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$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

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$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is chair and chief executive of Caxton Associates While the chair of the Federal Reserve Jay Powell has indicated “the time has come . . . to adjust” monetary policy, the magnitude and pace of US interest rate cuts remains undefined. I believe there is a case for a swift and significant reset lower.The Fed, unlike other central banks, has legal dual mandate objectives for price stability and maximum sustainable employment. Given that Powell has stated confidence in inflation progressing towards the 2 per cent objective, attention is now focused on the labour market outlook.To my mind, Powell made his position clear at the recent Jackson Hole meeting of central bankers, stating “we will do everything we can to support a strong labor market”. This has echoes of forceful language that in the past has preceded the reorientation of central bank policy, such as Mario Draghi’s famous assertion in 2012 that the European Central Bank would do “whatever it takes” to preserve the euro. Adjusting policy in a timely manner to sustain economic expansions is a difficult task. Powell has cited those occurring in 1965, 1984 and 1994 as soft landings. Alan Blinder has also described the 1999-2000 episode as “softish”. Soft landings are rare indeed, with the alternative being recession.While all cycles are unique, the soft landings cited above had monetary policy commonalities. In 1984, rates were eased by more than 3 percentage points in four months, in 2001 by 2.75 points in the first half of the year, with a 1 point cut in January alone. 1995 stands out for the gradual adjustment of 0.75 points in seven months. But this glosses over the fact that 1.5 points of anticipated rate increases at the end of the cycle did not occur and five-year Treasury yields fell by nearly 2 points from the last rise through the first cut. In comparison, today’s five-year Treasury yields have sat in a close range over the past two years, and are only 0.5 points or so below the levels of the last increase. Crucially, in each instance of a soft landing, the Fed acted before the labour market had deteriorated meaningfully. In these cases, the unemployment rate had increased by only 0.1 to 0.3 percentage points before the Fed began reducing rates. Whatever vagaries have driven the near 1-point increase in this cycle, the precedent is clear.Other cycles ended with recessions. Rudi Dornbusch, the Massachusetts Institute of Technology economist, once noted that “none of the postwar expansions died of natural causes — they were all murdered by the Fed”.Another sign of the need for a policy shift is in the housing market, a key conduit for the transmission of monetary policy to the economy. Affordability has been crushed in this cycle. According to the US National Association of Realtors, housing is at its least affordable since the mid-1980s. The current Fed policy rate was self-evidently high enough to lower the central bank’s favoured measure of core inflation — the Personal Consumption Expenditures Price Index — from 5.6 per cent to 2.6 per cent. It is therefore much more restrictive today in real terms given rates have not come down as much. Most participants on the policy-setting Federal Open Market Committee estimate that the neutral interest rate that does stimulate or restrict the economy is in the 2.5 to 3.5 per cent range versus the current 5.25 to 5.50 per cent.Some will question whether the Fed can or should radically alter its stance just months before the forthcoming presidential election. I would, however, ask an alternative question: can the central bank afford to stay with a policy that is no longer appropriate? By doing so it would risk its political impartiality. The worst possible outcome for Fed independence would be for it to be forced by markets to further adjust rates between scheduled policy meetings in the weeks leading up to the election because of a clear deterioration of the labour market, or a financial event linked to the high policy rate. The September policy meeting is the last opportunity to adjust before the election.    Given the recognised lags in monetary policy transmission of six to 12 months, the time to meaningfully reset the funds rate has arrived. The Fed will remain data-dependent and forthcoming economic releases are as unpredictable as ever. But rather than wait for weak labour market conditions to justify more than gradual policy steps as many claim, I think the onus is to forestall them. To otherwise maintain such a restrictive stance, Fed policy will become passive-aggressive. More

TOKYO (Reuters) -The safe-haven Japanese yen rallied on Wednesday while riskier currencies like the Australian dollar and sterling languished as traders ran for cover following the worst sell-off in almost a month on Wall Street.The catalyst was ostensibly some soft U.S. manufacturing data, which fanned worries about a hard landing for the world’s biggest economy, with traders already nervous ahead of crucial monthly payrolls data on Friday.”Price action across global markets (is) exhibiting the hallmarks of an unfolding growth scare,” said Kyle Rodda, senior financial market analyst at Capital.com.”The most damning price signals were in FX and commodity markets,” Rodda added, singling out the yen and Aussie, highlighting a nearly 5% overnight slump for crude oil.The yen was about 0.3% stronger at 145.02 per dollar as of 0047 GMT, following a 1% rally overnight against a broadly stronger dollar.The dollar-yen pair tends to track long-term U.S. Treasury yields, which dropped nearly 7 basis points (bps) overnight and continued to decline in Asian hours to stand at 3.8329%, with investors flocking to the safety of bonds.The dollar, though, was firm against most other major peers, as it tends to draw safety flows even when the U.S. economy is the locus of concern.Sterling edged down to $1.3110, after weakening 0.23% overnight. The euro rose slightly to $1.10495, following a 0.26% decline in the previous session.The Aussie slipped a further 0.15% to $0.67015, extending Tuesday’s 1.2% tumble.Risks to the U.S. soft-landing scenario – which had been gaining traction recently in markets – saw traders raise odds of a 50 basis point (bp) Federal Reserve interest rate cut on Sept. 18 to 38% from 30% a day earlier, according to the CME Group’s (NASDAQ:CME) FedWatch Tool.”Markets are nervous ahead of Friday’s very important non-farm payroll report, … which most market participants acknowledge will be a significant factor at the very least in whether the Fed cuts by 25 or 50,” said Gavin Friend, senior markets strategist at National Australia Bank (OTC:NABZY).”All those asset moves point to a risk-off view and a bias for safe havens, (with investors) stepping back a bit.”Economists surveyed by Reuters expect Friday’s report to show an increase of 165,000 U.S. jobs in August, up from a rise of 114,000 in July.Ahead of that, investors will keep a close eye on job openings data on Wednesday and the jobless claims report on Thursday.U.S. markets had been closed for the Labor Day holiday on Monday and came back Tuesday to a weak Institute for Supply Management (ISM) survey that suggested factory activity in the country would remain subdued for a while.”That was supposed to show a gain, but actually showed a decline, and has made people wonder once more about the Fed possibly being too late to act,” said Sam Stovall, chief investment strategist at CFRA.”This may be a short week but it will be an important and crucial one for investor confidence,” he added. “People are going to remain on edge.” More

