Economy

Investing.com – The Organization for Economic Co-operation and Development has lowered its global growth forecast for 2022, as the group warned that the war in Ukraine will take a “hefty” toll on the world economy.The OECD now expects global real GDP growth this year to be at 3%, down from its estimate of 4.5% in December. The Paris-based organization projects the figure will fall further to 2.8% in 2023.In a statement, OECD Chief Economist and Deputy Secretary-General Laurence Boone said Russia’s invasion of Ukraine has led to a recent spike in energy and food prices. She added that this could put particular pressure on low-income countries and Europe, while also impacting “firms’ profits and capacity to invest and create jobs.””The extent to which growth will be lower and inflation higher will depend on how the war evolves, but it is clear the poorest will be hit hardest. The price of this war is high and will need to be shared,” Boone said.At the same time, the OECD flagged that China’s zero-COVID policy could also weigh on the global economic outlook by lowering domestic growth and disrupting supply chains. More

Investing.com — Two major multilateral organizations cut their outlook for global economic growth this year, seeing lasting damage from Russia’s war in Ukraine and the West’s response to it. India becomes the latest central bank to join the 50-basis point club with a surprisingly large rate hike. U.S. stocks are back in cautious mode after Tuesday’s late rally, but Chinese tech roars ahead after fresh signs of the regulators relaxing their campaign against the sector. And oil prices drift as the market waits for corroboration of a surprising rise in U.S. inventories last week. Here’s what you need to know in financial markets on Wednesday, June 8.1. OECD, World Bank cut growth forecastsTwo major multilateral organizations cut their forecasts for the world’s economy within 24 hours, as the Organization for Economic Cooperation and Development joined the World Bank in slashing its estimates for 2023.The OECD cut its forecast for global growth this year to 3.0% from 4.5% in its last quarterly update, while also revising up its inflation forecast for its 38 advanced economy members to just under 9%.The Paris-based think-tank warned the world will pay a “hefty price” in sustained disruption of trade flows due to the war in Ukraine, the West’s sanctions response, and ongoing supply chain disruptions from China’s zero-COVID policy.The World Bank had cut its forecast for growth this year to 2.9%, warning that: “Even if a global recession is averted, the pain of stagflation could persist for several years.”2. India joins the 50bp club; Poland seen hiking by 75bpThe Reserve Bank of India joined the club of central banks taking bigger-than-usual steps to bring down inflation, raising its key rate by 50 basis points to 4.90%. The RBI was responding to a surge in inflation to 7.8%, well above its 6% tolerance threshold.  It said it expected inflation to stay above target for the rest of this year, but stayed by its existing growth forecasts which see the economy slowing to a growth rate of 4% by the first quarter of 2023, from an unsustainable 16% in the current quarter.Elsewhere, the central bank of Thailand kept its key rate unchanged, but the National Bank of Poland is expected to raise its key rate by 75 basis points to 6% at its meeting later Wednesday. That all comes one day before the European Central Bank’s next policy meeting. ECB hawks who want a 50 basis point hike in July were emboldened by a big upward revision to first-quarter Eurozone GDP earlier.3. Stocks set to open lower as markets rethink inflation outlook U.S. stock markets are set to open lower later, giving up some of Tuesday’s late gains as fears for the growth outlook dominate again.By 6:15 AM ET (1015 GMT), Dow Jones futures were down 170 points, or 0.5%, while S&P 500 futures and Nasdaq 100 futures were down in parallel.The three main cash indices had all risen by nearly 1% on Tuesday after taking a positive view on Target’s second profit warning in three weeks, which held out the prospect of discounting to reduce unsold inventory. That may take the edge off inflation gauges if it’s repeated by other retailers. Wholesale inventory data at 10 AM ET may shed more light on that.Brown-Forman (NYSE:BFb) and Campbell Soup (NYSE:CPB) head a thin earnings roster, while Credit Suisse ADRs (NYSE:CS) will also be in focus after an alarming profit warning from the Swiss-based bank. Novavax (NASDAQ:NVAX) is up strongly after getting FDA approval for its COVID-19 vaccine.  