Its previous forecasts, from June, were for 1.9% and 1.1% GDP growth, respectively.In a statement ahead of elections for parliament next month, it predicted headline inflation this year at 7.3%, and at 3.9% in 2023, against previous forecasts of 6.1% and 2.9%, respectively. More
Jobless claims totaled 250,000 for the week ended Aug. 13, down 2,000 from the previous week and below the 260,000 Dow Jones estimate.
Continuing claims, which run a week behind the headline number, totaled 1.437 million, an increase of 7,000.
In other economic news, the Philadelphia Fed reported that its monthly manufacturing survey for August rose to a reading of 6.2
A “We’re Hiring” sign is posted at a Target store on August 05, 2022 in San Rafael, California.
Justin Sullivan | Getty Images
Initial filings for unemployment benefits declined slightly last week though they were consistent with a drift higher in layoffs that began in the spring, the Labor Department reported Thursday.
Jobless claims totaled 250,000 for the week ended Aug. 13, down 2,000 from the previous week and below the 260,000 Dow Jones estimate.
The four-week moving average for claims, which helps smooth out weekly volatility, also fell by 2,750 to 246,750.
Earlier this year, claims had hit their lowest level in more than 50 years, but began moving higher in April after bottoming at 166,000. The four-week moving average has risen during that time by nearly 80,000.
Continuing claims, which run a week behind the headline number, totaled 1.437 million, an increase of 7,000.
Policymakers are watching the jobs market closely at a time when inflation is running near 40-year highs. Federal Reserve officials have instituted a series of interest rate increases aimed in part at cooling a labor market in which there are nearly two jobs open for every available worker.
At their July meeting, Fed officials noted “tentative signs of a softening outlook for the labor market” that included a rise in weekly claims. Policymakers said they were determined to continue to raise interest rates until inflation under control even if meant more a slowdown in hiring.
In other economic news Thursday, the Philadelphia Fed reported that its monthly manufacturing survey for August rose to a reading of 6.2, representing the percentage difference between companies expecting expansion vs. contraction.
That was above the estimate for a minus-5 reading and helped quell fears that manufacturing might be headed for a major slowdown. A similar survey on Monday from the New York Fed fell a stunning 40 points as respondents indicated that business conditions were deteriorating.
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The Biden administration said on Wednesday that it would begin formal trade negotiations with Taiwan this fall, after several weeks of rising tensions over the island democracy that China claims as its own.The announcement marks a step toward a pact that would deepen economic and technological ties between the United States and Taiwan, after initial talks were announced in June. But relations between the United States and China have markedly deteriorated since then, on the heels of visits by two delegations of U.S. lawmakers to Taiwan this month, including by Speaker Nancy Pelosi.The trips angered the Chinese government, which sees the island as an incontestable part of its territory, and it has responded by ramping up military drills and firing missiles into the waters around Taiwan. The United States, in turn, has accused China of using the visits as a pretext to step up operations to intimidate Taiwan, and has vowed to maintain its own military operations in the region.Despite its small size, Taiwan is the United States’ eighth-largest trading partner. It is an important market for U.S. agriculture and a key supplier of technology, particularly advanced semiconductors.Talks for the pact, called the U.S.-Taiwan Initiative on 21st-Century Trade, will focus on 11 trade areas, the announcement from the Office of the United States Trade Representative said, including expanding trade in agriculture and digital industries, raising labor and environmental standards, and enhancing trade between small and medium-size businesses.The governments also said they would combat market distortions caused by state-owned enterprises, as well as nonmarket policies and practices — an apparent nod at China, where such practices are common.China responded to the news of the trade talks with displeasure. Shu Jueting, a representative for China’s Ministry of Commerce, said: “China always opposes any form of official exchanges between any country and the Taiwan region of China, including negotiating and signing any agreements with sovereign connotations or an official nature.”She added that China would “take all necessary measures to resolutely safeguard sovereignty, security and development interests.”The U.S.