Economy

The Federal Reserve chair is eyeing near-term inflation expectations, which might shape wages — and help keep prices rising rapidly.Amitis Oskoui, a consultant who works mostly with nonprofits and philanthropies, has not had a wage increase since inflation began to noticeably eat away at her paycheck early this year. What she has had are job offers.Ms. Oskoui, 36, has tried to leverage those prospects to argue for a raise as the rising cost of food, child care and life in general in Orange County, Calif., has cut into her family budget.“Generally, in the past, it was taboo to say: I need it to survive, and I know what I’m worth on the market,” she said. “In this environment, I think it’s more acceptable. Inflation is so front of mind, and it’s a big part of the public conversation about the economy.”That logic, reasonable at an individual level, is making the Federal Reserve nervous as it echoes across America.When employees successfully push for raises to cover their cost of living, companies face higher wage bills. To offset those expenses, firms may lift prices, creating a cycle in which fast inflation today begets fast — and maybe even faster — inflation tomorrow.So far, Fed officials do not think that wage growth has been a primary driver of America’s rapid inflation, Jerome H. Powell, the Fed chair, said on Wednesday.But an employment report set for release Friday is likely to show that average hourly earnings climbed 4.7 percent over the past year, economists predict. That is far faster than the 3 percent pace that prevailed before the pandemic, and is so quick that it could make it difficult for inflation to fully fade. Plus, policymakers remain anxious that today’s pressures could yet turn into a spiral in which wages and prices chase each other higher.Inflation F.A.Q.Card 1 of 5What is inflation? More

Tim Bond was a partner at Odey Asset Management until March 2022, having joined in 2010 as its head of macroeconomic strategy, and managed the Odey Odyssey long-short macro fund. He is now senior non-executive director at The Law Debenture Corporation.“You are effing useless,” was the informed verdict from management, as they myopically closed my hedge fund in the middle of 2021. To be fair, the markets apparently held a similar opinion of my abilities. Anyone who had predicated their investments on rampant inflation and a dual bear market in bonds and equities was not looking too clever at that point. Yet the call had seemed the most obvious of my career. Mixing massive money printing with massive fiscal easing can only ever have one possible outcome. Even the details about the LDI-inspired collapse in the gilt market were obvious enough, once you spent a few hours digging out the facts and applied a modicum of common sense. In fact, the only unexpected bit was me no longer running a fund when it all eventually happened. Effing useless, indeed. It’s tempting today to assume that the worst might be over, at least for the markets, as monetary tightening precipitates an inflation-busting recession and the world returns to a familiar lowflation landscape. As likely as it might seem, such an outlook is impossible. The underlying economic condition of a structural slowdown in trend growth rates has not gone away. What has gone away is our ability to hide the problem. QE, negative interest rates and rising indebtedness were the product and palliative of a condition caused by a prolonged deceleration in productivity growth to an average pace not seen since the 19th century. Real wages stagnated for several decades on the back of this deceleration, whilst asset prices soared due to the evaporation of risk-free interest rates. By redistributing shares of wealth and income to the high-saving top 10 per cent, the economic mix ensured that demand and inflation fell short, simultaneously dismantling the social contract that keeps politics non-toxic. Meanwhile, zero interest rates worsened the productivity slowdown by artificially prolonging the lifespan of the least productive enterprises. Then came Covid. In an economic condition of parlous growth, most developed countries responded to the shock by spending money, largely financed by central bank printing presses — some 13 per cent of GDP in the UK, 21 per cent in the US. This was a live experiment with the magic money tree, a policy long advocated as an antidote for the slow growth condition. The net result, with a supply side constrained by negligible productivity growth, deglobalisation, geopolitical instability and the exigencies of the pandemic, was soaring inflation. This exercise has taught us that the monetary-fiscal escape route from slow growth is a delusion — a lesson that the inattentive Liz Truss administration in the UK was retaught in short order. The exercise also taught us that negative real interest rates and QE are indeed potentially very inflationary. The policy palliatives of the past are therefore no longer available to mask the effects of very low trend growth rates. As such, we are left with the debt accumulated over the past decades and the question of how that debt will be serviced if trend growth rates continue to stagnate. According to the BIS, since the start of this century, advanced economy non-financial debt (that is debt owed by governments, business and households) has risen by 86 percentage points of GDP to just shy of 300 per cent of GDP. The world has never been as levered as it is today. When central banks were able to suppress interest rates well below the trend rate of nominal GDP growth, these magnified debt burdens were supportable. Now, with rising wages signalling a self-reinforcing inflationary cycle, our range of options has narrowed to a choice between high inflation, a debt default crisis or exceptionally painful fiscal austerity. At considerable risk of understatement, all three of these choices will cause havoc for the ordinary citizen-voter. Indeed, when you extrapolate the likely outcomes, it becomes clear that all three present existential challenges to the social fabric. They are not, therefore, really choices at all. There is, however, a fourth choice, which is to deal with the root problem, the long slowdown in productivity growth. To do so, countries need to dismantle the oligopolies that are suppressing innovation, eradicate the influence of corporate behemoths on self-serving regulations, wean economies off the enervating drug of cheap globalised labour forces, improve the quality of education and kill off zombie businesses. And all of this needs to be accomplished within the ever-tightening constraints imposed by our environmental degradation. There is little point in increasing output per hour if that output speeds the destruction of Spaceship Earth. Despite the evidence of the above, I am actually an optimist. I am sure we will, eventually, stumble our way towards the right policy choices that foster an environmentally friendly acceleration in innovation, productivity and economic growth. But the process will be long and troubling, requiring a political willpower and level of general understanding of our predicament that is so far noticeably absent. For long term investors, the true buy signal will not be some temporary peak in inflation or policy rates, but when people finally comprehend the disease, rather than the symptoms. Financial markets are not a game; they have an important role to play in all this. Their existence is not solely justified on the basis of efficient capital allocation, but also in assisting the process of optimal policy discovery. If investors remain stupid to the reality that surrounds them, my optimism will most likely prove misplaced.(Odey Asset Management declined to comment.) More

