Economy

Inflation is all investors can think about right now. How high will it go? How long will it last? Can it be curbed in the US without a major recession?There are useful comparisons to be made with the era of high inflation in the 1970s and early 1980s. But there are also many factors today that are unique to our moment, and they make it unusually difficult to predict exactly how quantitative tightening will play out. Below are three inflation “wild cards” that are worth considering.The first is the way in which the financialisation of the economy could have an impact on the Federal Reserve’s efforts to tamp down inflation. Decades of low interest rates, coupled with several major bouts of quantitative easing following the 2008 financial crisis, raised both asset prices and debt levels.Retail investors are more exposed to stocks than they were a decade ago thanks to the growth of target-date funds that invest more in equities on the front end of their time horizon, as well as the gamification of trading. We have all grown used to an economy in which paper wealth grows. So, what happens when asset prices inevitably fall as interest rates rise?It is possible that this could put more strain on government budgets than expected. As analyst Luke Gromen noted in a recent edition of his newsletter, US tax receipts have become much more correlated with rising asset prices over the past two decades than they were in the past. Indeed, the two have been rising and falling roughly in sync since 2001. If markets stay down, that implies that tax receipts would go down, too. The federal deficit would increase accordingly — and cause the US government to borrow more at a time when rates are going up.That could, in turn, create difficulties with the balance of payments and force the central bank into a U-turn in order to drive down rates again. Given that foreign investors are less willing to fund US deficits these days, this is a risk that needs attention. It’s a complicated process that could play out many ways, but the point is that America’s dependence on easy money and a stretched-out business cycle for many decades could have a complex and worrisome macroeconomic ricochet effect.A second major wild card in the inflation cycle is housing. While pandemic-related stimulus created a housing boom in many countries, it is not the same kind of boom that we saw in the run-up to the financial crisis. As a recent TS Lombard report pointed out, low rates account for only about a third of the increase in property demand.What’s more, there has not been the same surge in mortgage applications throughout the pandemic that there was in the run-up to the subprime crisis. Mortgage lending over the past few years is of a much higher quality and the majority of it is tied to fixed interest rates. This means that even as rates rise, we are not going to have the massive amounts of forced selling by those who can no longer afford their homes that we saw then.What about first-time buyers? Research from the New York Fed assumes that every 100 basis point increase in mortgage rates reduces property sales by about 10 per cent. But that is in a “normal” housing market, which the post-pandemic market is most certainly not.Working from home, which clearly is not going to go away for many companies and employees, has resulted in major geographic shifts in the housing market, as people look for more space in places farther away from their jobs. While the dust has yet to settle, one new academic paper found a strong correlation between property price increases and those parts of the US in which people are more likely to work from home.So, what’s the bottom line? While the most speculative markets may see a decrease in housing inflation and price corrections as rates rise (I am already noticing this in some rural areas outside New York, where second-home owners overpaid at the peak of the pandemic), many areas may remain robust.As the Lombard report points out, Covid-19 has altered the pattern of internal American migration. This trend may turn out to be similar to the way in which the post-second world war mass adoption of the automobile led to the growth of the suburbs and spread the population westwards. It seems clear that today’s population growth is in both the west and the south of the country. Coupled with a demographic bulge of people in their thirties, the prime homebuying age, this may keep housing markets at a national level stronger for longer than many people think.Finally, there is the question of US labour markets. While much has been made of rising wages, an overheated labour market and the stickiness of pay rises, I think it’s quite possible that this part of the inflation problem is being overblown.While annual consumer price inflation in May was 8.6 per cent, wages were up 6.1 per cent, according to the Atlanta Fed’s wage tracker. That’s hardly within the 2 per cent target, but not enough to keep pace with inflation. Inflation itself is being driven not by employee demands or pandemic stimulus but by long-term Fed policy and politics — namely, the war in Ukraine. How the latter will end may be the biggest wild card of all.rana@[email protected] More

Shoppers are feeling the pressure as inflation pushes up prices for gas, groceries and a range of other goods and services.
Airlines, movie theaters and specialty retailers are among the businesses that so far say they’ve been shielded from a slowing economy.
Other companies like McDonald’s are seeing signs that consumer demand is weakening.

