Economy

UK unemployment fell to its lowest rate since the early 1970s this summer even as the economy stalled, according to official data that will reinforce policymakers’ fears that labour shortages are fuelling inflation.The Office for National Statistics said on Tuesday that the unemployment rate sank to 3.6 per cent in the three months to July, down 0.2 percentage points from the previous quarter and the lowest since 1974. But this was not because more people were in work. Instead, there was a new jump in the number of people who said they were not working because they were studying or had a long-term health condition — which took the economic inactivity rate up 0.4 percentage points to 21.7 per cent, well above its pre-pandemic level. Meanwhile the employment rate fell by 0.2 percentage points, to 75.4 per cent.The rise will trouble policymakers, given the acute pressures on household incomes that would usually be expected to draw more people into the workforce in order to make ends meet. “Instead of the cost of living crisis tempting people back into work, more people are exiting the jobs market altogether,” said Gregory Thwaites, research director at the Resolution Foundation, a think-tank. Bank of England governor Andrew Bailey has warned that a shrinking workforce will make price and wage pressures more persistent, and the latest figures will bolster the case for the Monetary Policy Committee to continue raising interest rates aggressively when it meets next week for a decision delayed by the Queen’s death. “The Bank of England has much more work to do,” said Ruth Gregory at the consultancy Capital Economics, while James Smith, economist at ING, said the data would “provide further ammunition for Bank of England hawks to push ahead with further tightening”. Tony Wilson, director of the Institute for Employment Studies, said the figures “should be sounding alarm bells in government”, showing that inactivity due to ill health was holding back growth and pushing up inflation. “If we don’t do more to help more people into work, then any tax cuts will just lead to even higher inflation,” he added. The data showed wage growth strengthened in the three months to July, with average total pay, including bonuses, 5.5 per cent higher than a year earlier.

But Yael Selfin, economist at KPMG, said this would be “little consolation to workers” whose pay packets were being squeezed by soaring inflation, with total pay down 2.6 per cent in real terms and regular weekly earnings down 2.8 per cent. Public sector workers — whose annual pay deals were announced by government only at the end of July — have been especially hard hit, with their regular weekly pay up by just 2 per cent in nominal terms, set against pay growth of 6 per cent in the private sector. There were also signs that the downturn in the economy was starting to make employers more cautious about taking on new staff, with the number of vacancies falling to 1.26mn in the three months to August — still high by historical standards, with as many posts vacant as there were people out of work, but the biggest drop since mid-2020. The ONS said a growing number of employers responding to its survey had announced recruitment freezes, with the largest falls in vacancies seen in the information and communication industry, and in professional, scientific and technical activities — although labour shortages remained acute in health and social work, and in hospitality. More

