Economy

Just two months ago many economists thought that Europe would escape the worst of the pandemic-induced inflation seen across other advanced economies. The bloc’s relative success in bringing people back to work minimised wage pressures of the kind experienced in the US, and the continent did not have to contend with the negative labour shock the UK experienced due to Brexit. In a different world, the lack of wage growth across Europe should have given the European Central Bank time to “ride out” inflation in favour of a stance more conducive to growth. War has irrevocably changed this outlook. Europe’s economy is now in danger of entering a period of low growth and high inflation. Exceptional energy price rises, driven by conflict, prompted the ECB to raise its forecast for inflation this year from 3.2 per cent to 5.1 per cent. Troublingly, this outlook may not improve. The longer war goes on, the more commodity, food and energy prices could be affected, while any further disruptions in China will compound problems. Along with inflation comes the prospect of companies and consumers losing confidence to stoke the engine of economic growth by investing and spending.While the possibility of lower growth will be worrying for the ECB, its chief mandate remains stabilising prices. Earlier this month it announced an expectation to halt additional bond purchases of member states’ debt in an effort to begin “normalising” monetary policy. While a move towards tightening is sensible in the face of inflation, the ECB must be flexible enough to ensure that this does not have unintended consequences. Not all countries will be affected equally by the ECB’s decision to tighten. Ending its bond purchasing programme will lead to pressure on some of the weaker eurozone members — especially those with large stocks of debts — as the spread between the funding costs of different countries widens. The reaction of markets to the withdrawal of ECB support may also be exacerbated by the still uncertain repercussions of the war across different European economies. But the ECB’s intention to wind down its interventions does not mean that it will be powerless to prevent widening spreads from spilling over into unintentionally high borrowing costs in some European economies.ECB quantitative easing has been the subject of much debate in recent years. The German constitutional court claimed in 2020 that the central bank had overstepped its mandate. The European Court of Justice recognised authoritatively that the ECB’s interventions have always been in service of its core mandate: to ensure price stability. In 2015, the threat of instability — and the ECB’s failure to meet its inflation target of just below 2 per cent — led to its bond market interventions. In 2022, the need to control inflation is informing its withdrawal. There is nothing to suggest, however, that this withdrawal needs to be absolute or irreversible. If rates do rise beyond the ECB’s intention in particular economies, then it should correct for this outcome through targeted interventions into bond markets. Action to ensure that tightening occurs at an appropriate level across the eurozone, rather than disproportionately in some economies over others, is consistent with its mandate. The ECB will know that its efforts to tighten may require revision and adaptation. Luckily, it has for some time now shown enough dexterity to adjust to changing circumstances. As it enters a new era of “normalisation”, these traits — built up over a decade of crisis fighting — will again be crucial. More