A woman pushes a shopping cart through the grocery aisle at Target in Annapolis, Maryland, on May 16, 2022, as Americans brace for summer sticker shock as inflation continues to grow.
Jim Watson | AFP | Getty Images

People still appear willing to shell out to travel, go to the movies and have a drink or two, even as surging prices and fears of a recession have them pulling back in other areas.
How people spend their money is shifting as the economy slows and inflation pushes prices higher everywhere including gas stations, grocery stores and luxury retail shops. The housing market, for example, is already feeling the pinch. Other industries have long been considered recession proof and may even be enjoying a bump as people start going out again after hunkering down during the pandemic.

Still, shoppers everywhere are feeling pressured. In May, an inflation metric that tracks prices on a wide range of goods and services jumped 8.6% from a year ago, the biggest jump since 1981. Consumers’ optimism about their finances and the overall economy sentiment fell to 50.2% in June, its lowest recorded level, according to the University of Michigan’s monthly index.
As gas and food prices climb, Brigette Engler, an artist based in New York City, said she’s driving to her second home upstate less often and cutting back on eating out.
“Twenty dollars seems extravagant at this point for lunch,” she said.
Here’s a look at how different sectors are faring in the slowing economy.

Movies, experiences holding up

Concerts, movies, travel and other experiences people missed during the height of the pandemic are among the industries enjoying strong demand.

Live Nation Entertainment, which owns concert venues and Ticketmaster, hasn’t seen people’s interest in attending concerts wane yet, CEO Joe Berchtold said at the William Blair Growth Stock Conference earlier this month.
In movie theaters, blockbusters like “Jurassic World: Dominion” and “Top Gun: Maverick” have also pulled in strong box office sales. The movie industry long been considered “recession proof,” since people who give up on pricier vacations or recurring Netflix subscriptions can often still afford movie tickets to escape for a few hours.
Alcohol is another category that’s generally protected from economic downturns, and people are going out to bars again after drinking more at home during the early days of the pandemic. Even as brewers, distillers and winemakers raise prices, companies are betting that people are willing to pay more for better-quality alcohol.
“Consumers continue to trade up, not down,” Molson Coors Beverage CEO Gavin Hattersley said on the company’s earnings call in early May. It might seem counterintuitive, but he said the trend is in line with recent economic downturns.
Alcohol sales have also been shielded in part because prices haven’t been rising as quickly as prices for other goods. In May, alcohol prices were up roughly 4% from a year ago, compared with the 8.6% jump for overall consumer price index.
Big airlines like Delta, American and United are also forecasting a return to profitability thanks to a surge in travel demand. Consumers have largely digested higher fares, helping airlines cover the soaring cost of fuel and other expenses, although domestic bookings have dipped in the last two months.
It isn’t clear whether the race back to the skies will continue after the spring and summer travel rushes. Business travel usually picks up in the fall, but airlines might not be able to count on that as some companies look for ways to curb expenses and even announce layoffs.
People’s desire to get out and socialize again is also boosting products like lipstick and high heels that were put away during the pandemic. That recently helped sales at retailers including Macy’s and Ulta Beauty, which last month boosted their full-year profit forecasts.
Luxury brands such as Chanel and Gucci are also proving to be more resilient, with wealthier Americans not as affected by climbing prices in recent months. Their challenges have been more concentrated in China of late, where pandemic restrictions persist.
But the fear is that this dynamic could change quickly, and these retailers’ short-term gains could evaporate. More than eight in 10 U.S consumers are planning to make changes to pull back on their spending in the next three to six months, according to a survey from NPD Group, a consumer research firm.
“There is a tug-of-war between the consumer’s desire to buy what they want and the need to make concessions based on the higher prices hitting their wallets,” said Marshal Cohen, chief retail industry advisor for NPD.

