Economy

South Koreans expect consumer inflation to average a median 3.3% over the next 12 months, up from 3.1% in April, touching its highest since October 2012, the Bank of Korea’s monthly survey showed.The finding comes just before the central bank’s monetary policy review on Thursday. The BOK has raised rates by a total of 100 basis points in four steps since August last year from a record-low 0.50% to fight inflation.In April, annual consumer inflation in Asia’s fourth-largest economy quickened far more than expectations to hit a more than 13-year high of 4.8%, prompting analysts to increase their bets for further tightening.The central bank also said on Tuesday the consumer sentiment index dipped to 102.6, its lowest since August last year, from 103.8 in April.The sentiment index still stood above the long-term average of 100 separating optimism and pessimism about the future. More than 2,300 households in urban areas participated in the survey, which polled for inflation expectations and consumer sentiment among other topics, between May 10-17. More

Also sworn in on Monday were Lael Brainard as the Fed’s new vice chair, and the two newest members of the Fed’s Board of Governors, Philip Jefferson and Lisa Cook, who are both Black economists, the Fed said in a statement.Powell was nominated for his first term as Fed chief by former President Donald Trump, then was chosen by President Joe Biden last November to serve another four years. The former private equity lawyer survived severe criticism from Trump during his first term at the helm of the central bank.The U.S. Senate voted on May 12 to confirm Powell to the post with bipartisan backing. Powell has served on the Fed’s Board of Governors since 2012.Cook is the first Black woman ever to serve on the Fed’s board. This is also the first time the Fed will have had more than one Black policymaker at the same time. The swearing in means six of the seven seats on the Fed’s board are filled just weeks before the central bank’s June 14-15 policy meeting, at which it is expected to raise its benchmark overnight lending rate by half a percentage point as it battles inflation.Jefferson was most recently dean of faculty at Davidson College, and has written extensively about poverty. Cook was an economics professor at Michigan State University where her research focused on the economic impact of gender and racial inequality.Neither is expected to have an immediate impact on the Fed’s monetary policy trajectory, decided at regular meetings throughout the year by the Fed Board and the presidents of the 12 regional Fed banks. Powell has promised to keep pushing on rate hikes until there is clear and convincing evidence that inflation is dropping. Traders of futures tied to the Fed’s policy rate are betting that means that the overnight lending rate between banks – currently in the 0.75%-1% range – will rise to 2.75%-3% by the end of the year, high enough to start putting the brakes on economic growth.Biden’s pick to fill the Fed’s seventh seat, former senior Treasury Department official Michael Barr, is likely to win Senate confirmation as the central bank’s vice chair for supervision, Republican U.S. Senator Pat Toomey told Reuters on Monday. That post would see Barr take on a sweeping portfolio overseeing the nation’s largest banks. More

Andrew Bailey fought back on Monday against critics of the Bank of England’s handling of inflation, insisting that the central bank had not allowed the economy to overheat and was treading a “narrow path” to contain price rises without triggering a recession.The BoE governor, speaking at a conference in Vienna, said he rejected the argument that the monetary policy committee had allowed demand to get out of hand and stoked inflation.“The facts simply do not support this,” he said, arguing that UK output was barely above its pre-coronavirus level, and that price pressures stemmed rather from an unprecedented succession of global shocks, combined with an unexpected shrinking in the size of the UK’s workforce.“What we do have is a very tight labour market. But that does not look like a story about rapid demand growth . . . It looks much more like an impact from the supply of labour,” he said.Bailey has come under intense criticism over the BoE’s failure to contain the recent surge in UK inflation, which hit 9 per cent in April and looks likely to stay high for longer than in other European countries.He admitted that the BoE could not lay claim to any “tremendous foresight” in the current situation, but underlined that it had already raised interest rates four times since December and was “prepared to do so again based on the assessment at each of our meetings”.However, he warned that the BoE was still trying to judge how far inflation would fall on its own, as higher energy prices ate into household incomes and forced consumers to retrench.“We are facing a very big negative impact on real incomes caused by the rise in prices of things we import, notably energy. We expect that to weigh heavily on demand,” he said, adding that this made him wary of making any public commitments on the likely path of interest rates.“We have to be careful and we have to take these decisions meeting by meeting, which is why I don’t want to overuse forward guidance,” he said, noting that the BoE faced the twin risks of “high inflation on one side and the risk of a recession on the other”.He said the biggest uncertainties over the outlook for UK inflation were whether consumers would spend the savings they had accumulated during the pandemic, in order to maintain living standards in the face of higher prices; and whether workers who had dropped out of the labour market would return as their savings ran out — or prove able to fund early retirement.Although the BoE had on average kept inflation on target over the period since the global financial crisis, Bailey said it now faced “a moment to be reflective and self-critical” as it sought to bring inflation under control without “undue damage to output”. More