Good morning. It’s CPI day. There is good reason for optimism that inflation will continue to abate, and not just because of gas prices. But as we like to repeat at Unhedged, there is no such thing as high and stable inflation. There will be more surprises, in both directions, before the current episode concludes. Email me: [email protected]: even worse (so, better?)The last time Unhedged checked in on the US housing market, back in June, we wrote that “housing remains the one big area of the economy that is not sending mixed signals. It just looks bad.” This is no longer true: the US housing market no longer just looks bad; now it is very bad. “Bad” is ambiguous in this context, though. Sharp housing downturns, such as the one we are unmistakably in now, simultaneously reflect and reinforce recessionary forces. At the same time, when inflation is running wild, as it unmistakably is now, a big slowdown in real estate activity, house prices and rents might be strong medicine. Rent inflation is the sticky kind of inflation central bankers hate — it goes hand in hand with wage inflation. Housing needs to cool if the Fed is to be satisfied. More on that shortly. First, let’s survey the wreckage: Rent growth has turned over, hard. This is reflected in the real-time indices maintained by listing sites such as Apartment List, Redfin and Zillow. Below is Apartment List’s. Month-over-month rent inflation is back into a historically normal range, and year-over-year will be there soon, on current trendsHome price growth, on more-or-less official but lagging indicators, such as the National Association of Realtors report and Case-Shiller indices, is decelerating but still strong. More timely measures remain elevated on an annual basis, but on a month-to-month basis, many are all the way back to normal (see Zillow’s price index below). House prices are still wildly high, but the inflation is ending. In many regions, at many price levels, prices are already falling. Unhedged’s friend Rick Palacios of John Burns Real Estate Consulting notes that, in his firm’s August price survey, prices fell in 98 of 140 covered markets fell on a month-to-month basis. “The pace of the declines is accelerating,” Palacios says. Seattle’s decline is the worst; prices there are down 8 per cent from earlier this year. Moderate house price deflation on the national level seems entirely possible before too long. If prices are just starting to edge down, sales volumes are already through the floor. Existing home sales were down 20 per cent year over year in July. New home sales were down 30 per cent. Mortgage applications keep on tumbling too.Steven Blitz, the head US economist at TS Lombard, argues that house prices, and indeed financial asset prices, have to fall hard if inflation is to come under control. He argues that the economic cycle that started over a decade ago, as we emerged from the financial crisis, was unusual in that it was not a credit cycle, but an asset cycle. “Typically, leverage increases in an expansion and decreases during a recession, but we had a ten-year expansionary period in which households and businesses continued to de-lever, and, after an initial surge of spending, the government did too, right through 2019,” he says. Wealth was created through the cycle not by credit expansion but by asset price inflation. The result, he says, is that the sensitivity of the economy to the Federal Reserve’s rate increases is going to be different this time. Deleveraging is not going to slow the economy enough to stop inflation. Falling asset prices will have to do the work.If Blitz is on to something here (I think he is, though I am not totally convinced that companies have reduced leverage) and the Fed shares this view (he thinks it does), the withering housing market is good news. It is part of what the Fed needs to see before it will be comfortable slowing the pace of policy tightening.But things are not so simple. I wrote in February about how home prices and rent inflation will take a long time to work their way through the official CPI data — a year or more. What is more, the housing inflation we have already seen may continue to support wage inflation. Strategas economist Don Rissmiller sums up that connection pithily: “Companies will pay what it costs workers to live where the companies need them to be.” The process of increasing workers wages to that level may take time, though. In the meantime, the Fed might keep tightening into a deep recession.This is a particular instance of a general question which, Rissmiller points out, is as important as any facing markets. When does the Fed declare victory? Official shelter inflation data may be falling soon. But it will be a while before it is all the way back to normal. The same goes to other categories. Some prices may never return to the soft trends that held in the days of ample cheap labour, ample cheap energy and wide-open global supply chains. Is 3 per cent-ish inflation enough for the Fed? Or will it fight all the way down to 2 per cent? If the latter, a deep recession seems increasingly likely. One good read“Trump is widely hated by many, of course, but equally loved by many. Everyone hates Jared.” More

I have just sold a family business of which I am the main stakeholder and now have a significant amount of money to protect for my only granddaughter, who is under 18. What is the best way of safeguarding the money for her to have when she is older? Camilla Wallace, head of the private client group and partner at law firm Wedlake Bell, says I assume you would like advice on investment and asset protection. As a solicitor I am not strictly qualified to give investment advice, so it is best to liaise with your usual advisers in this regard.