The real value of UK private wealth portfolios has fallen by as much as one-third on average in the first nine months of this year as investment losses, inflation and the weak pound combined to hammer people’s buying power. UK wealth management portfolios lost about 10 per cent on average in the year to the end of September, but price rises and the slide in sterling against the US dollar added to the damage, according to research by Asset Risk Consultants (ARC), which analysed the returns of strategies run by more than 100 large UK wealth managers.The figures underline that the tangible losses on investment portfolios are only a portion of the destruction of real wealth wrought by inflation and currency movements for UK investors this year. “It will be very hard for investors to get their heads around the fact that they have just seen a third of their wealth disappear. That is a pretty bitter pill to swallow,” said Graham Harrison, managing director at ARC. Harrison said investors tend to think about their wealth in terms of a fixed number and don’t mentally adjust when the buying power of those assets changes. Inflation, which has shot to a four-decade high this year, means the “money illusion is back with a vengeance”, Harrison added. The losses will make for painful conversations between wealth managers and their clients, as the industry responsible for stewarding the riches of well-heeled families is based on the idea of preserving wealth. A standard wealth management portfolio would need to have been invested since 2015 to keep pace with the consumer price index plus 3 per cent, ARC found. This marks a sharp change from the beginning of the year, when almost all portfolios would have been ahead of that benchmark. The damage to wealth management portfolios is in line with losses elsewhere. Do-it-yourself investors using Interactive Investor, an investment platform, lost about 13 per cent over the same nine-month period, while the MSCI World GBP Index declined 9 per cent. Combined with inflation and sterling moves, investors across the market will therefore be confronting big losses in real terms. The pound hit a record low against the dollar last month following the UK government’s now-scrapped plans for unfunded tax cuts. The UK currency is still down almost 15 per cent this year at $1.12, despite gains in recent weeks. The weak pound has meant overseas assets are worth more in sterling terms, boosting the apparent value of British investors’ portfolios. However, purchases from abroad have become more expensive, weakening buying power and adding to inflation pressures. ARC’s research adds up the combined effect on wealth of investment losses, price rises and the decline of sterling against the dollar. Harrison said the impact of the pound’s fall would appear both in inflation figures and the purchasing power adjustment, making ARC’s figures a pessimistic assessment of real wealth.