Homes, big-ticket items squeezed

The once red-hot housing market is among those clearly hurting from the slowdown.
Rising interest rates have dampened mortgage demand, which is now roughly half of what it was a year ago. Homebuilder sentiment has dropped to the lowest level in two years after falling for six consecutive months. Real estate firms Redfin and Compass both announced layoffs earlier this week.
“With May demand 17% below expectations, we don’t have enough work for our agents and support staff,” Redfin CEO Glenn Kelman wrote in an email to employees later posted on the company’s website.         
For the retail sector more broadly, data from the Commerce Department also showed a surprising 0.3% drop in overall in May from the previous month. That included declines at online retailers and miscellaneous store retailers such as florists and office suppliers.
And while demand for new and used cars remains strong, auto industry executives are starting to see signs of potential trouble. With the cost for new and used vehicles up by double digits over the last year, car and other motor vehicle dealers saw sales decline 4% decline in May from the previous month, according to the U.S. Department of Commerce.
Ford Motor CFO John Lawler said this week that delinquencies on car loans are starting to tick up too. Although the increase could signal tough times ahead, he said said it’s not yet a worry, since delinquencies had been low.
“It seems like we’re reverting back more towards the mean,” Lawler said at a Deutsche Bank conference.
The restaurant industry is also seeing signs of potential trouble, although how eateries are affected could vary.
Fast-food chains have also traditionally fared better in economic downturns since they’re more affordable and draw diners with promotional deals. Some restaurant companies are also betting people will keep dining out as long as grocery prices rise faster.
The cost of food away from home rose 7.4% over the 12 months ended in May, but prices for food at home climbed even faster, shooting up 11.9%, according to the Bureau of Labor Statistics. Restaurant Brands International CEO Jose Cil and Wendy’s CEO Todd Penegor are among the fast-food executives who have emphasized the gap as an advantage for the industry.
But McDonald’s CEO Chris Kempczinski said in early May that low-income consumers have started ordering cheaper items or shrinking the size of their orders. As the largest U.S. restaurant chain by sales, it’s often seen as a bellwether for the industry.
On top of that, traffic across the broader restaurant industry slowed to its lowest point of the year in the first week of June, according to market research firm Black Box Intelligence. That was after the number of visits also slowed in May, though sales ticked up 0.7% on higher spending per visit.
Barclays analyst Jeffrey Bernstein also said in a research note on Friday that restaurants are accelerating discounting, a sign that they’re expecting same-store sales growth to slow. Among the chains that have introduced new deals to draw diners are Domino’s Pizza, which is offering half-price pizzas, and Wendy’s, which brought back its $5 Biggie Bag meal.
Among those scrambling to adjust to a shift in shopper behavior are mass-merchant retailers like Target and Walmart, which issued cautious guidance for the year ahead.
Target warned investors earlier this month that its fiscal second-quarter profits would take a hit as it discounts people bought up during the pandemic but no longer want, such as small appliances and electronics. The big-box retailer is trying to make room on its shelves for the products in demand now: beauty products, household essentials and back-to-school supplies.
CEO Brian Cornell told CNBC that the company’s stores and website are still seeing strong traffic and “a very resilient customer” overall, despite the shift in their buying preferences. Rival Walmart has also been discounting less-desired items like apparel, although the retail giant said it’s been gaining share in grocery as shoppers look to save.
— Leslie Josephs, Lauren Thomas, Michael Wayland, John Rosevear, Sarah Whitten and Melissa Repko contributed reporting.

