Economy

The European Central Bank is likely to raise interest rates by 0.75 percentage points next month ahead of a further move in December to a level that no longer stimulates economic growth, several of its policymakers said on Wednesday.“We will do what we have to do, which is to continue hiking interest rates in the next several meetings,” ECB president Christine Lagarde told an Atlantic Council event in Frankfurt, adding that the bank’s “first destination” was to lift rates to the “neutral rate” that neither boosted nor restricted growth. The ECB has raised its deposit rate at its past two meetings from minus 0.5 per cent to 0.75 per cent in an effort to tackle record eurozone inflation. But Lagarde said this level was still below the neutral rate, which officials have estimated is 1-2 per cent in the euro area. Other members of the ECB’s rate-setting governing council also spoke out on Wednesday to say it could raise rates by 0.75 percentage points for a second consecutive meeting next month, followed by a further rise before the end of the year.“There is a case for taking a decision on another significant rate hike, be it 75 or 50 basis points or something else,” Finnish central bank chief Olli Rehn, a moderate on the ECB council, told Reuters. “There’s a stronger case for front-loading and determined action.”Peter Kažimír, Slovakia’s central bank governor and a more hawkish ECB council member, said: “Seventy-five basis points is a very good candidate for [us to] maintain the pace of tightening, but it’s also necessary to wait for fresh data.” Austrian central bank chief Robert Holzmann, another hawk, also expressed his support for a 75 basis-points rise.Eurozone government bond prices have fallen sharply this week on expectations that the ECB could raise its deposit rate higher than 3 per cent next year. Goldman Sachs has predicted two consecutive 0.75 percentage point rate rises in the final two meetings of this year. But bond prices, which move inversely to yields, rallied on Wednesday with the rate-sensitive German two-year bond yield dropping below 2 per cent to as low as 1.9 per cent after Lagarde spoke.“Our primary goal is not to reduce growth, our primary goal is not to put people on the dole, our primary goal is not to create a recession, our primary objective is price stability and we have to deliver on that,” Lagarde said. “If we’re not delivering it would hurt the economy far more than if we do deliver.”The ECB defines price stability as inflation of 2 per cent, but price growth in the euro area is expected to rise to a new record of 9.7 per cent when September data is released on Friday.Lagarde said inflation had been “more persistent and of a magnitude that nobody expected”. There have been some worrying signs for the ECB recently. Hourly salaries increased 4.1 per cent in the eurozone in the second quarter from a year ago — the strongest surge in at least a decade. The central bank’s own survey of consumers in July found on average they expected inflation to be 7 per cent in a year’s time — up from 5 per cent in February.Trade unions are also demanding much higher wages. IG Metall, Germany’s biggest union, has demanded an annual wage rise of 8 per cent for 3.8mn metal and electrical workers — among them many in the country’s huge car industry. In Austria, unions this month demanded a 10.6 per cent wage increase for the nation’s 200,000 metal workers. More

LONDON (Reuters) – If Moscow carries out a threat to sanction Ukrainian energy firm Naftogaz one of the last functioning Russian gas supply routes to Europe could be shut, exacerbating the energy crisis just as the crucial winter heating season begins. Naftogaz initiated a new arbitration proceeding against Gazprom (MCX:GAZP) earlier this month, saying the Russian company has not paid transit fees for sending its gas to Europe via pipelines that cross Ukraine. Gazprom this week rejected all the claims, adding that Russia may introduce sanctions against Naftogaz in the case that it further pursues the matter. Such sanctions would prohibit Gazprom from paying Ukraine transit fees, which analysts say could end Russian gas flows to Europe via the country.Yuriy Vitrenko, chief executive of Naftogaz, says the company will continue with arbitration proceedings against Gazprom regardless.”(Sanctions) would make into reality the worst-case scenario that European governments have been preparing for all summer, a European gas market without Russian gas,” said Natasha Fielding, head of EMEA gas pricing at Argus Media.”Transit through Ukraine is the only Russian gas delivery route to Europe still in use besides the Turkish Stream pipeline, which serves southeast European countries,” she added.Dutch wholesale gas prices, the European benchmark, shot up after Gazprom’s talk of sanctions on Tuesday, and rallied as much as 13% on Wednesday to stand around 120% higher since the start of the year. Gas flows via the only operational Ukraine transit route through Sudzha are currently around 42 million cubic metres a day. Kyiv had already in May suspended the Sokhranivka route which delivered almost a third of the fuel piped from Russia to Europe through Ukraine, declaring force majeure.Leaks detected on the Nord Stream 1 pipeline this week make a resumption of flows on that route unlikely