But Harrison added that double counting in the figures was minimal, and it was important to adjust for purchasing power to get an accurate picture. “The sorts of people who have investment portfolios are also consumers of goods and services that are not included in the inflation basket, and those things have gone up in price a lot more,” he said. Standard inflation measures are designed to capture the price of essentials, whereas wealthy households tend to have more international expenses, such as travel, and buy luxury goods whose prices are often based on the dollar, Harrison added. Almost half of wealthy individuals have already cut back their spending in response to worries about inflation, according to a survey by Swiss wealth manager UBS. However, UBS said these investors “see hope on the horizon” as about 60 per cent are optimistic about the trajectory of markets in the near future. Harrison said investors need to adjust to their losses, but should not overreact. “Don’t panic. Your wealth is only crystallised if you are pulling it out and spending it,” he said. More

For UK consumers anxious about how to keep their homes warm this winter a cosy fire might seem a handy way of dodging soaring energy bills.But there is no escape: smokeless fuel prices have risen by more than 50 per cent this year, driven by increased costs of raw materials, shipping and processing.Imported firewood has doubled in price since last winter, due to the Ukraine war’s impact on supplies and sharply rising international demand. The cost of UK-grown kiln dried logs, the mainstay of Britain’s wood burners, has risen a less alarming 10-15 per cent but increasing costs of drying, transportation and labour mean further price rises are inevitable.However, since gas and electricity prices have doubled in the last year many householders are finding it worthwhile to turn to their hearths.Who would have imagined that in 2022 chimney sweeps would be hugely in demand or that the smart wood burner in the corner might now be called on to keep an entire family warm?“It’s being driven by the energy crisis, people are looking for alternatives,” says Nic Snell, managing director of Hereford-based Certainly Wood, the UK’s largest supplier of homegrown kiln dried logs. “We have a lot of people saying they aren’t going to put the heating on until they really have to. It’s going back to the old days, sat in one room rather than the whole house.” 

Chimney sweeps talk on their online forums about the boom in business, as people get chimneys swept or open up an inactive fireplace. “One Monday in September I came in to 27 voicemails and 38 email inquiries,” says north east England chimney sweep Ian Welford. His earliest available slot is now mid-January; regulars are already booking for winter 2023. “A lot of customers aren’t putting their central heating on because they’re terrified about how much it’s going to cost them.”The Stove Industry Alliance (SIA), whose manufacturing members account for 75 per cent of UK stove sales, recently reported a 40 per cent increase in sales between April and June 2022, up from 25,000 to more than 35,000, compared with a year earlier.So are wood burners and open fires really cheaper? To cut costs, consumers should buy fuel in bulk and buy early. An Ecodesign wood-burning stove, compliant with UK environmental rules, may cost £1,000-£1,500, plus installation. For safety, chimneys should be swept annually, costing £60 each upwards. Snell says 3-4 metres cubed of kiln-dried logs for a wood-burning stove, enough for evenings and weekends between October and April, would currently cost £600-£650. If you keep the central heating off, this should save you money, although some rooms will remain cold. Alternatively, an SIA analysis indicates that a wood-burning stove, combined with limited central heating, can save £132 per year, a 6.8 per cent saving on heating based on this October’s price cap. But there is another question: air quality. Amid concern over global warming and rising emissions, are wood-burning stoves and open fires making matters worse? Much depends on whether consumers adhere to regulations, upgrade stoves and use the latest smokeless fuels.“If people are burning the right fuels in the right appliance, emissions from these fuels are going to be very low compared to the alternatives,” says Julian Martin, sales director of CPL, the UK’s largest smokeless fuels supplier.In recent years, the government has introduced measures to cut particulate emissions, including restricting sales of wet wood and coal in England. In UK smoke-controlled areas, covering most urban locations, only authorised fuels can be used. Some local authorities have banned wood burning on open fires with the threat of a £1,000 fine. Dry wood can be used in approved wood-burning stoves.The worry is that some might focus only on saving money, risking the environment and their own safety by burning damp wood, painted and treated timber and furniture and household rubbish. A return of family evenings around the fire might be welcome. But not pea souper fogs. More