-Taiwan trade initiative will be negotiated by the American Institute in Taiwan, which is the unofficial U.S. embassy in Taipei, and the Taipei Economic and Cultural Representative Office in the United States, which represents Taiwan in Washington in the absence of diplomatic recognition.The Biden administration is also carrying out a separate trade negotiation with 13 Asian nations to form a pact known as the Indo-Pacific Economic Framework. Taiwan has expressed interest in joining those talks, but given its contested status, it has not been invited to participate.In a briefing on Wednesday, Daniel J. Kritenbrink, the assistant secretary of state for East Asian and Pacific affairs, defended what he called “an ambitious road map for trade negotiations” with Taiwan.“We will continue to fulfill our commitments under the Taiwan Relations Act,” he said. “That includes supporting Taiwan’s self-defense and maintaining our own capacity to resist any resort to force or other forms of coercion that would jeopardize Taiwan’s security. And we will continue, consistent with our ‘one China’ policy, to deepen our ties with Taiwan, including through continuing to advance our economic and trade relations.”Austin Ramzy More
Central banks from the United States to Canada, Australia and Switzerland have lined up with aggressive rate rises recently. The European Central Bank last month delivered its first rate hike since 2011.Japan, which is yet to lift rates in this cycle, is the holdout dove among the 10 big developed economies.In total, those central banks have so far raised rates in this cycle by a combined 1,415 basis points.Here’s a look at where policymakers stand in the race to contain inflation.1) UNITED STATESThe Federal Reserve last month delivered its second straight 75 basis-point (bps) rate rise. Though inflation surprised by not rising in July, Fed officials have reiterated their determination to get on top of red-hot price pressures with tighter monetary policy. Following the inflation print markets reduced their bets on a third 75 bps move in September, now seeing a 40% chance. Even as growth worries mount, analysts say containing inflation will remain the Fed’s priority. Graphic: U.S. CPI vs 10-year Treasury yield https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrwyaavm/us%20cpi%20chart.PNG 2) CANADAThe Bank of Canada last month delivered the first 100-bps rate increase among the world’s advanced economies in the current policy-tightening cycle. It lifted its key policy rate to 2.5%.With annual inflation running way above target and the highest in nearly four decades, analysts reckon another rate hike in September is highly likely. Graphic: Canada in the hawkish camp https://fingfx.thomsonreuters.com/gfx/mkt/zdpxobjywvx/CA2107.PNG 3) NEW ZEALANDThe Reserve Bank of New Zealand on Wednesday delivered its seventh straight hike — and fourth consecutive rise of 50 bps — to lift rates to 3%, the highest since September 2015.The RBNZ also struck a more hawkish than expected tone as it battles soaring inflation. It now sees rates at 4% by early next year, compared to its previous projection of 3.7%, implying at least one more 50 bps rate hike at upcoming meetings. Graphic: RBNZ https://fingfx.thomsonreuters.com/gfx/mkt/movangbwrpa/Pasted%20image%201660737709275.png 4) BRITAINThe Bank of England this month lifted its key rate by half a percentage point to 1.75% – its highest level since late 2008.The BoE also warned that Britain was facing a recession with a peak-to-trough fall in output of 2.1%, similar to a slump in the 1990s. Despite those recession risks, double-digit inflation now has investors betting rates won’t peak until another 200 bps of hikes by May 2023. Graphic: BoE rate moves https://graphics.reuters.com/BRITAIN-BOE/myvmnenzgpr/chart.png 5) NORWAYNorway, the first big developed economy to kick off a rate-hiking cycle last year, on Thursday jacked up rates another 0.5% to 1.75% and said more hikes were in the pipeline, probably including one in September.6) AUSTRALIAThe Reserve Bank of Australia this month raised rates by 50 bps, tightening policy for a fourth month running. But it tempered guidance on further hikes as it forecast faster inflation but also a slowdown in the economy.The RBA has now delivered 175 bps of hikes since May, taking its key rate to 1.85%, in the most drastic tightening since the early 1990s. Graphic: G10 policy rates https://fingfx.thomsonreuters.com/gfx/mkt/gdpzyoaqevw/g10%20policy%20rates.PNG 7) SWEDENAnother late-comer to the inflation battle, Sweden’s Riksbank delivered a half percentage-point interest rate hike on June 30 to 0.75%, its biggest hike in more than 20 years.As recently as February, the Riksbank had forecast unchanged policy until 2024, but governor Stefan Ingves now expects rates to hit 2% in early 2023 and said 75 bps moves are possible.8) EURO ZONEThe ECB last month hiked its deposit rate by 50 bps — more than it initially guided — in its first rate rise since 2011 to fight soaring inflation. The move to 0% ended an eight year experiment with negative rates.The bank is expected to hike rates again at its next meeting on Sept. 8, with money markets pricing a full probability they will be jacked up to 0.5%. Graphic: ECB monetary policy https://fingfx.thomsonreuters.com/gfx/mkt/akpezkyqkvr/ecb%20monetary%20policy.PNG 9) SWITZERLANDOn June 16, the Swiss National Bank (SNB) unexpectedly raised its -0.75% interest rate, the