after they were cut to a fraction of capacity and finally suspended last month with Moscow citing the need for maintenance.Meanwhile the Yamal-Europe pipeline has been flowing eastbound from Germany to Poland for much of this year, although it has been in stop-start mode for weeks. WINTER RISKShould the Sudzha flows come to a halt, the only Russian gas being piped to Europe would be via Turkey and the Black Sea through TurkStream, which has an annual capacity of around 31.5 billion cubic metres.Gazprom ramped up supply to Hungary via the pipeline in August but overall Europe has been preparing for months for a complete stoppage of Russian gas deliveries this winter. Governments have been scrambling to diversify supply, buying more liquefied natural gas from suppliers such as the United States, Qatar and Egypt, as well as introducing measures to curb demand domestically and save energy.As a result, European gas storage was 88% full as of Sept. 26, although there are variations between countries.”There needs to be a combination of ‘ifs’ to threaten Europe’s energy supplies this winter, including a harsh winter, prolonged French nuclear outages, and other infrastructure issues,” said Norbert Rücker, head of economics and next generation research at investment bank Julius Baer.However, a greater risk remains for next winter as countries will end this year’s winter gas season with very low stocks and have less Russian pipeline gas available than ever before to replenish stocks during the spring and summer. More

Self-driving eighteen-wheelers are now on highways in states like California and Texas. But there are still human “safety drivers” behind the wheel. What will it take to get them out?This article is part of our series on the Future of Transportation, which is exploring innovations and challenges that affect how we move about the world.In March, a self-driving eighteen-wheeler spent more than five straight days hauling goods between Dallas and Atlanta. Running around the clock, it traveled more than 6,300 miles, making four round trips and delivering eight loads of freight.The result of a partnership between Kodiak Robotics, a self-driving start-up, and U.S. Xpress, a traditional trucking company, this five-day drive demonstrated the enormous potential of autonomous trucks. A traditional truck, whose lone driver must stop and rest each day, would need more than 10 days to deliver the same freight.But the drive also showed that the technology is not yet ready to realize its potential. Each day, Kodiak rotated a new team of specialists into the cab of its truck, so that someone could take control of the vehicle if anything went wrong. These “safety drivers” grabbed the wheel multiple times.Tech start-ups like Kodiak have spent years building and testing self-driving trucks, and companies across the trucking industry are keen to reap the benefits. At a time when the global supply chain is struggling to deliver goods as efficiently as businesses and consumers now demand, autonomous trucks could alleviate bottlenecks and reduce costs.Now comes the most difficult stretch in this quest to automate freight delivery: getting these trucks on the road without anyone behind the wheel.Companies like Kodiak know the technology is a long way from the moment trucks can drive anywhere on their own. So they are looking for ways to deploy self-driving trucks solely on highways, whose long, uninterrupted stretches are easier to navigate than city streets teeming with stop-and-go traffic.“Highways are a more structured environment,” said Alex Rodrigues, chief executive of the self-driving-truck start-up Embark. “You know where every car is supposed to be going. They’re in lanes. They’re headed in the same direction.”Restricting these trucks to the highway also plays to their strengths. “The biggest problems for long-haul truckers are fatigue, distraction and boredom,” Mr. Rodrigues explained on a recent afternoon as one of his company’s trucks cruised down a highway in Northern California. “Robots don’t have a problem with any of that.”It’s a sound strategy, but even this will require years of additional development.Part of the challenge is technical. Though self-driving trucks can handle most of what happens on a highway — merging into traffic from an on-ramp, changing lanes, slowing for cars stopped on the shoulder — companies are still working to ensure they can respond to less common situations, like a sudden three-car pileup.As he continued down the highway, Mr. Rodrigues said his company has yet to perfect what he calls evasive maneuvers. “If there is an accident in the road right in front of the vehicle,” he explained, “it has to stop itself quickly.” For this and other reasons, most companies do not plan on removing safety drivers from their trucks until at least 2024. In many states, they will need explicit approval from regulators to do so.But deploying these trucks is also a logistical challenge — one that will require significant changes across the trucking industry.In shuttling goods between Dallas and Atlanta, Kodiak’s truck did not drive into either city. It drove to spots just off the highway where it could unload its cargo and refuel before making the return trip. Then traditional trucks picked up the cargo and drove “the last mile” or final leg of the delivery.In order to deploy autonomous trucks on a large scale, companies must first build a network of these “transfer hubs.” With an eye toward this future, Kodiak recently inked a partnership with Pilot, a company that operates traditional truck stops across the country. Today, these are places where truck drivers can shower and rest and grab a bite to eat. The hope is that they can also serve as transfer hubs for driverless trucks.