The 2022 midterms are the first “post-pandemic” elections in the US, with the virus slipping down voters’ list of concerns and president Joe Biden still winning some credit for his handling of the Covid-19 crisis.But the issues voters are most concerned about, from high inflation and poor school test results to rising levels of crime, have all been exacerbated to some degree by the pandemic and its aftermath. And it is Republican candidates who are reaping the benefits.“Covid-19 is declining as an issue for the American public,” said Chris Jackson, senior vice-president at Ipsos. “People have gone back to normal, but they are not giving the Democrats credit for that — they want to know what both parties are going to do for them next.”Top of the list of voters’ worries going into Tuesday’s vote is inflation, multiple polls have shown, which is running at 8.2 per cent. Earlier this week, Fed chair Jay Powell indicated the US central bank’s fight with soaring prices is far from over, warning interest rates will peak at higher levels than previously expected.While high prices have also been exacerbated by the war in Ukraine, economists say the problem stems from the pandemic. A study by Adam Shapiro, an economist at the Federal Reserve Bank of San Francisco, shows nearly three-quarters of core inflation can be traced back to the supply chain and demand disruptions caused by the virus.Claudia Sahm, the founder of Sahm Consulting and a former Federal Reserve economist, said: “China has just locked down the city where Foxconn makes iPhones — we are still seeing the effects of the pandemic play into supply chains. I have no idea why we are not talking more about Covid.”When voters do link issues such as inflation to the pandemic, it can work against Democrats. For instance, some blame the stimulus bill passed in the early days of the Biden administration, which helped boost demand just as the economy was recovering. Rich Thau, a moderator of the Swing Voter Project who has been conducting regular focus groups during the campaign, said: “Voters say the pandemic has fuelled inflation mostly through the money that was shovelled out the door by the federal government.”The after-effects of the pandemic are also rippling through in other areas: notably education and crime.Last week the first National Assessment of Educational Progress since 2019 showed a drop in school children’s reading scores and the biggest fall ever in maths results, reigniting the fierce debate over Covid-related school closures.Republican Glenn Youngkin unexpectedly won the race to become governor of Virginia last year after a contest dominated by debates over schools. And Democrat Phil Murphy nearly lost his seat as governor of New Jersey thanks to the unpopularity of his mask requirements for schoolchildren.The most recent test results have turned the issue into an election issue once again. Tudor Dixon, who is running to unseat the Democrat Gretchen Whitmer as governor of Michigan, said afterwards: “Gretchen [and] not the pandemic, is responsible for plunging test scores and record low education achievement. It didn’t have to be this way.”

Meanwhile several high-profile midterm races are hinging on rising crime, including Democrat Kathy Hochul’s campaign to hold on to the New York governor’s mansion. Although Republicans blame rising crime on Democrats’ policing policies, some criminologists argue it has been fuelled in part by the economic scars left by the pandemic lockdowns. Data collated by the political website FiveThiryEight show that Americans broadly approve of the way in which Biden has handled the pandemic. But Tom Cochran at 720 Strategies, said that would hold little sway in the midterms. “Things are getting back to normal, but that’s exactly why many people don’t want to talk about it. Bringing it up on the campaign trail is just giving voters PTSD.”A poll released by Gallup on Friday showed 44 per cent of voters now believe the pandemic is over, up from 29 per cent last June. And a separate poll by Ipsos showed just 7 per cent of likely voters listed it among their top three concerns.That helps explain why there has been little mention of Covid-19 on the campaign trail, either from the president or Democratic candidates — a stark turnround from two years ago when Biden ran on his ability to handle the virus more professionally than Donald Trump.Conversely, Republican candidates that took a more laissez-faire approach to the pandemic have hammered Democrats for being too draconian. For instance, Ron DeSantis, running for re-election as governor in Florida, has touted his light-touch approach to lockdowns and mask mandates.“I kept the state open and I kept the state free,” he said during a debate with his Democratic opponent last month. More

