Economy

SYDNEY (Reuters) – The dollar surged to a fresh two-decade high against major peers and stocks fell on Thursday after the Federal Reserve raised U.S. interest rates and forecast more hikes ahead than investors had expected.The euro sank to a 20-year low of $0.9810 after Russia ordered the mobilisation of reserve troops in an escalation of the war in Ukraine.[FRX/]S&P 500 futures were down 0.6% and the dollar was flying in early trade. The dollar index hit a 20-year high of 111.65 and the greenback’s strength sent the Aussie, kiwi and Canadian dollars down to fresh multi-year lows.Sterling hit $1.1233, its lowest in 37 years. South Korea’s won slid past the symbolic 1,400 per dollar mark for the first time since 2009. The Thai baht, Malaysian ringgit, Singapore dollar and Swedish crown all made major new lows. Japan’s Nikkei fell 1%. Hang Seng futures were flat, though the Golden Dragon index of U.S.-listed Chinese shares took a beating and fell 5.9% overnight.The Fed raised rates sharply, by 75 basis points, on Wednesday – the third such rise in a row. That takes the bank’s benchmark overnight rate target range to 3-3.25%.Projections showed officials think rates are going higher and growth is going lower and the median forecast is for the funds rate to hit 4.4% this year – higher than markets had priced and 100 bps more than the Fed projected three months ago.”The Fed is not going to stop any time soon and there’s going to be an extended period of restrictive monetary policy for at least the next year or so,” said Sally Auld, chief investment officer at wealth manager JB Were in Sydney.”What else do you buy except for the U.S. dollar at the moment?” she added, with growth clouds over Europe, Britain and China and the yen tanking as Japan holds interest rates low.The U.S. yield curve deepened its inversion in a volatile session overnight as short-end Treasuries sold and the longer end rallied as investors priced out the chance of a “soft” economic landing, and braced for damage to longer-run growth.The two-year yield rose as high as 4.1230% and was last at 4.0848%, while the 10-year yield fell 6 bps to 3.5120%. [US/]”The chances of a soft landing are likely to diminish to the extent that policy needs to be more restrictive, or restrictive for longer,” Fed Chair Jerome Powell told reporters after the rate hike announcement.HIKES AHEADCentral bank meetings in Taiwan, Japan, the Philippines, Indonesia Britain and Norway are due later in the day with hikes expected everywhere but Japan.Japan has this week driven home its commitment to ultra-dovish policy by spending more than 2 trillion yen ($13.8 billion) in the past two days to hold a 0.25% ceiling on the 10-year Japanese government bond yield. [JP/]However, even if no policy changes occur, there will be intense focus on Governor Haruhiko Kuroda’s views on the yen’s precipitous slide, as growing discomfort could hint at policy changes and dovishness could unleash further yen selling.The yen is down about 20% on the dollar this year and at 144.29 per dollar is near a 24-year low.”We see risk of USD/JPY heading to 147 in the coming months,” Rabobank strategist Jane Foley said in a note to clients.The Australian and New Zealand dollars are pinned at their lowest since mid-2020, with the Aussie down 0.3% on Thursday to $0.6611 and the kiwi down 0.4% to $0.5831.China’s yuan is on the weaker side of 7 per dollar. The U.S. dollar index hit a 20-year peak of 111.63 in the wake of the Fed hike.In commodity markets oil slid on concern higher interest rates will crimp demand. U.S. crude futures were steady in early Asia trade at $82.81 a barrel. Brent futures were at $89.83. [O/R]Wheat rose overnight on fears of wider and deeper war in Ukraine. [GRA/]($1 = 144.3800 yen) More