Good evening,Is the three-decade run of globalisation going into reverse? That is the concern for world leaders gathering in the Swiss city of Davos for the first time since the Covid-19 pandemic was declared.The blame is being shared between the Ukraine invasion, disruption to supply chains caused by coronavirus lockdowns, recent market turmoil and the worsening economic outlook worldwide, according to company executives and investors interviewed by FT reporters.FT columnist Rana Foroohar identifies another reason for deglobalisation, quoting from a paper by the economist Dani Rodrik: efficiencies created by trade coincide with a much larger redistribution of wealth — $50 for every $1 of greater trade efficiency — to the already rich. “Globalisation isn’t inevitable, despite what we were told by politicians in the 1990s,” Foroohar writes. “In order for any political economy to work, it has to serve domestic needs.”The world does appear to be forming into tighter alliances, reflecting the greater tensions between the US and China, and Russia and the west in general. Yesterday, President Joe Biden pledged to deploy US military support to defend Taiwan if China were to invade. He also agreed to strengthen America’s security co-operation with Japan against “China’s increasingly coercive behaviour” and the nuclear threat in North Korea.Taking a different view, Kristalina Georgieva, IMF managing director, used her speech at Davos to defend global trade, urging countries not to “surrender to the forces of geoeconomic fragmentation that will make our world poorer and more dangerous”. However, she did admit that international structures were being tested, particularly by the Russian invasion of Ukraine and warned that the global economy faces perhaps its “biggest test since the second world war”.Latest newsBinance promoted terra as ‘safe’ investment before $40bn collapseNorth Sea’s biggest oil and gas producer warns against UK windfall taxDidi investors vote to delist in US in bid to revive China businessFor up-to-the-minute news updates, visit our live blogNeed to know: the economyJoe Biden has signed a trade agreement with 12 Indo-Pacific countries aimed at boosting economic co-operation in the region while countering a more assertive China. Biden unveiled the Indo-Pacific Economic Framework, which includes nations that represent 40 per cent of the global economy, in Tokyo after meeting Prime Minister Fumio Kishida on his first visit to Asia as US president.Latest for the UK and EuropeThe European Central Bank’s eight-year experiment with negative rates will end within months, according to comments made in a blog by its president Christine Lagarde. She wrote that “based on the current outlook”, the institution was “likely to be in a position to exit negative interest rates by the end of the third quarter”. The deposit rate is now minus 0.5 per cent and has been in negative territory since 2014, when the region was facing a sovereign debt crisis.The war in Ukraine, the refugee crisis and rising inflation have been such that EU member states are now bracing themselves for demands from Brussels for more cash, diplomats from the bloc have told FT reporters. The latest budget plans for spending of more than €1tn over a seven-year period.The British government must “come clean” about the impact new nuclear plants will have on their energy bills, Sir John Armitt, chair of the National Infrastructure Commission, has said in an interview with the FT. Constructing such facilities would “inevitably add cost to bills” in the short term and would take “a long time” to deliver, Armitt warned.Global latestChina’s ambition to become self-sufficient in chipmaking is being hampered by its lack of appropriate infrastructure, according to the head of one of the world’s largest suppliers of a material critical for semiconductor production. Eric Johnson, chief executive of JSR, a rare American leader at a Japanese semiconductor company, said it would be “very difficult” for China to develop cutting-edge chipmaking technology without such support.Need to know: businessHSBC has suspended a senior executive pending an internal investigation over a speech he gave at an FT conference last week, according to people with knowledge of the matter. Stuart Kirk, who is global head of responsible investing at the bank’s asset management division, accused central bankers and policymakers of overstating the financial risks of climate change in an attempt to “out-hyperbole the next guy”.JPMorgan Chase has updated its guidance on how much it will earn in 2022, anticipating that it will benefit from rising interest rates. The Wall Street bank now expects its core lending business to increase to more than $56bn, from at least $53bn previously.American drugmaker Pfizer is seeking emergency authorisation in the US for its Covid-19 vaccine for children under the age of five after interim results from its clinical trial showed the jab is safe and highly effective. An approval would open up the last large market for the coronavirus vaccine.The World of WorkLegislation giving workers the right to digitally disconnect from work is being introduced in countries across Europe. However, in France, which pioneered such laws in 2017, the “right to disconnect” has so far had a limited impact. Indeed, the pandemic has raised expectations that employees should be “always on”.One of the things that made Covid lockdowns bearable was the decline in nuisance calls. But the cold call is back and appears to be worse than ever, perhaps because we were all enjoying its absence during the pandemic, says FT columnist Pilita Clark.Get the latest worldwide picture with our vaccine trackerAnd finally . . . 