“The industry can’t afford to build this kind of infrastructure from scratch,” said Kodiak’s chief executive, Don Burnette. “We have to find ways of working with the existing infrastructure.”They must also consider the impact on truck drivers: They aim to make long-haul drivers obsolete, but they will need more drivers for the short haul.Executives like Mr. Burnette and Mr. Rodrigues believe that drivers will happily move from one job to the other. The turnover rate among long-haul drivers is roughly 95 percent, meaning the average company replaces nearly its entire work force each year. It is a stressful, monotonous job that keeps people away from home for days on end. If they switch to city driving, they can work shorter hours and stay close to home.But a recent study from researchers at Carnegie Mellon University and the University of Michigan questions whether the transition will be as smooth as many expect. Truck drivers are typically paid by the mile. A shift to shorter trips, the study says, could slash the number of miles traveled and reduce wages.Certainly, some drivers fear they cannot make as much money driving solely in cities. Others are loath to give up their time on the highway.“There are many drivers like me,” said Cannon Bryan, a 28-year-old long-haul trucker from Texas. “I wasn’t born in the city. I wasn’t raised in the city. I hate city driving. I enjoy picking up a load in Dallas and driving to Grand Rapids, Mich.”Building and deploying self-driving trucks is far from easy. And it is enormously expensive — on the order of hundreds of millions of dollars a year. TuSimple, a self-driving truck company, has faced concerns that the technology is unsafe after federal regulators revealed that one of its trucks had been involved in an accident. Aurora, a self-driving technology company with a particularly impressive pedigree, is facing challenging market conditions and has floated the possibility of a sale to big names like Apple or Microsoft, according to a report from Bloomberg News.If these companies can indeed get drivers out of their vehicles, this raises new questions. How will driverless trucks handle roadside inspections? How will they set up the reflective triangles that warn other motorists when a truck has pulled to the shoulder? How will they deal with blown tires and repairs?Eventually, the industry will also embrace electric trucks powered by battery rather than fossil fuel, and this will raise still more questions for autonomous trucking. Where and how will the batteries get recharged? Won’t this prevent self-driving trucks from running 24 hours a day, as the industry has promised?“There are so many issues that in reality are far more complex than they might seem on paper,” said Steve Viscelli, an economic and political sociologist at the University of Pennsylvania who specializes in trucking. “Though the developers and their partners are putting a lot of effort into thinking this through, many of the questions about what needs to change cannot yet be answered. We are going to have to see what reality looks like.”Some solutions will be technical, others logistical. The start-up Embark plans to build a roaming work force of “guardians” who will locate trucks when things go wrong and call for repairs as needed.The good news for the labor market is that this technology will create jobs even as it removes them. And though experts say that more jobs will ultimately be lost than gained, this will not happen soon. Long-haul truckers will have years to prepare for a new life. Any rollout will be gradual.“Just when you think this technology is almost here,” said Tom Schmitt, the chief executive of Forward Air, a trucking company that just started a test with Kodiak’s self-driving trucks, “it is still five years away.” More

Having badly misjudged the strength of inflation over the past year, central bankers are now anxious to convey the message that they are determined not to repeat the mistakes of the 1970s. So much the better, you might think, because that era told us that the long-term costs of allowing inflation to become entrenched far outweigh the short-term ones of bringing it under control.Yet while the current threat of stagflation rhymes with the 1970s, the wider economic and financial context when Federal Reserve chair Paul Volcker started tightening policy in 1979 differed notably from today. Inflation was much higher and the advanced economies looked very different. It is important, then, to ponder the likely new mistakes of the 2020s.The single most important difference, in terms of steering a course back to stable prices, relates to the huge accumulation of debt since that time. In the US, gross public debt as a percentage of gross domestic product rose from 34.3 per cent in 1982 to 127.0 per cent in 2021. A similar trend was apparent across the developed