Weekly mortgage applications data are due at 7 AM ET. 4. Chinese tech rallies on gaming licenses awardMarket sentiment may get a boost from fresh signs of a change of heart in Beijing toward the technology sector.  Chinese tech stocks rallied hard on local markets overnight after regulators issued a batch of licenses for new videogames – an area that has been one of many targets of the Communist Party’s disapproval in recent years.The ADRs of gaming platform Bilibili (NASDAQ:BILI) rose 7.8% in premarket trading, adding to gains of 10% on Tuesday amid revived hopes of a more liberal attitude generally to the big fortunes amassed by owners of tech companies. Alibaba ADRs (NYSE:BABA) rose 5.2%, while Tencent ADRs (OTC:TCEHY) rose 2.3%.5. Oil pushes higher on UAE warning; EIA inventories eyedCrude oil prices resumed their upward march after grim forecasts from a major oil producer and the head of the International Energy Agency.The United Arab Emirates Energy Minister Suhail Al Mazroui warned that the global supply-demand balance threatened to worsen considerably as demand in China rebounds. He also warned at a conference that the West has the capacity to make a tight market situation much worse if it leans on other countries to refuse Russian oil supplies.The EU’s latest sanctions package not only foresees a phased end to imports of Russian fuel, but also bans European insurers (who dominate the global market) from insuring seaborne cargoes of Russian oil. That has triggered fears of a creep toward even more punitive ‘secondary sanctions’ on the sector.By 6:25 AM ET, U.S. crude futures were up 1.4% at $121.03 a barrel, while Brent futures were up 1.2% at $122.06 a barrel, shrugging off a surprise increase in U.S. stockpiles reported by the American Petroleum Institute. The government’s data are due at 10:30 AM ET. More

Economic growth in the UK will grind to a halt next year with only Russia, hobbled by western sanctions, performing worse among the G20 leading economies, the OECD forecast on Wednesday. The Paris-based organisation’s forecast highlighted the effects of high UK inflation still squeezing household and corporate incomes in 2023 alongside a further round of tax increases as the main drivers of the country’s expected weak economic activity. The forecasts underscore the difficulties a weakened Prime Minister Boris Johnson is likely to face in the months ahead as he tries to shore up support within his Conservative party after surviving a no-confidence vote on Monday and demonstrate the government can manage the economy effectively. Speaking about the specific weaknesses of the UK economy compared with other rich countries, Laurence Boone, chief economist of the OECD, said the UK was unique in simultaneously grappling with high inflation, rising interest rates and increasing taxes.“Inflation is high compared with other OECD countries in the G20 . . . that’s one thing. The other thing is there is fast monetary tightening, which is obviously responding to [the inflation], and there is fiscal consolidation, which is the highest in the G7,” she said. “There is the sensitivity of manufacturing to the global supply chain and there is also probably a bit of Brexit [in explaining the poor performance] although we are not really able to disentangle each of these factors specifically.” The OECD forecast that the UK economy would record growth of 3.6 per cent in 2022, although much of that reflected recovery from coronavirus at the end of last year. But this growth would fall to zero next year as households are increasingly squeezed. Inflation would remain high and average 7.4 per cent next year having hit double digits later this year. The OECD said the economy would be “stagnating in 2023 due to depressed demand”.In response to the OECD report, the Treasury said: “We recognise many people will be concerned by these forecasts,” adding that “we can’t insulate the UK from global pressures entirely . . . [but] we are supporting people with the cost of living”.The Treasury has hinted about tax cuts to come, something the OECD said it should implement. “The government should consider slowing fiscal consolidation to support growth,” it said. But it also stressed that there were many risks and most of these would make the situation even worse if these materialised. “Spillovers from economic sanctions and higher than expected energy prices as the Ukraine war drags on, and a deterioration in the public health situation due to new Covid strains are significant downside risks,” the report said.

