Economy

Rishi Sunak’s Spring Statement on Wednesday offered minimal short-term help for UK households reeling from the cost of living crisis. Instead, the chancellor concentrated his fiscal firepower on building a war chest for pre-election giveaways. The move confirmed Sunak’s priorities. Surging inflation has generated a huge windfall of extra tax revenues for the chancellor by stealth, and he chose to return only a little to Britons, in the most eye-catching way possible. First, he unveiled a one-year 5p cut in fuel duty, effective from 6pm, plus a £6bn national insurance cut for 30mn workers that will apply from July. Second, he pre-announced a 1 percentage point reduction in the 20p basic income tax rate that will take effect in 2024 — the most likely year of the next general election. “For the first time in 16 years the basic rate of income tax will be cut,” said Sunak.Despite these moves by the chancellor, the UK fiscal watchdog said the tax burden as a percentage of national income was due to rise to 36.3 per cent in 2025-26: its highest level since just after the second world war, and surpassing the official forecast of last October.

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This partly reflects previous moves by Sunak to increase national insurance contributions, freeze income tax thresholds and raise corporation tax.But the maths behind the smoke and mirrors in the chancellor’s House of Commons speech is relatively simple and relates to the effects of higher inflation on the economy, the public finances and household living standards. The Office for Budget Responsibility expects inflation to peak at about 9 per cent towards the end of 2022 — the highest rate for more than 40 years. This will squeeze household disposable incomes by 2.2 per cent in 2022-23, which the fiscal watchdog estimated to be “the largest fall in a single financial year since [official] records began in 1956-57”.With real disposable incomes not forecast to return to pre-pandemic levels until 2024-25, Aveek Bhattacharya, economist at the Social Market Foundation, a think-tank, said: “The hit to living standards is set to be on a similar scale to the worst recessions.”Dave Innes, head of economics at the Joseph Rowntree Foundation, a charity, expressed fury that the most vulnerable families and pensioners received little or no immediate support with the rising cost of living.“The choices the chancellor has made today won’t deliver any security for those at the sharpest end of this crisis, instead he has abandoned many to the threat of destitution,” he said. Amid Russia’s invasion of Ukraine, it is no surprise the economic growth forecasts have been pared back. Compared with growth of 6 per cent in 2022 and 2.1 per cent in 2023 in its October forecast, the OBR now thinks the economy will sustain expansion of only 3.8 per cent and 1.8 per cent, respectively. Thereafter, it envisages some catch-up to the previous economic path. Public services will also suffer from higher inflation, for which they received no compensation from Sunak. Jonathan Portes, professor of economics at King’s College London, said that with higher energy bills and other costs, the lack of compensation meant “pay cuts for . . . nurses, teachers and the police, with cuts to the quantity and quality of service provision”. In contrast to the pain that will be suffered by households and the public sector, higher inflation brings additional money into the Treasury’s coffers without the chancellor raising tax rates. This is because it increases the nominal value of all goods and services produced upon which taxes are levied. The OBR calculated that the additional tax receipts resulting from surging inflation provide a windfall of roughly £35bn a year to Sunak, with only some of that having to be spent on higher costs of servicing government debt and welfare benefits. Apart from a one-off bad year in 2022-23, the OBR reckoned Sunak will gain at least £15bn more annually from higher tax revenues than he is forced to spend on debt servicing and uprating benefits. Sunak then had a choice to make: should he compensate Britons and public services for their losses with his windfall, or should he bank the money? In the current financial year he gained a £50bn windfall, which has been banked. For future years, he has decided to give back to the public paying the taxes a net amount of a few billion of his projected £15bn annual windfall. This giveaway is at its highest in 2024-25, the likely year of the next election, but even then it is still only £3.6bn net. Sunak made it sound as if the giveaways were much larger than that but, once again, smoke and mirrors were at work. He said cutting 5p off fuel duty on a litre of petrol and diesel would cost more than £5bn this year, but the Treasury documents show an expense of only £2.4bn. The difference arises because the chancellor calculated the cost from a notional world in which the rate of duty on fuel was higher than it actually is. The Institute for Fiscal Studies, another think-tank, said the cost of Sunak’s tax and national insurance changes in the Spring Statement were more than paid for by the extra revenues secured from freezing income tax thresholds for four years at a time of much higher than expected inflation. Paul Johnson, director of the IFS, said: “Almost all workers will be paying more tax on their earnings in 2025 than they would have been paying without this parliament’s reforms to income tax and national insurance contributions, despite the tax-cutting measures announced today.”In addition, these tax cuts are offset by large increases in the amount of loan repayments that recent graduates will face over their working lives. This Spring Statement sought to distract from stealthy tax increases and real public spending cuts. Or, as Torsten Bell, chief executive of the Resolution Foundation think-tank, said on Twitter: “This package only makes sense if your only test for policy choices was can you prove you’re a tax cutter [and] you’ve already announced a rise in national insurance.” More

