Economy

The Fed’s current plan for half point increases is “a good benchmark for now,” Bullard said on Yahoo Finance. Large increases are “not my base case … I think we have a good plan in place,” Bullard said. The comments from one of the Fed’s most vocal advocates of faster rate hikes show how tightly U.S. central bankers have coalesced around the plan outlined by Fed Chair Jerome Powell last week to raise rates by half a point at the next two Fed meetings, and take stock along the way of how inflation is behaving and what more might need to be done.Bullard, however, repeated on Wednesday that he feels the Fed will need to keep moving in those half-point increments for the remainder of 2022, pushing the federal funds rate to a range of between 3.25% and 3.5% by the end of the year.That’s higher than the level many other Fed officials have projected so far.But Bullard said data could push the Fed in either direction still.”I think it is more state contingent … We want to take it one meeting at a time. It is possible inflation could moderate a lot,” he said. It is possible the real economy could take twists and turns … We don’t want to be promising today what we will do in December.” More

The confirmation of a third Democrat creates an opportunity for Lina Khan, the Federal Trade Commission’s chair, to advance efforts to rein in corporate power.WASHINGTON — The confirmation of a third Democrat to the Federal Trade Commission on Wednesday broke a partisan deadlock at the agency. That’s good news for Lina Khan, the agency’s chair and a Democrat.It is also a test.With the F.T.C.’s new Democratic majority — which came with the confirmation of Alvaro Bedoya, who becomes the fifth commissioner, in a slot that had been vacant since October — Ms. Khan’s allies and critics are watching to see if she pushes forward plans to address corporate power. That could include filing an antitrust lawsuit against Amazon, setting online privacy rules and tapping little-used agency powers to clip the wings of companies like Meta, Apple and Google.As Congress remains gridlocked and the midterm elections near, agencies like the F.T.C. and the Department of Justice are likely the best remaining hope for activists and policymakers who want the government to restrain corporate power. President Biden, who has promised to crack down, last year ordered the F.T.C. and other federal agencies to take steps to limit concentration.Under Ms. Khan, 33, who became the chair in June, the F.T.C. has already tried tamping down mergers by threatening to challenge deals after they close. The commission has said it will punish companies that make it hard for users to repair their products. And it settled a case with the company once known as Weight Watchers over a diet app that collected data from young children.But Ms. Khan’s new Democratic majority is essential for a broader “realization of her vision,” said William E. Kovacic, a former chair of the F.T.C. “And the clock’s ticking.”In a statement, Ms. Khan said she was “excited” to work with Mr. Bedoya and the other commissioners. She did not address how the F.T.C.’s new majority would affect her plans.The F.T.C.’s previous split between two Republicans and two Democrats led to impasses. In February, the commission couldn’t reach an agreement to move forward with a study of the practices of pharmacy benefit managers.Sarah Miller, the executive director of the American Economic Liberties Project, a progressive group that wants more antitrust enforcement, described the F.T.C.’s two Republicans, Noah Phillips and Christine Wilson, as “libertarian holdouts” who have “kind of thrown the brakes” on Ms. Khan’s ability to advance her agenda.Mr. Phillips said in an email that he supported the commission’s “long tradition of bipartisan work to advance the interests of American consumers.” But he will not support Ms. Khan’s agenda when it “exceeds our legal authority,” raises prices for consumers or harms innovation, he said.Ms. Wilson pointed to three speeches she gave over the last year criticizing Ms. Khan’s philosophy. In one speech last month, Ms. Wilson said Ms. Khan and her allies were drawing on tenets from Marxism.Alvaro Bedoya, a Democrat, was confirmed on Wednesday as the fifth member of the F.T.C.Senator Chuck Schumer of New York, the Democratic majority leader, said Wednesday’s vote confirming Mr. Bedoya was “pivotal to unshackling the F.T.C.”Now Ms. Khan may gain the ability to pursue a legal case against