It added that higher than expected goods and energy prices could reduce real incomes even further and there was no guarantee that the Bank of England would be able to get inflation quickly back to its 2 per cent target. “A prolonged period of acute supply and labour shortages could force firms into a more permanent reduction in their operating capacity or push up wage inflation further,” the OECD said.The organisation said it expected the BoE to raise interest rates from the current 1 per cent to 2.5 per cent as a result of the significant inflationary pressure and because it had noticed some “upward drift” in professional forecasters’ expectations of inflation in the UK, unlike in all other advanced economies except the US. More

The world will pay a necessary but “hefty price” for taking a stance against Russia’s invasion of Ukraine, the OECD said on Wednesday as it urged governments to ensure that the burden is shared fairly. The Paris-based international organisation said the conflict would lead to lower growth and higher inflation as it urged its members to protect the poorest households within their countries and guarantee grain supplies for the countries most affected by the war in Ukraine. The OECD represents the majority of the world’s advanced economies and its call to action came as it published much weaker economic forecasts, with large cuts to expectations of growth and big increases in expected inflation across rich countries. Laurence Boone, chief economist of the OECD, said: “There is a price [of Russia’s invasion] and the questions for policymakers are, how high is the price, and how should it be shared.”“If you don’t share it well, the price will be higher,” Boone added, highlighting the potential political fallout from famine in food-importing countries and polarisation in rich countries, if those on low incomes bore the burden of Moscow’s actions. Food prices have surged as Russia has “weaponised” supplies, prompting several countries to introduce export bans to safeguard their stocks for their citizens. “We have not been very good with [sharing Covid-19] vaccines and I hope we will be better this time,” Boone said. The report was published a day after the World Bank warned of a rise in extreme poverty among the poorest in the world and increased chances of a debt crisis in low- and middle-income countries. The OECD lowered its global growth forecast for 2022 to 3 per cent, from 4.5 per cent in December. That put it below the IMF’s 3.6 per cent estimate made in April and suggests the global economic pain as a result of the war is still increasing. In 2023, global growth would slip further to 2.8 per cent. Some countries would flirt with recession, it added, singling out the UK as the country most likely to contract as it forecast stagnation in 2023, the weakest performance of any economy in the G20 outside Russia.

The war’s ability to impose costs on other countries came as a result of the importance of Russia as a commodities and fossil fuel exporter, and both Russia and Ukraine as food exporters.Higher prices for these commodities as Europe, in particular, seeks to minimise its imports of oil and gas has fuelled the forces of inflation that were already growing across advanced economies, the OECD said. It expects inflation to average 8.5 per cent across OECD countries in 2022 and 6 per cent in 2023 and noted that energy price rises were now spreading out into other areas. Across the US, eurozone and the UK, more than half of the goods and services included in the inflation calculations had annual price increases of more than 4 per cent and there were signs that it was becoming a more persistent problem. Central banks should tighten policy, the OECD said. While significant interest rate rises in the US and UK were necessary, more “cautious” action was needed in the eurozone. However, it still called on the European Central Bank to begin to remove some of the extraordinary stimulus put in place over the past decade.“The question we should ask is do we need this extent of monetary policy accommodation and I don’t think we can answer ‘yes’,” Boone said.For the ECB, which meets on Thursday, the OECD recommended taking a data-driven approach, while in the US, where Boone said there was “over-buoyant demand”, the Federal Reserve could tighten policy at a faster pace. More

The workers, at a store in western Massachusetts, cited health and safety concerns and cuts to benefits at the grocery chain.In a sign that service industry workers continue to have a strong interest in unionizing after successful votes at Starbucks, REI and Amazon, employees at a Trader Joe’s in western Massachusetts have filed for a union election. If they win, they will create the only union at Trader Joe’s, which has more than 500 locations and 50,000 employees nationwide.The filing with the National Labor Relations Board late Tuesday seeks an election involving about 85 employees who would form an independent union, Trader Joe’s United, rather than affiliate with an established labor organization. That echoes the independent union created by Amazon workers on Staten Island and the worker-led organizing at Starbucks.