Egypt has asked for support from the IMF, the fund said, as the country struggles to weather the economic impact of Russia’s invasion on Ukraine. Cairo is facing mounting pressures on its public finances as Moscow’s assault in Kyiv has sent grain prices soaring and increased the price of oil. Egypt is the world’s biggest wheat importer, is heavily reliant on supplies from Russia and Ukraine and has a subsidised bread programme which feeds 70mn people. Its predicament underscores how the war is rippling into Arab and African states that rely on food and energy imports. “The rapidly changing global environment and spillovers related to the war in Ukraine are posing important challenges for countries around the world, including Egypt,” said Celine Allard, IMF mission chief for Egypt in a statement released on Wednesday evening. “In that context, the Egyptian authorities have requested the International Monetary Fund’s (IMF) support to implement their comprehensive economic programme.”Egypt, the Arab world’s most populous nation, has benefited from previous IMF loans and programmes. In 2016 it secured a $12bn loan over three years after a crippling foreign currency crisis as it emerged from the political upheavals that followed its 2011 revolution. It also received $8bn in 2020 to deal with the impact of the pandemic, making it one of the biggest borrowers from the fund after Argentina. At the time of the 2016 agreement it devalued the currency, which lost half its value against the dollar.Analysts have been expecting this latest announcement after the country devalued its currency on Monday in a move seen as a prelude to discussions with the fund on a potential loan. Egypt also announced a package of tax breaks and increases in social spending worth $7bn.The Egyptian pound has fallen 14 per cent against the dollar since Monday when the central bank allowed its value to slip, citing the role of exchange rate flexibility as a shock absorber. The dollar traded at E£18.4 on Monday up from E£15.66 on Sunday.Goldman Sachs said the devaluation “smooths the path for an IMF programme which we believe will help anchor confidence in Egypt’s fiscal and reform trajectory”.Allard’s statement welcomed the devaluation and the expansion of the social protection network and added that “continued exchange rate flexibility will be essential to absorb external shocks and safeguard financial buffers during this uncertain time. Prudent fiscal and monetary policies will also be needed to preserve macroeconomic stability.”The war has also hit the country’s tourism, a main source of foreign currency, because it stopped the flow of visitors from Russian and Ukraine — both important markets for the sector.Foreign debt investors have also pulled billions of dollars from Egypt in recent months, adding to pressure on its currency. “There were around $5bn of net outflows in September-December and further outflows accompanied news of the Ukraine conflict,” said Fitch Ratings agency in a note last week.“In our view, these outflows reflect tighter global financial conditions, as well as investor concerns about Egypt’s external funding needs in the absence of an IMF programme, the impact of rising inflation on Egypt’s real interest rates, and the sustainability of Egypt’s exchange-rate level, after significant real appreciation in recent years.” More

Good evening,Cuts in National insurance and fuel duty were among the highlights of Rishi Sunak’s Spring Statement today, but the UK chancellor banked most of a windfall in public finances as a war chest for tax cuts ahead of the next election, with minimal help provided to households and services hit by surging inflation.Sunak hailed the raising of the National Insurance threshold by £3,000 to £12,570, bringing it into line with the point at which people start paying income tax, as “the largest single personal tax cut in a decade”. However, the promised income tax cut from 20p to 19p in 2024 brought criticism that — as recent experience has taught us — two years is a long time in economics and the state of public finances that far ahead is far from certain.There was also criticism that the cuts in National Insurance would be wiped out by the new health and social care levy that takes effect next month, with the Labour opposition hitting out at “Alice in Wonderland” economics that did little to help struggling families cope with soaring energy bills. Similar criticism came from energy and environmental groups, while lobby groups attacked the “sticking plaster” support