This article is the latest part of the FT’s Financial Literacy and Inclusion CampaignHow much have you talked to your children about the cost of living crisis? Our instinct as parents is to shield our children from the financial problems of the adult world, but it’s getting harder to do.Even if your family has been able to absorb the impact of rising prices, children are picking up on news reports about soaring bills, strikes over pay and political upheaval. While younger children might be blissfully unaware, older children may have overheard their parents fretting about mortgage rates, the weekly shop or how household budgets might need trimming.How included should they be in these conversations? Parents don’t want children to worry, but as mortgage costs soar, even fairly affluent families are cutting treats, and don’t want children to feel this is somehow their fault.“My 10-year-old daughter Maddie is very aware of what’s going on as she overhears us talking, but I still want her to be a kid,” says Katie Handsley, a clerical worker from Aberdeen. “As much as we’d like to give her everything in the world, it’s just not possible in the current climate. But I also want her to know we’re not being horrible when we say no; there’s a reason behind it.”For older children, the financial pressures move beyond pocket money. Wealth managers say that falling investment values combined with cost of living pressures could affect the ability of Bomad (the Bank of Mum and Dad) to provide property deposits for adult offspring. Plus, the high cost of childcare means that Nomad (the Nursery of Mum and Dad) is increasingly being relied upon to look after the grandchildren gratis.

Takeaways are off the menu for Maddie Handsley and mother Katie: © image1st.co.uk

Pocket money The cost of living crisis has blighted the financial lives of millions of families, and prompted children to ask many questions about money.“Money touches every single part of our lives, and if you hide it or shelter your kids from it, you’re not going to be helping them in future,” says Louise Hill, co-founder of gohenry, a children’s savings app. There have been clear changes in pocket money spending, according to data sourced from over 435,000 UK children using gohenry’s prepaid contactless cards. The majority of 6 to 18-year-olds spent much less on “non-essentials” in the first half of 2022 than a year previously. Categorised by merchant, the amount children spent fell by 32 per cent on toys, 14 per cent on fashion and clothing, and 11 per cent on online gaming.

32%

Percentage of children who spent less on toys in the first half of 2022, among gohenry’s 435,00 customers

However, the number of children using their cards to spend on “essential” categories such as supermarkets increased by 17 per cent, suggesting more are using pocket money to buy food and everyday items. The amounts that children are saving has also risen by just over 14 per cent in the same period, suggesting that more of them are targeting bigger purchases.Michelle Dickson, a local government administrator from Weston-super-Mare, uses gohenry cards with her two sons Liam, 10, and Benjamin, 7, as a way of teaching budgeting. Her own budget has been under pressure, but she hasn’t had direct conversations with her sons about the war in Ukraine or why inflation is soaring. “They hear a lot about the cost of living in the news and a little bit at school, but I don’t want to scare them,” she says.“Mum’s always saying don’t leave the lights on, or don’t turn on the heating,” says Liam.Seven-year-old Benjamin saved up for months to buy a pair of rollerblades. He was happy to buy them, but “felt sad” when he saw all the money had gone from his account. One thing is certain — whether or not we talk to our children about the cost of living, they’re picking up how concerned we are. Nearly three-quarters of 2,000 children and teenagers surveyed by gohenry said they were worried about the cost of living crisis, including rising food and energy bills.