Camilla Wallace, partner at Wedlake Bell

That said, in times of rising inflation clients are always keen to find safe harbour for their capital by investing in assets which will rise in line with inflation. Popular investments include real estate, companies with pricing power, index-linked equity funds or bonds, short-term bonds (so as to reinvest as and when interests rates increase), gold and, perhaps counter-intuitively, savings on deposit. Although it may not generate huge capital growth, cash can at least benefit from rising interest rates. I have not included commodities (metals, energy, grains and so on). Though these can perform well in times of inflation due to rising prices, they are not without risk — similarly cryptocurrencies.The simplest way of making sure your sale proceeds are protected for your granddaughter is to ensure that your will is up to date and reflects this wish. I would consider leaving your estate, including the investments representing your former holding in the family business, in a discretionary trust held for her benefit with detailed guidance set out in a letter to the trustees. The latter would confirm how and when she should benefit and what type of investments you would be happy for the trustees to hold. If you wanted to carry out some tax and estate planning during your lifetime, you could consider setting up an investment company with the two of you as shareholders. This would work particularly well if you are investing in equities as it provides for tax mitigation within the company on its receipt of dividends. If you fund the company initially via debt you can enjoy tax-free repayment of capital for the duration of the loan. You can retain control of the company by being the director. With the supply of rental properties possibly on the wane as some buy-to-let landlords sell up due to increasing interest rates on their debt and a tightening mortgage market, real estate could be a good option. Depending on the value of the property, a trust could be used here whether as part of a single or hybrid ownership structure. Finally, your granddaughter might prefer her inheritance to be invested on a sustainable mandate, which may not always be compatible with avoiding inflation but may engender a greater acceptance on her part of the value and purpose of the wealth she is to inherit. Depending on her age and maturity you may wish to take her views into account now to ensure that how you invest the proceeds is in line with her values. This would also ensure that the inheritance does not come as a surprise and she is prepared to receive it.Can the tax system help me to be greener?I would like to support the CO₂ net zero agenda personally and through my manufacturing business. However, I understand that grants for electric cars have ended and there are no longer special capital allowances for investing in energy- and water-saving plant and machinery. Are there ways the tax system can help me be environmentally responsible?Paul Falvey, tax partner at accountancy and business advisory firm BDO, says you are correct that these specific subsidies have ended. However, there are general tax reliefs to support investment in green technology.

Paul Falvey, tax partner at BDO

The business community overwhelmingly believes the government should still use the tax system to support its net zero agenda, research has found. Views are split, though, on whether net zero should be achieved through taxing high carbon emissions or enhancing first year allowances for carbon reduction technologies. If you are installing solar panels or new, more efficient machinery at your business premises, you may be able to claim the 130 per cent capital allowances super deduction to offset 24.7 per cent of the cost after tax. There is no limit on the amount you can invest and claim relief on, but this only applies to qualifying investments made before March 31 2023. From April 1 2023, when corporation tax is due to rise to 25 per cent, you may still be able to get a 25 per cent subsidy by claiming relief for plant and machinery investments under the 100 per cent annual investment allowance (AIA). The AIA is currently limited to £1mn of investments and is scheduled to fall to £200,000. However, it is expected the AIA and other capital allowances will be increased significantly next year to replace the super deduction. These allowances do not apply to vehicles but there are specific 100 per cent capital allowances available for the purchase of electric cars or vans to help make your business greener. If you provide electric cars to employees (including yourself) the benefit-in-kind on them is minimal — just 2 per cent of the value of the car. You can claim relief for installing charging facilities at your premises.At a more fundamental business level, if you are carrying out any technical research to make your processes or products more energy efficient or to use greener materials in your products, you may be able to claim R&D tax relief. If your research involves resolving a technological uncertainty, it is likely some element of the work involved will qualify for R&D tax relief. This can give a qualifying SME tax relief at up to 33 per cent of the relevant research costs.The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent. More

