Economy

The bread, one of a handful of still subsidized basic food products in Cuba, will be reduced from 80 grams to 60 grams (2.1 oz), or approximately the weight of an average cookie or a small bar of soap. Its price, too, was slightly reduced, to just under 1 peso, or 1/3 of a cent.Still, many Cubans, who earn around 4648 pesos a month, or around $15, can scarcely afford to shop for more expensive bread on the private market, leaving them with few alternatives.”We have to accept it, what else can we do?” Havana-resident Dolores Fernandez told Reuters while she stood outside a bakery on Monday. “There’s no choice.”Cuba last week said it had run short of the wheat flour it needs to produce the bread, a predicament the government blames on the U.S. trade embargo, a complex web of restrictions that complicates Cuba’s global financial transactions. The Caribbean island nation is suffering from extreme shortages of food, fuel and medicine, shortfalls that have primed a record-breaking exodus of its citizens to the nearby United States.Cuba’s ration book, or “libreta,” as it is known among island residents, was once considered a hallmark of Fidel Castro’s 1959 revolution, providing a range of deeply-discounted products to all Cubans, including bread, fish, meat, milk, and cleaning and toiletry supplies.Today, the crisis-racked government offers just a fraction of those products, and often, they arrive late, in poor quality or not at all.Bernardo Matos, of Havana, said he had not detected a change in bread size on Monday, but said he was unhappy with the quality.”The quality is terrible,” he said shortly after purchasing his ration. “The flour tastes like acid.” Cuba’s government has said it planned to reinforce inspections at state bakeries to assure quality does not suffer.Cuba earlier this year sought help from the World Food Programme to guarantee the supply of subsidized powdered milk for children, another key staple of the Cuban ration book that has recently grown scarce.Beyond the few remaining centrally planned economies like Cuba’s and North Korea’s, rationing is typically only used during war-time, natural disasters or specific contingencies. More

(Reuters) -Top White House economic adviser Lael Brainard declared that the U.S. economy had turned the corner in bringing down inflation and it was now time to focus on safeguarding jobs and growth.Two days before the Federal Reserve is expected to begin a long-awaited monetary easing cycle, Brainard said that inflation was returning to pre-pandemic levels without the considerable job losses and growth slowdown that were previously predicted.”Today, we are at an important turning point. Inflation is coming back down close to normal levels, and it is important to safeguard the important labor market progress we have made,” Brainard told a Council on Foreign Relations event in New York.Brainard, the former Fed vice chair who now serves as the director of the White House National Economic Council, said the Biden administration’s focus now is to support growth and the labor market.There could still be some inflationary supply shocks in the global economy, but many countries and businesses have taken steps to become more resilient in the face of such shocks, partly by diversifying supply chains.Brainard did not say in her remarks what action the Fed should take on Wednesday, and her comments were in line with recent comments from Fed officials.But she said President Joe Biden has emphasized the independence of the U.S. central bank, drawing a contrast with Republican presidential candidate Donald Trump’s frequent criticism of Fed monetary policy decisions during his presidency.HOUSING AFFORDABILITY PUZZLEBrainard described the actions that the Biden administration has taken to support the recovery, from COVID relief spending to clean energy tax subsidies, but said more work was needed to help Americans cope with price pressures and higher living costs, including to increase the supply of housing.”If we can address affordability of housing that will give people a lot more breathing room. So I think what we are very focused on is solving the kind of cost of living squeeze that Americans are feeling,” Brainard said.Brainard said housing affordability has been one of the most complicated challenges in bringing down inflation, adding that the non-housing components of the Consumer Price Index are now increasing at only a 1.8% rate, below the Federal Reserve’s 2% inflation target.”Housing has been really the kind of stickiest piece of that, and it’s a complicated part of the inflation puzzle, because we actually need more homes, ultimately, to get to greater affordability,” Brainard said.Lower mortgage rates, predicted by markets as they anticipate Fed rate cuts, will make development of more housing easier, she said, adding that lower borrowing costs for homes and automobiles will also help sustain growth going forward.Brainard said that a more benign financing environment also could encourage more conversions of some vacant office buildings in certain cities that help ease supply crunches and financial vulnerabilities in commercial real estate, but she noted that the high costs of such conversions remained an obstacle.She said the Biden administration has “kept a close eye” on pressures from commercial vacancies, especially in older “Class B” office buildings.”It does seem to be a very targeted problem, a difficult, difficult problem. But commercial real estate writ large, there are areas that are doing quite well,” she said. More

