers in June. The survey was released as separate data showed the negative impact of rising interest rates on the construction sector, including housebuilding.The S&P Global/Cips UK construction purchasing managers’ index, a measure of sector activity, fell to 48.9 in June, from 51.6 the previous month, and the lowest level since January. Tim Moore, economics director at S&P Global Market Intelligence, which compiles the data, said “weaker housing market conditions in the wake of higher borrowing costs acted as a major constraint on UK construction output in June”. More

Corporate America has taken to laying off a large number of their workforce, as aggressive interest rate hikes by the Federal Reserve to tame inflation have besmirched the United States’ economic outlook, stoking fears of a potential recession.Despite the drop in job cuts in the month, layoffs in June were higher than the corresponding month a year earlier, the report said.Technology companies continue to lead job cut announcements with 141,516 layoffs in the first half of the year, compared with about 6,000 in the same period last year.The sector laid off nearly 5,000 employees last month, the report said.”In fact, June is historically the slowest month on average for announcements. It is also possible that the deep job losses predicted due to inflation and interest rates will not come to pass, particularly as the Fed holds rates,” said Andrew Challenger, senior vice president at the employment firm.Meta Platforms had slashed jobs in May, part of a plan announced in March to eliminate 10,000 roles.Like its peers, Amazon.com (NASDAQ:AMZN) in March had said it would axe another 9,000 roles as a part of its second retrenchment drive, as investors also persuaded the firms to cut costs.After a round of multiple rate hikes, the Fed unanimously kept its interest rates steady at the central bank’s June meeting that could freeze layoffs and allay fears of employees.”Probably we have already seen the tech sector shed the bulk of its ‘at risk’ workers, and as such I would expect further Fed tightening to now impact more heavily on other sectors of the US economy,” said Stuart Cole, chief macro economist at Equiti Capital. More

BRUSSELS (Reuters) -The metaverse, shared virtual worlds accessible through the internet, has not triggered any concerns so far or the need for legislation to rein it in, EU antitrust chief Margrethe Vestager said on Thursday.An initiative that she will present on the metaverse next week aims to help competition regulators understand the industry’s dynamics, Vestager said.Facebook (NASDAQ:META) owner Meta Platforms, Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) are working on metaverse products or services, prompting fears that the companies may get an unfair advantage over smaller competitors such as Roblox .Vestager said she does not have any competition concerns.”Actually we see that there is a lot of innovation when it comes to virtual worlds. I don’t think that any company can claim that they will own it, so to speak, but that is what we hope to find out,” she told reporters on the sidelines of a conference.The initiative to be announced next week proposes a toolbox with guidelines on taking part in virtual worlds and one to fight counterfeiting, according to a document seen by Reuters.It also proposes standards for open and interoperable virtual worlds to avoid the dominance of a few and the introduction of regulatory sandboxes.”The (European) Commission aims for a Web 4.0 that is powered by open and highly distributed technologies and standards that enable interoperability between platforms and networks and freedom of choice for users,” the document said.Vestager said a raft of legislation adopted in the last five years to regulate Big Tech, ranging from privacy to market power and upcoming artificial intelligence rules, can also apply to the metaverse.”In Europe, now we have a body of digital legislation, I think we do have time to explore, to know that we should not jump to regulation as the first sort of safety pad,” Vestager said.”We should really be careful because now there will be a lot of work to be done to implement, both for the Commission but also for member states.” More

(Reuters) – U.S. law firm Paul Hastings said Thursday that it has hired two partners from rival Goodwin Procter as practice leaders in New York and Washington, D.C.Seo Salimi is departing Goodwin after more than eight years to co-lead Paul Hastings’ equity capital markets and corporate life sciences practices in New York.Salimi advises life sciences companies on initial public offerings, private placements, cross-border offerings, as well as capital raising strategies and U.S. Securities and Exchange Commission compliance.His clients have included Karuna Therapeutics (NASDAQ:KRTX), CRISPR Therapeutics, Goldman Sachs and J.P. Morgan Securities, according to his former profile on Goodwin’s website.Salimi is joining Paul Hastings along with Sean Donahue, who will chair the firm’s public company advisory practice group and co-chair its shareholder activism and takeover defense group. He will split time between Washington, D.C., and New York.Donahue chaired Goodwin’s public company advisory practice and co-chaired its environmental, social and governance practice. Earlier in his career, he worked in the SEC’s Division of Corporation Finance. Paul Hastings hired other practice group leaders from rival firms in June, including Dana Syracuse, former firmwide co-chair of the fintech industry group and co-leader of the blockchain, digital assets and custody team at Perkins Coie, and Kenneth Deutsch, who led the entertainment and media practice at Latham & Watkins.The Los Angeles-founded firm has hired at least 24 partners globally since January.A spokesperson from Boston-founded Goodwin wished Salimi and Donahue well.Read more:Law firm Goodwin taps new Silicon Valley-based chairPaul Hastings team takes Latin America-focused deal practice to Baker McKenzie More

