Economy

British and EU officials have agreed to meet for the first time in months to discuss how to resolve a bitter dispute over Northern Ireland’s post-Brexit trading arrangements, in a sign that new UK prime minister Liz Truss wants to improve relations with Brussels.Negotiations to find a breakthrough over the Northern Ireland protocol, the part of the UK’s Brexit deal that regulates trade between Great Britain and Northern Ireland, broke down in February.But on Friday, UK foreign minister James Cleverly spoke to Maroš Šefčovič, the EU’s Brexit negotiator, and agreed that officials would meet “soon” to consider kick-starting the stalled talks.The dispute over the protocol has soured relations between the two sides since the UK left the EU in 2020, but Truss wants to resolve the disagreement.Cleverley said in a tweet: “Good to speak to Maroš Šefčovič today on important shared issues including the Northern Ireland protocol. We agreed we want to look for solutions to protect the Belfast (Good Friday) agreement. We will speak again soon.”Šefčovič said in a separate tweet: “Both sides agree to look for solutions around the protocol, to bring predictability and certainty to people in Northern Ireland. The EU is committed to joint efforts. Teams will meet soon. James and I will stay in contact.”Officials on both sides said the atmosphere had warmed since Truss replaced Boris Johnson as prime minister.Downing Street announced on Friday that she has agreed to meet leaders from the EU at a summit in Prague next week. Downing Street said: “The continent faces unprecedented shared challenges, driven by [Russian president Vladimir] Putin’s barbaric invasion of Ukraine, and the UK is resolved to work with international allies to find solutions.”Truss is prioritising UK economic growth above all else and the lingering dispute with the EU over Northern Ireland’s trading arrangements threatens that goal.Truss held what UK officials said were “positive” talks with French president Emmanuel Macron and European Commission president Ursula von der Leyen at the UN in New York last week.British diplomats said Truss wanted to settle the Northern Ireland dispute before next Easter’s 25th anniversary of the Good Friday Agreement, potentially leading to a state visit by US president Joe Biden to London in 2023.The president has urged the UK and EU to reach a negotiated settlement on the protocol.The protocol kept Northern Ireland in the EU single market for goods to avoid a border on the island of Ireland after Brexit.It requires checks on products entering the region from Great Britain, which many of Northern Ireland’s unionists view as undermining the UK’s integrity. Businesses have complained about bureaucracy.The dispute over the protocol has paralysed politics in Northern Ireland and fresh elections may be called if the assembly at Stormont and the power-sharing executive are not restored by October 28.The small Ulster Unionist party welcomed the planned meeting between UK and EU officials but called on London and Brussels “to involve key Northern Ireland stakeholders in these discussions”.Additional reporting by Jude Webber in Dublin More

(Reuters) – U.S. consumers are exhibiting fragility ahead of the peak period for corporate results next month, as some are struggling to pay bills and others are slowing purchases of cars, sneakers, and household goods, the week’s earnings show.Data released on Friday showed U.S. consumer spending increased more than expected in August, but aggressive interest rate hikes from the Federal Reserve as it battles stubbornly high inflation are slowing demand. Nike (NYSE:NKE), maker of Air Jordan and Converse sneakers, saw its shares tumble to the lowest level in 2-1/2 years on Friday, a day after the company said it needed bigger discounts to clear a build-up of inventory. “We are seeing evidence of a slowdown in spending across a wide swath of the consumer space, with the combination of inflation and rising interest rates pressuring household budgets,” said Garrett Nelson, VP and senior equity analyst at CFRA Research.Big-ticket items like furniture and cars that are typically financed have been hit particularly hard, he said. Rent-A-Center (NASDAQ:RCII) Inc, a retailer that rents televisions, sofas and appliances to lower-income customers, cut its profit forecast for the third-quarter on Thursday, citing a weakening economy. “External economic conditions have continued to deteriorate over the past few months,” Rent-A-Center’s Chief Executive Mitch Fadel, said in a statement. “This has affected both retail traffic and customer payment behavior,” he said.Used-car retailer CarMax Inc (NYSE:KMX) on Thursday said higher interest rates and inflation were starting to take a toll on vehicle demand, a warning that spooked investors in the wider autos sector.”Obviously, consumers are having to make decisions … I just think they are prioritizing their spend a little differently,” Chief Executive Officer William Nash told analysts.Home goods retailer Bed Bath & Beyond Inc (NASDAQ:BBBY) on Thursday said net sales plunged 28% as it heavily discounted to rid its shelves of unsold inventory. “We’re in a situation right now where a lot of companies are having to work through inventory issues and at the same time that inflation is having some impact on consumer spending,” said Morningstar analyst David Swartz.Caution is even creeping into spending on travel, a red-hot sector that has benefited from the easing of COVID restrictions.Cruise line operator Carnival (NYSE:CCL) Corp saw its shares plummet more than 20% on Friday after reporting third-quarter results that fell well short of analyst estimates.Carnival has been heavily discounting and ramping up advertisements to attract passengers after a long pandemic-led interval. It also has a higher exposure to the mass-market category that has been more affected by inflation.All the weak results and warnings seen this week have left investors cautious heading into October when the bulk of companies report results, said CFRA’s Nelson. More