BRASILIA (Reuters) -Brazil’s central bank on Wednesday chose to keep interest rates unchanged, pausing an aggressive monetary tightening cycle even as U.S. and European policymakers are still racing to catch up with inflation.The bank’s rate-setting committee, known as Copom, decided by a vote of 7-to-2 to leave its benchmark Selic interest rate at 13.75% after 12 consecutive increases, as expected by 24 of 32 economists polled by Reuters.With that, policymakers likely ended what had been the world’s most aggressive rate-hiking cycle, lifting the Selic rate from a record-low 2% in March 2021 and putting Brazil ahead of many central banks that only started raising rates recently. The Federal Reserve delivered its third straight big rate increase on Wednesday and flagged another on the way this year.Brazil’s central bank decided to stop hiking rates after consumer prices registered their second straight monthly drop in August, helped by tax cuts on fuel and energy.Still, Copom’s split decision, with two committee members voting for a “residual” interest rate increase of 25 basis points, underscored lingering concerns about inflation, which hit a nearly 20-year high in Brazil just a few months ago. “The Committee reinforces that future monetary policy steps can be adjusted and will not hesitate to resume the tightening cycle if the disinflationary process does not proceed as expected,” policymakers wrote in their decision statement.José Francisco Gonçalves, chief economist at Banco Fator, said even as most of the committee voted to hold rates, their statement leaving the door open to resuming rate hikes sent a clear message about staying vigilant to price pressures.”The hawkish message to some extent replaces the 25-basis-point increase we were expecting,” he said.In a note to clients, he predicted the yield curve should adjust on Thursday to reflect interest rates only beginning to fall in the fourth quarter of 2023. Others have bet on the central bank loosening policy sooner, including Economy Minister Paulo Guedes, who predicted rate cuts in early 2023.However, central bank directors have taken a harsher tone in recent public comments, stressing it is too early to start discussing lower rates as the battle with inflation is not done. Copom’s 2023 inflation forecast was unchanged from last month, at 4.6% in Wednesday’s statement, and its 2024 outlook rose to 2.8%, from 2.7% earlier, against a 3% official target.Twelve-month inflation in Brazil ran into double digits from September 2021 to July, suffering from a post-pandemic rebound in services demand and soaring food and fuel prices after the war in Ukraine.The central bank forecast for inflation this year fell to 5.8%, from 6.8% last month, still far above the 3.5% target, with a tolerance margin of 1.5 percentage points on either side. More

Federal Reserve officials made another large rate increase and signaled more to come, pledging to quash inflation despite expected pain.The Federal Reserve raised interest rates by three-quarters of a percentage point in an attempt to lower inflation back to 2 percent.Drew Angerer/Getty ImagesFederal Reserve officials, struggling to contain the most rapid inflation in 40 years, delivered a third big rate increase on Wednesday and projected a more aggressive path ahead for monetary policy, one that would lift interest rates higher and keep them elevated longer.The Fed raised its policy interest rate by three-quarters of a percentage point, boosting it to a range of 3 to 3.25 percent. That’s a significant jump from as recently as March, when the federal funds rate was set at near-zero, and the increases since then have made for the Fed’s fastest policy adjustment since the 1980s.Even more notably, policymakers predicted on Wednesday that they would raise borrowing costs to 4.4 percent by the end of the year and forecast markedly higher interest rates in the years to come than they had previously expected. Jerome H. Powell, the Fed chair, warned that those moves would be painful for the U.S. economy — but said curbing growth to contain price increases was essential.“We have got to get inflation behind us,” Mr. Powell said during his post-meeting news conference. “I wish there were a painless way to do that; there isn’t.”Together, the Fed’s stark projections and the Fed chair’s comments amounted to a declaration: The central bank is determined to crush inflation, even if doing so comes at a cost to the economy in the near term. That message got through to markets, which slumped in reaction to the news, with the S&P 500 index closing down 1.7 percent.“We want to act aggressively now, and get this job done, and keep at it until its done,” Mr. Powell explained.His stern remarks reflect a challenging reality for the Fed. Inflation has been stubbornly rapid, and it is proving difficult to wrestle back under control.Prices continue to increase at more than three times the central bank’s target rate of 2 percent, making everyday life hard to afford as everything from rent to food to household goods continues to grow more expensive. The jump in inflation, which is being felt globally, stems partly from supply chain disruptions caused by the pandemic and war in Ukraine. But the price pressures also come from sustained consumer demand, which has allowed companies to charge more without losing customers.In fact, people have continued to buy cars, retail goods and dinners out even as the central bank has begun to sharply raise interest rates. Companies have continued to rake in big profits while hiring at a rapid clip, lifting wages as they compete for scarce workers — and sending prices relentlessly higher.The Fed is trying to change that, a statement the central bank delivered clearly on Wednesday.“It’s consistent with the message that inflation is public enemy No. 1: They have to keep going,” said Priya Misra, head of global rates research at T.D. Securities.What the Fed’s Rate Increases Mean for YouCard 1 of 4A toll on borrowers. More