The state is among a handful that will decide the presidential contest, and workers have felt increased prices at the grocery store and gas station.Sold-out shows along the Strip. Crews constructing a course for a major Formula 1 race. A record number of passengers at Harry Reid International Airport.For much of the past year, Las Vegas, the anchor of Nevada’s economy, has watched in delight as visitors have flocked to town for conventions, football games and summer pool parties, further solidifying its rebound from the doldrums after the pandemic shutdowns.But statewide, the economy is still burdened by high unemployment and higher costs of living — twin pocketbook struggles that animate voters here in one of a handful of states expected to decide the November presidential election.And about a quarter of Nevada voters in a New York Times/Siena College poll last month named the economy as their top issue. It was cited nearly twice as often as any other concern, comparable to findings in other swing states.A topic with particular resonance among Nevada workers — eliminating federal taxation on tips — burst into the national discourse after former President Donald J. Trump told a crowd in Las Vegas that he intended to do away with the practice if elected. He was inspired, Mr. Trump has said, by a conversation with a waitress in the city.His opponent, Vice President Kamala Harris, later endorsed the idea during a campaign stop in Las Vegas, but paired the proposal with a promise to raise the federal minimum wage.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Efforts by the Beijing-backed Semiconductor Manufacturing International Corporation, or SMIC, to break through innovation barriers have landed it in a geopolitical tech battle.In a sprawling factory in eastern Shanghai, where marshy plains have long since been converted into industrial parks, China’s most advanced chipmaker has been hard at work testing the limits of U.S. authority.Semiconductor Manufacturing International Corporation, or SMIC, is manufacturing chips with features less than one-15,000th of the thickness of a sheet of paper. The chips pack together enough computing power to create advancements like artificial intelligence and 5G networks.It’s a feat that has been achieved by just a few companies globally — and one that has landed SMIC in the middle of a crucial geopolitical rivalry. U.S. officials say such advanced chip technology is central not just to commercial businesses but also to military superiority. They have been fighting to keep it out of Chinese hands, by barring China from buying both the world’s most cutting-edge chips and the machinery to make them.Whether China can advance and outrace the United States technologically now hinges on SMIC, a partly state-backed company that is the sole maker of advanced chips in the country and has become its de facto national semiconductor champion. SMIC pumps out millions of chips a month for other companies that design them, such as Huawei, the Chinese technology firm under U.S. sanctions, as well as American firms like Qualcomm.So far, SMIC hasn’t been able to produce chips as advanced as those of rivals such as Taiwan Semiconductor Manufacturing Company in Taiwan, or others in South Korea and the United States. But it is racing forward with a new A.I. chip for Huawei called the Ascend 910C, which is expected to be released this year.Huawei’s chip is not as fast or sophisticated as the coveted processors from Nvidia, the U.S. chip giant, which the White House has banned for sale in China. SMIC can also most likely make only a small fraction of what Chinese firms want to buy, experts said.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The ECB cut rates for the second time this year on Thursday but provided little to no guidance on further moves, even as some policymakers privately argued that coming back for another cut in just five weeks was too soon.Markets now see only a 25% chance of a move on Oct. 17, but pricing could shift after the U.S. Federal Reserve’s own policy decision later this week. “A gradual approach to dialling back restrictiveness will be appropriate if the incoming data are in line with the baseline projection,” ECB chief economist Philip Lane said in a speech. “We should retain optionality about the speed of adjustment.”He said the ECB may need to speed up cuts if the economy faltered or disinflation accelerated but the bank would have to slow down in case of surprises going in the other direction.Peter Kazimir, Slovakia’s central bank chief, was however keen on shutting the door on October, arguing that quick cuts were risky and the ECB needed more hard data proving that inflation is indeed coming back to target by the end of 2025.”We will almost surely need to wait until December for a clearer picture before making our next move,” Kazimir, an outspoken conservative, or policy hawk said in a blog post.”I would require a significant shift, a powerful signal, concerning the outlook to consider backing another cut in October,” Kazimir said. “But the fact is that very little new information is in the pipeline.”The key issue is that wage growth remains quick and that is putting pressure on prices in services, a sector where worker pay is the biggest variable in overall costs.Labour costs rose by an annual 4.7% in the second quarter, a slowdown from 5.0% three months earlier, but that is still well above the 3% rate the ECB considers consistent with its target, Eurostat data showed earlier in the day.But wages are just catching up after workers lost a big chunk of their purchasing power to rapid inflation, and there will be a big slowdown in labour cost growth next year, ECB Vice President Luis de Guindos said in Madrid. Like Lane, de Guindos made the case for keeping all options open on interest rates.The policymakers also pointed to inflation volatility, which may present a communications hurdle.Price growth will slow sharply in September, possibly to target or even below, but will accelerate again towards the end of the year. That could make it seem like the inflation target will already have been met by the next policy meeting, but this is part of the “bumpy” nature of inflation and price growth is not likely to be back at 2% on a sustainable basis until late 2025. More