world. Debt levels in the corporate and household sectors were also on a rising trend during that period. But why?One fundamental cause was the supply-side shock whereby China, India and the eastern Europeans joined the world economy, cheapening labour relative to capital. This resulted in less investment and weaker demand in the advanced economies. Central banks compensated for this with looser monetary policy that distorted asset prices upwards relative to goods prices while securing debt dependent growth. Meantime, inflation remained quiescent, making it easy for central banks to keep within inflation targets introduced in the post-Volcker era.Morally hazardous low interest rates encouraged further borrowing — an effect that ratcheted up after the 2007-09 financial crisis on the back of ultra-low and negative interest rates across the world, along with the central banks’ asset purchasing programmes. And then fiscal support during the pandemic resulted in the largest one-year debt surge since the second world war. The IMF estimates that public plus non-financial private debt rose by 28 percentage points in 2020 to 256 per cent of global GDP.Such borrowing was relatively painless with ultra-low rates. It now becomes a debilitating vulnerability as pandemic-induced deficits rise and central banks raise interest rates and shrink their balance sheets to address burgeoning inflation. In the public sector borrowing costs naturally increase. Where central banks have engaged in large-scale asset purchases, higher interest rates will also reduce central bank remittances to governments.The central banks have in effect replaced long-term debt with debt pegged to the overnight interest rate — the rate on bank reserves that financed their asset buying. The Bank for International Settlements says that as a result, in the largest advanced economies, as much as 30-50 per cent of marketable government debt is in effect overnight. In the process, losses on the sale of assets as bond yields rise and prices fall could raise politically awkward questions around whether central bank balance sheets should be strengthened with taxpayers’ money.In the private sector, tighter policy brings rising debt servicing costs, with falling house and securities prices. The globalisation of capital flows since the 1980s also means that over-indebted emerging markets will be particularly hard hit by rising rates.Changes in financial structure since Volcker’s day point to looming financial instability. The growth of the opaque derivatives markets, the rise of under-regulated shadow banks and a post-crisis regulatory environment that constrains banks’ ability to take securities on to their balance sheet in times of stress are unnerving features of modern markets. As Michael Howell of CrossBorder Capital has pointed out, the chief role of the financial system is no longer to take deposits and make loans but to refinance the debt that sustains global growth and consumption. This complex system is increasingly dependent on shaky collateral.The successful control of inflation requires pre-emptive action. Yet central banks declare that they are data dependent and focus closely on inflation and employment numbers, which are lagging indicators. Fed chair Jay Powell, like most other central bankers, has minimal interest in money supply numbers, which are forward indicators. Tim Congdon of the University of Buckingham, whose forecasting record in relation to the current inflation is much better than that of the central banks, has noted that broad money growth in the US came to an almost complete halt in the six months to this July. We have here the perfect recipe for monetary overkill and liquidity crises. More

The writer is chief investment strategist at Charles Schwab It’s often been said that a key risk in a monetary policy tightening cycle is that the Federal Reserve hikes interest rates until something “breaks”. That raises questions of how far the Fed will now go to tackle surging inflation.Part of the reason that is cited for the central bank’s current aggressiveness is the strength of the US labour market and the potential for that to add to inflation. But a look under the hood highlights that there may already be some breakage in the labour market, not picked up by traditional headline indicators — including payroll growth and the unemployment rate.The “establishment survey” is what generates the headline payrolls number each month when the Bureau of Labor Statistics releases its US employment data. According to that survey, 315,000 jobs were added in August, which was strong, but well down from the prior month’s 526,000. Of course, counting payrolls only results in an estimate of the number of jobs created; it doesn’t measure unemployment.That’s where the US household survey comes in, from which the unemployment rate is calculated. It’s a survey of households’ members, so it counts people, and whether they’re employed or not.A recent trend picked up by the household survey is the increase in multiple job holders. If one person picks up a second or (God forbid) a third job for economic reasons, that is still counted as one employed person per the household survey. However, it’s possible those additional jobs get picked up as individual payroll jobs within the establishment survey.