71%

Percentage of children and teenagers worried about the cost of living crisis. Survey of 2,000 youngsters by gohenry

Nearly 8mn Britons are finding it a “heavy burden” to keep up with their bills, up from 5mn in 2020, according to the UK financial regulator. More than 4mn people have missed a bill or credit card payment in more than three of the past six months, and charities expect distress levels to increase over the winter. Even if more affluent households have absorbed rising costs, children are aware that their friends and classmates are being affected.Michelle says the main change for the Dickson family is no more foreign holidays. “You worry the kids will ask how come [our friends] can have a trip to Disneyland or a brand new PlayStation and we can’t?”Katie has told her daughter that expectations for Christmas presents “need to be different this year” and the family has cut back on eating out. “We used to get a takeaway every Saturday, but the cost for the three of us has gone from £23 to £36,” she says. Instead, she and her 10-year-old daughter have been finding recipes for “Fakeways” on TikTok, and Maddie proudly tells me about making egg fried rice with her mum: “It was so fun.”Of the 2,000 children and teenagers surveyed, one in three said they would happily go without having treats or new toys for a month if this helped their families pay for essentials. In real life, millions of other children don’t have a choice. One colleague recently had a heart-to-heart with his son after he found him sitting in the dark playing computer games as he was “trying to save money”.Some parents who contacted me on social media say they don’t watch the news as they don’t want their children to have nightmares about energy blackouts, recession or the prospect of nuclear war. Another was angry that “the 0.01 per cent of privileged kids are actually having to have it explained to them what the cost of living crisis is,” adding: “The struggle is real!”Other parents were eager to reassure their children, but also wanted them to realise how privileged they are.“I spend time reassuring my children about how we are coping by giving them a budget that they can decide how to spend on their own treats,” one mum says. “On Halloween night, I noticed they were very generous with the candy and satsumas they gave out as they were worried some of the other kids might not have had treats for a while.”

Turning out the lights: Benjamin, left, and Liam Dickson, with mother Michelle © image1st.co.uk

Financial lessonsIn the classroom, children are more eager than ever to learn about money. “What we see, particularly with younger children, is that they’re asking questions about things they’re seeing and hearing in the news,” says Rebekah Young, senior fundraising manager at MyBnk, a financial education charity.‘What is inflation?’ is a common question she hears; but since the “mini” Budget, even year 7 children have been quizzing her about tax and national insurance. “Children are trying to draw connections between what they’re seeing in the news, and what these things actually mean for them,” she says. “It’s important to have conversations when you’re going around the supermarket making purchasing decisions, and how to tell the difference between a want and a need.”Sixteen-year-old Lucy Roche from Dublin has learned a lot about inflation at college, as she’s studying business — but she’s aware most of her friends know nothing. “It didn’t feel too relevant when we first learned about it, but now it’s coming in handy,” she says. She and her friends have noticed how clothes prices are rising fast, but are using apps such as Depop and Etsy to buy and sell clothing. “There are no careless purchases now,” she says. Others say they are encouraging their children to watch the news, and using this to start conversations about money. “My nine-year-old daughter has really got involved with the news, and understands about the effects the war in Ukraine is having,” says FT reader Dija Ayodele. “I run a business, and it really hit home for her when I had to make staff redundant — she saw a clear link then. My husband has schooled her on the electricity bill and she’s now the smart meter monitor.”Michelle’s two sons are both keen footballers, which means football boots are an expensive necessity — although they cancelled their subscription to Match of the Day magazine after the price increased. “We use Vinted and eBay to buy secondhand football boots, and the boys sell their old ones too,” she says. Liam tells me he’s been shopping around online for bargains. “I recently bought a magnet pen for £5, but the first one I saw was £15,” he says. Does he know the difference between a “want” and a “need”?“A need is spending money on electricity, broadband and clothing — but not fancy, branded clothing,” he says. And what’s a luxury? “Espresso pods,” he says. “No, those are definitely a need!” says his mum. Even so, she’s saving money buying dented and less-than-perfect pods via the Odd Coffee Company. Just givingAll the parents who contributed to this article recognise that, while they have to cut back, many others are in a far worse position.Many are actively involving their children when making donations to food banks. In the words of one of my social media followers: “My nine-year-old is not being brought up in a bubble.”