Good evening,The adage that a week is a long time in politics has never appeared more apt.Can it be just seven days since we reported on the UK’s “mini” Budget? A fiscal statement that unleashed chaos in financial markets, stinging criticism from the IMF and an emergency £65bn intervention from the Bank of England, leaving Brits fearing implications for their mortgages and pensions and the Tories getting hammered in opinion polls.But first, some better news for the UK government. New GDP data this morning showed the economy improving in the second quarter, lessening fears of recession. However, significant revisions to earlier data show the UK is now the only G7 economy that remains smaller than it was before the pandemic.One of the big criticisms of last week’s package was the lack of any independent scrutiny from the Office for Budget Responsibility. Prime minister Liz Truss and her chancellor Kwasi Kwarteng tried to make amends today by meeting OBR officials in an effort to reassure markets that they were serious about bringing down Britain’s debt.The financial shockwaves from the sell-off in UK gilts have been felt far beyond Britain, sparking big swings in US and European bonds in what one market participant described as the “tail wagging the dog”. UK pension funds are still caught up in the chaos. (If you want to go deeper on the implications for markets, try Rob Armstrong’s Unhedged newsletter: Five lessons from Britain’s bad week.)The political repercussions are also huge. On taking office, Truss said she was prepared to be unpopular, which is just as well. The Tory leader heads to her party conference this weekend — just as swingeing new energy price rises take effect — facing a struggle to contain frustration both from within her ranks and from the wider UK electorate, which could yet get worse if a new round of austerity is seen as the way to balance the books.Truss is sure her government’s reforms will eventually deliver in the form of improved growth and points to a generous package of help on energy bills for households and businesses.But, as economics editor Chris Giles points out, the prime minister’s experiment has, so far at least, failed to take account of unforeseen circumstances in the real world.It is not wise to denigrate economic orthodoxy, he argues, “nor to sack the respected top Treasury civil servant, nor to refuse to allow independent assessment of the public finances. In fact, the past week has shown the only problem with the economic orthodoxy is its name. Call it knowledge and experience instead”.UK financial crisis: full coverageLatest newsGerman energy support plan sparks ‘animosity’ within EUUS stocks on track for longest run of quarterly declines since 2008Burkina Faso president calls for calm as coup fears growFor up-to-the-minute news updates, visit our live blogNeed to know: the economyEurozone inflation hit a new high of 10 per cent in the year to September, up from 9.1 per cent in August. Energy prices rose a whopping 40.8 per cent and food by 11.8 per cent, but stripping out these volatile items left “core” inflation at 4.8 per cent, up from 4.3 per cent in August.Inflation in Germany, the bloc’s biggest economy, hit 10.9 per cent. Economists think the country, which yesterday announced a €200bn energy aid package, will enter recession next year. Latest for the UK and EuropeThe EU is ploughing ahead with imposing new sanctions on Russia after Moscow annexed four Ukrainian regions, including a price cap on Russian oil, a ban on EU individuals serving on boards of Russian state-owned enterprises and new measures targeting individuals. Brussels puts the hit to Russian revenues at €7bn a year.EDF Energy is considering postponing the closure of two of the UK’s five remaining nuclear power plants at Hartlepool and Heysham to buttress the country’s energy supplies. Our Big Read looks at the EU’s emergency plan for winter. Global latestPolls suggest Luiz Inácio Lula da Silva is on track for victory in Brazil’s presidential election on Sunday amid concerns that incumbent Jair Bolsonaro may contest the result if he loses. “The world’s tenth-largest economy deserves a better political class” is the view of the FT Editorial Board. Watch our new film on the country’s most important choice since its return to democracy in 1985.