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PARIS (Reuters) -Voting was underway in France on Sunday in a parliamentary election that could deprive newly re-elected centrist President Emmanuel Macron of the absolute majority he needs to govern with a free hand.Initial projections were expected at 8 p.m. (1800 GMT) from the election that could change the face of French politics. Turnout by midday was a bit stronger – at 18.99% – than at the same time during a first round of voting last Sunday and than in 2017, when it reached only 18.43% and 17.75% respectively. Macron won a second term in presidential elections in April. If Sunday’s vote does not give his camp an outright majority it would open a period of uncertainty that could be resolved by a degree of power-sharing among parties unheard of in France over the past decades – or result in political paralysis and repeat parliamentary elections down the line.Pollsters predict Macron’s camp will end up with the biggest number of seats, but say it is in no way guaranteed to reach the 289 threshold for an absolute majority. Opinion polls also see the far right likely to score its biggest parliamentary success in decades, while a broad left-green alliance could become the largest opposition group and the conservatives find themselves as kingmakers.In the town of Sevres just outside Paris, where light rain provided some relief after a major heatwave hit France on Saturday, some voters said they were motivated by environmental concerns to cast a ballot for the Nupes left-wing alliance.”During the past 5 years, the presidential majority wasn’t able to meet the challenges of climate change – the current heatwave makes you want to support environmental projects even more,” Leonard Doco, a 21-year-old film student, told Reuters.Others said they didn’t trust the leader of the left-wing bloc, firebrand Jean-Luc Melenchon, who has campaigned under the slogan “Elect me prime minister” and who promises to cut the retirement age to 60 from 62, freeze prices and ban companies from firing workers if they pay dividends.”Melenchon is a hypocrite. He makes promises that don’t hold up. Retirement at age 60, that’s impossible,” said Brigitte Desrez, 83, a retired dance teacher, who voted for Macron’s party.Overnight, results of France’s overseas departments brought bad news for Macron, with his minister for maritime affairs losing in her Caribbean constituency. Some 15 government ministers are running in this election and Macron has said they’ll have to quit if they lose.REJUVENATED LEFT Macron is seeking to raise the retirement age and pursue his pro-business agenda and further European Union integration.After electing a president, French voters have traditionally used legislative polls that follow a few weeks later to hand him a comfortable parliamentary majority – with Francois Mitterrand in 1988 a rare exception. Macron and his allies could still achieve that. But the rejuvenated left is putting up a tough challenge, as inflation puts cost of living concerns at the forefront of many voters’ minds.If Macron and his allies miss an absolute majority by just a few seats, they may be tempted to poach MPs from the centre-right or conservatives, officials in those parties said.If they miss it by a wider margin, they could either seek an alliance with the conservatives or run a minority government that will have to negotiate laws with other parties on a case-by-case basis.Even if Macron’s camp does win an absolute majority, it is likely to be thanks to his former prime minister, Edouard Philippe, who will be demanding more of a say on what the government does.However Sunday’s vote goes, the president is likely entering new period of having to strike more compromises, after five years of undisputed control since his first election in 2017. More

NEW DELHI (Reuters) – Sequoia Capital India has asked a local court to dismiss a defamation lawsuit filed by one of its former general counsels, saying it was an attempt to curb its free speech rights and harm its interests, the venture capital firm’s court filing shows. Sequoia has been locked in a legal battle with Sandeep Kapoor, after he included the company in a defamation lawsuit against media companies that reported on a leaked Sequoia email of June 2. Kapoor was Sequoia’s in-house general counsel for nearly nine years until 2019. The lawsuit is the latest in a series of troubles for Sequoia that have the company grappling with complaints from startups about damaged trust following high-profile governance scandals at some of its portfolio companies in India and Southeast Asia. Kapoor’s firm, Algo Legal, has said in a press statement and its lawsuit that Sequoia sent an email to its portfolio companies this month making baseless references to “concerning details” about the law firm that hurt its business and reputation. Sequoia denied the allegations in a 19-page court filing in India’s tech hub of Bengaluru on June 18, calling the lawsuit “frivolous and vexatious” and saying it was duty bound to inform its portfolio companies when it detected certain irregularities. An independent probe at Sequoia Capital-backed fashion startup in Singapore, Zilingo, found certain payments made to Algo and its related entities “were not in consonance with the engagement terms/contracts”, forcing Sequoia to caution its portfolio companies from dealing with the law firm, the court filing states.Sequoia’s filing, which has been seen by Reuters, has not been made public. A spokesperson for Algo and Kapoor said on Sunday they told the court on Saturday the investigation into Zilingo’s affairs is ongoing and there was no final finding, and that Sequoia’s allegations in the filing were without merit. Detailing the Zilingo probe’s findings for the first time, Sequoia said it found the fashion startup paid Algo and its related entities more than $6 million between 2020 and 2022. In such circumstances, Sequoia said, its “right to freedom of speech prevails over the plaintiff’s right of reputation since the statement was issued without any malice and without any intention to defame.” Sequoia was Algo’s top client in billings, but the U.S. venture capital firm ended its engagement with Algo in January. Sequoia on Sunday declined to comment on its court filing. The Bengaluru court will next hear the matter on June 29. Zilingo in April suspended its 30-year-old CEO and cofounder Ankiti Bose, a former Sequoia analyst, over suspected financial irregularities. Bose was later dismissed in what she has said was a wrongful termination.Zilingo and Bose did not immediately respond to a request for comment on Sunday. Bose’s removal, Zilingo has previously said, followed an independent investigation into complaints about what the startup described as “serious financial irregularities”. More