Amazon. She wrote a student law review article in 2017 criticizing the company’s dominance. The F.T.C. began investigating the retail giant under the Trump administration; some state attorneys general have also conducted inquiries into the company.Ms. Khan could file a lawsuit to challenge Amazon’s recent purchase of the movie studio Metro-Goldwyn-Mayer. When the $8.5 billion transaction closed in March, an F.T.C. spokeswoman noted that the agency “may challenge a deal at any time if it determines that it violates the law.”Ms. Khan may put her stamp on other deals. The agency is examining Microsoft’s $70 billion purchase of the video game publisher Activision Blizzard and sent a request to the companies this year for additional information.An executive order from Mr. Biden last year encouraging more aggressive antitrust policy pushed the F.T.C. and the Justice Department to update the guidelines they use to approve deals, which could lead to stricter scrutiny. Ms. Khan is likely to need the support of the commission’s two other Democrats, Mr. Bedoya and Rebecca Kelly Slaughter, to approve aggressive new guidelines or to challenge major mergers.Ms. Khan has also said she wants to bulk up the agency’s powers by considering regulations governing privacy and how algorithms make decisions. She has said that the F.T.C. underutilized its role as a rules-making body and that regulations would enhance its mandate to protect consumers.“Given that our economy will only continue to further digitize, marketwide rules could help provide clear notice and render enforcement more impactful and efficient,” she said last month at a privacy conference.The F.T.C. could also act on requests from progressive activist groups that want the agency to ban data-driven advertising business models and forbid noncompete agreements that stop workers from taking a job with a competitor of their current employer.But former F.T.C. officials said Ms. Khan faced challenges, even with the Democratic majority. The creation of privacy regulations could take years, said Daniel Kaufman, a former deputy head of the agency’s consumer protection bureau. Businesses are likely to challenge rules in court that don’t fit into the F.T.C.’s mandate to protect consumers from deceptive and unfair practices.“The F.T.C.’s rule-making abilities are not designed to tackle behavioral advertising so I’ve been telling my clients the agency could kick something off with a lot of press but it’s unclear where it will go,” Mr. Kaufman, a partner at the law firm BakerHostetler, said.Ms. Khan’s efforts are also sure to continue facing opposition from Mr. Phillips and Ms. Wilson. Mr. Phillips has said he has reservations about the agency’s becoming a more muscular regulator. In January, he said Congress, not the F.T.C., should be the one to make new privacy rules.Ms. Wilson recently posted screenshots of an internal survey showing that satisfaction among the F.T.C.’s career staff has fallen. “New leadership has marginalized and disrespected staff, resulting in a brain drain that will take a generation to fix,” she said.To overcome their opposition, Ms. Khan will have to keep her majority intact. That gives leverage to Mr. Bedoya, a privacy expert who has focused on the civil rights dangers of new technologies, and Ms. Slaughter, a former top member of Senator Schumer’s staff.Ms. Slaughter said in a statement that Mr. Bedoya’s privacy expertise would serve the F.T.C. well. She did not comment on the agency’s Democratic majority.Mr. Bedoya was tight-lipped about his own plans, saying only that he was “excited” to work with his new F.T.C. colleagues. More

US stocks resumed their slide on Wednesday after unexpectedly hot “core” inflation data raised expectations for aggressive policy tightening, pushing the tech-heavy Nasdaq Composite down nearly 30 per cent from its record high.Growth stocks that are seen as particularly sensitive to rising rates led the declines, with the Nasdaq falling 3.2 per cent. The blue-chip S&P 500, which had rallied as much as 1.2 per cent earlier in the trading session, ended the day 1.6 per cent lower.Consumer prices in the world’s largest economy rose at an annual rate of 8.3 per cent in April, down from 8.5 per cent in March but remaining at a historically elevated level. The figure surpassed economists’ expectations for a cool-down to 8.1 per cent. The month-on-month change in core inflation — which excludes food and energy prices and is closely watched by