world’s lowest, by 50 bps, sending the franc soaring.Recent franc weakness has contributed to driving Swiss inflation towards 14-year highs and SNB governor Thomas Jordan said he no longer saw the franc as highly valued. That has opened the door to more rate hikes including at its next meeting on Sept. 22.10) JAPANJapan is the holdout dove. The Bank of Japan in July maintained ultra-low interest rates of -0.1% and signalled its resolve to keep them that way even as it projected inflation would exceed its target this year.BOJ Governor Haruhiko Kuroda said he had no plan to raise rates or hike an implicit 0.25% cap set for the bank’s 10-year bond yield target, because Japan was still recovering from the pandemic and its terms of trade had worsened. Graphic: BOJ is the last dove standing https://fingfx.thomsonreuters.com/gfx/mkt/klvykrzggvg/Pasted%20image%201655441669556.png More
TORONTO (Reuters) – Canadian inflation is not likely to return to the central bank’s 2% target until 2024 after possibly peaking in June, as less volatile items like wages and rent displace energy as key sources of price pressure, analysts say. In a bid to return inflation to target, since March the Bank of Canada (BoC) has raised its benchmark interest rate by 225 basis points to 2.50%, including a full-percentage-point move in its last policy decision in July, the biggest single hike by a G7 country in this economic cycle.A slow grind back to target could make the central bank less willing to pivot to interest rate cuts next year if the economy moves into recession as some analysts expect.Earlier this month, expectations were building that the central bank would be cutting rates as soon as next March.”Even with the economy likely to see a mild recession next year, we think it will take until 2024 to get inflation back to target, or reasonably close,” said Josh Nye, senior economist at Royal Bank of Canada.The Bank of Canada’s latest forecast, in July, was for inflation to return to 2% by the end of 2024 and for the economy to avoid recession.Canadian inflation slowed to 7.6% in July on lower gasoline prices, down from an almost 40-year high of 8.1% in June, but measures of core price pressures that strip out the most volatile components, such as energy, continued to climb. The problem is that increases in slower-moving drivers of inflation like wages and rent are likely to be persistent, or sticky, even as commodity-price gains and some supply constraints caused by the COVID-19 pandemic and the Ukraine war ease, analysts say.”The biggest theme from this latest (inflation) reading is a significant rotation in where the most intense price pressures are coming from,” Doug Porter, chief economist at BMO Capital Markets, said in a note.”The Bank can scarcely back down anytime soon, as it has a long-term battle on its hands reining in 5% core inflation.”Investors appear to have taken note, with money markets now expecting the central bank’s benchmark interest rate to peak at about 3.75% in the first quarter of next year and stay close to that level through much of 2023. The Federal Reserve could also be facing a lengthy battle to bring inflation back to target. But it has a dual mandate of employment and price stability, unlike the single goal of low inflation pursued by Canada’s central bank.”The BoC is most likely biased towards taking the risk of overtightening rather than undertightening until they see enough evidence that demand is cooling,” said Jimmy Jean, chief economist at Desjardins Group. More
COLOMBO (Reuters) -Sri Lanka will ask Japan to invite the Indian Ocean island’s main creditor nations, including China and India, to talks on bilateral debt restructuring, as it seeks a way out of its worst economic crisis in decades, its president said on Thursday.”Someone needs to call in, invite the main creditor nations. We will ask Japan to do it,” President Ranil Wickremesinghe told Reuters in an interview, adding that he would travel to Tokyo next month and hold talks with Japanese premier Fumio Kishida.Sri Lanka, a country of 22 million people, is facing its most severe financial crisis since independence from Britain in 1948, resulting from the combined impact of the COVID-19 pandemic and economic mismanagement.Left with scant foreign exchange reserves, which have stalled the imports of essentials including fuel and medicines, ordinary Sri Lankans have been battling crippling shortages of months amid sky-rocketing inflation and a devalued currency.Public anger stoked unprecedented mass protests, which forced the country’s then president, Gotabaya Rajapaksa, to flee to Singapore in early July and then quit.Wickremesinghe, a six-time prime minister, won a parliamentary vote and took office as president on July 21.Besides seeking assistance from its allies, Sri Lanka is also in negotiations with the International Monetary Fund for a loan package of between $2 billion and $3 billion, Wickremesinghe said.Sri Lanka’s total bilateral debt was estimated at $6.2 billion at the end of 2020 by the IMF, according to a March report.Local broadcaster Newsfirst, citing a former ambassador, said on Wednesday that Rajapaksa would return home next week.Wickremesinghe said he was “not aware” of any such plans. More