Did UK inflation stabilise in May?After surging in April, UK inflation is expected to stabilise over the next few months — albeit remaining at historic levels — before reaching new heights later this year.Economists polled by Reuters expect UK consumer price growth to have hit 9.1 per cent on an annual basis in May. That figure would represent little change from the 40-year high of 9 per cent reached in April, when a jump in the country’s energy price-cap bill led to a sharp rise from 7 per cent in the previous month.“We are expecting fewer fireworks in the May CPI release,” said Ellie Henderson, economist at Investec. She forecast the headline consumer price index rate to remain at 9 per cent in May, but expects a combination of firmer food costs, higher petrol prices and another steep uptick in the energy price cap in October to push inflation into double figures in the second half of the year.This is in line with forecasts by the Bank of England which last week said it expects inflation to average above 11 per cent in the last quarter but pointed out that “risks to the inflation projection were judged to be skewed to the upside.”In order to bring inflation down closer to the bank’s target of 2 per cent, markets expect the bank to increase interest rates to 3 per cent by the end of the year, from the current level of 1.25 per cent. They are also pricing a more-than 50 per cent probability of a 0.5 percentage point interest rate rise at the BoE’s next policy meeting in August, which would be the sixth consecutive rise in rates. Valentina RomeiHow far has eurozone inflation hit business activity in June?As the European Central Bank prepares to end its era of easy money and start raising interest rates, economists will be tracking whether business activity has grown at a slower pace than expected in the face of surging inflation.A monthly survey released on Thursday is forecast to show that eurozone business activity expanded in June, but at a slower pace than in May. Economists polled by Reuters predict that the ‘flash’ or early reading of the S&P Global composite purchasing managers’ index for the eurozone will come in at 54 compared with 54.8 a month earlier. Any number above 50 indicates growth rather than contraction.That consensus estimate comes as businesses and consumers in Europe grapple with record inflation levels stemming from supply chain disruption and the soaring price of goods and energy, exacerbated by Russia’s invasion of Ukraine.Bert Colijn, a senior economist at ING, said a central factor in determining the health of business activity would be how well the services industry — particularly in southern eurozone economies — has fared after the lifting of pandemic restrictions.“Also important is whether the manufacturing sector continues to hold up despite supply chain problems and falling new orders,” he said, adding: “Energy price growth remains problematic, but we also hear anecdotal evidence of businesses becoming more careful to price through higher input costs to the consumer.” Nikou AsgariWill Norway announce an extra-large rate rise?Norway may have been ahead of other big central banks in tightening monetary policy before the current inflation scare. But even after three rate rises since last September, Norges Bank still faces questions about the pace of future increases when it meets on Thursday.Most economists expect it to raise interest rates by 0.25 percentage points to 1 per cent, and to indicate that it will speed up future rises. Nordea, the Nordic region’s biggest bank, expects four more increases this year after next week, with the subsequent one due in August, a more rapid increase than Norges Bank indicated in March. By the end of 2023, its main policy rate should be 3 per cent, Nordea believes.Norway, western Europe’s leading petroleum producer and one of the world’s richest countries, is suffering from many of the same issues as other developed nations — from rising inflation and wage pressure to worries about future growth. But it also has the world’s largest sovereign wealth fund, which provides about a quarter of the government’s budget, and sky-high revenues from oil and particularly gas.Could Norges Bank be tempted to follow the US Federal Reserve with a large rate rise? The Nordea economists do not believe so, arguing that as 94 per cent of households have floating mortgage rates (versus about 10 per cent in the US) Norway’s policy rate is effectively transmitted to individuals, lessening the need for shock rises of 0.5 percentage points or more. Richard Milne More