© FT montage

There has been much excitement about tomorrow’s opening of London’s Elizabeth Line, a £19bn east-west express underground rail route. But with passenger numbers falling on the capital’s existing network and working patterns in flux, could large-scale investment in metro rail become a thing of the past? The FT’s Big Read team investigates. More

A Federal Reserve survey released Monday showed Americans already growing nervous about the economy in the latter part of 2021.
Just 24% thought conditions were good or excellent, down from 50% in 2019.
Expectations also declined for government aid programs as well as for the prospects of a higher federal minimum wage.

A man shops for meat at a Safeway grocery store in Annapolis, Maryland, on May 16, 2022, as Americans brace for summer sticker shock as inflation continues to grow.
Jim Watson | AFP | Getty Images

Americans already were getting nervous about the state of the national economy late last year, before the spate of surging prices and fears of a looming recession that have arisen in 2022, according to a Federal Reserve survey released Monday.
The Fed’s annual Survey of Household Economics and Decisionmaking for 2021 showed that just 24% thought national economic conditions were good or excellent. That was down from 26% in the pandemic-scarred 2020 and a tumble all the way from 50% in 2019.

Similarly, those rating their local economies favorably totaled 48% last year, actually an improvement from the 43% in 2020 but a sharp decline from 2019’s 63%.
The survey was conducted in October and November and came from interviews of more than 11,000 respondents.
By then, inflation had just started heating up, with the consumer price index rising 6.8% in November from the same time in 2020, on the way to an 8.5% peak in March 2022. Also, first-quarter growth as measured by gross domestic product declined 1.4%, the first negative reading since the pandemic outbreak in the first quarter of 2020.
Despite their concerns about a slowing economy, households reported fairly strong financial circumstances. Some 78% said they were doing either OK or living comfortably, the highest reading yet for a survey that goes back to 2013. Low-income families saw particular growth in that category, jumping 13 percentage points from 2020 to 53%.
Similarly, 68% said they could cover a $400 expense either with cash or a credit card, also a new high. The share of those saying they were worse off financially than a year ago fell four percentage points to 20%, but was still notably higher than 2019’s 14%.

The survey came well ahead of the Fed’s moves to start slowing the economy with interest rate hikes as inflation raged in late 2021 and so far this year. In addition, the central bank halted its monthly bond purchases and in June will start reducing its $9 trillion in holdings.
A separate survey released Monday from the New York Fed showed decreasing expectations for government help through social programs.
Since the start of the pandemic, Congress approved more than $5 trillion in various aid forms. Expectations for rising welfare and unemployment benefits tumbled from respective highs of 49% and 45% in April 2021 to 35% and 26% a year later.
Respondents to that survey also indicated decreasing expectations for housing assistance and student loan programs. The likelihood of an increase in the federal minimum wage also declined from 50% in April 2021 to 39% this year.