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An additional sign of underlying cracks in the labour market is the falling number of full-time jobs and the very sharp inflection higher in part-time employment. The gain of 442,000 jobs in the household survey in August appeared on the surface to be strong. But that was more than all accounted for by part-time workers, with full-time jobs actually shrinking by 242,000. It was the third month in a row of declines, totalling 465,000 over that period.Another fly in the ointment of labour market statistics is associated with job openings — the most common tracker coming from the Job Openings and Labor Turnover Survey (Jolts). A key measure of labour market tightness has been the relationship between job openings and the number of unemployed people; with the former outnumbering the latter by a ratio of 2.0 to one.

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The problem is that the Jolts statistics arguably overstate the number of actual individual job openings. One of the criteria for a job opening is that there is “active recruiting” for workers by an establishment. That may include advertising, internet notices, signs, word-of-mouth “announcements”, contact with employment agencies, or setting up at a job fair or similar source of possible applicants.In addition, the pool of labour available for those jobs spans beyond just individuals who are unemployed. Potential job switchers, included in the number of people employed, should also be considered as potentially competing for those job openings. This suggests that the labour market may be less tight than conventionally believed, confirmed by recent research by the St Louis Fed.The Fed has explicitly stated that its goal is to weaken job openings, without a significant rise in the unemployment rate — a narrow opening in the needle it’s trying to thread. But the Fed also cites the need for more restrained wage growth — which is elevated by historical standards, but remains below the rate of inflation. This means real wage growth is still in negative territory.

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There is another reflection of weakening demand for labour and that is the number of hours each week companies are asking of their workers.Notwithstanding the healthy reading on August payroll growth, there was yet another reduction in the workweek, which has been flat or down in five of the six months through August. At 34.5 hours, it is tied for the lowest reading since April 2020, when the pandemic lockdown was in full force. The decline in hours worked was so significant that it resulted in the first decline this year in the index of aggregate hours worked. With labour the highest input cost for many companies, and economic growth and demand weak, the hints of weakness in the labour market are likely to foreshadow further deterioration to come. As the Fed has been pointing out, it may be a necessary ingredient in the quest to quell the surge in inflation. More

The $24tn US Treasury market has been hit with its most severe bout of turbulence since the coronavirus crisis, underscoring how big swings in international bonds and currencies and jitters over US rate rises have spooked investors. The Ice BofA Move index, which tracks fixed income market volatility, has reached its highest level since March 2020, a time when deep uncertainty about how the pandemic would affect the world economy set off massive fluctuations in US government bonds. “Right now it is all about market volatility,” said Gennadiy Goldberg, a strategist at TD Securities. “You have investors staying away because of the volatility — and investors staying away increases volatility. It is a volatility vortex.” Fixed income investors’ nerves have been frayed by a series of events most commonly seen during market crises. Japan, the world’s third-biggest economy, last week stepped in to defend the yen after the currency rapidly tumbled to a 24-year low against the dollar. Just days later, plans for big tax cuts by the UK government ignited a historic sell-off in Britain’s currency and sovereign debt markets. These international events have added to a powerful pullback in the US Treasury market that accelerated after the Federal Reserve last week delivered its third-straight 0.75 percentage point rate rise and signalled significantly tighter monetary policy to come.The 10-year Treasury yield, a key benchmark for global borrowing costs, has surged to more than 4 per cent from 3.2 per cent at the end of August, leaving