Good eveningAs FT columnist Rana Foroohar writes today, the war in Ukraine has not only upended countless lives but is upending business models too, further damaging supply chains already weakened by the pandemic.The situation is unprecedented. “The ongoing supply chain disruptions have now lasted longer than the 1973-4 and 1979 oil embargoes — combined,” says Richard Bernstein of the RBA investment firm.Even companies that do little business in the region are recognising the importance of more regional or local production hubs, writes Foroohar, something long recognised by “maker” firms that source locally but which is now being picked up by bigger brands wanting more insurance against any kind of shock, whether political or climate-related.Many larger businesses are looking to vertical integration to smooth disruptions such as those caused by the global semiconductor crisis. Intel last week said it would invest €33bn in manufacturing and research in Europe, rising to €80bn by the end of the decade, as well as $40bn to expand chipmaking in the US. The US and Europe are also planning tens of billions in support for the industry in an attempt to lessen dependence on Asian manufacturers.Food production is another sector being forced into a rethink. The EU was already reviewing its sustainable food strategy as part of a drive to eliminate carbon emission but now has to contend with a drop in grain and fertiliser exports from Russia and Ukraine, raising concerns over food security.Energy too is in the throes of transformation, as the west, and Europe in particular, race to find alternatives to Russian oil. Germany yesterday said it had made a long-term agreement with Qatar for the supply of liquefied natural gas, a deal described by a minister as a “door opener” for the German economy, while in the UK, Shell has submitted revised plans for a North Sea gasfield originally rejected by the country’s regulator.As well as reshaping traditional business practices, the conflict has also boosted nascent sectors such as cryptocurrency systems, adopted enthusiastically by the Ukraine government as a speedy way of raising donations as well as paying for military equipment.Another beneficiary of disrupted supply chains cited by Foroohar is 3D printing, which gained ground during the pandemic to locally manufacture everything from PPE to emergency housing.“Even in times of war, decoupling and geopolitical fear, it’s worth remembering that there is opportunity in crisis,” she concludes. Latest newsUN migration agency says almost 6.5mn people displaced inside Ukraine due to war Moscow takes first steps towards reopening financial marketsRussian court rules Facebook and Instagram ‘extremist’For up-to-the-minute news updates, visit our live blogNeed to know: the economyUK chancellor Rishi Sunak is being urged to address the cost of living crisis in his Spring Statement, but chief economics commentator Martin Wolf says he must also explore opportunities for lasting reform. We’ll have full details in the next Road to Recovery but in the meantime, here are five things to look out for in Wednesday’s speech.Saudi Arabia said it would not be held responsible for shortages in the global energy market as it warned of disruption from missile attacks on oil installations by Iranian-backed Houthi rebels in Yemen. The former head of Ukrainian state-owned energy company Naftogaz called in the FT for an immediate embargo on Russian liquefied natural gas and petroleum products. Read our explainer on whether Europe can wean itself off dependence on Russian fossil fuels. And if you have school-age children, direct them to our new set of resources for students on climate change.Latest for the UK/EuropeKaren Betts, chief executive of the Food and Drink Federation, warned that UK consumers would face shortages and higher bills because of the Ukraine crisis unless the government stepped in to help the industry. Suggestions include allowing the use of alternative products and a relaxation of regulation. Fertiliser prices today hit a new record.Global latestThe Ukraine crisis has led to food shortages in Arab countries as wheat prices soar. Grains and vegetable oil from Ukraine and Russia are crucial to national diets across the region and the UN has warned the situation “could cause an escalation of hunger and poverty with dire implications for global stability”. Egypt today devalued its currency and raised interest rates in an attempt to contain the impact of the war. Businesses in Hong Kong welcomed the relaxation of some quarantine and flight restrictions, including from the US and UK. “The measures are the sign we have all been waiting for,” said the chair of the European Chamber of Commerce, but added: “The decision comes at an almost too late stage . . . We need to see the recovery plan to avoid further damage, as the damage has already happened big time.” Mainland China is still grappling with the problem of mass infections and millions of unvaccinated elderly.Influential investor Bill Gross told the FT that the Federal Reserve’s plan for rate rises would “crack the US economy”.Need to know: business“Grand Theft Aero” was how one observer described Moscow’s move to allow foreign jets to be re-registered in Russia, thwarting efforts by global leasing groups to recover more than 500 aircraft, worth an estimated $10bn, that were stuck in the country.Grand corporate statements about exiting Russia are easy to make but complicated to carry out. FT reporters look at the key questions facing multinationals. Nestlé was forced to defend its decision to stay in Russia as Ukraine’s president increased the pressure on the world’s biggest food company to withdraw, citing the incongruity of its slogan “good food, good life”. The latest in our Charts that Matter series shows the level of fear in markets, as measured by the Cboe Vix index, starting to return to normal after violent swings caused by the invasion of Ukraine and ahead of the Federal Reserve’s first rate rise since 2018.The UK hospitality and leisure sectors are particularly at risk from soaring energy prices, with energy-intensive gyms and leisure centres with swimming pools “now at major risk of closure”. The next few weeks are critical as a large number of bespoke contracts signed with energy suppliers come to an end in April, in line with the end of the UK’s financial year.From selling drinks without bottles to niche food start-ups, young companies have been busily responding to the pandemic-driven shift in the way people work, live, shop and communicate. Read more in our annual survey of Europe’s 1,000 fastest-growing companies.About 90 per cent of all goods traded around the world are carried by sea but the costs to the climate are huge, accounting for a billion tons of greenhouse gases pumped into the atmosphere each year. Is there a viable alternative? Watch our new video on the cost of greener shipping.