Video: Brazil: a nation divided | FT Film

Lebanon is to re-peg its currency for the first time in 25 years, moving it closer to the black market value, in an effort to restore confidence in its financial system. Since the start of the country’s financial meltdown in October 2019, the Lebanese pound has shrunk by more than 95 per cent.Need to know: businessCineworld said ticket sales were unlikely to recover to pre-pandemic levels for at least two years. The world’s second-largest cinema chain, which recently filed for Chapter 11 bankruptcy, has been hit by the rise of streaming services and a dearth of new blockbuster movies.The strength of the US dollar is piling pressure on international airlines, which raise revenue in local currencies but pay much of their costs in greenbacks. Fares, which have already surged after the ending of border restrictions, could edge up even further.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

H&M, the world’s second-largest retailer, reported a plunge in quarterly profits after being hit by the closure of its Russian business and surging costs. Fellow clothes seller Next became the latest UK company to cut its forecasts and warn of the effect of the falling pound.The market turmoil of recent days has added to fears about the health of the UK stock market, which is already suffering from a wave of takeovers and a collapse in initial public offerings. Pension funds and insurers have also been “spooked” about committing cash to UK-focused private equity groups.The UK car industry is pleading for more help with their £100mn jump in energy bills. Our Big Read examines the prospects of Britishvolt, which aims to spearhead development of batteries for electric vehicles. Chinese carmaker Geely has taken an 8 per cent stake in Aston Martin.A cost-of-dying crisis? UK funeral provider Dignity has been hit by the impact of surging energy prices on cremations.Science round-upUK health chiefs have warned of a potential “twindemic” of coronavirus and flu this winter unless people get vaccinated. The dominant flu virus worldwide is H3N2, a subtype associated with more severe disease.Our Behind the Money podcast discusses who’s going to pay for the next Covid vaccines as experts say the US isn’t doing enough to support their development.Carlo Rovelli, the physicist know for making complex ideas seem simple, tells the FT that “science is not just about writing equations. It’s about reconceptualising the world”.And in some more out-of-this-world news: Nasa successfully smashed a satellite into an asteroid to deflect its course in a test of new technology that could potentially save the earth from destruction.IMPACT SUCCESS! Watch from #DARTMIssion’s DRACO Camera, as the vending machine-sized spacecraft successfully collides with asteroid Dimorphos, which is the size of a football stadium and poses no threat to Earth. pic.twitter.com/7bXipPkjWD— NASA (@NASA) September 26, 2022
Get the latest worldwide picture with our vaccine trackerSome good news . . . New fundraising opportunities have opened up in this weekend’s London Marathon after assisted wheelchair participants were allowed to race for the first time.