it set for the biggest monthly rise since 2003. It is on track for its sharpest ever annual rise. The two-year yield, more sensitive to fluctuations in US monetary policy, has leapt 3.55 percentage points this year, which would also mark a historic increase. The big price movements have left investors wary of trading in a market that acts as the bedrock of the global financial system and is typically considered a haven during times of stress. With investors on the sidelines, liquidity in the Treasury market — the ease with which traders buy and sell — has deteriorated to its worst level since March 2020, according to a Bloomberg index. Poor liquidity tends to exacerbate price swings, worsening volatility. In a sign of how the fraught conditions are keeping some fund managers away, the US has drawn lacklustre demand at sales this week for a combined $87bn in new debt. A two-year issuance on Monday priced at a high yield of 4.29 per cent, while a five-year deal one day later priced at 4.23 per cent — both marking the highest borrowing costs for the government since 2007. The two-year debt was sold with the widest difference — or “tail” — between what was expected just before the auction and where it actually priced since the 2020 Covid-induced market ructions, said Tom Simons, a money market economist at US investment bank Jefferies.The Treasury department will auction off $36bn in seven-year notes on Wednesday. The seven-year note has struggled to attract demand in less volatile moments, so the environment this week could pose a challenge. “Until there is more certainty I think we will continue to have this ‘buyers’ strike,’” Simons said. “The markets are so crazy that it’s hard to price any kind of new [longer-dated bonds] coming into the market.”A divergence between the Fed’s own outlook for interest rate and market expectations has added to the sense of uncertainty. According to their latest projections, most Fed officials now expect the federal funds rate to rise from its current target range of 3-3.25 per cent to 4.4 per cent by year-end. By the end of 2023, Fed officials expect interest rates to stand at 4.6 per cent. Meanwhile, investors are betting that the Fed will be forced to cut interest rates next year — with expectations in the futures market of a peak of 4.5 per cent in May of 2023, with a fall to 4.4 per cent by year-end. Given persistent and broad-based price pressures, there is significant uncertainty about whether that amount of monetary tightening will be sufficient to bring inflation back down to the Fed’s 2 per cent target. Recession risks have also risen markedly, further clouding the outlook.Strong rhetoric adopted by Fed officials about the central bank’s battle against inflation has stoked further angst in the market. Many officials now agree that interest rates need to rise to a level that actively constrains the economy and stay there for an extended period.“The only other time I have seen us this united was at the beginning of the pandemic, when we knew we had to act boldly to support the economy through the pandemic and through the downturn,” said Neel Kashkari, president of the Minneapolis branch of the Fed, in an interview with the Wall Street Journal on Tuesday. “We are all united in our job to get inflation back down to 2 per cent, and we are committed to doing what we need to do in order to make that happen.” More

Typical. You take care of one cost of living shock and another turns up to take its place.The extreme gilt market reaction to UK chancellor Kwasi Kwarteng’s “fiscal event” last week, which came on the back of a package to tackle soaring energy costs, has triggered mayhem in the mortgage market. A clutch of lenders, including Virgin Money, Skipton Building Society and Halifax, stopped offering new mortgages or withdrew certain products on Monday in response to the soaring cost of funding.This isn’t 2008. The market isn’t just slamming shut because lenders lack funds. But the impact will be painful and unequally felt.Banks have been caught with products on offer that are just bad business after the surge in funding costs. The two-year swap rate, which mortgages are priced off, has jumped from under 4 per cent a few weeks ago to north of 5.5 per cent. Business that looked decent very recently is now uneconomic, particularly for those with the keenest pricing in the market.The shock has jarred some banks more than others. The biggest lenders are more likely to have hedged their funding several weeks ahead. HSBC and Santander suspended new deals on