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Volodymyr Zelensky has urged the international community to help fund Ukraine’s reconstruction after the war and use frozen Russian assets to compensate victims. Borrowing words used to launch the reconstruction of Europe after the second world war under the Marshall Plan, Ukraine’s president said his proposal to help cover a rebuild that looks set to cost more than $500bn was “designed to counter hunger, poverty, despair and chaos”. Speaking by video link to a packed main conference hall at the World Economic Forum in Davos, Zelensky said: “I invite you to take part in this reconstruction. The work to be done is colossal. There are more than [$500bn] in losses. Tens of thousands of buildings have been destroyed.”He suggested a “special, historically significant reconstruction model” under which separate countries, cities and companies would take leading roles in rebuilding specific cities and industries in Ukraine.Russian assets in various jurisdictions “should be found, seized or frozen, and allocated to a special fund to compensate all the victims of the war”, he told business leaders and officials, adding that this would set a precedent that could be used around the world. The US and Europe have frozen assets worth €300bn from the Russian central bank, but are yet to confiscate them. Ukraine’s officials accept that there are no internationally legal ways to confiscate frozen Russian assets as yet. But that has not stopped them pushing the moral arguments to such a move. “If the aggressor loses everything, then it deprives him of his motivation to start a war,” Zelensky said.His comments echoed those of other Ukrainian representatives, who have come to the Swiss mountain resort with a disciplined and unified message on sanctions, the global impact of the conflict and rebuilding. The president denounced the “brute force” deployed by Russia in his country. He also claimed “tens of thousands of lives” could have been saved if the west had given Ukraine all of the weaponry, political and financial support it needed as well as passing more sweeping sanctions against Russia when the invasion began in February. “Values must matter when global markets are being destabilised,” Zelensky said.Ukraine, Zelensky said, needed “at least $5bn a month” in financing to survive Russia’s onslaught, separate from the larger sums required to rebuild the country. US and European finance ministers met last week to discuss how to plug Ukraine’s short-term financing gap, with Treasury secretary Janet Yellen acknowledging that existing commitments fell short. Western countries, led by Switzerland, have organised a conference in the summer to discuss the reconstruction of Ukraine’s cities, infrastructure and industry, but no proposals are yet on the table. Zelensky called for tougher sanctions on Russia and for all foreign companies to leave the country. He added Russian banks should be thrown out of the global financial system, all relations with Russian IT companies should cease, and no trade with Moscow should take place. “[Sanctions] should be maximum, so that Russia and every other potential aggressor that wants to wage a brutal war against its neighbour would clearly know the immediate consequences of their actions,” he said. European countries are still arguing over an EU plan to ban the import of Russian oil. Robert Habeck, Germany’s vice-chancellor, told the forum on Monday that the world was “seeing the worst of Europe” in the debate over a ban on Russian oil. Some states, notably Hungary, are blocking the development. More

BRUSSELS (Reuters) – Lithuania, Slovakia, Latvia and Estonia will call on Tuesday for the confiscation of Russian assets frozen by the European Union to fund the rebuilding of Ukraine after Russia’s invasion, a joint letter by the four showed on Monday.On May 3, Ukraine estimated the amount of money needed to rebuild the country from the destruction wrought by Russia at around $600 billion. But with the war still in full swing, the sum is likely to have risen sharply, the letter said.”A substantial part of costs of rebuilding Ukraine, including compensation for victims of the Russian military aggression, must be covered by Russia,” said the letter, that is to be presented to EU finance ministers on Tuesday.The letter, seen by Reuters, also calls for the 27-nation bloc to start preparing new sanctions against Moscow.”Ultimately, if Russia does not stop the military aggression against Ukraine, there should be no economic ties remaining between EU and Russia at all – ensuring that none of our financial resources, products or services contributes to Russia’s war machine,” it said.The four countries noted that the EU and like-minded countries have already frozen assets belonging to Russian individuals and entities and some $300 billion of central bank reserves.”We must now identify legal ways to maximise the use of these resources as a source of funding – for both the costs of Ukraine’s continued efforts to withstand the Russian aggression, and for the post-war reconstruction of the country,” they said.”Confiscation of state assets, such as central bank reserves or property of state-owned enterprises, has a direct link and effect in this regard.”The European Commission said last Wednesday it could check if it was possible to seize frozen Russian assets to finance Ukraine under national and EU laws but did not mention central bank reserves. Various EU officials have cautioned that confiscation of assets is legally tricky as there are no appropriate EU laws for it.”In cases where legal ways to confiscate the assets will not be identified, it should be used as leverage and released only once Russia compensates Ukraine for all the damages done,” the four countries said.Russia calls its actions in Ukraine a “special operation” that it says is not designed to occupy territory but to destroy its southern neighbour’s military capabilities and capture what it regards as dangerous nationalists. More

“Strong economy, big storm clouds,” JPMorgan Chase & Co. chief executive officer said at the firm’s investor day Monday. “I’m calling it storm clouds because they’re storm clouds. They may dissipate.”Monetary and fiscal stimulus have been fueling strength in the economy, but countervailing forces including high inflation and quantitative tightening by the Federal Reserve are creating a combination that’s not been seen before, Dimon said. A recession is possible, but it would be unlike past downturns because of the unique blend of economic conditions acting on the economy, he said.The investor day is the New York-based bank’s first since before the Covid-19 pandemic. Senior leaders including Dimon, Chief Financial Officer Jeremy Barnum and President Daniel Pinto are set to speak. For a Live Blog of JPMorgan’s investor day, click here. The biggest U.S. bank is seeking to ease concern among investors following backlash over its plans to ramp up spending to build out offerings, bolster technology and compete for talent. The bank on Monday maintained its expense outlook of $77 billion excluding legal costs, an 8.6% hike from 2021. JPMorgan also raised its estimate for net interest income excluding its markets business to more than $56 billion for 2022. That would be a 26% increase from last year, according to a presentation on its website Monday. ©2022 Bloomberg L.P. More