The U.S. company had been seeking compensation over its acquisition of British tech firm Autonomy amid claims of fraud masterminded by its co-founder Mike Lynch to inflate the company’s value. Lynch, who died in August when his yacht sank off the coast of Sicily, had denied any wrongdoings. “It is HPE’s intention to follow the proceedings through to their conclusion,” the company said in an emailed statement to Reuters. HP (NYSE:HPQ) had bought Autonomy for $11.1 billion in 2011 in one of the UK’s biggest tech deals. But in late 2012 the company said it had discovered a massive accounting scandal at the British tech firm. In 2022, HP won a civil case against Lynch but a High Court judge said that any damages would be less than the $5 billion HP had claimed.A spokesperson for Lynch’s family said they did not have any comment to share at this stage. The company had filed the lawsuit against both Lynch and Autonomy’s former chief financial officer, Sushovan Hussain. More

BENGALURU (Reuters) – House prices in most key markets will rise modestly this year and next on expectations mortgage rates will fall further and help to marginally improve affordability of expensive property, a Reuters poll of analysts showed.Most central banks were expected to start cutting interest rates sometime this year, or have already done so, with the U.S. Federal Reserve predicted to start at its Sept. 17-18 meeting.That is providing housing prices in developed countries, contending with low supply of property that is affordable to most new homebuyers, impetus to climb modestly higher.The Reuters poll of nearly 150 housing analysts taken Aug. 19-Sept. 3 covering the U.S., Britain, Germany, Canada, Australia, New Zealand, China, Dubai and India showed average home prices in almost all of these markets will rise this year and next.But compared with recent episodes of expected central bank policy easing, the forecast price rises are tame. While median predictions showed the change in average home prices in 2024 to vary between markets from a modest 1.4% decline to a rise of around 8%, the overall outlook was positive with analysts upgrading their outlook for five of nine housing markets surveyed from three months ago.”Falling mortgage rates across many markets will strengthen the position of aspiring home purchasers, but only modestly, with affordability pressures already at breaking point,” said Matthew McAuley, global property sectors research director at JLL.”Increasingly large proportions of the populations of countries such as the U.S., Canada, Britain, France, Germany, Australia and Japan will rely on income-driven housing models to satisfy their housing needs.” A near-80% majority of analysts, 82 of 106, who answered an additional question said affordability will improve for first-time homebuyers over the coming year. The remaining 24 said it would worsen.But with supply still tight in most countries, many aspiring new home buyers are likely to remain renters in coming years, and pay even more to rent.Urban home rents were expected to outpace consumer inflation over the coming 12 months in all the countries that were surveyed, according to median predictions from analysts who answered a separate question.”In a higher interest rate environment, prime rents are continuing to outperform capital values… Low levels of stock in many locations and higher numbers of would-be buyers are driving the trend in many prime rental markets,” said Justin Marking, head of global residential at Savills.Average U.S. home prices were expected to rise 5.4% in 2024, 3.3% next year and 3.4% in 2026.Much of that price appreciation has to do with homeowners who have locked in low 30-year mortgage rates, most under 5% and some even below 3%, and who are unwilling to part ways with their homes on such cheap deals.While the Fed is widely expected to start cutting rates in September and by a total of 75 bps by year-end, a lack of adequate supply is already underpinning a market where average house prices are well above their pandemic-era peak.Average home prices in Australia were forecast to rise more than 6% this year, again on tight supply, bringing average prices above their pandemic peak too.”It is worth noting though, that we don’t anticipate a material improvement in affordability, with the unaffordability of houses likely to be structurally higher than prior to the pandemic over the short-to-medium term,” said Johnathan McMenamin, senior economist at Barrenjoey.In neighboring New Zealand, where prices surged over 40% during the COVID-19 pandemic, they were expected to rise only 1%.In India, demand for luxury properties from cash-rich individuals was expected to drive house prices even higher over the next couple of years. Despite demand coming from a wealthy few in a country of 1.4 billion, that translates into a sizeable market, enough to push average home prices up by around 8% this year and 6% next.The battered German housing market, where house prices plunged 7.2% last year, was expected to stabilise in the coming months with a 1.4% fall this year, followed by a 2% rise in 2025.(Other stories from the Q3 global Reuters housing poll) (Other reporting and polling by Indradip Ghosh, Pranoy Krishna, Jonathan Cable, Sarupya Ganguly, Susobhan Sarkar, Devayani Sathyan and Vijayalakshmi Srinivasan; Editing by Ross Finley and Jonathan Oatis) More