on offer from the chancellor.Sunak’s day began with the news that UK inflation hit a 30-year high of 6.2 per cent in February. The monthly rise of 0.8 per cent was the fastest since 2009, showing the impact of surging global prices on energy, petrol, food and durable goods. An even steeper rise is due next month when new energy prices kick in.New economic projections from the Office for Budget Responsibility, unveiled by Sunak in his speech, added to the gloom. The OBR expects inflation to average 7.4 per cent this year and GDP to grow 3.8 per cent in 2022 and 1.8 per cent in 2023.The OBR also forecast that household energy bills would increase by a further £830 a year from October and living standards in 2022-23 would fall by the biggest amount in any financial year since records began in 1956-57. Economics editor Chris Giles in his dissection of the smoke and mirrors of today’s speech characterised it thus: “stealthy tax increases, stealthy real public spending cuts and very headline public tax cuts”.Key linksFull FT coverageFull text of Sunak’s speechTreasury documentsLatest newsRenewed concerns about oil outlook push Brent crude above $120European consumer confidence falls sharply amid Ukraine crisisWall Street average bonus hit record high of $257,500 last yearFor up-to-the-minute news updates, visit our live blogNeed to know: the economyThe energy crisis continues. The US and its allies will announce an escalation of sanctions on Russia during President Joe Biden’s trip to Europe which begins today, including more action against the Russian oil sector. Germany is still holding firm against a full embargo of Russian energy. Russia in the meantime is cutting back capacity on a key pipeline delivering crude to global markets and said it would switch European payments for gas supplies to roubles. Our Energy Source newsletter discusses the commodity’s weaponisation.EU leaders will discuss joint purchasing and gas storage facilities at a two-day summit starting tomorrow, our Europe Express newsletter reports. Belgium’s prime minister told the Financial Times that member states needed to avoid a fight for deals in a rush to replace Russian supplies. In the UK, Prime Minister Boris Johnson is expected to push through proposals for more onshore wind farms as part of a new energy supply strategy.Traders at the FT Commodities Global Summit warned of a looming global diesel shortage and a “broken” European gas market. Premium FT subscribers can gain free access to videos of the sessions once the summit ends by using the promo code: PREMIUM2022.Soaring oil and gas prices and the potential for shortages are stark reminders that the road to cleaner energy is far from smooth. Join us on April 7 for our Energy Source Live Summit where we will take a deep dive into the issues set to reshape the US energy industry. Register here today.Latest for the UK/EuropeThe US has agreed to ease steep Trump-era tariffs on UK steel and aluminium products from June 1. The UK in return will lift tariffs on US bourbon as well as agricultural and other goods.Andy Haldane, outgoing head of the government’s levelling up task force and former head economist at the Bank of England, told the FT the cost of living crisis would hit left-behind areas the hardest.Germany’s Ifo Institute slashed 2022 growth forecasts for Europe’s largest economy to between 3.1 and 2.2 per cent, from its earlier prediction of 3.7 per cent, citing surging commodity prices, sanctions, supply bottlenecks and increased economic uncertainty. The FT editorial board warned of the dangers to the European economy from low growth and high inflation and the importance of the ECB revising and adapting plans to adapt to changing circumstances.Global latestDespite the enormous effects of the war in Ukraine, global monetary policy must continue to focus on controlling inflation and inflationary expectations, writes chief economics commentator Martin Wolf. Countries need to apply their fiscal resources to look after refugees and help the poorest from the impact of surging food prices, he argues.Bookmark this: The FT inflation tracker shows country by country trends in inflation indices with breakdowns for energy and food costs.Given how badly the world has done in distributing vaccines equitably, the omens for how it will deal with the looming food crisis are not good, says the FT editorial board. Sanctions against Russia are entirely justified, it adds, but richer countries must cushion the blow for poorer ones caught in the crossfire. Ireland has launched a €12mn crop cultivation scheme to boost grain production. Imran Khan came to power in Pakistan as a populist, religious reformer with a promise to end corruption and fix longstanding economic problems. But as our Big Read explains, soaring inflation and deteriorating living standards threaten his political future.Need to know: businessNestlé, the world’s largest food company, is to halt sales of most of its products in Russia after criticism from Ukraine’s leaders over its presence in the country.BNP Paribas, the eurozone’s biggest bank, and Crédit Agricole have joined others in severing ties with Russia. French rival Société Générale is among the foreign banks with the biggest exposure via its Rosbank network, but has yet to clarify its