Tuesday, in part because they were inundated by demand. Halifax only pulled certain mortgages with fees, where the upfront payment has to compensate for a lower interest rate. Others, mostly challenger banks and building societies, froze everything.Make no mistake: all banks will be hiking their mortgage rates over the coming weeks. But the urgency is greater for some. Big high street names, like Barclays or NatWest, have more sticky, low-cost deposits in their funding mix. Challengers and building societies tend to be more reliant on higher-cost savings deposits and hot money that moves more frequently. That has been becoming more expensive: on Monday, the average 2-year bond rate on offer was 2.8 per cent from building societies and 3.2 per cent from challenger banks, according to Omar Keenan at Credit Suisse. For the big banks, it was just 1.6 per cent. Similarly, the Big Five banks have a loan to deposit ratio of about 80 per cent, notes Keenan. Other specialist lenders are more likely to be reliant on other sources of funding, such as the market for mortgage-backed securities.The hit to households won’t be immediate. UK borrowers are now overwhelmingly on two to five-year fixed-rate deals. There are 600,000 fixed-rate deals due to expire in the second half of this year and 1.8mn next year, according to UK Finance. If mortgage rates go up to 6 per cent, the average household refinancing a two-year deal would see monthly repayments jump over 70 per cent from £863 to £1,490, according to Pantheon Macroeconomics.More households than ever are insulated from this market shock. Outright home ownership has been steadily rising since 1990, with owner-occupiers without a mortgage outnumbering borrowers since about 2014. But those protected from the mortgage ructions are concentrated in the older age groups: 62 per cent of outright owners (roughly a third of the market) are 65 or over; 58 per cent of owners with a mortgage (another third) are aged 35 to 54. Private renters could suffer as landlords seek to pass on higher mortgage costs.Younger people, many already shut out of buying, are likely to be those who increasingly struggle to get a mortgage on affordability grounds. First-time buyers, who last year borrowed on an average income ratio of 3.58 times based on UK Finance numbers, are likely to be most affected by higher rates and tightened lending criteria, followed by home movers on 2.96 times and those remortgaging on 2.8 times.And just as with energy, poorer households will suffer most. UK Finance earlier this month looked at household “wiggle room”, or the proportion of disposable income left after mortgage repayments and basic expenditure. A 100 basis point rise in mortgage rates (and the market is pricing in close to triple that by the end of the year) left the picture for richest households barely changed, but meant a substantial deterioration in the position of those in the lowest income brackets. Even for this modest rise in rates, the trade body estimated that three in 10 could struggle to pay their bills after refinancing this year.Needless to say, these are also among the households set to benefit least from the tax cuts that helped spark this [email protected]@helentbiz More

It is important, Daly said at a symposium held jointly with the Monetary Authority of Singapore, “to navigate through this high inflation environment as carefully as we can, so that we don’t leave longer term damage to our labor market.”The Fed has been aggressively raising interest rates to bring down inflation that is more than three times its 2% target. Last week’s rate rise of 75 basis points was the central bank’s third straight increase of that size, and it signaled it would likely lift the policy rate — now in the 3%-3.25% range – to 4.4% by year-end and to 4.6% next year.Fed Chair Jerome Powell has said he expects that raising rates at that pace will push up unemployment and be painful for some households and businesses, but that ultimately it would be more painful to allow inflation to get entrenched. “Price stability is fundamental,” Daly said on Tuesday. U.S. inflation is about half due to excess demand, and about half due to constrained supply, she said, and the hope is that as the Fed raises rates to slow demand, the supply side will also heal, allowing the two to “meet in the middle.” But supply chains are still tangled and labor supply has not returned as quickly as had been hoped, she said, so the Fed may end up needing to do “a little more” on demand to make sure inflation does come down. More