“Over the past however many years, changes have been happening without our consent,” said Maeg Yosef, an 18-year employee of the store who is a leader of the union campaign. “We wanted to be in charge of the whole process, to be our own union. So we decided to go independent.”Ms. Yosef said the union had support from over 50 percent of workers at the store, known as crew members.“We have always said we welcome a fair vote and are prepared to hold a vote if more than 30 percent of the crew wants one,” said a company spokeswoman, Nakia Rohde, alluding to the N.L.R.B. threshold for an election. “We are not interested in delaying the process in any way.”The company shared a similar statement with workers after they announced their intention to unionize in mid-May.In explaining their decision, Ms. Yosef and four colleagues, all of whom have been with the company for at least eight years, cited changes that had made their benefits less generous over time, as well as health and safety concerns, many of which were magnified during the pandemic.“This is probably where we get to all of these things coming together,” said Tony Falco, another worker involved in the union campaign, alluding to Covid-19.Mr. Falco said the store, in Hadley, took several reassuring steps during the first 12 to 15 months of the pandemic. Management enforced masking requirements and restrictions on the number of customers who could be in the store at once. It allowed workers to take leaves of absence while continuing to receive health insurance and gave workers additional “thank you” pay as high as $4 per hour.But Mr. Falco and others said the company was too quick to roll back many of these measures — including additional pay — as vaccines became widely available last year, and noted that the store had suffered Covid outbreaks in the past several weeks after masking became laxer. The store followed the policy of the local health board, which altered its mask mandate at various points, lifting it most recently in March.Some employees were also upset that the company did not inform them that the state had passed a law requiring employers to provide up to five paid days off for workers who missed work because of Covid.“It was in effect seven months, and they never announced it,” Ms. Yosef said. “I figured that out at the end of December, early January.”Ms. Rohde, the spokeswoman, said this account was incorrect, but four other employees who support the union also said the company had not told them of the policy.A Trader Joe’s store in New York. Early in the pandemic, the chief executive wrote that union advocates “clearly believe that now is a moment when they can create some sort of wedge in our company.”Benjamin Norman for The New York TimesTrader Joe’s has generally resisted unionization over the years, including earlier in the pandemic. In March 2020, the chief executive, Dan Bane, sent employees a letter referring to “the current barrage of union activity that has been directed at Trader Joe’s” and complaining that union advocates “clearly believe that now is a moment when they can create some sort of wedge in our company through which they can drive discontent.”The company’s response to the current campaign appears somewhat less hostile, though union organizers have recently filed charges of unfair labor practices, such as asking employees to remove pro-union pins.Several employees said a broader issue was underlying their frustrations: what they saw as the company’s evolution from a niche outlet known for pampering customers and treating employees generously to an industrial-scale chain that is more focused on the bottom line.The company’s employee handbook urges workers to provide a “Wow customer experience,” which it defines as “the feelings a customer gets about our delight that they are shopping with us.” But longtime employees say the company, which is privately held, has gradually become stingier with workers.For years, the company offered health care widely to part-timers. In the early 2010s, the company raised the average weekly hours that employees needed to qualify for full health coverage to 30 from roughly 20, informing those who no longer qualified that they could receive coverage under the federal Affordable Care Act instead. (The company dropped the threshold to 28 hours more recently.)“It was done under the guise of ‘You can get these plans, they’re the same plans,’ but they were not the same plans,” said Sarah Yosef, the Hadley store’s manager at the time, who later stepped back from the role and is now a frontline worker there.“I had to sit there individually with crew members saying you’re going to be losing health insurance,” added Ms. Yosef, who is married to Maeg Yosef.Retirement benefits have followed a similar trajectory: Around the same time, Trader Joe’s lowered its retirement contribution to 10 percent of an employee’s earnings from about 15 percent, for employees 30 and older. Beginning with last year’s benefit, the company lowered the percentage again for many workers, who saw the contribution fall to 5 percent. The company is no longer specifying any set amount.Tony Falco and Sarah Yosef at the Trader Joe’s store in Hadley. She said, “I had to sit there individually with crew members saying you’re going to be losing health insurance.”Holly Lynton for The New York TimesMs. Rohde, the spokeswoman, said the change was partly a response to indications from many workers that they would prefer a bonus to a retirement contribution.Workers said the company’s determination to provide an intimate shopping experience had often come at their expense amid a rapid increase in business over the past decade, and then again with the resurgence of business as pandemic restrictions lifted.For example, Trader Joe’s doesn’t have conveyor belts at checkout lines and instructs cashiers to reach into customers’ carts or baskets to unload items. This can appear to personalize the service but takes a physical toll on workers, who typically bend over hundreds of times during a shift.