OTTAWA (Reuters) – Despite three interest rate cuts since June, Canadian consumers still appear to be feeling more stressed than their neighbors in the U.S., where the Federal Reserve has yet to start any reductions in borrowing costs.The persistent financial pressure reflects the vagaries of the Canadian mortgage structure, a surge in rents and a heavy debt load carried by many households. All three have crimped disposable incomes. With more mortgage renewals coming up and high population growth to put more upward pressure on rents, analysts and economists say Canadians will feel stressed well into next year and after, keeping economic growth muted.The outlook remains muted even though Canada got a headstart in lowering borrowing costs, becoming the first ecomomic power in June to cut rates in the current cycle. It has followed up with two more cuts, bringing the key policy rate to 4.25%.The Federal Reserve is likely to cut its benchmark rate for the first time next week, with markets now debating whether it will start with a 25 or 50-basis-point reduction. Canada’s inflation-adjusted per person expenditure has fallen by 2% since the peak of 2022 and 1.1% annually in the second quarter, showing that consumers are reeling under the burden.By comparison, inflation-adjusted spending in the U.S. grew 2.7% annually in July and is generally considered to be in line with the pre-pandemic trend.This divergence mainly reflects the differing structure of Canadian and U.S. mortgages.”What you’re seeing in the U.S. is a preponderance of 30-year fixed-rate mortgages,” said Randall Bartlett, senior director of Canadian economics at Desjardins. “It’s very predictable for households,” he said.By contrast, most Canadian mortgages are either variable rate, or adjustable after four or five years. For homeowners with low-interest loans now coming up for renewal, they can expect their payments to jump, even with the Bank of Canada’s current series of cuts. Bank of Canada Governor Tiff Macklem said during a press conference in London last week that consumers had less extra money to spend compared with their American counterparts because Canadians were spending more to service their mortgage.About C$400 billion ($294.55 billion) worth of mortgages are set to renew in 2025, out of which more than two-thirds are four- or five-year contracts. The 2025 figure is more than 30% of the value of mortgages being renewed this year.”It’s a wall of mortgage renewals coming up,” Bartlett said, and added that this would keep many Canadians under stress way into 2025 and 2026. ELEVATED DEBT LEVELSVivek Dehejia, an associate professor of economics at Carleton University, said renters, a category that comprises two out of every five Canadians, were also feeling the strain.Landlords, themselves burdened with high mortgage payments, are raising rents for their tenants, who in turn are taking on more debt to meet other obligations, he said. That cycle is not likely to ease any time soon, he said. On the demand side, an immigrant-led rise in population has put upward pressure on Canadian rents, which rose 8.5% year on year in July.Canada’s household debt levels were already high when interest rates started rising after the pandemic and that has made conditions worse, analysts said. “Canada entered the pandemic with a very elevated level of vulnerability to interest rates,” said Karl Schamotta, chief market strategist at Corpay, an global payments firm.He said the big interest rate tightening cycle, which began in early 2022, had a disproportionate impact on Canadians.The total household debt exceeds the size of Canada’s GDP, while in the U.S. that figure was less than three-quarters of the size of the economy as of March 31.In the first quarter, Canadian households spent around 15% of their disposable income to meet debt-servicing costs, while Americans paid about 10% of their income, according to official data. Now they are forced to save more to meet debt obligations. Canada’s household savings rate touched 7.2% in the last quarter, its highest in nine quarters, while in the U.S. it was at 2.9% as of July, the lowest since June 2022. That number indicates U.S. consumers were still spending much more despite high rates.($1 = 1.3580 Canadian dollars) More

Dudley, in a Bloomberg Opinion piece, argues that a larger cut is necessary to prevent a potential recession and align monetary policy with the Fed’s dual mandate of price stability and maximum sustainable employment.He highlights that while both price stability and employment are currently more balanced, the current interest rate is still too high.”Monetary policy should be neutral, neither restraining nor boosting economic activity. Yet short-term interest rates remain far above neutral,” he writes. According to Dudley, this gap needs to be corrected swiftly, as continuing with high rates risks pushing the US economy into a deeper slowdown.While economic data has shown some resilience, with the Atlanta Fed’s GDPNow model projecting 2.5% growth in the third quarter, the labor market has started to weaken.Dudley points out that the unemployment rate has increased by 0.8 percentage points since January 2023, while wage inflation has moderated. This weakening labor market, he notes, could reach a tipping point. Historically, when the three-month average unemployment rate rises by more than 0.5 percentage points from its low, it has led to a recession.Dudley believes that the 50-basis-point cut would help the Fed better align its projections with market expectations. He warns that a smaller 25-basis-point move could send mixed signals, potentially leading to confusion over the Fed’s future policy direction.”If the Fed does only 25 now and projects another 50 at its next two meetings this year, it will send a hawkish signal,” he noted.However, the former Fed New York president also acknowledges that the Fed might hesitate to make such a large move due to concerns over inflation. The central bank has been cautious about inflation reaccelerating, and Chair Jerome Powell is determined not to repeat the mistakes of the 1970s.Moreover, even though the US economy has slowed a bit and the labor market has weakened, there are not many signs that it’s in or near a recession.Nonetheless, Dudley still expects the Fed to opt for a 50-basis-point cut.“Monetary policy is tight, when it should be neutral or even easy,” he said. “And a bigger move now makes it easier for the Fed to align its projections with market expectations, rather than delivering an unpleasant surprise not warranted by the economic outlook.” More

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