Video: The cost of greener shipping | FT Rethink

The World of WorkAlongside the pandemic’s Great Resignation came the Great Retirement as many older workers said goodbye to the office. We could however be set for the Great Return, says the FT Lex column, as falling stock markets and higher living costs force retirees to return. Coming back may also be a little more alluring now that sociable office life can be mixed with working from home.Many of those quitting through burnout or other reasons could be stopped from heading for the exit in the first place if companies spent more time on giving them reasons to stay, writes Emma Jacobs.Could sun, sea and sand do the trick? One of our most read articles last week concerned Citigroup’s new hub for junior bankers in the Spanish city of Malaga, offering a distinctly different work/life balance. Management editor Andrew Hill says the proposal will need careful management: “burnout by the beach is still burnout”.PureGym boss Humphrey Cobbold tells the FT how he kept faith in his business model despite failed IPOs and forced closures during the pandemic, in our latest How to Lead interview.Get the latest worldwide picture with our vaccine trackerAnd finally…From psychoanalyst Susie Orbach on the need to achieve and mindful ways to deal with life’s twists and turns, to the truth about fasting. Browse FT Magazine’s State of Mind special.© Ana Yael More

Rishi Sunak works under the watchful gaze of Nigel Lawson — a portrait of Margaret Thatcher’s tax-cutting chancellor in his office acts as a daily reminder of the kind of politician Sunak would dearly like to be. But Sunak, who presents his Spring Statement on Wednesday, holds office at a time when there is pressure on him to spend and borrow more, first on Covid-19 and now to help families struggling to meet the soaring cost of living. Under Sunak taxes are at their highest level for 70 years. And next door there is Boris Johnson, the prime minister. “The boss always wants to spend more money,” sighed one of the chancellor’s colleagues.Sunak is on course to be one of the biggest tax-raising chancellors in postwar UK history, with the burden of taxation predicted to rise to 36.2 per cent of GDP by 2026-27, according to the Office for Budget Responsibility.His daunting political task, starting on Wednesday, is to find a way to help people facing a crippling cost of living crisis without undermining the fiscal discipline he believes must accompany any tax-cutting in the future. The chancellor’s decisive response to the Covid-19 crisis in 2020, including the creation of the furlough scheme, won him massive popularity, with his approval rating in April 2020 hitting plus-43.But as pandemic schemes wound down and Britons were left facing the bill — including April’s £12bn national insurance rise — Sunak’s approval ratings fell to minus-2 in February.Tory activists have also shown signs of falling out of love with the chancellor. In April 2020 he enjoyed a record plus-94 rating and topped a ConservativeHome cabinet league table; today he is the 11th most popular minister, with a rating of just 38.Sunak, who harbours leadership ambitions, knows he must start cutting taxes, but as he said in his Mais economics lecture last month, his hero Lawson brought spending under control before he started doing so. He pointed out that fans of Lawson and Thatcher were “perhaps less quick to remember, that only once the deficit was under control, did they begin cutting taxes”. Tensions between the high-spending Johnson and Sunak were high earlier this year during the “partygate” saga over Downing Street parties held during coronavirus restrictions. The chancellor feared the prime minister was about to reverse the planned NI increase to win the support of Tory backbenchers, while he believed the rise was essential to bring the public finances under control.“It was anything to survive,” says one senior Conservative who was close to negotiations between Sunak and Johnson at the time.