(The company asks workers to perform different tasks throughout the day so they are not constantly ringing up customers.)Maeg Yosef and her co-workers began discussing the union campaign over the winter, angry over the store’s failure to publicize the state-mandated paid leave benefit and the change in retirement benefits, and some have drawn inspiration from the successful union elections at Starbucks, Amazon and REI.Their union campaign may also benefit from the same leverage that workers at those companies enjoyed as a result of the relatively tight job market.“People just keep leaving — I know they want to hire people now,” Maeg Yosef said. “It’s hard to keep people around.” More

Good morning. Thanks for all the replies to yesterday’s letter. We discuss them below, along with some thoughts on the current bout of market illiquidity. Are we missing something important? Email us: [email protected] and [email protected] to the market matrixYesterday we presented this matrix of possible economic scenarios for the next 12 months, and asked readers to weigh in with probabilities and preferred asset classes for each cell: 

Anyone who offered hard numerical probabilities is included in the chart below, alongside the Unhedged house opinion:Mostly everyone seemed in agreement that soft landing (C) and growthflation (D) are lower probability. Readers see a two-in-three chance of recession in the next 12 months. Stagflation (B) was the most divisive cell. Some were completely certain that we are, as reader Todd Foley put it, “on the precipice of a stagflation tsunami”. Others thought it unlikely. Unhedged tends toward a successful inflation-fighting campaign that sinks us into recession (A). We figure that the Federal Reserve is dug in on bringing down inflation — but both growth and inflation are showing signs of peaking already. The Fed may push on an opening door, hard. Housing inflation will ease as wages continue moderating, and bloated inventories will prove disinflationary. Unfortunately that will spell a recession.Our friend/nemesis John Authers at Bloomberg offered a probability distribution very much in line with Unhedged readership (in alphabetical order, 40/40/15/5). He thinks inflation is a bigger threat than we do: “I see more of an inflation risk than you do, partly for reasons beyond the Fed’s control.” Oil and food commodity inflation may indeed prove decisive.What about asset class picks? Here’s ours:A (low inflation and recession): keep it simple and own longish-duration Treasuries.B (stagflation): high-quality, dividend-paying staples stocks for relative price stability and a little return. All assets may perform badly under stagflation, but we’d rather own Pepsi, Johnson & Johnson, Kimberly-Clark, Bristol-Myers et al than sit and watch our cash lose its earnings power. We wish these stocks were cheaper; we can only stand to own so many Treasury inflation-protected securities at zero-ish yields.C (soft landing): equities and corporate credit.D (growthflation): commodities.Several of our picks overlapped with those of Matthew Klein at The Overshoot. He picked Tips under stagflation; John says buy precious metals.Readers were even more imaginative. In scenario A, John Clardy notes an out-of-fashion pick that could come back into vogue: emerging market equities. He expects the dollar to weaken, which could help growth in EMs as the US sags. Dominic White at Absolute Strategy Research disagrees. He picks EMs in scenario C instead. Or if the future seems too unsure, Hans Ole Lørup suggests looking for promising growth stocks positioned for decarbonisation.Several readers proposed buying value stocks as the best all-weather pick. We’re not so sure. Value stocks tend to be cyclical, and get whipped heading into a recession.Keep sending your probabilities and picks our way. If there’s interest, we’ll keep updating the reader average. There is wisdom in the crowd. (Wu & Armstrong)A few words in praise of illiquidity The FT’s Eric Platt, Joe Rennison and Kate Duguid have written a nice piece about falling liquidity in US markets:Liquidity across US markets is now at its worst level since the early days of the pandemic in 2020 . . . Relatively small deals worth just $50mn could knock the price or prompt a rally in exchange traded funds and index futures contracts that typically trade hands without causing major ripples.Slowing growth, rising rates, and high inflation don’t support trading volumes. And then there is the old chestnut about post-crisis regulation:The trading landscape changed dramatically after policymakers in Washington and Brussels sought to safeguard Main Street from Wall Street in the wake of the 