LONDON (Reuters) – The Bank of England looks set to raise interest rates by at least half a percentage point on Thursday in a bid to tame inflation that is just off a 40-year high, against a backdrop of a tumbling currency and a free-spending government.Economists polled by Reuters last week expect the BoE to announce at 1200 GMT that rates will rise to 2.25% from 1.75%, while financial markets have priced in a bigger move to 2.5%.The BoE is also expected to confirm that it will soon sell some of the 838 billion pounds ($944 billion) of government bonds which it bought during more than a decade of quantitative easing – the first major central bank to do so.The BoE’s half-point increase in rates last month was its biggest since 1995. If it raises rates by three-quarters of a point on Thursday it would be the largest hike since 1989, barring a failed, temporary attempt to shore up sterling in 1992.The U.S. Federal Reserve increased its main interest rate by three-quarters of a percentage point on Wednesday and signalled more large increases to come.Sterling sank to its lowest since 1985 against the U.S. dollar after the Fed decision and is at its lowest against a basket of currencies since 2020, pushing up the price of imports.Central banks globally have been hiking rates to tackle inflation caused by the surge in energy prices following Russia’s invasion of Ukraine, as well as supply-chain pressures and labour shortages since the COVID-19 pandemic. The BoE was the first major central bank to raise rates in the current cycle, beginning in December last year.Britain’s annual rate of consumer price inflation edged down to 9.9% in August from a 40-year high of 10.1% in July, its first drop in nearly a year though still far above the BoE’s 2% target and the highest in the Group of Seven.MIXED INFLATION OUTLOOKThe short-term outlook for inflation is now somewhat better than at the time of the BoE’s last meeting in early August.New Prime Minister Liz Truss’s caps on household and business energy tariffs mean inflation is unlikely to rise as high as the 13.3% peak the BoE had pencilled in for October, or rates of more than 15% which economists expected for early 2023.However, the caps – combined with likely cuts to taxes on employment, business profits and potentially house purchases – amount to more than 150 billion pounds of economic stimulus that was not factored into the BoE’s forecasts last month.This, in turn, could prompt the BoE to raise rates more than previously thought over the coming year, despite what will still be a big squeeze on living standards from high inflation.”Although the immediate risk of recession over the coming winter is diminished, substantial fiscal stimulus adds to the risk of high inflation being maintained for longer – and hence the chances of, ultimately, substantially more policy tightening by the Bank of England being required,” Investec economist Sandra Horsfield said.Interest rate futures late on Wednesday showed BoE rates reaching 3.75% in December and plateauing at 4.75% from March.New finance minister Kwasi Kwarteng will set out more details of the budget plans on Friday, including an update to debt issuance.Last month, the BoE forecast the economy would enter recession in the final quarter of 2022 and shrink throughout 2023.A recession of this length now looks unlikely, economists say, but there is a risk – following contraction in the second quarter and weak retail sales and business survey data since – that the economy is already in a technical recession.A public holiday to mark Queen Elizabeth’s funeral, following more than a week of national mourning that led to the cancellation of some public events, will also reduce third-quarter output. The BoE also decided to delay by a week its policy announcement, which had been due out on Sept. 15.($1 = 0.8876 pounds) More

The majority of Britons are pro increasing taxes and welfare spending, while nearly half support the redistribution of income to benefit the less well off, an annual public attitudes survey has shown.Some 52 per cent of respondents said the government should increase taxes and spend more on health, education and social benefits, according to research by the National Centre for Social Research released on Thursday, The level was up 2 percentage points from the previous year and 36 per cent from a decade ago, reflecting a shift in public concern around social inequalities as the country confronts a cost of living crisis.Gillian Prior, deputy chief executive at NatCen, a research institute, said: “Our annual survey suggests the public faces the ‘cost of living crisis’ with as much appetite for increased government spending as it had during the pandemic.”“Recognition of inequalities in Britain is at a level not seen since the 1990s, with people more willing than they were a decade ago for government to redistribute income from the better off to the less well off,” he added. The findings come ahead of the mini Budget to be released on Friday, in which new prime minister Liz Truss is expected to announce a package of tax cuts for the wealthy and profitable companies. The measures are likely to include a cut to national insurance and the reversal of a planned corporation tax increase, intended to stimulate growth to help the country manage rising inflation and energy bills. In August, UK inflation rate was 9.9 per cent, it’s highest rate in almost 40 years. This week, Truss froze the household energy cap at £2,500 per year for the next two years to shield consumers from rising energy costs. She also vowed to focus on “growing the size of the pie,” rather than redistributing income to rebuild the economy. The survey was based on more than 6,200 responses collected between 16 September and 31 October across Great Britain. The survey found that 49 per cent of people think the government should redistribute income from the better-off to those with less means — up 10 percentage points from 2019 and the highest level since 1994.Support for more intervention reflects a shift in national views on welfare. More than two-thirds believe ordinary working people do not get their fair share of the nation’s wealth — the largest proportion since 1991 and up ten percentage points since 2019. The annual public attitudes survey took views on a range of topics. Most people favoured introducing “proportional representation” — the voting system whereby candidates win seats based on a proportion of votes cast — than keeping the current “first past the post”. Public satisfaction with the health service fell to its lowest level in 25 years, as a quarter of people reported not getting the medical treatment they needed in the past year. The report also found that support in Scotland for Scottish independence and in Northern Ireland for Irish reunification has increased in recent years.Sir John Curtice, senior research fellow at NatCen, said the findings suggest “why Britain might appear divided, buffeted, and ‘broken’.” More