Competitors in the 2010 London Marathon. Until 2022, wheelchair participants were not allowed to be assisted during the race © Tom Hevezi/AP More

In a round of interviews, the prime minister showed little sympathy for the pain that high interest rates could inflict on mortgage holders, critics said.LONDON — For Prime Minister Liz Truss, it was a chance to steady the waters after days of turmoil in the financial markets over her new fiscal plan: eight rapid-fire interviews with local BBC radio stations from Leeds to Nottingham.By the time Ms. Truss signed off from the last one on Thursday morning, her political woes had multiplied, leaving her new government in a state of disarray almost without precedent in recent British politics.She was, critics said, robotic in defending a tax-cut plan that had been eviscerated by the markets, and showed little sympathy for the pain that high interest rates could inflict on mortgage holders. One host described her as a “reverse Robin Hood.” A listener on another station asked, “Are you ashamed of what you’ve done?”Barely three weeks into her job, Ms. Truss has suffered a dizzying loss of public support. Her Conservative Party now trails the opposition Labour Party by 33 percentage points, according to a new poll by the market research firm YouGov. That is the largest Labour lead since Tony Blair’s early days as prime minister in 1998, and the kind of gap that usually results in a landslide election defeat.Her plunging poll numbers have badly damaged Ms. Truss’s standing in her party, which is gathering on Sunday in Birmingham for what promises to be an anxious annual conference. Some speak openly of the party ousting her before the next election, though the mechanics for doing that remain complicated.“This is by far the biggest and swiftest hit to a party’s opinion poll rating that British politics has ever seen,” said Tim Bale, a professor of politics at Queen Mary University of London. “For Tory MPs, this is like realizing on your wedding night that you’ve made a truly terrible mistake.”Matthew Goodwin, a politics professor at Kent University and an expert on the Tory Party, said, “I can’t think in my lifetime of any British prime minister who has mismanaged her first few weeks in office like Liz Truss.”What makes Ms. Truss’s predicament so difficult is that none of the escape hatches are appealing. Reversing some of her tax cuts — particularly the one for the top income bracket of people earning more than 150,000 pounds, or about $164,000, a year — would mollify the markets and probably some voters.Tax cuts announced last week by Kwasi Kwarteng, Britain’s chancellor of the Exchequer, threw the markets into turmoil.Clodagh Kilcoyne/ReutersBut it would be a heavy psychological blow for a leader who ran her campaign, and has built her government, on the conviction that tax cuts and supply-side policies will reignite growth. Giving that up, Professor Bale said, would vitiate the ideological rationale of her government and potentially turn her into a lame-duck leader until the next election, which she will have to call by early 2025.Sticking to her guns, which has been Ms. Truss’s response so far, leaves open the chance that Britain’s economy will pick up by the time she faces voters. But the stubborn threat of inflation all but guarantees that the Bank of England, Britain’s central bank, will keep raising interest rates. That will hurt people who need to refinance home mortgages and likely throw the broader economy into a recession.More on Politics in BritainPrime Minister Liz Truss was chosen by a divided British Conservative Party to lead a country facing the gravest economic crisis in a generation.A Domestic Push: After a period of mourning for the death of Queen Elizabeth II, the new government led by Ms. Truss began to work in earnest, announcing several initiatives to address Britain’s economic and social problems.A Turn Toward Thatcherism: Ms. Truss bet on a heavy dose of tax cuts, deregulation and free-market economics to reignite growth. The negative reaction from financial markets underscored the extent of the gamble.Seizing the Moment: Accusing Ms. Truss of losing control of Britain’s economy, the leader of the opposition Labour Party, Keir Starmer, staked his claim as the guardian of sound fiscal policy.Energy Policies: The British government said it would freeze electric and gas bills for households and cut energy costs for companies in an effort to mitigate the effects of Russia’s restriction of gas supplies to Europe.When she was asked by BBC Radio Stoke about her fiscal plan’s impact on the housing market, Ms. Truss paused before saying, “Interest rates are a matter for the independent Bank of England.” She added that “interest rates have been rising around the world” and blamed much of the crisis on Russia’s war in Ukraine.For the last few days, the bank has actually helped Ms. Truss by intervening in the market to buy British government bonds. That brought down interest rates and strengthened the pound, which had tumbled to its lowest level against the dollar since 1985. On Friday, the pound traded up to $1.11.But the intervention, which was driven by fears of the damage done to British pension funds by the turbulent market, has put the Bank of England in an awkward position, economists said. It runs counter to the bank’s monetary policy of raising interest rates to cool inflationary pressures.