economists — also exceeded forecasts at 0.6 per cent. Rising costs of new cars, food, airline fares and housing were the biggest drivers of the increase in consumer prices, the US labour department said. “The report should be of concern for the Fed given price gains in the core segment appear to be spreading,” TD Securities said in a note to clients. As consumer prices have surged, traders expect the Fed to raise interest rates aggressively for the rest of this year, which has placed short-term US government debt under pressure. The yield on the two-year Treasury note, which is particularly sensitive to monetary policy, rose 0.03 percentage points to 2.64 per cent, from below 0.2 per cent a year ago. Yields rise when prices fall.In contrast, the 10-year Treasury yield, which is driven by longer-term economic trends, shed 0.06 percentage points to 2.93 per cent. “Today’s report will strengthen the Fed’s resolve to tighten aggressively at its coming meetings, crystallising expectations of [half percentage point] hikes in June and July,” said Silvia Dall’Angelo, senior economist at Federated Hermes. Futures markets indicate investors expect the Fed’s main interest rate, currently set at between 0.75 per cent and 1 per cent, to reach 2.75 per cent by the end of this year. Investors strengthened their bets on the pace of rate rises after Wednesday’s inflation data, though the expected end-of- year rate remained slightly below the peak hit last week.European stocks and US equity futures had rallied before the inflation report as investors assumed that price rises would show more signs of peaking as higher energy costs, driven by Russia’s invasion of Ukraine, depressed consumer spending. “There was a sense that people were cutting back on spending in order to fill up their gas tanks and heat their homes,” said Brian Nick, chief investment strategist at Nuveen. “That clearly wasn’t the case last month.” Investors and analysts on Wednesday cautioned that even if inflation had now peaked, it could remain elevated for some time, pushing central banks to continue raising borrowing costs. The Fed, which raised its main interest rate by 0.5 percentage points last week and signalled more hikes to come, targets an average inflation rate of 2 per cent over time. “It is not just about inflation peaking, but also the trajectory going forward,” said Aneeka Gupta, research director at exchange traded fund provider WisdomTree. “We believe it is going to be a long, drawn-out process back to levels where central banks are comfortable.”Elsewhere in markets, Europe’s Stoxx 600 share index rose 1.7 per cent. Brent crude, the international oil marker, climbed 4.9 per cent to $107.51 a barrel. More

Chancellor Rishi Sunak is preparing to announce in the summer a major new support package for UK households struggling with soaring energy bills, as he seeks to head off criticism he is not doing enough to tackle the cost of living crisis.Sunak’s colleagues said he is looking to make the announcement in August, around the same time as the regulator Ofgem unveils a new UK energy price cap, which could increase to as much as an average £2,900 a year per household.The revised price cap would take effect in October, but Sunak is under huge pressure to bring forward an announcement on what he intends to do to reassure households that state help will be on hand when energy bills go up.Boris Johnson said on Tuesday that he and Sunak would be saying more about how they would use their “ingenuity and compassion” to tackle the problem and would outline more “in the days to come”.Ministers later clarified this did not mean there would be an immediate emergency Budget, but Sunak is now looking at making a statement in the summer.“Once we have a good sense of where the price cap will go, we will come forward with what we can do to help people,” said one ally of Sunak. “The regulator will say what the increase will be in August.”Sunak is also “leaving open the door” to partly funding a support package through a windfall tax on the UK energy sector, according to his allies, unless oil companies bring forward new investment plans soon.The chancellor was bruised by comments by BP chief executive Bernard Looney that a windfall tax would not affect his company’s investment plans.“If their own CEOs are saying they don’t mind, it makes our lives very easy,” said one ally of the chancellor, adding that Sunak’s preference was to see companies investing more, not taxed more.

