Prices (Fares, Fees and Rates)

More stories

  • 150 Shares189 Views

    in Economy

    Biden Seeks to Tame Oil Prices if Mideast Conflict Sends Them Soaring

    by

    The president has previously drawn down the Strategic Petroleum Reserve to ease price pressures, but that could be more difficult nowBiden administration officials, worried that a growing conflict in the Middle East could send global oil prices soaring, are looking for ways to hold down American gasoline prices if such a jump occurs.Those efforts include discussions with large oil-producing nations like Saudi Arabia that are holding back supply and with American oil producers that have the ability to pump more than they already are producing, administration officials say.A senior administration official said in an interview that it was also possible that President Biden could authorize a new round of releases from the nation’s Strategic Petroleum Reserve, an emergency stockpile of crude oil that is stored in underground salt caverns near the Gulf of Mexico. Mr. Biden tapped the reserve aggressively last year after Russia’s invasion of Ukraine sent oil prices skyrocketing, leaving the amount of oil in those reserves at historically low levels.The conflict in the Middle East has not yet sent oil prices surging. A barrel of Brent crude oil was trading for about $88 on global markets on Wednesday. That was up from about $84 earlier this month, shortly before Hamas attacked Israel and rattled markets. But analysts and administration officials fear prices could rise significantly more if the conflict in Israel spreads, restricting the flow of oil out of Iran or other major producers in the region.So far, American drivers have not felt a pinch. The average price of gasoline nationally was $3.54 a gallon on Wednesday, according to AAA. That was down about 30 cents from a month ago and 25 cents from the same day last year.Administration officials are wary of the possibility that prices could again jump above $5 a gallon, a level they briefly touched in the spring of 2022. Mr. Biden took extraordinary efforts then to help bring prices down — but those steps are likely to be far less effective in the event of a new oil shock.“They succeeded last year in the second half, but this year I think they’ve kind of run out of bullets,” said Amrita Sen, director of research at Energy Aspects.In part that’s because the administration did not refill the strategic reserve more aggressively when prices were lower, Ms. Sen said. That could undercut its ability to counteract rising prices now.“They got a little overconfident that prices would stay low,” she said. “In some ways, they’ve missed the boat.”

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    Crude oil in the strategic petroleum reserve
    Note: Levels are as of end of each week.Source: Energy Information AdministrationBy The New York TimesMr. Biden released a record 180 million barrels of oil from the strategic reserve, flooding the market with additional supply. His administration replenished just six million barrels when prices dipped this year, leaving the reserve at its lowest level since the 1980s. The Energy Department announced plans last week to continue refilling in the months ahead, but only if prices drop below $79 a barrel.Administration officials insist that tapping the reserve again remains an option. It still holds more than 350 million barrels of oil. That’s more than enough to counteract a disruption in oil markets if one occurs, energy analysts say.The U.S. economy is also less vulnerable to a price spike than in previous decades because the country has become less dependent on foreign oil. The United States produced more than 400 million barrels of oil in July, a record.