“The bank has had to reverse course on its objectives practically overnight,” said Eswar Prasad, a professor of economics at Cornell University. “It looks like the bank is being forced to clean up the adverse consequences of the U.K. Treasury’s actions.”“This could have some longer-term implications for the bank’s independence, credibility, and effectiveness,” Professor Prasad continued. “That really hampers it in its ability to fulfill its objectives.”Once the Bank of England completes its bond-buying program on Oct. 14, economists said they expected it to revert to its tighter monetary policy, which would suggest another increase in interest rates at its November meeting. The only government action that could forestall, or even moderate a sharp spike in rates, economists said, would be if the government reversed one of more of its tax cuts.“Absent that U-turn, the bank is going to have to raise interest rates a lot,” said Adam S. Posen, who served on the Bank of England’s monetary policy committee. He said the bank needed to curb both the inflation from an expansionary fiscal budget and the additional inflation caused by a devalued pound.Once the Bank of England completes its bond buying program, economists expect it to revert to its tighter monetary policy by possibly raising interest rates at its November meeting.Hannah Mckay/ReutersBeyond the tug-of-war between fiscal and monetary policy, critics say Ms. Truss faces a more elemental problem: her chancellor of the Exchequer, Kwasi Kwarteng, has lost the faith of the markets in his economic stewardship.That is partly because when Mr. Kwarteng announced the tax cuts last week, he did not submit the package to the scrutiny that a government budget normally receives. That fed fears that the tax cuts were “unfunded,” meaning that they would not be matched with cuts in spending and so would require massive borrowing.On Friday, Mr. Kwarteng and Ms. Truss met at Downing Street with officials from the government’s forecasting agency, the Office of Budget Responsibility — a move designed to signal they now welcomed the scrutiny. The office will submit its projections for the cost of the fiscal program and its effect on Britain’s growth on Oct. 7, but the government will not publish the numbers until Nov. 23.For Ms. Truss, the political fallout from her program’s botched rollout has been profound. Political analysts point out that she won the support of only a third of Conservative Party lawmakers in the first stage of the leadership contest. Now, the collapsing polls have left the lawmakers angry, fearful, and divided.Unless the trends are reversed, many of the party’s members in Parliament will be swept out of their seats in the next election, particularly in the “red wall” districts of the Midlands and the North, where Ms. Truss’s predecessor, Boris Johnson, lured traditional Labour voters to switch to the Tories with his promise to “Get Brexit done.”That realignment of British politics is in jeopardy. Professor Goodwin, of the University of Kent, said these voters did not want Ms. Truss’s low-tax, neoliberal economic policies. Adding to the alienation, he said, she was determined to relax immigration laws, another core issue for working-class voters.“We’re seeing the complete implosion of the Conservative vote,” Professor Goodwin said. “They’re losing middle-class voters who are alienated by Brexit, and working-class voters who are alienated by their economic policy.”For all the hand-wringing, it is not immediately clear what the Tories can do about it. Three months after evicting Mr. Johnson from Downing Street, few people want to go through with another protracted, divisive leadership contest.Professor Bale said another option would be for the party to settle on a consensus alternative to Ms. Truss and then pressure her to step down, so the new leader could be crowned without any delay. The problem with this scenario, he said, is a lack of obvious candidates to step into the role of the party’s savior. More