(Reuters) – Foreign hedge funds have been lapping up Argentinian equities at cheap valuations in anticipation of a change in political regime and given sky-high inflation, pushing the country’s benchmark stock index to a record high.Argentina’s S&P MerVal index has more than doubled in the first six months of this year in dollar terms and hit its highest level since early 2018 late last month. It also touched an all-time high in local peso terms in late June.Ratings of the ruling Peronist alliance have been hit by a mounting cost-of-living crisis in Argentina, and with other front-runners for October’s general election belonging to a conservative opposition and the far-right, hopes have grown that the next president could be more market friendly.”The current state of the economy is very poor. A hope of change means that the outlook can be better than the current scenario and hence some people will try to invest ahead of that change,” said Pablo Riveroll, head of Latam equities for Schroders (LON:SDR), which has had exposure to Argentinian equities for the past twelve months.Centre-left President Alberto Fernandez is not running for re-election and the ruling coalition has picked centrist economy minister Sergio Massa as its nominee, spiking the candidacy of a close ally to populist Vice President Cristina Fernandez de Kirchner.The Global X MSCI Argentina ETF saw inflows of $5.5 million in the past week to June 28, the highest in over four months, while assets under management have more than doubled to nearly $65 million from the same period last year, according to Refinitiv Lipper data. Investors, though, caution the rally in the benchmark stock index is unlikely to last over the long term, with the new government facing the daunting task of steering Argentina out of the country’s worst economic crisis in decades.South America’s second-largest economy is currently battling annual inflation that is over 100% and dwindling foreign currency reserves, that have compelled the government to enforce strict capital controls to support a rapidly depreciating currency.”The situation is a perfect storm, almost. If inflation is going up, if the currency is getting devalued, if you can’t take your currency out of the country because of FX controls, you put it in local equities,” said Ashish Chugh, portfolio manager of global emerging market equities at Loomis Sayles, which is invested in Argentinian stocks.Equities are also getting a boost from certain companies’ ability to pass through price increases to consumers.Argentina, which has a history of debt default, is trying to revamp its $44 billion loan program with the International Monetary Fund after a historic drought hammered exports of key commodities such as corn and soy and wiped out the country’s foreign exchange reserves.Investors believe the top priority of the new government should be to tackle inflation and loosen capital controls supporting the official exchange rate.”Long-only (investors) aren’t involved, because there’s no clarity on how Argentina will get to the other side smoothly and who will take it there,” said Chugh. More

BEIJING (Reuters) – China will take measures to support growth and employment, as well as to prevent risks, state media cited Premier Li Qiang as saying on Thursday. The country will establish appropriate communication channels between the government and foreign and private companies, Li said, while presiding over a symposium on the economic situation. More

BEIJING (Reuters) -U.S. Treasury Secretary Janet Yellen arrived in the Chinese capital on Thursday, beginning a four-day visit expected to focus on easing ties between the world’s two largest economies, despite low expectations on both sides.Yellen received a low-key welcome from a Chinese finance ministry official and the U.S. envoy to China, Nicholas Burns, as she stepped off a government aircraft just after a rainstorm brought some relief to an otherwise sweltering Beijing.Both sides are sceptical that Yellen’s visit will be able to take much heat out of U.S.-China ties, however, with officials accepting that both countries have placed safeguarding national security above economic ties.”Especially if there are things that we may disagree about, it’s even more important that we are talking,” said a U.S. official travelling with Yellen, speaking on arrival in Beijing.”I don’t think it’s fruitless, I will say that definitively.” Yellen will address “unfair” practices by China, including recent punitive actions against U.S. firms and market access barriers, the official added.On Friday she will meet China’s Premier Li Qiang and former economy tsar Liu He, who is widely seen as a close confidant of President Xi Jinping. Chinese commentators cry hypocrisy over U.S. concerns over the country’s trade practices, however. “I wouldn’t regard it as Janet Yellen is not welcome, but China cannot just swallow all the poison pills and continue to show a smile,” said Wang Huiyao, the president of a thinktank, the Center for China and Globalisation, referring to U.S. sanctions on a growing number of Chinese firms. Before Yellen’s visit, Chinese analysts told state media that her April speech, which ranked securing the national security interests of the U.S. and its allies as the key plank of economic policy with China, did not inspire optimism.Zhu Feng, a professor of international relations at Nanjing University, told the Global Times newspaper that Yellen’s emphasis on national security meant the U.S. was unlikely to stop the “economic and technological suppression” of China.Yellen will emphasise that the United States does not support decoupling and call for greater transparency by China on its new espionage law, as well as progress in resolving international debt distress, the U.S. official added.Even though no major breakthroughs are expected, U.S. officials say Yellen will push to open new lines of communication and coordination on economic matters, and stress the consequences of supplying lethal aid to Russia, an assertion China has adamantly rejected.When Chinese ambassador Xie Feng met Yellen in Washington on Monday, he urged the U.S. to “pay great attention” and move to tackle China’s main concerns on the economy and trade. Trade tariffs imposed by the Trump administration and sanctions against Chinese firms are the country’s chief concerns, said Wu Xinbo, an American studies specialist at Fudan University, who is familiar with Beijing’s thinking.Yellen’s long-anticipated trip comes weeks after a visit by Secretary of State Antony Blinken, who agreed with Chinese President Xi Jinping that the mutual rivalry should not veer into conflict, amid a freeze in talks between their militaries.Both visits are seen as critical to improving communication after the U.S. military shot down a Chinese balloon over the United States.They come ahead of a possible meeting between President Joe Biden and Xi at the Asia-Pacific Economic Cooperation gathering scheduled for November in San Francisco. More