UK employers paying the voluntary “living wage” have been urged to deliver an early increase of more than 10 per cent so that their lowest-earning workers can keep pace with soaring prices.The Living Wage Foundation, a charity that campaigns for fair pay, said on Thursday that it was increasing its national living wage rate from £9.90 to £10.90 an hour, the sharpest rise in its 11-year history. Meanwhile, the London rate — which reflects the higher costs of living in the capital — will rise from £11.05 to £11.95 an hour.The charity recalculates the rate annually based on what people need to live on but brought forward this year’s change by two months because of the cost of living crisis.Katherine Chapman, the foundation’s director, said the existence of the voluntary rate was “more vital than ever” because millions of people were facing a “heat or eat choice this winter”. She added that the uprating would give workers and their families “greater security and stability”.The announcement comes a day before Kwasi Kwarteng, the chancellor, is due to outline a cut in national insurance, which will disproportionately benefit the better-off. The UK’s statutory minimum wage — whose main adult rate stands at £9.50 — rose 6.6 per cent in April. But that increase, initially intended to be generous, has already turned into a real-terms cut, with consumer price inflation running at 9.9 per cent in August.Average wages have been rising rapidly in nominal terms, leading Bank of England policymakers to worry they will contribute to persistently higher inflation. But prices have been rising even faster, leaving households facing the sharpest drop in living standards for at least 20 years.Data published on Wednesday by the research group XpertHR showed that the median basic pay award employers offered staff in the three months to August remained steady at 4 per cent — high by historic standards but well below the peaks reached in previous periods of very high inflation. The rise in the voluntary living wage will directly affect about 400,000 people working for just over 11,000 employers accredited by the charity. However, many more could be indirectly affected, since some large employers including supermarkets use the living wage as a benchmark, albeit without committing to apply it throughout their supply chain. Charles Cotton, an adviser at the CIPD body for HR professionals, said Thursday’s increase was “significant” but that employers should still look at other ways to support workers’ financial wellbeing.

He said these included guaranteeing working hours and offering occupational sick pay or hardship loans, and added that bosses struggling to afford higher wages should focus on designing jobs and tasks better to raise productivity.The number of accredited living wage employers has more than doubled in the past two years, as the coronavirus pandemic raised awareness of low-paid workers’ contribution and led companies to compete for staff.“It’s easy to blame the pandemic or Brexit . . . but the industry is experiencing staff shortages that are partly self-inflicted,” said Christian Kaberg, managing director of the St Pancras Hotel Group, which runs six venues in central London and won accreditation in 2019. He added: “As an industry and an employer, we need to start doing the right things — and one of them is paying people properly.” More