256%

Increase in donations to charity by gohenry users

A significant shift in children’s spending is charity donations. Amounts given to charity by children using gohenry accounts increased by an astonishing 256 per cent in the first half of 2022 with over £435,000 given to good causes compared with £120,000 the year previously. “When I first saw this data, my instant reaction was that can’t be right, but it is,” says Hill, noting that the figure includes direct donations to charities as well as websites such as JustGiving.com and Change.org. “It just shows you that children are not only aware of the cost of living crisis, they want to do something about it,” she says. Such donations also rose early in the pandemic, but less dramatically. “Customers told us their children realised there were a lot of people out there in worse situations than they were,” she says. “I think we’re seeing the same sentiment here, but on a much greater scale than before.”For every family prepared to talk to their children about budgeting, there are others desperately hiding the fact that they can’t afford to pay bills. Young from MyBnk encountered one child at a school session who asked “My mum says she’s £500 into her overdraft — what does that mean?”Parents believe it shouldn’t just be their job to explain and argue that lessons about money should be on the curriculum in primary and secondary schools. As they navigate the cost of living crisis, they also wish they had been taught more in school. “Knowing the value of money is really, really important,” says Young. “These are complex skills, and to be picking up that knowledge at such a young age is going to be hugely beneficial going forwards. But it’s also a worry because not every child will have that opportunity.” More

SINGAPORE (Reuters) – The dollar looked set to post its best week in over a month on Friday on expectations that U.S. rates could peak higher, while sterling was on the ropes as investors revised their rate projections after a shift in tone from the Bank of England.Sterling edged up 0.1% to $1.1170, after sliding 2% overnight. It was headed for a weekly loss of nearly 4%, the largest since September’s market turmoil triggered by an economic plan that alarmed investors.While the BoE raised interest rates by the most since 1989 on Thursday, it warned investors that the risk of Britain’s longest recession in at least a century means borrowing costs are likely to rise less than they expect.”Sterling is getting a dose of the reality of the economy. That the Bank of England has to make – surely to the fiscal side – tough choices,” said Rodrigo Catril, a currency strategist at National Australia Bank (OTC:NABZY).”It’s been sort of coming for some time that the Bank of England is a reluctant hiker … in the current environment. But certainly, those inflation numbers are still way too high.”Euro was up 0.08% at $0.97575, after falling close to 0.7% overnight, while the kiwi fell 0.06% to $0.5772, having similarly slid 0.7% in the previous session.The U.S. dollar index, which measures the greenback against a basket of currencies, firmed to 112.90, after surging 0.8% overnight and touching a roughly two-week high of 113.15.The index was on track for a weekly gain of 2%, its largest since September.While the Federal Reserve raised interest rates by three-quarters of a percentage point this week and signaled that it may be nearing an inflection point in its aggressive monetary policy tightening campaign, Fed Chair Jerome Powell was quick to dampen hopes of a potential pivot, adding that it was “very premature” to discuss when the Fed might pause its increases.Fed rate futures now point to a terminal rate of about 5.15% by June, with U.S. Treasury yields moving in step with the higher expectations.The two-year Treasury yield, which typically moves in step with interest rate expectations, last stood at 4.7243%, after hitting a 15-year peak of 4.745% the previous session. [US/]”Overall, the dollar has economic and central bank relativities on its side, and for now, it’s sort of the realisation that (a) pivot is not really coming in, it’s just a downshift in terms of gears,” said Catril.Markets now shift their focus to key U.S. jobs data due later on Friday, with economists polled by Reuters expecting nonfarm payrolls to have increased by 200,000 jobs in October.Elsewhere, the Japanese yen rose a marginal 0.07% to 148.155 per dollar, while the Aussie fell 0.02% to $0.6287, following a nearly 1% overnight fall.The Reserve Bank of Australia on Friday downgraded the outlook for economic growth, warning that more rate hikes will be necessary to bring down sky-high inflation even as it strives to avoid an outright recession. More

MANILA (Reuters) – Philippine annual inflation accelerated to 7.7% in October from the previous month’s 6.9%, the statistics agency said on Friday.Last month’s inflation rate was above the 7.1% median forecast in a Reuters poll, and near the top end of the central bank’s 7.1% to 7.9% forecast for the month. More