PARIS (Reuters) – French President Emmanuel Macron may find himself without a ruling majority during his second term and unable to push through his economic reform agenda with a free hand after a new left-wing alliance did well in the first round of voting.The second round will be held on Sunday. Here are three possible outcomes.ABSOLUTE MAJORITYScared off by increasingly strident warnings against Jean-Luc Melenchon’s radical left platform, voters elect more than 289 Macron-supported candidates to parliament.He will have free rein to drive through his manifesto, which includes a contested pension reform. Even so, the president is unlikely to find it as easy to push legislation through parliament as during his first mandate.His former prime minister, Edouard Philippe, who is widely believed to harbour presidential ambitions, has created his own party, officially part of Macron’s majority, and is likely to want a say on legislation, pushing for more conservative policies on pensions and public deficits, for instance. With a tight majority, even a small contingent of lawmakers could help make Philippe a kingmaker during Macron’s second term. HUNG PARLIAMENTMacron’s coalition fails to reach the 289 mark and does not command a majority of seats despite being the largest party in parliament.This is an unusual event under the Fifth Republic, and there is no institutional rule to follow to build a coalition, as is the case in countries like Belgium or the Netherlands.Macron may have to reach out to other parties, probably the centre-right Les Republicains, to form a coalition, which would probably involve offering prominent cabinet roles to rivals and manifesto adjustments in return for parliamentary support.He could also try to poach lawmakers individually and offer sweeteners to encourage them to break ranks with their parties.Failing that, Macron could be forced to negotiate bill by bill, securing centre-right support for his economic reforms, for example, while attempting to win over the centre-left support on some social reforms.That would slow down the pace of reforms and might lead to political deadlock in a country where consensus-building and coalition work is not engrained in the political culture.But the president would still have a few tricks up his sleeve. He could, at any time, call for a new snap election, for instance, or use article 49.3 of the constitution that threatens a new election if a bill is not approved.COHABITATIONMelenchon defies opinion polls and his Nupes alliance wins a majority in the National Assembly. Under the French constitution, Macron must name a prime minister who has the support of the lower house, and “cohabitation” follows. Macron is not compelled to pick the person put forward by the majority for premier. However, should he refuse to name Melenchon, a power struggle would almost certainly ensue with parliament, with the new majority likely to reject any other candidate put forward by Macron.Cohabitation would leave Macron with few levers of power in his hands and upend his reform agenda. The president would retain the lead on foreign policy, negotiate international treaties, but cede most day-to-day policymaking to the government.There have been few previous periods of cohabitation in post-war France. They typically led to institutional tension between the president and prime minister, but were surprisingly popular with the electorate.Polls show this to be the least likely of the three outcomes. More

A Chinese state-owned company that trumpeted its green credentials when listing on the London Stock Exchange has quietly acquired a development in Indonesia that scientists warn threatens the world’s rarest great ape.SDIC Power signed off plans to invest in the $277mn Batang Toru hydropower plant in Indonesia less than two months after completing a listing in 2020 that was backed by big western banks and strongly supported by the LSE.But environmentalists have argued the dam is not needed and questioned whether the project was pushed through for political reasons to support China’s Belt and Road Initiative. They also said that the development risked the extinction of the critically endangered Tapanuli orang-utan.SDIC Power’s acquisition of a 70 per cent stake in the project, unreported until now except in company disclosures, has fanned concerns, too, about companies overstating their environmental credentials in the growing market for responsible investments. Activists have called on Beijing to withdraw from the development in Sumatra, in western Indonesia, as it prepares to host the UN Biodiversity Conference this year. Up to 800 Tapanuli orang-utans were discovered in the region in 2017 © Tim Laman/Creative Commons Attribution 4.0 International“We had these high hopes China was becoming a responsible financier on the global stage,” said Amanda Hurowitz, a director at campaign group Mighty Earth. Now “a Chinese state entity is involved in this project that could lead to the extinction of a species. I’m just heartsick.”SDIC Power, part of the State Development and Investment Corporation, listed in the UK in October 2020 via the London-Shanghai Stock Connect, a programme launched the previous year to boost links between the financial centres. HSBC, Goldman Sachs and UBS were bookrunners for its London debut. The LSE’s then interim chief executive Denzil Jenkins hailed the listing as a “milestone for [SDIC Power’s] business”.The group said approximately 70 per cent of the proceeds would be used for investing in overseas renewable energy projects.The Batang Toru dam is considered part of China’s Belt and Road Initiative, one of Xi Jinping’s flagship foreign policy projects, designed to build infrastructure and win political influence around the world. Opponents, however, are sceptical about the merits of the development. A 2020 report commissioned by Mighty Earth and co-authored by a Stanford University lecturer found there was no energy deficit in north Sumatra, the region the hydropower dam would supply, where 80 new plants were planned to be built or developed in the next decade.The acquisition could be “geopolitical”, said one environmentalist. “We question whether SDIC is involved because the Chinese state wants this.”