2008 financial crisis. Through a series of regulations introduced over the past 12 years, banks are now required to hold bigger capital cushions to protect their balance sheets against major swings. It has meant banks now hold far fewer assets, like stocks and bonds, making them less nimble at responding to investors’ requests to buy or sellThe result has been lot of days where prices swing more than 2 per cent:Stable prices are nice and we all like being able to trade things when we want to trade them. All else equal, liquidity is good. But all else is not equal, so a few words should be said in praise of illiquidity.But note, first, that liquidity in the Treasury market is a special case. When the risk-free asset is hard to transact in, the zillions of credit instruments it collateralises and all the balance sheets it anchors become suspect, and bad things happen. Second, market liquidity (broadly, the ability to trade significant volumes of whatever security without big price disruption) and system liquidity (roughly, how much cash-like stuff there is washing around the financial system) are different (but related) concepts. We blather on quite a bit here about the relationship between system liquidity and asset prices, driven by investors’ preferred allocation to cash and risk assets. Market liquidity and prices are of course related, too. Illiquidity can radically change prices in the short run, but this is different from the portfolio allocation effect.The reason that silky-smooth market liquidity and low volatility are not an unalloyed good is that they are easily mistaken for, but are not indicative of, the absence of risk. In the hyperliquid low-vol world it is tempting to leverage everything to the hilt and otherwise push the risk envelope, leading to a proper mess when something really goes wrong. The metaphor is forest fires: if you don’t get lots of little ones to clear the underbrush, you get one big one, which kills the trees, too. There are advantages to a world where institutions must be able to hold the things they buy. The Platt/Rennison/Duguid piece mentions one:The Vix index, a gauge of volatility in the US stock market, had jumped more than 5 points on a single trading day nine times in the 15 years before the financial crisis. In the 15 years after the crisis, it has happened 68 times. And yet during that period, trading losses incurred by major US banks have been manageable and not threatened the overall financial system. It is a fact not lost on traders and investors, particularly after the fallout from the collapse of family office Archegos last year was broadly contained.Risk markets exist for two reasons. They let companies raise capital efficiently, and let individuals earn fair risk-adjusted returns on their savings over the long run. Illiquidity is a problem only if it interferes with those two activities. The market does not owe speculators a nice, predictable living. One good readMaking guns may or may not be an evil business. It is undoubtedly a bad one: commoditised, low growth, and risky.  More

Bridgewater is betting on a sell-off in corporate bonds this year as the world’s largest hedge fund takes a gloomy view on the trajectory of the global economy.The wager against US and European corporate debt underscored Bridgewater’s view that weakness across financial markets will not be shortlived. “We’re approaching a slowdown” — Greg Jensen, one of Bridgewater’s chief investment officers, told the Financial TimesJensen warned that inflation would be far stickier than economists and the market have predicted, and that could put pressure on the Federal Reserve to raise interest rates higher than expected by Wall Street.Bridgewater had already been positioning for a sustained sell-off in the $23tn US government bond market and has wagered similarly on equity prices falling further even after collectively shedding $9tn in value this year.High-grade US corporate bonds are down about 13 per cent this year on a total return basis, while those in Europe have fallen 15 per cent, according to ICE Data Services indices.Thank you for reading First FT Americas — do share your feedback with us at [email protected]. Five more stories in the news1. Yellen urges Congress to do more on inflation US Treasury secretary Janet Yellen has pressed Congress to help ease price surges. The call came as pressure mounts on Joe Biden’s administration to contain the highest inflation in four decades. “Congress can do a lot to mitigate some of the most important and burdensome costs that households face,” Yellen said, although she acknowledged that inflation was running at an “unacceptable” level.2. Zelenskyy: Stalemate with Russia ‘not an option’ Ukraine’s president Volodymyr Zelenskyy told FT editor Roula Khalaf that pushing Russian forces back to positions occupied before the invasion would amount to a “serious temporary victory”. Speaking at the FT Global Boardroom conference, he added that full territorial sovereignty remained his ultimate goal. “We are inferior in terms of equipment and therefore we are not capable of advancing,” he said, appealing for western military support.More on the war: Angela Merkel denied that she “appeased” Vladimir Putin as German chancellor in her first interview since stepping down last year.