intentions, warning of extreme scenarios such as an expropriation of its assets. Yesterday, Ukraine’s central bank chief urged international banks to cease all business in Russia.Companies face a huge increase in bills if ministers allow Gazprom’s UK energy supply business to go bust, industry leaders have warned. Many of its 30,000 corporate customer are on contracts negotiated long before the current spike in prices began.Chinese companies are walking a fine line between conducting normal business in Russia and bankrolling its war against Ukraine, writes our China economics reporter Sun Yu. Some have decided there is too much risk trading with their northern neighbour as sanctions tighten, but others are determined to expand their trade.International business editor Peggy Hollinger says foreign businesses in China need to learn lessons from the exodus from Russia of companies fearing sanctions or backlashes from customers. One economist described it as a “case study for how the global system can unravel”.Carnival, the world’s biggest cruise company, has warned that rising fuel prices caused by the Ukraine crisis would knock back its recovery, just as “wave season” begins and countries relax pandemic travel restrictions. Saga also warned of the hit from the Omicron variant and the Ukraine crisis on its travel business.The pandemic-fuelled boom in online shopping has been great for warehouse businesses. Prologis, the world’s largest warehouse owner, is bidding €21bn to buy Blackstone’s portfolio of 2,000 properties in what would be the biggest-ever private real estate deal. “Safe and sexy together rarely describe any investment. In today’s uncertain environment, they do apply to warehouses and logistics,” says Lex.Chief business commentator Brooke Masters says some companies are honest about passing cost increases on to customers, but others are practising “shrinkflation” by reducing the size of their products. Penny pinching is also spreading beyond consumer goods to restaurants and hotels, she adds.Cadbury owner Mondelez insists a cut to the size of multipack Wispa chocolate bars is part of a ‘proactive strategy to help tackle obesity’ © Roy Perring/AlamyThe World of WorkThe “leakiness” of modern work into evenings and weekends has left many feeling starved of time, writes employment columnist Sarah O’Connor, leading to a new push for the four-day week. Properly managed, the shift could benefit employers as well as employees, she argues.Two years of limited interactions with our office colleagues may have meant fewer opportunities for workplace relationships, but is that a good or bad thing? Our latest Working It podcast discusses the pros and cons of office romance.Get the latest worldwide picture with our vaccine trackerAnd finally . . . The organisers of the Oscars would love this weekend’s Academy Awards to be a comeback story after last year’s low-key (and low ratings) Covid-affected ceremony. Can the grand bash filled with star names and box office successes help draw back public attention?© FT montage More

Global bond markets have suffered their deepest downturn since at least 1990 as investors brace themselves for rapid rises in interest rates from central banks that are battling the highest inflation in decades.The Bloomberg global aggregate index, a broad gauge of government and corporate debt, has fallen by more than 11 per cent since its peak in January 2021, eclipsing a 10.8 per cent decline during the financial crisis in 2008 and marking the heaviest pullback in the history of the index running back to 1990. The selling has accelerated since the start of the year as central bankers signal their determination to rein in inflation, which has soared to the highest levels in decades — even if they risk choking off the economic recovery in the process. Federal Reserve chair Jay Powell on Monday hinted that the US central bank is prepared to act more aggressively if necessary to keep a lid on price rises after raising interest rates last week for the first time since 2018. Markets are now expecting at least seven further rate US rate increases this year. The Bank of England raised interest rates for a third consecutive meeting this month and is expected to lift short-term borrowing costs above 2 per cent by the end of 2022. Even the European Central Bank outlined a faster-than-expected wind-down of its bond-buying programme at its most recent meeting. Its hawkish signalling comes as policymakers focus on record inflation despite the eurozone facing a greater hit than many other global economies from the war in Ukraine.“This is a very different world for bond investors,” said Mike Riddell, a senior portfolio manager at Allianz Global Investors. “For the last 20 years we’ve lived in a world where as soon as growth starts to weaken central banks look to ease policy. Now they are determined to tighten even if that risks a recession.”The US Treasury market — which is on course for its worst month since November 2016 — has borne the brunt of the recent selling. The US 2-year note yield, which is highly sensitive to expectations of the path of short-term interest rates, climbed to a three-year high of 2.2 per cent this week, up from just 0.73 per cent at the start of the year. The two-year Treasury is on track to post its biggest quarterly rise in yield since 1984. Longer-term yields have also jumped, albeit more slowly, largely as a result of rising inflation expectations, which chip away at the allure of holding the securities that provide a fixed stream of income long into the future. The US 10-year yield hit its highest since May 2019 at 2.42 per cent on Wednesday.Bonds in Europe have followed suit, while even government bonds in Japan — where inflation is lower and the central bank is expected to buck the global hawkish trend — have recorded losses this year.Adding to the pain for investors, corporate debt has suffered even sharper losses, widening the extra yield, or spread, that it offers relative to government bonds.