Final timing and details of the support package have not been nailed down but Sunak used cuts to council tax bills in February to help families contending with markedly higher electricity and gas bills from April, when the energy price cap was last raised.A one-off repayable £200 discount on energy bills was also included in the £9bn package in February, alongside a rebate of £150 for council taxpayers in bands A to D in England. Sunak said 80 per cent of households would receive £350 in support.Analysts and power suppliers are expecting the energy price cap to increase to an average of between £2,600 and £2,900 a year per household in October given wholesale markets have remained volatile since Russia’s invasion of Ukraine. Ofgem chief executive Jonathan Brearley prepared households for a further increase by telling a conference on Wednesday that “the market remains highly volatile and as a result we do expect further price increases later this year”.The price cap is at an average of £1,971 a year per household, after it increased by 54 per cent in April.Sunak, criticised for his supposedly underpowered response to the cost of living crisis in his Spring Statement, is under pressure to come up with a better package in the summer.Johnson is also working on a package of “non-fiscal” measures to help households. Ideas include the removal of tariffs on certain food imports. More

Good evening,US government bonds and Wall Street stocks sustained renewed selling today after fresh data showed US inflation defied expectations of a bigger drop. Meanwhile, European shares went up after a turbulent week.US consumer prices rose at an annual pace of 8.3 per cent in April, staying at a 40-year high and underscoring the urgency of the Federal Reserve’s push to tackle inflation.Although the consumer price index moderated for the first time in eight months — it was a step down from the 8.5 per cent increase recorded in March — it was slightly above economists’ expectations of an 8.1 per cent rise. The core CPI, which excludes food and energy prices, increased at a faster pace than the previous month at 0.6 per cent compared with 0.3 per cent. (Take a look at how your country compares on rising prices using our global inflation tracker.)Increases in the cost of new vehicles, food, airline fares and housing were the biggest drivers of the rise, according to the report by the Bureau of Labor Statistics. The data may represent the beginning of a peak in the pandemic-era inflation surge. Will the US be able to curb rising prices without leading to an economic downturn? “It is, alas, quite likely that a recession will now be needed to keep inflationary expectations under control,” writes chief economics commentator Martin Wolf.Food protectionism is also adding to the global inflation crisis. Indonesia’s decision to ban overseas sales of palm oil has been a further blow to consumers struggling with a rise in cooking prices. Meanwhile, Malaysia is boosting its palm oil exports. The second-largest producer of the commodity, which is under pressure to support its finances during a simmering political crisis, has set itself apart from other exporters as it seeks to capitalise on rising prices.Latest newsModerna’s new CFO Jorge Gomez departs after one dayUK provides security assurances to Sweden and FinlandMoscow says it is open to annexing Kherson region from UkraineFor up-to-the-minute news updates, visit our live blog.Need to know: the economyEuropean Central Bank president Christine Lagarde has signalled she would support raising the ECB’s main interest rate in July, leading economists to declare that the first increase for more than a decade is almost certain to go ahead.The head of automaker Stellantis has warned that carmakers will struggle to get hold of enough batteries in the next three to four years as they race to roll out electric vehicles. Carlos Tavares said the battery supply challenges would feed into the bigger problem of keeping cars affordable in the switch to electric models.US households added $266bn to their debt balances in the first quarter, led by mortgage loans, in the largest single-quarter increase since 2006, according to the Federal Reserve Bank of New York.Latest for the UK and EuropeIn yesterday’s Queen’s Speech, the UK government included 38 headline bills to be introduced over the next year, pledging to regenerate the economy and drive strong growth in the face of rising global economic headwinds.France, the EU’s biggest wheat exporter, is facing challenges because of low rainfall this year. It has brought the threat of drought, triggering warnings of a hit to output and exports as well as adding to fears of a further squeeze to global supplies.Global latestWe are likely to experience global warming of 1.5C within the next five years because of record greenhouse gas levels, according to a new report. Global banks are facing increasing regulatory pressure over their climate change vulnerabilities, ranging from the risks posed to the future value of assets to the difficulty dealing with heavily polluting clients. Read more in of our special report on Risk Management: Financial Institutions.The head of the World Health Organization warned that China’s zero-Covid strategy was unsustainable, as new modelling showed the country risked unleashing a “tsunami” of coronavirus infections. China dismissed the criticism from the WHO, saying the agency was “irresponsible” to question the sustainability of the country’s reliance on lockdowns.The US Pharma and Biotech Summit returns to New York on May 11 2022. Join us in-person or online to hear views from industry leaders and FT journalists on regional and global trends in areas such as drug discovery, clinical development and market access.Need to know: businessToyota