Critics said the project had been shrouded in secrecy since it was launched in 2015 by North Sumatera Hydro Energy, a Chinese-backed company that SDIC Power bought a majority stake in last October. Campaigners began targeting the development when up to 800 rare Tapanuli orang-utans were discovered in the region in 2017.Tensions escalated in 2019 following the “extremely suspicious” death of an environmental lawyer in Sumatra. Golfrid Siregar, who had opposed the dam, died three days after being found beaten on the side of a road, environmentalists said.The lack of awareness of SDIC Power’s stake in the project has highlighted “how complicated [responsible investing] is”, said Serge Wich, a professor in primate biology at Liverpool John Moores University who has opposed the dam. Although investors often “hope they are doing the right thing”, they may still be “investing in questionable projects”.SDIC Power and HSBC did not respond to a request for comment. The LSE, Goldman Sachs and UBS declined to comment. More

(Reuters) -Federal Reserve Governor Christopher Waller on Saturday became the latest U.S. central banker to pledge a whatever-it-takes approach to fighting inflation, three days after the Fed raised interest rates by three-quarters of a percentage point and signaled more hikes to come.”If the data comes in as I expect, I will support a similar-sized move at our July meeting,” Waller told a Society for Computational Economics conference in Dallas. “The Fed is ‘all in’ on re-establishing price stability.” A surge in inflation, which is at its highest level in 40 years, has made hawks of nearly all Fed policymakers, only one of whom dissented earlier this week against what was the central bank’s biggest rate increase in more than a quarter of a century. Policymakers currently expect to raise the Fed’s benchmark overnight interest rate, now in a range of 1.50%-1.75%, to at least 3.4% in the next six months. A year ago, the majority thought the rate would need to stay near zero until 2023. On Friday, the Fed called its fight against inflation “unconditional,” and Atlanta Fed President Raphael Bostic, who had been its most dovish policymaker, declared “we’ll do whatever it takes” to bring inflation back down to the central bank’s 2% target.Inflation, as measured by the Personal Consumption Expenditures Price Index, is running at more than three times that level.”That’s the most important thing I’m worried about,” Waller said on Saturday, adding that moving rates quickly up to the neutral level and into restrictive territory is necessary to slow demand and put a check on inflation.That monetary tightening will likely drive unemployment, now at 3.6%, to between 4% and 4.25%, or possibly higher, Waller said, “but my goal is just to slow the economy.” Rising worries that Fed rate hikes will cause a recession, he said, “are a bit overblown.”Waller also said there are limits to how fast the Fed can move: markets would have a “heart attack” if the central bank raised rates by a full percentage point in a single move.RISK OF OVERSHOOTSpeaking at the same event in Dallas, former Fed Vice Chair Donald Kohn blamed high inflation in part on a decision to delay the tightening of policy that he traced to a framework the U.S. central bank adopted in 2020. That framework ruled out raising rates to preempt inflation triggered by falling unemployment. Waller, however, argued that it was the Fed’s overly specific promises about when it would end its massive asset purchases, implemented in 2020 to shelter the economy from pandemic-related fallout, that were at fault. Structural changes to the economy mean there is a “decent chance” the Fed will in the future need to again slash its policy rate to zero and buy bonds to fight even a typical recession, he said.Waller said, next time, he would support less restrictive promises around the end of bond purchases and more clarity around not just when the Fed would start to tighten policy but also how fast. If the Fed says it will not start raising rates until the labor market is at full employment, as it did in the recent cycle, markets should be primed to understand that borrowing costs will be pushed up very quickly once rates start to rise.Kohn, for his part, urged some caution once rates are high enough to start slowing inflation, warning that the Fed risks overshooting on its goals. “It requires judgment and confidence to know when to back off,” Kohn said. More