“For credit investors the bleakest scenario is when both interest rates and credit spreads move against you,” said Tatjana Greil Castro, co-head of public markets at Muzinich & Co. “That’s exactly what we are experiencing at the moment.”The spread on an Ice Data Indices measure of high-grade European corporate debt has grown to 1.45 percentage points from 0.98 percentage points at the end of last year. The equivalent US spread has widened to 1.31 percentage points from 0.98 percentage points. “Interest rates have moved higher across jurisdictions. You can’t just say ‘we’ll focus on Europe or we’ll focus on the UK’. Geographically there’s nowhere to hide,” said Greil CastroLosses for the safest government debt have also accompanied a pullback in equity markets. Although stocks have recovered most of the losses they made since Russia’s invasion of Ukraine major indices including the S&P 500 remain lower so far this year.For some investors, the moves renew doubts about the traditional role of bonds within a portfolio as a counterweight that tends to rally when riskier assets are suffering, such as the classic “balanced” portfolio of 60 per cent equities and 40 per cent bonds.“It’s a huge challenge to the 60-40 model,” said Eric Fine, a portfolio manager at Van Eck. “All bond funds are seeing outflows, including Treasury funds. Investors have not experienced this, analysts have not experienced this, it’s a new paradigm”. More

The writers are co-chairs of the Sovereign Debt Working Group of the Bretton Woods CommitteeSince late February, the world’s attention has been focused on Russia’s brutal invasion of Ukraine. However, some of the most damaging economic and financial impacts of this act of aggression will be felt by non oil-exporting developing economies in Africa, Asia and Latin America.Even prior to the invasion, many of these countries were experiencing debt distress, reflecting the strains of their response to the Covid-19 pandemic. Recent events in Ukraine have made the prospect of a new sovereign debt crisis both more imminent and more damaging. Adding to the potential downside risks for these countries, the mechanisms currently in place to deal with sovereign debt problems have become dysfunctional. While the need for reform had been recognised previously, the G20s’ recent effort in this direction appears to have failed. Renewed international action is needed urgently to prevent a paralysing stalemate. However, the current crisis will make finding a solution more difficult, just as it has raised the cost of failure. The added risks for low-income countries from recent events are self-evident: the economic and financial fallout from the Ukraine conflict — including the unprecedented sanctions imposed on Russia, and its expected default on its sovereign debt — has already produced substantial downward revisions to global growth forecasts, but upward revisions to expected near-term inflation. Prior to the start of the war, the impact of the pandemic on low-income countries’ public spending and revenues had produced an increase in their gross sovereign borrowing equivalent to about 25 per cent of their gross domestic product. As shown in World Bank data, this increase was somewhat larger in percentage terms than that of higher-income borrowers. However, as IMF calculations demonstrate, the increase in these countries’ debt service costs relative to government revenues was dramatically greater than for higher-income economies. Co-operative policy action after Covid struck staved off an immediate debt crisis for low-income borrowers. In addition to providing new financial support programmes, the IMF and the World Bank in May 2020 agreed on a Debt Service Suspension Initiative (DSSI) that was then endorsed by the G20 finance ministers, and eventually extended for all multilateral and bilateral official lending until the end of 2021. With the DSSI now ended, a critical challenge is to make the debt exposure of low-income countries sustainable. Undoubtedly, this will require establishing a workable mechanism for restructuring sovereign debt. However, as noted in the World Bank’s latest World Development Report, the G20’s effort to create a new system for debt renegotiation — the Common Framework for Debt Treatment — appears to have failed. According to analysis by the Bretton Woods Committee’s Sovereign Debt Working Group, a key factor sharply weakening the pre-existing arrangements for sovereign debt renegotiation has been the lack of transparency regarding the scale and terms of outstanding debt obligations. In part, this reflects the sharp shift in