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    Monthly U.S. crude oil production
    Source: Energy Information AdministrationBy The New York Times“There’s still a lot of oil in the U.S. strategic reserve, and the U.S. is not in this alone,” said Richard Newell, president and chief executive of Resources for the Future, an energy-focused think tank. He noted that other countries had their own strategic reserves.Still, with Mr. Biden already taking criticism from Republicans for depleting the stockpile, he may be reluctant to tap it again now. “There’s another arrow in the quiver, but there’s only so many arrows right now,” said Jim Burkhard, head of energy markets research for S&P Global Commodity Insights. “Could they repeat it? Yes, but then you’re left with much, much less oil.”The stakes for Mr. Biden are high. Voters often punish presidents for high gasoline prices, and the challenge is amplified for Mr. Biden because, unlike most presidents, he has leaned into his role — intervening aggressively when prices soared early last year, and then claiming credit when prices fell.Independent experts say Mr. Biden is justified in claiming some credit for the moderation in prices last year, though they say other factors — including weaker-than-expected Chinese oil demand — also played a major role.The initial jump in oil prices was driven not by an actual shortage of oil but by a fear of one: Investors worried that millions of barrels of Russian oil would be blocked from the international market, either as a result of Western sanctions or Russian retaliation.Worried that the growing conflict in the Middle East could send oil prices soaring, Biden officials are looking for ways to hold down gasoline prices.Mark Abramson for The New York TimesMr. Biden’s decision to release oil from the strategic reserve provided additional supply at a crucial moment, helping to calm markets and push prices down.Analysts worried that additional sanctions from Europe, which were set to take effect near the end of 2022, would cause a second surge in prices by knocking more Russian supply offline. The Biden administration worked to prevent that by leading an international effort to impose a price cap on Russia that allowed the country to keep exporting oil — but only at reduced prices.That effort has worked to keep Russian oil flowing to markets and avoid a supply shock. In the first half of this year, it also appeared to be denting Moscow’s oil revenues. Increasingly, Russia has found ways around the price cap, forcing administration officials to take steps this month to crack down on enforcement of the cap in hopes of reducing the price at which Russian oil is sold.There is some risk that those enforcement efforts could at least temporarily knock Russian supply off the market at a tenuous time for global oil supply. But more important for the administration, there is little chance that a similar sort of price cap could help keep supply flowing from a large oil producer that could be involved in a widening war in the Middle East — most notably, Iran.Last October, the White House announced that it would enter into contracts to buy oil for the strategic reserve when prices fell below $72 a barrel. Doing so, the administration argued, would not just replenish the reserve but encourage domestic production by guaranteeing demand for oil at a reasonable price. But the effort has gotten off to a fitful start.Rory Johnston, an oil market analyst, said that the administration had been admirably creative in its energy policy, but that its execution had been flawed. Investors, he said, have been left skeptical about the administration’s ability to execute its strategy on refiling the reserve. They are also wondering if Mr. Biden will ever be willing to risk the political hit from driving up oil prices, by buying supply and pulling it off the market to refill the reserve.“If you want to be cynical, they’re very keen to do the price downside stuff and understandably not as keen to do the things that could seen as lifting prices,” Mr. Johnston said. More

  • 113 Shares99 Views

    in Economy

    How High Interest Rates Sting Bakers, Farmers and Consumers

    by

    Home buyers, entrepreneurs and public officials are confronting a new reality: If they want to hold off on big purchases or investments until borrowing is less expensive, it’s probably going to be a long wait.Governments are paying more to borrow money for new schools and parks. Developers are struggling to find loans to buy lots and build homes. Companies, forced to refinance debts at sharply higher interest rates, are more likely to lay off employees — especially if they were already operating with little or no profits.Over the past few weeks, investors have realized that even with the Federal Reserve nearing an end to its increases in short-term interest rates, market-based measures of long-term borrowing costs have continued rising. In short, the economy may no longer be able to avoid a sharper slowdown.“It’s a trickle-down effect for everyone,” said Mary Kay Bates, the chief executive of Bank Midwest in Spirit Lake, Iowa.Small banks like Ms. Bates’s are at the epicenter of America’s credit crunch for small businesses. During the pandemic, with the Fed’s benchmark interest rate near zero and consumers piling up savings in bank accounts, she could make loans at 3 to 4 percent. She also put money into safe securities, like government bonds.But when the Fed’s rate started rocketing up, the value of Bank Midwest’s securities portfolio fell — meaning that if Ms. Bates sold the bonds to fund more loans, she would have to take a steep loss. Deposits were also waning, as consumers spent down their savings and moved money into higher-yielding assets.Higher Interest Rates Are Here More