Sunak’s allies say Johnson’s “shadow whipping operation” — his closest allies charged with saving the prime minister’s job — suggested the NI rise could be reversed, but the chancellor refused.Johnson was also furious over Sunak’s supposed lack of loyalty, notably over his slowness in giving public support at the prime minister’s moment of maximum danger during the partygate scandal. Sunak had chosen that day to travel to Ilfracombe in north Devon. Some in Number 10 believed the chancellor was willing to undermine Johnson without having the nerve to take him on. “Rishi is basically crap at politics. He had a moment to strike and didn’t take it. He’s now seriously weakened himself,” said one Johnson ally.The prime minister’s position is now more secure, as political attention has shifted from Downing Street parties to the tragedy unfolding in Ukraine. “The war has saved him,” said one cabinet minister. But Johnson’s brush with political mortality earlier this year has, according to some close to Sunak, created the basis for an uneasy truce — for now — as both want the same thing.The prime minister’s fiercest critics include those on the right who demanded lower taxes as a price for their support, and Johnson must deliver to shore up his own position. Sunak, the pretender, has the same objective.The chancellor argues that more borrowing is not an option, given the country’s high debt levels and rising interest rates. He believes the prime minister now agrees.“Everyone wants to see lower taxes and the PM understands that,” said one ally of Sunak. “You have to start saying ‘no’ to more spending because as Conservatives we have to start cutting taxes.”The chancellor is resisting additional public spending in his Spring Statement — including on defence — and has instead ordered departments to find £5.5bn of efficiency savings.Sunak will also bank as much of the “good news” as he can, including higher-than-expected growth and tax revenues that could give him a £25bn windfall this year, in the hope he can cut taxes later.But as part of their fragile rapprochement, Sunak has agreed with Johnson on the need for a significant package of support for households facing a crisis on their cost of living.In an ideal world, the chancellor would hold back big fiscal decisions until his autumn Budget, when the situation in Ukraine may be clearer and volatility in global markets may have stabilised. But Johnson, still weakened by partygate, wants action now. Cuts to taxation on fuel and possible changes to NI thresholds have been mooted.Johnson’s allies insist relations with his chancellor are now good. The two men share a hope that a modicum of fiscal restraint this week will create space for tax cuts closer to the next election, due by 2024.Prof Jonathan Portes of King’s College London predicted that Sunak could practice “austerity by stealth”, fixing public spending plans in cash terms while higher inflation helped collect more tax revenues than expected.But one senior Tory MP predicted that the differences between Johnson and Sunak may resurface nearer the election, especially if higher gas and oil prices inflict a stagflationary shock.“You can imagine Boris wanting to offer a big tax cut before the election, which would probably be unfunded and Rishi refuses,” the MP said. At that point, the MP added, Sunak’s days in the Treasury would be numbered. More

The US government bond market is suffering its worst month since Donald Trump was elected president in 2016, as high inflation pushes the Federal Reserve to aggressively pull back monetary stimulus from the economy.Falling bond prices have lifted the benchmark 10-year Treasury yield 0.48 percentage points in March to 2.3 per cent, its highest level since May 2019. A rise in yields of that magnitude was last registered in November 2016. Then, Treasury yields rose on the back of expectations of higher US economic growth. Now the trigger is persistently strong inflation readings, fuelled over the past month by Russia’s invasion of Ukraine and its potential to constrain the supply of oil and other key commodities. Price increases for goods and services prompted the Fed last week to implement the first rise in interest rates since 2018, and traders are now betting the central bank will lift interest rates above 2 per cent by December, from near-zero at the start of this year.“There is a lot of unease in the bond market about how far the Fed goes and how bad the inflationary trend is. Can they get their arms around it?” said Alan McKnight, chief investment officer of Regions Bank. Break-even inflation rates — market measures of inflation expectations derived from Treasury yields — have been rising since the Fed meeting last week. That does not necessarily mean investors doubt the central bank’s determination to tighten policy. But it does suggest that traders believe some of the forces driving inflation higher this month are outside the Fed’s control, most notably the increase in commodity prices stemming from the invasion of Ukraine. “If anything, last week was a Fed credibility-enhancing event because the Fed came out and made it abundantly clear that they will respond to inflation and they will be more aggressive than they have been in prior cycles,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets. “Now we know what the Fed’s reaction function is, we have priced it in, and so now we’re going back to trading what was driving the market previously, which was energy prices,” Lyngen said. The two-year Treasury yield, which moves closely with interest rate expectations, has swung dramatically this month. The yield on the two-year note has increased 0.69 percentage points so far in March, its largest monthly increase since April 2004.