the sources of lending to low-income countries after the global financial crisis. China is now the largest single lender to these borrowers, but Chinese institutions often fail to provide consistent or complete data reporting on their lending. An immediate goal of reform should be to achieve real progress on transparency, while addressing the related challenge of strengthening the degree of engagement, fairness and trust in the process of sovereign restructuring. To be successful, reforms must reach beyond simple data transparency to greater clarity regarding the entire restructuring process. This won’t be easy or quick: the G20 finance ministers’ latest communiqué supported the goal of enhanced debt transparency, but in practice did no more than mention the existing — and apparently failing — effort. Nonetheless, progress is possible. The Working Group has developed a menu of concrete steps that would meaningfully reduce crisis risks. The key uncertainty is whether the principal protagonists are capable of meaningful co-operation, or whether the current spiral of great power confrontation will prevent mutually beneficial action. Global leadership is needed urgently. The potential costs of failure include a new sovereign debt crisis that would do the worst damage to the poorest and most vulnerable. More

The symbolism of Ireland’s government telling its farmers to grow more crops because of wartime shortages should be lost on no one: it recalls Irish ministers in the 1940s ordering growers to plant more grain during the second world war. This time round the programme, designed to replace imports from Russia and Ukraine, relies on cash rather than coercion. The rush across the EU to get more crops in the ground goes against the decades-long direction of European agricultural policy and subsidies. Warnings of a global food crisis are not a drill.It’s not Covid-related general interruptions to trade that are causing soaring food prices and shortages. There was a false alarm along those lines early in the pandemic, when governments worried about shortages and export restrictions similar to those on personal protective equipment. In fact, the supply chains held up quite well. The current episode looks more like the global food crisis in 2007 to 2008. Shocks didn’t emanate from the trading system but ended up there, with countries slamming on export controls to keep produce at home.Food prices have been rising sharply since the middle of last year, chased higher by energy costs — not mainly the diversion of crops to biofuels but the fossil-fuel intensity of modern agriculture, including the use of synthetic nitrogen fertiliser. The Ukraine war has disrupted output and exports of grain and fertiliser from two of the world’s biggest producers. There’s a historical irony here: Stalin’s insistence that Ukraine keep exporting grain in the early 1930s to pay for imports of machinery to industrialise the Soviet Union worsened the Holodomor famine, in which more than 3mn Ukrainians starved to death.The world has had 15 years since the previous food crisis to prepare its emergency response, including agreements to minimise export controls. It hasn’t done very well. The Global Trade Alert monitoring service reports food export curbs more or less doubling since the middle of 2021. By now there’s another story every few days of governments restricting food sales abroad. It’s a global prisoners’ dilemma: it’s in everyone’s interest to keep exports flowing, but no one wants to run short by being the only country that does.During the crisis of 2007 to 2008, India and other countries panicked and banned exports of rice despite no evidence of global shortages, resulting in huge price rises. In response, governments created the Agricultural Market Information System (Amis) to promote transparency in production. That’s fine when there are no shortfalls, but doesn’t guarantee co-operative policy reactions if there are. Despite discussions at the World Trade Organization, there are no binding agreements between governments to eschew food export restrictions. Export bans are illegal under WTO law, but cases would almost certainly fail under the exception for temporary restrictions “to prevent or relieve critical shortages of foodstuffs or other products”, a loophole you could drive a fleet of combine harvesters through.Governments can try stimulating output in the short term, as Ireland and the EU are doing. The US will do the same, though it’s already pumping out huge production-distorting handouts to compensate farmers for retaliation from Donald Trump’s absurd trade war with China, and US wheat is often already too expensive to compete globally.One-off support schemes to turn unused land back to growing basic crops are worth trying if they don’t get baked into permanent production-distorting subsidies. But they should represent only a temporary reversal of the sensible longer-term direction of encouraging farmers to go up the value chain. (The EU is actually a net exporter of food, including selling wheat abroad, but it’s disproportionately high-end stuff: Brussels could put on export restrictions to keep its food at home, but even Europeans can’t live on Gorgonzola and champagne alone.)In any case, the increase in supply is not likely to be dramatic. It’s