  • 113 Shares189 Views

    in Economy

    Inflation Slowdown Remains Bumpy, September Consumer Price Data Shows

    by

    Prices are rising at a pace that is much less rapid than in 2022, but signs of stalling progress are likely to keep Federal Reserve officials wary.Consumer prices grew at the same pace in September as they had in August, a report released on Thursday showed. The data contained evidence that the path toward fully wrangling inflation remains a long and bumpy one.The Consumer Price Index climbed 3.7 percent from a year earlier. That matched the August reading, and it was slightly higher than the 3.6 percent that economists had predicted.The report did contain some optimistic details. After cutting out food and fuel prices, both of which jump around a lot, a “core” measure that tries to gauge underlying price trends climbed 4.1 percent, which matched what economists had expected and was down from 4.3 percent previously. And inflation is still running at a pace that is much less rapid than in 2022 or even earlier this year.Even so, several signs in the report suggested that recent progress toward slower price increases may be stalling out — and that could help to keep officials at the Federal Reserve wary.The S&P 500 fell 0.6 percent and the yield on 10-year Treasuries rose on Thursday to 4.7 percent, as investors worried that September’s inflation report showed less progress than they had hoped for, both in rents and a measure of inflation that strips out volatile goods and services.Fed policymakers have been raising interest rates in an effort to slow economic growth and wrestle inflation under control. They have already lifted borrowing costs to a range of 5.25 to 5.5 percent, up sharply from near-zero 19 months ago. Now, they are debating whether one final rate move is needed.Given the fresh inflation data, economists predict that policymakers are likely to keep the door open to that additional rate increase until they can be more confident that they are well on their way to winning the battle against rising prices. Inflation has begun to flag, but the September data served as a reminder that it is not yet clearly vanquished.“This report still suggests that we have stepped out of the higher inflation regime,” said Laura Rosner-Warburton, a senior economist at MacroPolicy Perspectives. Still, “we’re not out of the woods — there are still some sticky corners of inflation.” More

  • 100 Shares119 Views

    in Economy

    Exxon Acquires Pioneer Natural Resources for $60 Billion

    by

    The acquisition of Pioneer Natural Resources, Exxon’s largest since its merger with Mobil in 1999, increases the company’s presence in the Permian basin in Texas and New Mexico.Exxon Mobil announced on Wednesday that it was acquiring Pioneer Natural Resources for $59.5 billion, doubling down on fossil fuel production even as many global policymakers grow increasingly concerned about climate change and the oil industry’s reluctance to shift to cleaner energy.After decades of investing in projects around the world, the deal would squarely lodge Exxon’s future close to its Houston base, with most of its oil production in Texas and offshore in the Gulf of Mexico and along the coast of Guyana.By concentrating its production close to home, Exxon is effectively betting that U.S. energy policy will not move against fossil fuels in a major way even as the Biden administration encourages automakers to switch to electric vehicles and utilities to make the transition to renewable energy.Exxon executives have said that in addition to producing more fossil fuels, the company is building a new business that will capture carbon dioxide from industrial sites and bury the greenhouse gas in the ground. The technology to do that remains in an early stage and has not been successfully used on a large scale.“The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a standalone basis,” said Darren Woods, Exxon’s chief executive.American oil production has reached a record of roughly 13 million barrels a day, around 13 percent of the global market, but growth has slowed in recent years. Despite a wave of consolidation among oil and gas companies, and higher oil prices after the Russian invasion of Ukraine last year, producers are having a more difficult time finding new locations to drill.The Pioneer deal is a sign that it is now easier to acquire an oil producer than to drill for oil in a new location.Exxon, a refining and petrochemical powerhouse, needs a lot more oil and gas to turn into gasoline, diesel, plastics, liquefied natural gas, chemicals and other products. Much of that oil and gas is likely to come from the Permian basin, the most productive U.S. oil and gas field, which straddles Texas and New Mexico and where Pioneer is a major player.Exxon’s $10 billion Golden Pass terminal near the Texas-Louisiana border is scheduled to begin shipping liquefied natural gas to the rest of the world next year. Gas bubbles up with oil from the Permian basin, making the basin all the more valuable for exports as Europe weans itself from Russian gas.The Pioneer deal would be Exxon’s largest acquisition since it bought Mobil in 1999. It is bigger than the company’s ill-fated $30 billion acquisition of XTO Energy, a major natural gas producer, in 2010. Exxon had to write off much of that investment later when natural gas prices collapsed from the high levels that prevailed when it bought XTO.By buying Pioneer now, when the U.S. oil benchmark is around $83 a barrel, Exxon is counting on prices remaining relatively high in the next few years.Exxon has been careful in recent years to invest modestly in new production as it raised its dividends and bought back more of its own stock. Buying Pioneer would add production, a big change in its strategy.The acquisition would make Exxon the dominant player in the Permian basin, far outpacing Chevron, its biggest rival.Pioneer has been a darling of Wall Street investors as it has capitalized on the shale drilling boom. Scott Sheffield, its chief executive, got the company out of Alaska, Africa and offshore fields while buying up shale operations in the Permian at cheap prices. By 2020, it had become one of the biggest American drillers, with relatively low cost production.Mr. Sheffield is retiring at the end of the year. His company has a market value of about $50 billion, roughly one-eighth the size of Exxon. Many of its oil and gas fields are still untapped.“While the company has a solid succession plan in place, oil and gas markets have been volatile and the capital available to traditional oil and gas companies in the U.S. has been limited,” said Peter McNally, an analyst at Third Bridge, a research and analytics firm.The deal would be Exxon’s first major acquisition since Mr. Darren Woods became chief executive in 2017, replacing Rex Tillerson, who went on to become secretary of state.Exxon, which reported a record profit of $56 billion last year, is flush with cash that it could invest in Pioneer’s untapped fields. Since Exxon is also a large producer in the Permian, analysts say the merger would bring greater efficiencies in operations of both companies.This is just the latest in a series of mergers and acquisitions in the oil industry in recent years. But it has been consolidating. Occidental Petroleum acquired Anadarko Petroleum four years ago for nearly $40 billion, a deal that made Occidental a major competitor to Exxon and Chevron in the Permian basin. Pioneer spent more than $10 billion buying two other Permian producers, Parsley Energy and DoublePoint Energy, in 2021.Exxon bought Denbury, a Texas energy company that owns pipelines that can transport carbon dioxide, for $4.9 billion this year. More