has warned of a 20 per cent drop in annual operating profit, blaming a doubling in raw material prices linked to the pandemic, as well as higher energy costs.Pfizer has agreed to buy US biotech Biohaven Pharmaceuticals for $11.6bn, striking its biggest deal in more than five years as the pharma company bolsters its pipeline of drugs. With the record revenues linked to the success of its Covid-19 vaccine and antiviral pill forecast to fade, Pfizer had been hunting for acquisitions to sustain its growth.Peloton shares hit new lows yesterday after reporting far higher quarterly losses than expected. As more people return to gyms and fitness studios, the company has struggled to maintain its equipment sales.The Australian government has moved to re-establish a commercial shipping fleet in the country to ensure the flow of critical goods during times of geopolitical tension.Elon Musk has said he would reverse Donald Trump’s ban from Twitter, accusing the social media company of having a leftwing bias that had aggravated political divisions in the US. Watch Musk’s interview with the FT’s Peter Campbell here.The World of WorkMillions of people started a “side hustle” to make some extra cash during the pandemic, but how can you scale yours into a full-time business? On this week’s Money Clinic podcast, a fledgling fashion designer with more than 40,000 Instagram followers who wants to turn her passion for knitting into a main source of income gets advice from FT journalists and a chartered accountant.With the lifting of Covid-19 restrictions, business travel is making a comeback. But with climate concerns growing and the ability to work remotely, can we justify flying abroad for a business conference in a windowless room? This week’s Working It podcast looks at business travel trends, away days in theme parks and why your employer may book your vacation.People from a working-class background who attempt upward mobility can suffer in their careers because they are not familiar with the invisible rules of middle and upper-class professionals — and can feel alienated as a result. The book What’s Your Zip Code Story? offers tips for businesses on incorporating social class into their diversity, equity and inclusion initiatives. Plus, take a look at other titles in this month’s business books.Get the latest worldwide picture with our vaccine trackerAnd finally . . . Malaysian actress Michelle Yeoh broke the glass ceiling of Hong Kong action cinema to become one of its biggest stars. She has been at the vanguard of female action heroes for nearly 40 years. Yeoh talks to Sam Moore about her new role in surreal comedy and indie hit Everything Everywhere All at Once, which is in UK cinemas from May 13 and in US cinemas now.Michelle Yeoh with Harry Shum Jr in the film ‘Everything Everywhere All at Once’ © Allyson Riggs More

Three former members of the Bank of England’s Monetary Policy Committee have warned of the increasing risk that the UK economy will fall into recession as a result of the institution’s efforts to contain inflation.BoE governor Andrew Bailey has recently spoken of being on a “narrow path” towards achieving price stability by raising rates without generating negative growth.But Adam Posen, president of the Peterson Institute for International Economics and a former MPC member, told the House of Commons Treasury select committee that this goal would be difficult to achieve.“I will be very happy if there is a narrow path,” said Posen, “but the reality is that there is going to have to be an economic slowdown beyond what is already on the cards in order to get inflation back to target.”Kristin Forbes, another former MPC member and professor at MIT’s Sloan School of Management, said it was still possible that inflation would return to target without a recession, but only if the central bank moved “more aggressively now”.“Much of the reason that inflation is so high is because of temporary factors: high energy factors, high traded goods prices, shifts in spending patterns due to Covid. Many of these will fade,” said Forbes. But getting inflation back to 2 per cent will require a better match of supply and demand in the labour market, she added. Forbes was in favour of the BoE considering “50 basis point” increases to its benchmark rate if the labour market remains tight, arguing that the MPC could revert to a more accommodative stance if necessary.Posen agreed, stating that the UK’s inflationary outlook warranted a “higher terminal rate” and a “faster move to that point” than is currently expected by markets and current BoE forecasts. Forbes acknowledged that any easing of the labour market might give the BoE room to move slower on rates, especially if the “large pool of workers” that has recently dropped out of the workforce were to re-enter.Charles Goodhart, another former MPC member and now emeritus professor at the London School of Economics, thought that the uncertain economic outlook justified the BoE moving cautiously with a series of 25 basis point increases.“I think that the prospects of a soft landing are not zero, but they’re certainly less than 50-50,” he said. “The likelihood is that we’re at the very least going to have a minor recession and unemployment rising.”While accepting that “the optimal path for monetary policy is going to keep changing”, Forbes pointed out that the UK faced a greater combination of inflationary pressures than other advanced economies.All countries are experiencing inflation because of the energy prices shock. But Forbes noted that “medium to long term” inflation expectations in Britain were higher than in the eurozone and US. Paired with the weakness in sterling, this meant that inflation was a “particularly difficult challenge” for the UK. More