The second-in-command at the Federal Reserve said the US central bank was paying attention to tumult in global markets caused by monetary policy tightening, but insisted rates must still keep rising to combat inflation.Lael Brainard, Fed vice-chair, acknowledged rate rises across the world — a movement largely led by the Fed — would affect highly indebted emerging markets, with rapidly rising rates potentially causing instability.“As monetary policy tightens globally to combat high inflation, it is important to consider how cross-border spillovers and spillbacks might interact with financial vulnerabilities,” Brainard said on Friday. She added that the Fed was “attentive” to such vulnerabilities, which “could be exacerbated by the advent of additional adverse shocks”.At the same conference, hosted jointly by the Fed and its New York branch, Agustín Carstens, general manager of the Bank for International Settlements — the umbrella body for central banks — urged policymakers to stick with their campaigns to tighten monetary policy.“When you are flying an airplane, yes there might be some turbulence [but] you don’t abort the direction of your flight unless you really face something completely unexpected,” he said.The Fed is considering whether to carry out what would be its fourth consecutive 0.75 percentage point rate rise at its next policy meeting in November. More generally, the round of interest rate rises and bond sell-offs by central banks across the world has resulted in a surge in borrowing costs and a retreat from risky assets such as equities.Emerging market stocks have tumbled 29 per cent in dollar terms this year, leaving them on track for the biggest drop since the global financial crisis in 2008, according to a broad gauge by index provider MSCI. The company’s index of developing economy currencies is down 8.4 per cent this year.Global financial markets have also whipsawed this week as a result of turmoil in the UK related to the government’s tax cuts and borrowing plan, as well as broader concerns about how aggressively the Fed will need to stamp out the worst inflation problem in four decades.Asked about the fallout from the UK this week, Carstens said fiscal and monetary policy needed to be co-ordinated and have some “congruency”.On the same panel, Claudia Buch, vice-president of Germany’s Bundesbank, said the situation also underscored the need for “surveillance of the entire financial sector” to identify potential risks.Cartstens said: “We need to develop the discipline to act in a more forceful way when we are in peace times.”A chief concern for policymakers is the implication of rapidly rising interest rates on highly indebted countries and companies.The IMF and other multilateral organisations have repeatedly warned about the acute risks confronting emerging and developing economies, many of which are saddled with large stocks of debt, whose servicing costs have ballooned as global interest rates have risen.In her remarks, Brainard said fears about debt sustainability could propel “deleveraging dynamics”, such as the sell-off of assets in countries with high sovereign or corporate debt levels.But she underscored the Fed’s commitment to “avoiding pulling back prematurely” from higher interest rates.In August, the Fed’s preferred inflation gauge — the core personal consumption expenditures price index — increased 0.6 per cent and is now running at an annual pace of 4.9 per cent. This compares with its 2 per cent inflation target.Brainard warned the risk of additional inflationary shocks “cannot be ruled out” and emphasised that the Fed met regularly with its counterparts across the world to “take into account cross-border spillovers and financial vulnerabilities in our respective forecasts, risk scenarios and policy deliberation”.The Fed vice-chair reiterated that “at some point” it would need to consider if its monetary tightening went too far. She argued the effects of the policy would take time to filter through the economy and that uncertainty about how far rates needed to rise was high.Brainard highlighted the impact of tighter US monetary policy on demand for foreign products, which means that those countries’ economies are reined in not just by interest rate rises at home but also by reduced US appetite for their goods.“The same is true in reverse: tightening in large jurisdictions abroad amplifies US tightening by damping foreign demand for US products,” she added. More