not generally high-quality productive land that farmers have allowed to go fallow. And time is short: Ireland’s farmers had better get a move on before the barley planting season ends in a few weeks. Digging for victory isn’t a major short-term solution. More helpful would be cutting tariffs to ensure that what grain there is ends up where it’s needed, backed up with rapid aid disbursements to developing countries to give them more purchasing power. Australia, where the government is handing out export credits to wheat exporters, has surpluses to sell, as does India.For both substantive and signalling reasons, the EU should quickly push through the preferential trade deals with Australia and New Zealand once the French presidential election is done and Emmanuel Macron doesn’t have to strike agricultural protectionist poses any more. As well as Australia’s wheat, New Zealand’s fruit and vegetables, grown in the southern hemisphere summer, will be welcome when the northern winter comes.Even during food crises there’s generally enough to eat in the world as a whole, but it’s in the wrong places. You can try producing more, or you can move it to the right ones. In the short term, the second of those may be politically harder but it’s more likely to be [email protected] up for Trade Secrets, the FT’s newsletter on globalisation More

A chief goal of the meetings this week is to show that Russia’s invasion of Ukraine will not lead to sniping and disagreement among the United States and its allies.WASHINGTON — President Biden will announce sanctions this week on hundreds of members of Russia’s lower house of Parliament, according to a White House official familiar with the announcement, as the United States and its allies reach for even stronger measures to punish President Vladimir V. Putin for his monthlong invasion of Ukraine.The announcement is scheduled to be made during a series of global summits in Europe on Thursday, when Mr. Biden will press Western leaders for even more aggressive economic actions against Russia as its forces continue to rain destruction on cities in Ukraine.In Brussels on Thursday, Mr. Biden and other leaders will announce a “next phase” of military assistance to Ukraine, new plans to expand and enforce economic sanctions, and an effort to further bolster NATO defenses along the border with Russia, Jake Sullivan, the White House national security adviser, said on Tuesday.“The president is traveling to Europe to ensure we stay united, to cement our collective resolve, to send a powerful message that we are prepared and committed to this for as long as it takes,” Mr. Sullivan told reporters.Officials declined to be specific about the announcements, saying the president will wrap up the details of new sanctions and other steps during his deliberations in Brussels. But Mr. Biden faces a steep challenge as he works to confront Mr. Putin’s war, which Mr. Sullivan said “will not end easily or rapidly.”The sanctions on Russian lawmakers, which were reported earlier by The Wall Street Journal, will affect hundreds of members of the State Duma, the lower house of Parliament, according to the official, who requested anonymity to discuss diplomatic deliberations that have not yet been publicly acknowledged.Earlier this month, the United States announced financial sanctions on 12 members of the Duma. The announcement on Thursday will go far beyond those sanctions in what one senior official called a “very sweeping” action. Another official said details of the sanctions were still being finalized.The NATO alliance has already pushed the limits of economic sanctions imposed by European countries, which are dependent on Russian energy. And the alliance has largely exhausted most of its military options — short of a direct confrontation with Russia, which Mr. Biden has said could result in World War III.That leaves the president and his counterparts with a relatively short list of announcements they can deliver on Thursday after three back-to-back, closed-door meetings. Mr. Sullivan said there will be “new designations, new targets” for sanctions inside Russia. And he said the United States would make new announcements about efforts to help European nations wean themselves off Russian energy.Still, the chief goal of the summits — which have come together in just a week’s time through diplomats in dozens of countries — may be a further public declaration that Mr. Putin’s invasion will not lead to sniping and disagreement among the allies.Despite Russia’s intention to “divide and weaken the West,” Mr. Sullivan said, the allies in Europe and elsewhere have remained “more united, more determined and more purposeful than at any point in recent memory.”A damaged residential building in Kyiv, Ukraine, on Friday.Ivor Prickett for The New York TimesSo far, that unity has done little to limit the violence in Ukraine. The United States and Europe have already imposed the broadest array of economic sanctions ever on a country of Russia’s size and wealth, and there have been early signs that loopholes have blunted some of the bite that the sanctions on Russia’s central bank and major financial institutions were intended to have on its economy.Despite speculation that Russia might default on its sovereign debt last week, it was able to make interest payments on $117 million due on two bonds denominated in U.S. dollars. And after initially plunging to record lows this month, the ruble has since stabilized.Russia was able to avert default for now because of an exception built into the sanctions that allowed it to continue making payments in dollars through May 25. That loophole protects foreign investors and gives Russia more time to devastate Ukraine without feeling the full wrath of the sanctions.Meanwhile, although about half of Russia’s $640 billion in foreign reserves is frozen, it has been able to rebuild that by continuing to sell energy to Europe and other places.