The writer is a financial journalist and author of ‘Surviving the Daily Grind: Bartleby’s Guide to Work’It is now clearer than ever that we have entered a new era of financial and economic policy. In this new period, governments are far less willing to incur the unpopularity of raising taxes or cutting spending to keep their budgets in check. There could be no better symbol of this change than the sight of a British prime minister, who campaigned for a smaller state, announcing a huge intervention in the energy market to cap prices, at a cost that may reach £150bn.By the same token, western governments adopted a “shock and awe” approach to fiscal policy in the face of the Covid-19 pandemic. Budget deficits passed 10 per cent of gross domestic product in several countries, including the US and the UK. Governments felt free to borrow this much because, in most cases, the markets placed no apparent constraint on their deficits; interest rates and bond yields stayed very low.The response to the 2008 financial crisis was rather different. True, there was a brief period of Keynesian fiscal stimulus in the immediate aftermath of the crisis. But austerity programmes followed when deficits grew so large that politicians became nervous, especially when the bond markets’ willingness to finance Greece’s deficit evaporated in 2010. Central banks bore the brunt of supporting the economy in the 2010s, just as they had in much of the period since 1980. This was the dominant trend in what was often dubbed the “neoliberal” era.In theory, neoliberalism was about open markets and a smaller state. In practice, states didn’t shrink that much. In 1980, the average OECD country spent 14.5 per cent of its GDP on social spending. By 2019, this average had increased to 20 per cent, with the US and Britain matching the global trend. The more striking thing about the past 40 years has been the dominance of monetary policy and the low levels of inflation and interest rates. This era was, by and large, very good for risky assets and those who trade them.When the 2008 crisis hit, central banks felt obliged to break an old taboo, using newly created money to buy government bonds — so-called quantitative easing. The experience of monetary financing of government spending in Germany in the 1920s was so calamitous that it had become anathema until that point. When the rules of the euro were set up in the 1990s, the German authorities tried hard to rule out monetary financing.QE did not involve the direct financing of governments by the central bank; the bonds were bought in the secondary market. But the distinction was fairly technical, especially once central banks started returning the interest on their accumulated bond piles to their respective Treasuries.Hyperinflation did not occur, as some feared, and QE appeared to be the only means of keeping the developed economies from a deflationary slump. But the habit was hard to break. Only now, after more than a decade, are central banks starting to unwind their accumulated bond portfolios. And politicians have got used to cheap finance and have come to believe that deficits don’t matter. This view has seemed all the more pertinent since 2016 when the election of Donald Trump as US president seemed to show that voters were tired of “orthodox” economic policy.Conservative politicians may mouth the mantra that cutting tax rates will lead to increased revenues. But look what happened after the Trump tax cuts of 2017, which focused on business and the wealthy. In 2016, under Barack Obama, the US budget deficit was $587bn or 3.2 per cent of GDP. By 2019, before the pandemic, the deficit had risen to $984bn or 4.6 per cent of GDP. The Republican party stopped talking about balancing the budget.Rightwing politicians criticise their leftwing rivals for “tax and spend” policies but their alternative seems to be “spend but don’t tax”. There is no appetite for renewed austerity and any political leaders who shift in that direction may soon find themselves out of office.But if politicians are relying on central banks to keep supporting them, they may be disappointed. Inflation is now well above target and central banks are tightening policy quickly. Nor are central banks likely to return to QE.So instead of tight fiscal policy and loose monetary policy, financial markets may face an era of the reverse. This may mean higher interest rates and lower valuations for risky assets. The adjustment may be extremely painful. More