TOKYO (Reuters) -The Bank of Japan is expected to keep interest rates ultra-low on Thursday and reassure markets that it will continue to swim against a global tide of central banks tightening monetary policy to combat soaring inflation.Any such decision could drive down the Japanese currency further from 24-year lows hit in recent weeks, as investors focus on the widening gap between Japan’s ultra-low interest rates and the U.S. Federal Reserve’s aggressive rate hike plans.The Fed delivered its third straight rate increase of 75 basis points on Wednesday and signalled more large hikes at its upcoming meetings, underscoring the U.S. central bank’s resolve not to let up in its battle to contain inflation.The BOJ, by contrast, is set to leave unchanged its -0.1% target for short-term rates, and 0% for the 10-year government bond yield under its yield curve control (YCC) policy at its two-day meeting ending on Thursday.The dollar index hit a fresh 20-year high after the Fed’s announcement, although the U.S. currency’s gain against the yen was limited as traders remained wary of the chance of yen-buying intervention by Japanese authorities. The dollar last traded at 143.98 yen.Markets are focusing on whether the BOJ would make any tweaks to its dovish guidance projecting short- and long-term interest rates to remain at “current or lower” levels, and a pledge to ramp up stimulus “without hesitation” with an eye on the economic impact of the COVID-19 pandemic.”Making big changes to the BOJ’s guidance could stoke market speculation of an early exit from YCC, and cause big disruptions in the bond market,” said Naomi Muguruma, chief bond strategist at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley (NYSE:MS) Securities.”That’s something the BOJ will probably avoid this time,” she said. “With other central banks hiking rates, the BOJ’s negative rate policy will come under the spotlight and may unleash further yen selling.”The BOJ’s rate review will be the first one for Hajime Takata and Naoki Tamura, who joined the nine-member board in July. They succeeded former commercial banker Hitoshi Suzuki and economist Goushi Kataoka, a vocal advocate of aggressive easing who consistently voted against keeping rates steady.A unanimous vote would suggest the two newcomers are unlikely to rock the boat on monetary policy for the time being.Japan’s core consumer inflation quickened to 2.8% in August, exceeding the BOJ’s 2% target for a fifth straight month, as price pressure from raw materials and yen falls broadened.But BOJ Governor Haruhiko Kuroda has ruled out the chance of a near-term withdrawal of stimulus on the view that wages need to rise more to sustainably achieve his 2% inflation target.Kuroda’s dovish message has worked to weaken the yen, contradicting the government’s efforts to slow the currency’s decline through verbal threats of yen-buying intervention.Once welcomed for the boost it gives to exports, a weak yen has turned into a headache for Japanese policymakers as it pushes up the cost of importing already expensive fuel and raw materials.The world’s third largest economy expanded an annualised 3.5% in April-June, but its recovery has been hobbled by a resurgence in COVID-19 infections, supply constraints and rising raw material costs. More

National Labor Relations Board officials said the company had applied its workplace rules unfairly, and asked it to change or scrap the regulations.Federal labor regulators have moved to force Amazon to scrap a rule that governs employees’ use of nonwork areas, accusing the company of illegally singling out union supporters in enforcing the policy.A complaint issued on Tuesday by the National Labor Relations Board’s Brooklyn office said Amazon “selectively and disparately enforced the rule,” which applied to distributing materials and to solicitation activities, “by discriminatorily applying it against employees who engaged in union activity.”The complaint amounted to a finding of merit in a charge brought by the Amazon Labor Union, which mounted organizing efforts — one successful, one not — at two warehouses on Staten Island this year. The case will be litigated before an administrative law judge unless it is settled beforehand, and Amazon could appeal an adverse ruling to the national labor board in Washington.The complaint said the company applied the solicitation policy unlawfully when it prohibited workers from posting a pro-union sign in a nonwork area at one of the Staten Island warehouses, known as LDJ5. The company threatened discipline if the workers posted the sign or did not remove the sign, according to the complaint, which also said at least one worker was disciplined under the solicitation policy.The complaint also accuses the company of disciplining two workers to discourage them from engaging in union activity.After winning a vote to represent roughly 8,000 workers at another Staten Island warehouse, JFK8, the union lost an election at LDJ5 by a wide margin in May.Under Amazon’s stated policy, employees are prohibited from soliciting co-workers for, say, financial contributions on company grounds during work time, or from distributing nonwork-related material in work areas. The policy also prevents nonemployees from conducting any kind of solicitation on company grounds.The labor board’s complaint said Amazon could reinstate the policy only if it explicitly stated that the policy did not apply to organizing and related activity by workers, known as protected concerted activity. The complaint also seeks to require that all supervisors, managers, security personnel and outside consultants hired by Amazon receive training on workers’ federally-protected labor rights. It could affect most of the company’s roughly one million employees nationwide.(The complaint is not clear on whether the training would be nationwide or only in the New York region, and a spokeswoman for the labor board was not immediately able to clarify.)“Amazon is committing flagrant human rights violations by unlawfully disciplining A.L.U. supporters and prohibiting union organizing in the company’s break rooms,” said Connor Spence, the union’s treasurer, in a statement. “Union organizing in employer break rooms is a protected right mandated by the National Labor Relations Board.” Paul Flaningan, an Amazon spokesman, said in a statement, “These allegations are completely without merit, and we look forward to showing that through the process.”The complaint comes at an important moment for the Amazon Labor Union. This month, a hearing officer for the labor board recommended rejecting Amazon’s formal challenge to the union’s JFK8 victory. (Amazon has said it will probably appeal a ruling on this question.) But defending the victory consumed time that the union had hoped to spend on pushing for a contract at the warehouse.In October, the labor board will hold an election involving the union and roughly 400 workers at an Amazon warehouse in Albany, N.Y.Karen Weise More