Video: Volodymyr Zelenskyy: ‘No one is humiliating Ukraine. They are killing us’

3. Billionaire to face congresswoman in race for mayor The billionaire property developer Rick Caruso — who only recently switched to the Democratic party — will face California congresswoman Karen Bass in a November run-off election to be mayor of Los Angeles. The contest is likely to be dominated by debate over how to fight rising crime and homelessness, and both contenders can boast a host of celebrity backers.4. OECD: UK economic growth to grind to a halt next year Only Russia, hobbled by western sanctions, will perform worse among the G20 leading economies in 2023, the OECD forecast today. The Paris-based organisation forecast that the UK economy would record growth of 3.6 per cent this year, but that growth would fall to zero next, as households were increasingly squeezed. The economy was described as “stagnating in 2023 due to depressed demand”.5. Bolsonaro tries to burnish diplomatic credentials with Biden meeting Joe Biden and Jair Bolsonaro, the leaders of the western hemisphere’s two most populous nations, will try to set aside their differences in a first bilateral meeting. Their meeting, during this week’s Summit of the Americas in Los Angeles — which several Latin American leaders are boycotting — will be a chance for each to boost their standing, analysts said. Bolsonaro, who is fighting for re-election, confirmed his summit attendance only after the White House agreed he could meet Biden — Felipe Loureiro, a professor of international relations at the University of São Paulo, said that what the president wanted was “the picture opportunity.” Brazilian army launches search for missing journalist and researcher The Brazilian army is searching for a British journalist, Dom Phillips, a contributor to the Guardian and FT, and Bruno Pereira, an expert on indigenous peoples, who disappeared on Sunday deep inside the Amazon rainforest. The men were last seen leaving a village by boat en route to Atalaia do Norte, a regional town. They never arrived.The day aheadFootball corruption trial The fraud trial of former Fifa president Sepp Blatter and ex-Uefa chief Michel Platini over a 2011 payment of SFr2mn ($2.19mn) begins in the Swiss Federal Criminal Court.Quarterly earnings Campbell Soup Company and Brown-Forman will report quarterly earnings before the bell.Spotify investor day The audio streaming company holds its investor day today. Spotify, which has invested heavily in its podcast business this year, has seen its shares drop 55 per cent in the past 12 months and below its initial list price.US primaries California, New Jersey, Iowa, Mississippi, Montana, South Dakota and New Mexico are holding primaries today.Wholesale inventories Economists expect wholesale inventories to rise 2.1 per cent month on month in May, matching the rate of increase in April.Today is day two of the FT Global Boardroom, with speakers including Gina Raimondo, the US Secretary of Commerce, and the Bank of Japan governor Haruhiko Kuroda. Find out more.What else we’re reading and listening toHow space debris could threaten modern life After 65 years of space flight, the area around Earth is littered with 9,000 metric tonnes of debris, according to Nasa, all zooming uncontrollably around at 25,000km an hour. Check out our impressive interactive on the increasing threat posed by space junk.The FT’s Investing in Space conference begins today, online and in person at the Pan Pacific hotel in London. It includes an interview with astronaut Samantha Cristoforetti from the International Space Station. You can register here.Why the US must start caring about Latin America Irene Mia argues that although some steps have been taken by the Biden administration to re-engage with Latin America after years of neglect, the reality is that the region’s importance in US foreign policy remains “painfully low”. Mia explains why this may prove a strategic miscalculation.Who rules porn? Stoya is a porn star who saw first-hand how free pornography online transformed the adult industry. She sends the hosts of our new Hot Money podcast, Alex Barker and Patricia Nilsson, on a quest: find out who’s in charge and get to the bottom of how the business works.

TikTok Shop’s troubled UK expansion A culture clash between the social media group’s Chinese owners and some of its London employees has triggered a staff exodus and complaints about a “toxic” corporate culture that runs counter to typical working practices in Britain.Johnson’s hollow victory is a bad outcome for Britain Despite his nominal win in a confidence vote, the magnitude of the protest against Boris Johnson is a bad result for him and, above all, the country as it faces momentous challenges at home and abroad, writes our editorial board.OpinionDon’t miss Janan Ganesh on the bright side of Anglo-American populism and how the invasion of Ukraine succeeded in forcing both the British conservative party and American Republicans into a choice between pushing back or seeming weak. “It triggered their national egoism, their dread of losing face in front of foreigners, even their machismo,” Ganesh writes, in this must-read piece. More