LONDON/WASHINGTON (Reuters) -The International Monetary Fund’s executive board, under pressure to provide emergency funding to countries facing war-induced food price shocks, reviewed a plan on Monday that would help Ukraine and other countries hit hard by Russia’s war, sources familiar with the matter told Reuters.Board members engaged with the plan, first reported by Reuters, at an informal board session. Developed by IMF staff in recent months, it would allow the IMF to support countries struggling with budget problems because of the war, without imposing conditions required in a regular fund program, said the sources, who asked not to be named since the plan has not been formally approved. Board members were generally supportive heading into the meeting, and a formal vote backing the measure is likely before the Fund’s annual meetings in October, two of the sources said.If approved, it would temporarily increase existing access limits and allow all member countries to borrow up to an additional 50% of their IMF quota under the IMF’s Rapid Financing Instrument, while low-income countries could tap the Rapid Credit Facility, the sources said. “The concept is simple, but it could help many countries,” said one of the sources.Masood Ahmed, a former IMF official who now heads the non-profit Center for Global Development think tank, welcomed the move and said the IMF existed precisely to help countries deal with the kind of balance of payments shock unleashed by the war.”It’s good news, and I’m glad they’re doing it, but I wouldn’t stop at that,” Ahmed told Reuters.SURGING FOOD PRICESFood prices surged worldwide after the start of the war given blocked supply routes, sanctions and other trade restrictions, although a UN-brokered deal that allowed resumed exports of grain from Ukrainian ports last month has begun to help improve trade flows and lower prices in recent weeks.The Washington-based lender projected in July that inflation posed a “clear risk” to current and future macroeconomic stability.Many African countries and other poor nations suffering food shortages and acute hunger have clamored for increased funds, but it was not immediately clear how many countries would seek the additional financing aid.”I don’t think this is going to be big money here,” Ahmed said, noting that countries that already had or were negotiating for an IMF program would not be able to apply.That would rule out Egypt, for instance, which is in negotiations with the IMF for a larger program.The new plan could offer some limited help to Ukraine, which has grown frustrated with delays in its push for a “full-fledged” financing package to keep the government running while fighting the first major war in Europe since World War Two. But Ukrainian officials say they need far more than the $1.4 billion than they could get through the RFI.The IMF does not comment on informal board sessions.An IMF spokesperson last week told Reuters the global lender “continues to closely engage with the Ukrainian authorities and is currently exploring all feasible options to provide further support to Ukraine in these challenging circumstances.”Ukraine’s overseas creditors have backed a two-year freeze in payments on almost $20 billion in international bonds, but the country must make $635 million in principal payments on prior IMF loans beginning in mid-September.The IMF in March approved $1.4 billion in emergency funding for Ukraine under the RFI instrument to help meet urgent spending needs and mitigate the impact of the war. Its economy is expected to contract by 35% this year.Russia’s war against Ukraine has altered global patterns of trade, production, and consumption of commodities in ways that will keep prices at historically high levels through the end of 2024, the World Bank reported in August. https://www.worldbank.org/en/topic/agriculture/brief/food-security-updateFood is the single largest category in inflation baskets – the selection of goods used to calculate the cost of living – in many developing nations, accounting for around half in countries like India or Pakistan and on average for some 40% in low-income countries, IMF data shows. More