The jump reflects the Fed’s hawkish turn, which at its policy meeting this month raised interest rates 0.25 percentage points for the first time since 2018 and signalled that officials expect to raise rates at each subsequent meeting this year. Higher yields have been skewed towards shorter-dated notes, which flattens the shape of the yield curve, most commonly measured as the spread between two-and 10-year yields. An inverted yield curve has historically been an accurate predictor of recession, and a flattening curve typically indicates a slowdown in the economy. The yield curve is currently at its flattest level since March 2020.Some investors cautioned that the moves appeared more dramatic on Monday because investors who might otherwise be biased towards short positions in the Treasuries market have been covering those positions on Fridays and resuming them on Mondays. That could be because of fears that weekend events in Ukraine have the potential to drive a flood of money towards Treasuries, which typically act as a haven in periods of geopolitical stress. More

Jay Powell has said the Federal Reserve needs to move “expeditiously” towards tighter monetary policy and is prepared to act even more aggressively if necessary to tackle excessive inflation. In remarks delivered at a conference hosted by the National Association for Business Economics on Monday, the Fed chair laid out the case for a series of interest rate increases this year and substantive steps to shrink the central bank’s $9tn balance sheet, as it confronted a labour market that looked “extremely tight” and inflation that was “much too high”.Powell expressed confidence that the Fed could continue to tighten policy without sparking a recession, which some fear is inevitable. “There is an obvious need to move expeditiously to return the stance of monetary policy to a more neutral level and then to move to more restrictive levels if that is what is required to restore price stability,” he said. The “neutral” rate is one that neither aids nor hampers growth and most policymakers believe that figure to be around 2.4 per cent.Powell’s comments come just days after the Fed delivered its first interest rate increase since 2018, which is expected to be the first of many rate rises this year and into 2023.US stocks sold off after Powell affirmed the Fed’s commitment to using its tools to quell inflation, including possibly raising rates by half a percentage point, rather than the standard quarter-point increase — a move the central bank has not made since 2000. Powell said there was “nothing” to prevent the bank moving forward with a half point rate increase in May but added that the committee had not yet made a decision on the next policy move.The S&P 500 was down as much as 0.8 per cent before recouping some of those losses, and US government bonds remained under pressure. The benchmark 10-year yield was up 0.15 percentage points on the day at 2.3 per cent.Treasuries have suffered their worst month since Donald Trump was elected president in 2016, driven by inflation fears exacerbated by Russia’s invasion of Ukraine and by tightening in the supply of oil and other key commodities. A majority of Fed officials signalled last week that the benchmark policy rate would jump to 1.9 per cent by the end of the year, from the current range of 0.25 per cent to 0.50 per cent. Getting there would require six quarter-point increases at each of the remaining gatherings of the Federal Open Market Committee this year.The so-called “dot plot” of individual policymakers’ interest rate projections showed seven out of 16 officials expected rates to rise above 2 per cent in 2022, indicating at least one of the adjustments this year will be a half point. Most officials, meanwhile, predicted rates would rise to 2.8 per cent in 2023.Powell said on Monday a “substantial firming in the stance of policy” was necessary despite a sharp escalation in geopolitical tensions tied to Russia’s invasion of Ukraine, and would continue until the Fed saw signs of actual progress on supply-related issues. The war was expected to add “near-term upward pressure” to the prices of energy, food and commodities at a time of “already too high inflation”.The Fed chair’s challenge this year will be in forging consensus among committee members about how swiftly monetary policy needs to tighten in order to bring inflation in line with the Fed’s 2 per cent target.Officials last week raised the median estimate for core inflation this year to 4.1 per cent from 2.7 per cent in December. Their forecasts for the funds rate during this year ranged between 1.4 per cent and 3.1 per cent.Raphael Bostic, president of the Atlanta Fed, said on Monday that he supported just five more interest rate increases this year, which would bring the fed funds rate to roughly 1.63 per cent. He pushed back on the idea that the Fed would need to “actively slow the economy” in order to get inflation back under control by moving rates above neutral.