Within hours of the Bank of England raising its main interest rate to 1 per cent in May and warning there would be more to come, mortgage lenders got busy pulling some of the crazy-low rates they had been offering. Twitter was alive with people boasting they had secured a five-year deal at 1.2 per cent just days earlier. Almost overnight rates doubled, with financial markets judging the central bank would raise its main interest rate to 2.5 per cent within a year.Even 2.5 per cent will still be a very low rate. Since the Bank of England was founded in 1694 its Bank Rate (under various names) has been 2.5 per cent or below for only about a sixth of the time it has existed. Most of that was due to the emergency rate of 2 per cent that began with the second world war and ended more than a decade later. Almost all the rest occurred in the past 13 post-banking crisis years, when it was under 1 per cent. My own calculations show the BoE’s official rate has a daily average of 4.66 per cent since the bank was founded. Omitting the past few peculiar years pushes that up slightly to 4.83 per cent.My current bedtime reading is A History of Interest Rates by Sidney Homer and Richard Sylla. It explains that in 1694 the new Bank of England set its first rate at 6 per cent, chosen to match the maximum allowed for private loans under the Usury Act 1660. That rate was cut to 5 per cent in 1714 and Bank Rate followed it there for 100 years. Throughout the reign of Queen Victoria (1837-1901), money was lent at 5 per cent and borrowed by the government at 3 per cent — despite the uncertainty created by frequent wars and the occasional banking crash. That safe, guaranteed return on “consols” — The Funds as they were known — supported the income of aristocrats and the growing wealthy middle classes. Over most of the 19th century inflation was fairly flat and wages doubled. The poor were allowed to get richer — even if the rate of growth was relatively slow. So the market’s predicted 2.5 per cent Bank Rate for 2023 would barely be half the typical rate over most of the BoE’s 328 years. If the economy returns to what used to pass for normal, we should expect a Bank Rate of 4 per cent or 5 per cent. That can only make borrowing more expensive, which would be normal too.Homer and Sylla also go much further back, revealing that the maximum rates allowed in Mesopotamia from 3,000 to 400 BCE were between 20 and 33⅓ per cent. These are not bank rates, of course, but the actual interest charged to individuals when they borrowed money to buy silver or grain. Our banks today lend like Mesopotamians — the average credit card rate for April was 26.6 per cent (annual percentage rate), according to finance website Moneyfacts. That is five times a rate that would have been banned until the Usury Acts were repealed in 1854. Even the Romans banned lending at rates above 12 per cent. In Renaissance Europe, where modern banking was invented, money was lent out at between 10 and 15 per cent.Never for the past 5,000 years were rates as low as 1 per cent — until February 2009. In 2012, when the Bank Rate was 0.5 per cent, the BoE ensured low rates were passed on to borrowers by lending money to retail banks at 0.75 per cent through the Funding for Lending Scheme. Four years later the Term Funding Scheme lent £192bn to banks and others at as little as 0.25 per cent, the same as Bank Rate at that time. The banks dutifully cut rates on mortgages, leading to the borrowing enjoyed recently by homebuyers at rates beginning with a 1. They also slashed rates on savings, which are only just beginning to show the first hints of recovery.All this is being brought to an end by inflation which is now 11.1 per cent, 9 per cent or 7.8 per cent depending on which you believe of the three main measures (yes, there really are more than that) published by the Office for National Statistics.Unlike Victoria’s reign, where prices at the end of her rule were lower than at the start, Elizabeth II’s 70 years on the throne have seen prices rise every single year bar one by an average 5.14 per cent. The Monetary Policy Committee (MPC) was created in 1997 to hold inflation at 2.5 per cent as measured by the Retail Prices index excluding mortgage interest (RPIX) — later changed to 2 per cent measured by the CPI.Since its first meeting in June 1997, the nine MPC members have solemnly sat down every six weeks wondering whether to raise or cut rates and then — whichever way that vote went — deciding almost every time that a quarter of one percentage point would be adequate. Over those 25 years CPI inflation has averaged 2.0 per cent. Job done.That was partly due to a new lever given to the MPC called quantitative easing (QE). This mechanism magicked money out of thin electrons and in a little over 10 years created £895bn that was used almost exclusively to buy back government debt. In that decade the MPC invented the one thing most politicians tell us does not exist, becoming the Money Tree Policy Committee.Whatever QE did to economic activity — it was supposed to increase it but in March this year growth was minus 0.1 per cent after being flat in February — printing that much virtual money inevitably boosted inflation. Now, as inflation takes off, the only way the BoE can try to control it is by raising the Bank Rate. And the cost of money lent to us can only go one way — up, up and, probably, up.Paul Lewis presents ‘Money Box’ on BBC Radio 4, on air just after 12 noon on Saturdays, and has been a freelance financial journalist since 1987. Twitter: @paullewismoney More