WASHINGTON/LOS ANGELES (Reuters) -The Biden administration urged railroads and unions to reach a deal to avoid a railroad work stoppage, saying on Monday it would pose “an unacceptable outcome” to the U.S. economy that could cost $2 billion a day.Railroads, including Union Pacific (NYSE:UNP), Berkshire Hathaway (NYSE:BRKa)’s BNSF, CSX (NASDAQ:CSX), and Norfolk Southern (NYSE:NSC), have until a minute after midnight on Friday to reach tentative deals with hold out unions representing about 60,000 workers. Failing to do so opens the door to union strikes, employer lockouts and congressional intervention. U.S. Labor Secretary Marty Walsh is postponing travel to Ireland to remain in talks, the department said Monday.”The parties continue to negotiate, and last night Secretary Walsh again engaged to push the parties to reach a resolution that averts any shutdown of our rail system,” a Labor Department spokesperson said. “All parties need to stay at the table, bargain in good faith to resolve outstanding issues, and come to an agreement.” The brinkmanship comes at a sensitive time for unions, railroads, shippers, consumers and President Joe Biden, who appointed an emergency board to help break the impasse. A White House official told Reuters Biden has been in touch today with unions and companies to try to avert a strike, as have cabinet officials.U.S. railroads account for almost 30% of cargo transport by weight and maintain about 97% of the tracks Amtrak uses for commuter rail. Widespread railroad disruptions could choke supplies of food and fuel, spawn transportation chaos and stoke inflation. Unions, which won significant pay increases, are pushing back on work rules that would require employees to be on-call and available to work most days. Railroads are struggling to rebuild employee ranks after slashing their workforce by almost 30% over the past six years.At midday on Wednesday, Norfolk Southern will stop accepting intermodal cargo: goods that move by combinations of ship, truck and rail transport. Those shipments include consumer products and e-commerce packages that account for almost half of U.S. rail traffic.   That could exacerbate existing backups at East Coast seaports and inland hubs, causing cascading delays across the country as farmers prepare for harvest and retailers restock stores for the Christmas shopping season. Bulk commodities – including food, energy, automotive and construction products – make up the remainder of U.S. rail shipments. U.S. industry groups are pressuring Congress to avert the worst-case scenario. “A shutdown of the nation’s rail service would have enormous national consequences,” the Chamber said on Monday, adding it would lead to perishable food waste, disrupt goods delivery and prevent heating fuel and chemicals transport.The Labor Department said there have been dozens of calls by Cabinet officials and other top administration officials to help the sides reach agreement.Railroads late last week said they would cease shipments of hazardous materials such as chlorine used to purify drinking water and chemicals used in fertilizer on Monday so they are not stranded in unsafe locations if rail traffic stops. On Sunday, two unions negotiating contracts said halting hazardous shipments was designed to give employers leverage ahead of this week’s deadline to secure labor agreements.As of Sunday, eight of 12 unions had reached tentative deals covering about half of 115,000 workers, the National Railway Labor Conference (NRLC) said. Hold outs include the transportation division of the International Association of Sheet Metal, Air, Rail, and Transportation Workers (SMART-TD) and the Brotherhood of Locomotive Engineers and Trainmen (BLET).There has not been a nationwide U.S. rail service stoppage since 1992, when major freight railroads closed operations for two days in response to an International Association of Machinists strike against CSX, saying that a strike against one railroad was a strike against all railroads. More

Malaysia’s top court on Aug. 23 rejected Najib’s appeal to set aside his conviction on graft and money laundering charges in a case linked to a multibillion-dollar scandal at state fund 1Malaysia Development Berhad (1MDB).Najib, 69, who has also been fined nearly $50 million, has consistently denied wrongdoing and has applied for a royal pardon. He remains on trial in four other cases, each carrying jail terms and heavy financial penalties. [L4N30C0UY]On Sept. 4, Najib was admitted to a Kuala Lumpur hospital for what an aide described as routine medical checks, but was able to attend a court hearing the next day. His daughter, Nooryana Najwa, alleged in a social media post on Monday that doctors who saw Najib again on Sept. 10 prescribed a change in medication and discharged him back to the prison complex. Najib’s request to remain under observation in hospital was denied, she said. She did not specify whether his request was rejected by the Prison Department or the hospital.The Prison Department did not immediately respond to a request for comment. “On humanitarian grounds, our family pleads with the prison authority, the hospital and government to do the right thing and allow for dad to receive proper medical care and observation,” Nooryana said.She added the ex-premier’s blood pressure is “dangerously high” and that he has developed new stomach ulcers, a medical issue that she said has been recurring for more than 15 years. Malaysian Prime Minister Ismail Sabri Yaakob, on Monday instructed the health ministry in a Twitter (NYSE:TWTR) post to provide the “best treatment” for Najib. Health Ministry Director-General Noor Hisham Abdullah said Najib was admitted as an elective case to ensure his good health, where doctors held two meetings with him and his family to discuss the test results. “They were also informed about the unanimous decision of the consulting experts that he be allowed to be discharged,” he said in a statement. The medicine prescribed is of the same type and Najib was healthy before being discharged, Noor Hisham said.Media reported that Najib was in court on Monday morning for another corruption trial and would be taken to hospital in the afternoon. More