Bostic’s views stand in sharp contrast to those outlined by James Bullard, president of the St Louis Fed, who on Friday said he supported the fed funds rate rising above 3 per cent this year.Bullard dissented from the committee’s decision to raise the benchmark interest rate just a quarter of a percentage point last week, favouring a half-point move instead.Bullard was joined on Friday by Christopher Waller, a Fed governor, who advocated for “front-loading” rate increases this year, with half-point rate rises “at one or multiple meetings in the near future”. He supports a policy rate above a range of 2 per cent and 2.25 per cent by the end of the year and for the Fed to soon begin shrinking its $9tn balance sheet. Powell on Monday pushed back on concerns that future monetary policy tightening would cause a recession, citing episodes in 1965, 1984 and 1994 when the Fed slowed an overheated economy without prompting a sharp contraction. Fed officials forecast marginally slower growth this year, which they see steadying at 2 per cent in 2024. They also expect the unemployment rate to stabilise at 3.5 per cent before ticking up to 3.6 per cent in two years’ time. Economists have previously warned these projections amount to “wishful thinking”.“I hasten to add that no one expects that bringing about a soft landing will be straightforward in the current context — very little is straightforward in the current context,” Powell warned. “And monetary policy is often said to be a blunt instrument, not capable of surgical precision.” More

The writer is executive director of American CompassThe Ronald Reagan Presidential Library is playing host this year to prominent Republicans speaking about their party’s future. Senator Tom Cotton used his recent turn to disavow the longstanding alliance on America’s right-of-centre between conservatives and libertarians. “Whereas libertarian ideas have helpfully influenced domestic tax and regulatory policy,” he said, “these ideas often falter in a world of borders. There’s no natural level of people, goods, or money moving across borders; it’s a policy choice that must be made by the people and their representatives.” Despite the priority that the Republican party has traditionally given to the free flow of capital, elevating it almost to a core principle, a wide range of conservatives are now making the case that China should be the exception. Cotton is one such intellectual bellwether. His speech was a sign of how far the economic consensus has shifted against globalisation. Investors should anticipate major policy responses, he made clear, in financial markets. Since 2020, Beijing has been opening China’s financial markets to foreign participation, setting off a gold rush led by US firms like BlackRock, Goldman Sachs, and JPMorgan Chase. The latter two, as well as Citigroup, have received permission in recent months to operate wholly-owned investment banking ventures, which the Chinese Communist party hopes will facilitate greater inbound investment and acquisition of foreign assets. The banks, for their part, hope to earn a great deal of money. Some US policymakers have other ideas. For his part, Cotton argued that America “ought to ban US investment in strategic Chinese industries and encourage reshoring of US factories and jobs — and punish offshoring to China. Further, we need to scrutinise and regulate Chinese investment in America much more closely.” In a 2021 report he highlighted a wide range of “financial weapons”. Republican senator Marco Rubio is another outspoken critic of globalisation. In December, he sent an open letter to his colleagues, declaring it a “strategic disaster” that “American financial investment is pouring into [China] at its highest rate ever” and seeking support for his “American Financial Markets Integrity and Security Act,” which would block investment in Chinese companies flagged by the Departments of Defense and Commerce. Even bastions of free-market dogma like the Heritage Foundation and the American Enterprise Institute (AEI) are repositioning themselves. Speaking in January, Heritage president Kevin Roberts announced that his organisation is “investing resources . . . to help [state legislatures] write legislation that divests their state-level investments from companies that are engaged with China”. The AEI director of economic policy studies, Michael Strain, recently acknowledged that, because of “the geopolitical situation that we’re in”, a dollar invested in Shanghai raises concerns that one in Berlin would not.Financial flows are gaining attention over imports for a number of reasons. Capital is fungible in ways goods and services are not, so the economic effect of curtailing one source or destination is less economically disruptive. Chinese components in telecommunications equipment may be unwise, but Chinese ownership of the domestic network is much worse. Purchasing something that had forced labour somewhere in its supply chain may be unsavoury, but it can also feel unavoidable. Investing in the company that forces the labour is indefensible.Cracking down on Wall Street may be the first step, but a broader decoupling is the logical endpoint. Last month, Republican senator Rick Scott’s “11-Point Plan to Rescue America” contained a distinctive final bullet point: “We will gradually end all imports from Communist China until a new regime honours basic human rights and freedoms.” If that becomes standard GOP fare, watch out. More