Should you kick someone when they’re down? In life, the right answer must be “no”, but when it comes to monetary policy the correct response should be, “yes, when it is necessary”. Imagine you are a policymaker and you have been given the task of controlling inflation. If you think price rises are increasingly persistent, the labour market is too hot and companies are too gung-ho about passing on cost increases to customers, you need to damp things down. The tool you have is interest rates, which you raise to increase borrowing costs and encourage more saving than spending. This is painful medicine, which you administer.This describes the Bank of England’s position exactly. Last week it raised interest rates a quarter point to 1 per cent, the highest in 13 years, even though it knew households face the largest cost of living squeeze in decades. It also forecast that the UK economy would be 0.8 per cent smaller next summer than this summer. When it took the decision, the central bank’s Monetary Policy Committee added that most members believed “some degree of further tightening in monetary policy may still be appropriate in the coming months”. There can be no doubt: the BoE is giving us all a good kicking when we’re down because it thinks that is the right thing to do. It want us to feel poorer, spend less and be more fearful about demanding pay increases. It wants companies to think twice about raising prices. The alternative would result in prices and nominal wages going up further, without companies or households becoming better off. And that would require even more unpleasant action later on. Although the BoE’s policy position was obvious from its forecasts and interest rate decision, bank officials were exceptionally coy about spelling out the implications. When asked what the bank had to say to the people it was kicking, governor Andrew Bailey and two of his deputies danced around the subject. In four minutes of obfuscation, the answer seemed to be that monetary policy had been carefully calibrated, a phrase the governors used five times. No one doubts the MPC was diligent in examining the evidence. The nine members clearly voted for the monetary policy path they thought was most likely to hit the 2 per cent inflation target while also minimising volatility in the economy. But to have the best hope of ensuring high inflation is transitory, they needed to give the public and companies the clear message that they were adding to the pain and this was necessary for the BoE to restore price stability. The only reason these governors sit in the privileged position of unelected officials taking important decisions is because society requires them to take expert decisions and tell the public the whole truth. The BoE was given operational independence to set interest rates 25 years ago because history told us politicians could not be trusted to take tough and necessary action on interest rates, leading to an inflationary bias and a more volatile economic cycle. Since independence in 1997, the BoE has not really been challenged with a severe inflation rise at a time of extremely low unemployment and excess demand. Now the test has arrived, officials are sounding more like politicians than central bankers, who should tell it as it is, however unpopular that makes them. This can only amplify inflation expectations, ensuring the BoE ends up having to raise interest rates more than otherwise necessary to quell persistent price rises. Let me put this bluntly. If BoE officials are unwilling to tell us about the pain required to bring down inflation, there is little point in having them set policy. At least with politicians, we can kick them out. [email protected] More

With ECB policymakers clamouring for a rate hike for weeks, President Christine Lagarde has finally thrown her weight behind such a move, saying the central bank was likely to end its stimulus programme early in the third quarter, followed by a rate hike that could come just “a few weeks” later.Most other major central banks have already raised borrowing costs but the ECB, which had fought too low inflation for a decade, is still pumping cash into the financial system via bond purchases.”My expectation is that they should be concluded early in the third quarter,” Lagarde said at a conference in the Slovenian capital.”The first rate hike, informed by the ECB’s forward guidance on the interest rates, will take place some time after the end of net asset purchases…(and) this could mean a period of only a few weeks.”Inflation hit 7.5% in the euro zone last month and even measures that strip out food and energy prices rose above the ECB’s 2% target.”What started as a one-off shock has now become a more broad-based phenomenon,” ECB policymaker Bostjan Vasle said at the same event. “When the circumstances change, the policy response must follow,” the Slovenian governor added.ECB board member Isabel Schnabel said the ECB needed to act now to protect its credibility and stop inflation expectations, which have risen to 2% or slightly above, from spiralling out of control. GROWING CALLSThe number of ECB policymakers calling for a July hike has been growing almost every day and on Wednesday alone included board member Frank Elderson, French central bank governor Francois Villeroy de Galhau and Bundesbank president Joachim Nagel.”I think that from this summer onwards, the ECB will gradually raise its interest rates,” Villeroy de Galhau told France Inter radio.Estonian governor Madis Mueller also hinted at a series of hikes that could lift the ECB rate on bank deposits, which is currently -0.5%, above zero by the end of the year for what would be the first time since 2014.”Even if we go by 25 basis point increments, we may get to a positive rate by the end of the year,” he told Reuters in an interview. More