BENGALURU (Reuters) – The Federal Reserve will deliver another 75-basis-point interest rate hike next week and likely hold its policy rate steady for an extended period once it eventually peaks, according to a Reuters poll of economists released on Tuesday.Policymakers have done little to push back on market pricing for a third consecutive rate hike of three-quarters of a percentage point at the U.S. central bank’s Sept. 20-21 meeting, with inflation, as measured by the Fed’s preferred gauge, running at more than three times its 2% target.A strong majority of economists, 44 of 72, predicted the central bank would hike its fed funds rate by 75 basis points next week after two such moves in June and July, compared to only 20% who said so just a month ago.If realized, that would take the policy rate to the 3.00%-3.25% target range, the highest since early 2008, before the worst of the global financial crisis. The remaining 39% still expected a 50-basis-point hike.The shift in expectations for the larger hike has pushed the dollar to a two-decade high against a basket of currencies. The U.S. currency was forecast to extend its dominance for the remainder of this year and into early next. [EUR/POLL]”If there has been a shift in the Fed’s tone in recent months, it has been in the direction of a stronger commitment to reducing inflation, even at the risk of a downturn,” noted Michael Gapen, chief U.S. economist at Bank of America (NYSE:BAC) Securities, who was among those polled.Like many others in the poll, Gapen recently changed his forecast to show the Fed hiking rates by 75 basis points next week instead of half of a percentage point.But raising borrowing costs so quickly comes with its own risks. The poll put the probability of a U.S. recession over the coming year at 45%, unchanged from the previous forecast, with the chance of one occurring over the next two years rising to 55% from 50%.The world’s No. 1 economy, which has seen its gross domestic product contract in the past two quarters, was expected to grow below its long-term average trend of 2% until at least 2025, according to the poll.Economists said the interest rate outlook for the September meeting could change if inflation drops. The U.S. Labor Department is due to release consumer price index data on Tuesday, with economists polled by Reuters forecasting the CPI would rise 8.1% in the 12 months through August. The CPI jumped 8.5% in the 12 months through July.Whether or not the Fed slows its monetary tightening, either through a 50- or 25-basis-point hike at its Nov. 1-2 policy meeting, is on a knife’s edge, the poll showed. A majority of the economists, however, expected the central bank to opt for a 25-basis-point hike at its Dec. 13-14 meeting.There was still no consensus among economists on where and when the Fed will stop hiking rates, and similarly there was no consensus on when it would start cutting them.Among the economists who had a view through the end of 2023, 47% forecast at least one rate cut, down from 57% in a poll last month.Once the fed funds rate reaches a peak, the central bank is more likely to leave it unchanged for an extended period rather than cut it quickly, according to more than 80% of respondents who answered an additional question.Fed Chair Jerome Powell has said he and his fellow policymakers will raise rates as high as needed and would keep them there “for some time” to bring inflation down to the 2% target.”We just don’t see the Fed cutting rates next year, it would be too soon. They won’t have enough evidence inflation is on a sustained downward course towards the target,” said Sal Guatieri, senior economist at BMO Capital Markets, who also was among those polled.’WISHFUL THINKING’While inflation, as measured by CPI, was forecast to average 8.0% and 3.7% this year and in 2023, respectively, a tight labor market was expected to underpin price pressures, according to the poll.The U.S. jobless rate, which rose to 3.7% in August from 3.5% in July, was forecast to average 3.7% this year before climbing to 4.2% in 2023 and 2024.However, the unemployment rate needs to go significantly higher to bring inflation down to 2%, according to 16 of 30 respondents to an additional question who gave a median jobless rate of 5%. The other 14 said it did not need to rise significantly.”The claim wage pressures can be reduced … without substantially increasing unemployment is wishful thinking on the Fed’s part,” said Philip Marey, senior U.S. strategist at Rabobank, who was among those polled.(For other stories from the Reuters global economic poll:) More