The personal consumption expenditures price index, which the Fed targets at 2%, rose 6.2% in August from a year earlier, the Commerce Department reported. Underlying inflation, as measured by a core reading that excludes food and energy prices, rose 4.9% from 4.7% previously. Even before the report the Fed was widely expected to deliver a fourth straight 75-basis-point interest rate hike when officials meet early next month. So far this year policymakers have increased their benchmark policy rate by 3 full percentage points to a range of 3%-3.25%, and have signaled they expect to deliver another 1.5 percentage points by early next year, and then keep rates there through 2023 to slow the economy and undercut price pressures that have not been this high in 40 years.”What we need to see is decreasing inflation on a sequential basis and we’re just not seeing that yet,” said Art Hogan, chief market strategist at B. Riley Wealth. More

Core inflation rose 4.9% from a year ago in August and 0.6% on a monthly basis, according to a measure the Federal Reserve watches closely.
Personal income rose 0.3%, the same as July and in line with the estimate. Spending rose 0.4% after declining 0.2% the month before.
Headline inflation, including food and energy, also accelerated, despite a sharp drop in gasoline prices.

Inflation in August was stronger than expected despite the Federal Reserve’s efforts to bring down prices, according to data Friday that the central bank follows closely.
The personal consumption expenditures price index excluding food and energy rose 0.6% for the month after being flat in July. That was faster than the 0.5% Dow Jones estimate and another indication that inflation is broadening.

On a year-over-year basis, core PCE increased 4.9%, more than the 4.7% estimate and up from 4.7% the previous month.
Including gas and energy, headline PCE increased 0.3% in August, compared with a decline of 0.1% in July. It rose even with a sharp decline in gas prices that took the cost at the pump well below the nominal record above $5 a gallon earlier in the summer.
The Fed generally favors core PCE as the broadest indicator of where prices are heading as it adjusts for consumer behavior. In the case of either core or headline, the data Friday from the Commerce Department shows inflation running well above the central bank’s 2% long-run target.
Outside the inflation data, the numbers showed that income and spending continues to grow.
Personal income rose 0.3% in August, the same as July and in line with the estimate. Spending rose 0.4% after declining 0.2% the month before, beating the 0.3% expectation. After-tax income increased just 0.1% after rising 0.5% the previous month, while inflation adjusted spending rose 0.1%.

The inflation data reflected the shift in spending from goods back to services, which saw respective gains of 0.3% and 0.6% on the month. Food prices rose 0.8% while energy prices slid 5.5%. Housing and utilities prices were up 1% while health care rose 0.6%.
Markets showed little reaction to the news, with stock futures pointing to a slightly higher open on Wall Street.
The market, however, has been highly volatile as investors deal with the highest inflation since the early 1980s. To combat inflation, the Federal Reserve has enacted a series of interest rate increases this year totaling 3 percentage points, taking rates to their highest levels since early 2008.
However, with data showing that the rate hikes have yet to work their way through to bringing down prices, Fed officials have remained vigilant about the need to keep tightening policy.
Fed Chair Lael Brainard in a speech Friday morning cautioned against pulling back “prematurely,” saying rates will remain higher “for some time” until inflation is brought under control.

WATCH LIVEWATCH IN THE APP More

NEW YORK (Reuters) – Federal Reserve Vice Chair Lael Brainard said on Friday the U.S. central bank will need to maintain higher interest rates for some time as part of its effort to lower high levels of inflation and must guard against lowering rates prematurely. “Monetary policy is focused on restoring price stability in a high-inflation environment,” Brainard said in prepared remarks for a speech to a conference in New York that took stock of how financial stability is being affected globally by the effort to combat inflation. “It will take time for the full effect of tighter financial conditions” caused by rate rises to work its way through the economy and lower price pressures, Brainard said. As that happens, “monetary policy will need to be restrictive for some time to have confidence that inflation is moving back to target. For these reasons, we are committed to avoiding pulling back prematurely.”The Fed’s second-in-command noted it’s far too soon to declare victory over price pressures. “Inflation is very high in the United States and abroad, and the risk of additional inflationary shocks cannot be ruled out,” she said. Brainard spoke in the wake of last week’s Fed policy meeting. At that meeting, policymakers raised their overnight target rate by three-quarters of a percentage point to a range of between 3.00% and 3.25%, as part of their aggressive campaign to lower the highest levels of inflation seen in the United States in 40 years. Officials also penciled in more rate rises spilling into next year. Brainard noted the destination point of Fed rate hikes is not clear at this time. “Uncertainty is currently high, and there are a range of estimates around the appropriate destination of the target range for the cycle,” Brainard said. The Fed will have to feel its way forward and see how its rate rises work through the economy, and will act “deliberately and in a data-dependent manner” with future policy actions. Brainard said in her prepared remarks that the Fed is closely watching how its policy actions affect the global economy and financial system. Financial markets across the world have been facing high levels of volatility and the dollar’s value against key currencies has surged, fueling concern that the Fed’s domestic mission could cause major problems elsewhere. “We are attentive to financial vulnerabilities that could be exacerbated by the advent of additional adverse shocks,” Brainard said. She laid out areas where parts of the world could run into trouble, but did not say that any particular problems appeared imminent or of a magnitude that would change the Fed’s current monetary policy path. More