“The fact that Russia is generating a large trade and current account surplus because of energy exports means that Russia is generating a constant hard currency flow in euros and dollars,” said Robin Brooks, the chief economist at the Institute of International Finance. “If you’re looking at sanctions evasion or the effectiveness of sanctions, this was always a major loophole.”The president is scheduled to depart Washington on Wednesday morning before summits on Thursday with NATO, the Group of 7 nations and the European Council, a meeting of all 27 leaders of European Union countries. On Friday, Mr. Biden will head to Poland, where he will discuss the Ukrainian refugees who have flooded into the country since the start of the war. He will also visit with American troops stationed in Poland as part of NATO forces.Mr. Biden is expected to meet with President Andrzej Duda of Poland on Saturday before returning to the White House later that day.White House officials said a key part of the announcements in Brussels would be new enforcement measures aimed at making sure Russia is not able to evade the intended impact of sanctions.“That announcement will focus not just on adding new sanctions,” Mr. Sullivan said, “but on ensuring that there is a joint effort to crack down on evasion on sanctions-busting, on any attempt by any country to help Russia basically undermine, weaken or get around the sanctions.”He added later, “So stay tuned for that.”Sanctions experts have suggested that Western allies could allow Russian energy exports to continue but insist that payments be held in escrow accounts until Mr. Putin halts the invasion. That would borrow from the playbook the United States used with Iran, when it allowed some oil exports but required the revenue from those transactions to be held in accounts that could be used only to finance bilateral trade.Russia-Ukraine War: Key DevelopmentsCard 1 of 3A new diplomatic push. More

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.50% from 4.27%.
Mortgage applications to purchase a home fell 2% for the week and were 12% lower than the same week one year ago.
“The number of high-quality refi candidates was already down more than 75% through last week – these latest jumps will likely cut that population even further,” said Andy Walden, vice president of enterprise research at Black Knight.

A sharp increase in mortgage interest rates is taking its toll on loan demand, especially refinances. Total mortgage application volume fell 8.1% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.50% from 4.27%, with points rising to 0.59 from 0.54 (including the origination fee) for loans with a 20% down payment.

“The jump in rates comes as markets moved to price in a much faster pace of rate hikes, as well as expectations of fewer MBS purchases from the Federal Reserve,” said Mike Fratantoni, the MBA’s chief economist. “MBA’s new March forecast expects mortgage rates to continue to trend higher through the course of 2022.”
As a result, applications to refinance a home loan, which are highly sensitive to weekly rate moves, fell 14% from the previous week and were 54% lower than the same week one year ago. The refinance share of mortgage activity decreased to 44.8% of total applications from 48.4% the previous week.
“The number of high-quality refi candidates was already down more than 75% through last week – these latest jumps will likely cut that population even further,” said Andy Walden, vice president of enterprise research at Black Knight. “But, while we are now seeing declines in overall lending activity, cash-out lock volumes continue to hold stronger than rate/term refis against rising rates. This will be an important market segment for lenders, particularly given the record $10 trillion in tappable equity available being padded even further by the still red-hot housing market.”
Mortgage applications to purchase a home, which are less sensitive to weekly rate moves, fell 2% for the week and were 12% lower than the same week one year ago. Economists are starting to revise their home sales forecasts lower, due to rising rates. The housing market is already expensive, as a supply-demand imbalance puts upward pressure on prices. Rising rates are weakening affordability even further.
While overall purchase application volume was down slightly, there was a larger drop in FHA and VA loan demand. These loans are popular with lower-income homebuyers.

“First-time homebuyers, who rely on these government programs, are increasingly challenged by both the rapid increase in home prices and higher mortgage rates,” added Fratantoni.

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