On Monday, Federal Reserve chair Jerome H. Powell is scheduled to speak at the National Association of Business Economics conference. The speech comes after the central bank lifted interest rates on Wednesday, the first in a series of moves aimed to ease inflation. On Wednesday, Mr. Powell will speak again at a panel hosted by the Bank for International Settlements, discussing the “challenges for central bank governors in a digital world.”Russia is due to pay its next sovereign coupon payment on Monday. The country faces the threat of a default prompted by Western sanctions, imposed after it invaded Ukraine. The payment is a $66 million dollar coupon, which has a grace period of 30 days. Russia managed to avoid a default this week after it made interest payments on Thursday totaling $117 million on two bonds denominated in U.S. dollars.The Securities and Exchange Commission will consider on Monday whether climate disclosures should be required by publicly traded companies to inform investors about their greenhouse gas reduction goals and emissions. The meeting comes as more investors are requesting the amendments as they consider climate change risks in their investment decisions.Opening statements for the trial of Ramesh Balwani, the former president of Theranos and ex-boyfriend of Elizabeth Holmes, are expected to begin on Tuesday. The trial was postponed this week because of a juror’s exposure to Covid-19. Mr. Balwani, who is known as Sunny, faces several fraud charges as a co-conspirator in defrauding investors by claiming its blood tests could detect a variety of ailments with just a few drops of blood.On Friday, the University of Michigan will release the final results of its monthly index measuring consumer sentiment. Preliminary results showed that the index fell to its lowest level in over a decade, with consumers feeling pessimistic about the rest of the year because of inflation and the potential impact of the conflict in Ukraine. More

“I penciled in six rate hikes for 2022 and two more for 2023,” Bostic said Monday in prepared remarks to a National Association for Business Economics conference in Washington. “I recognize that I am toward the bottom of the distribution relative to my colleagues, but the elevated levels of uncertainty are front forward in my mind and have tempered my confidence that an extremely aggressive rate path is appropriate today.”Federal Open Market Committee policy makers led by Chair Jerome Powell voted 8-1 last week to raise interest rates by a quarter point for the first increase since 2018 as they confront the highest inflation in four decades. The move took the target range for their benchmark policy rate to 0.25% to 0.5%. St. Louis Fed President James Bullard’s dissent in favor of a half-point hike was the first vote against a decision since September 2020.“Events are shifting rapidly, and we could see marked changes along key dimensions, such as aggregate demand, that could warrant quickly adjusting the trajectory of policy,” Bostic said.The FOMC’s “dot plot” in its economic forecasts showed policy makers penciling in their expectation of rate hikes through each of the remaining six meetings in 2022, with the median projection for a quarter point every time. With almost half of policy makers seeking to go even faster, that would imply a half-point move at some time during the year.“The risks go both ways,” Bostic said. “Should demand falter in the face of economic uncertainty or removal of monetary policy accommodation, then the appropriate path may be shallower than I currently project. But there are other developments, such as shifts in supply strategies, that could mean higher costs and thus motivate a steeper policy path than I expect.”Bostic said he considered inflation as the top concern for policy makers this year and described the U.S. labor market as tight.©2022 Bloomberg L.P. More