Investing.com — Turkey’s central bank cut its key interest rate by a full percentage point on Thursday despite the country suffering 80% inflation.In a statement accompanying the decisions, the bank justified its action by pointing to an expected growth slowdown in the current quarter and expectations that a process of disinflation will soon set in after a surge in prices in the spring triggered by Russia’s invasion of Ukraine.The bank cut its one-week repo rate to 13% from 14%, after holding it steady for the past year. It also cut its overnight deposit and lending rates, which form a corridor for short-term lira market rates, by a similar amount to 11.50% and 14.50% respectively.The announcement hit the lira, which has been badly undermined by a decade of unorthodox and often erratic macroeconomic policies under President Recep Tayyip Erdoğan. The dollar spiked as high as 18.1488 against it before paring its gains to be up 0.7% at 18.0759 by 08:00 ET (12:00 GMT). The benchmark BIST 100 stock index fell sharply before recovering to trade roughly where it was before the announcement. Credit default swaps on the country’s sovereign bonds, meanwhile, widened by around 50 basis points.The lira is already down some 27% against the dollar so far this year against the backdrop of runaway inflation that the central bank has been unable to tackle effectively. The consumer price index was up 79.6% in the 12 months through July, setting the stage for what would be a second currency crisis in only four years. Erdoğan fired his last central bank governor for failing to accommodate his economic stimulus policies by keeping interest rates too high as the effects of the 2018 currency crisis eased.In its statement, the CBRT said it expects a “disinflation process to start on the back of measures taken and decisively implemented for strengthening sustainable price and financial stability, along with the resolution of the ongoing regional conflict,” in what appeared to be a nod to Erdoğan’s role in helping the UN to broker a deal allowing Ukraine’s grain exports to reach world markets. The conflict between Russia and Ukraine continues, but that deal has helped allay fears of food shortages in many poor countries that are dependent on Ukraine and Russia for wheat imports. U.S. Wheat Futures are now below their levels immediately before the invasion in February.That, along with the global drop in energy prices since the middle of the year, has taken some of the steam out of Turkish inflation, which ran at a monthly rate of ‘only’ 2.37% in July, down from a peak of 13.6% in January and its smallest increase since October last year.Even so, analysts were baffled by the decision.”Just when you think the CBRT cannot get any crazier, they go to yet another level of craziness,” said Tim Ash, an associate fellow at Chatham House in London. More
Turkey has surprised markets with a 100 basis point interest rate cut despite inflation of nearly 80 per cent, as the central bank loosens policy further to spur growth ahead of a general election next year.The bank had been expected to keep the rate at 14 per cent, which has already pushed Turkish yields into deeply negative territory, according to a poll by broadcaster Bloomberg HT. Instead, policymakers lowered the rate to 13 per cent, saying they were concerned about the possibility of slowing economic growth.“Leading indicators for the third quarter point to some loss of momentum in economic activity,” the bank said in a statement on Thursday. “It is important that financial conditions remain supportive to preserve the growth momentum in industrial production, and the positive trend in employment in a period of increasing uncertainties regarding global growth as well as escalating geopolitical risk.” The lira dropped about 1 per cent to as low as 18.14 against the US dollar, the weakest level on an intraday basis since a severe slide late last year. The currency has tumbled more than 25 per cent in 2022 as scorching inflation and deep concern over the central bank’s unorthodox monetary policy has prompted foreign investors to flee the market. Turkey has been bucking the trend of other central banks that are raising borrowing costs to rein in global inflation. Şahap Kavcioğlu, the central bank governor, supports President Recep Tayyip Erdoğan’s unusual theory that high interest rates cause inflation, while mainstream economists subscribe to the opposite view.Kavcioğlu, who took the helm at the bank last year, began easing monetary policy in September, cutting rates from 19 per cent. That has unleashed Turkey’s highest inflation in a quarter century. Rates, until Thursday, had been unchanged at 14 per cent since December.In recent weeks, the central bank has recorded a sharp rise in its foreign currency reserves, helped by inflows from governments abroad, according to the finance minister. This may have encouraged Kavcioğlu to cut rates again, even though the bank’s coffers remain about $61bn in the red, when liabilities to other banks are accounted for, according to Goldman Sachs estimates. More