  • 113 Shares189 Views

    in Economy

    Fragile Global Economy Faces New Crisis in Israel-Gaza War

    by

    A war in the Middle East could complicate efforts to contain inflation at a time when world output is “limping along.”The International Monetary Fund said on Tuesday that the pace of the global economic recovery is slowing, a warning that came as a new war in the Middle East threatened to upend a world economy already reeling from several years of overlapping crises.The eruption of fighting between Israel and Hamas over the weekend, which could sow disruption across the region, reflects how challenging it has become to shield economies from increasingly frequent and unpredictable global shocks. The conflict has cast a cloud over a gathering of top economic policymakers in Morocco for the annual meetings of the I.M.F. and the World Bank.Officials who planned to grapple with the lingering economic effects of the pandemic and Russia’s war in Ukraine now face a new crisis.“Economies are at a delicate state,” Ajay Banga, the World Bank president, said in an interview on the sidelines of the annual meetings. “Having war is really not helpful for central banks who are finally trying to find their way to a soft landing,” he said. Mr. Banga was referring to efforts by policymakers in the West to try and cool rapid inflation without triggering a recession.Mr. Banga said that so far, the impact of the Middle East attacks on the world’s economy is more limited than the war in Ukraine. That conflict initially sent oil and food prices soaring, roiling global markets given Russia’s role as a top energy producer and Ukraine’s status as a major exporter of grain and fertilizer.“But if this were to spread in any way then it becomes dangerous,” Mr. Banga added, saying such a development would result in “a crisis of unimaginable proportion.”Oil markets are already jittery. Lucrezia Reichlin, a professor at the London Business School and a former director general of research at the European Central Bank, said, “the main question is what’s going to happen to energy prices.”Ms. Reichlin is concerned that another spike in oil prices would pressure the Federal Reserve and other central banks to further push up interest rates, which she said have risen too far too fast.As far as energy prices, Ms. Reichlin said, “we have two fronts, Russia and now the Middle East.”Smoke rising from bombings of Gaza City and its northern borders by Israeli planes.Samar Abu Elouf for The New York Times Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said it’s too early to assess whether the recent jump in oil prices would be sustained. If they were, he said, research shows that a 10 percent increase in oil prices would weigh down the global economy, reducing output by 0.15 percent and increasing inflation by 0.4 percent next year. In its latest World Economic Outlook, the I.M.F. underscored the fragility of the recovery. It maintained its global growth outlook for this year at 3 percent and slightly lowered its forecast for 2024 to 2.9 percent. Although the I.M.F. upgraded its projection for output in the United States for this year, it downgraded the euro area and China while warning that distress in that nation’s real estate sector is worsening.“We see a global economy that is limping along, and it’s not quite sprinting yet,” Mr. Gourinchas said. In the medium term, “the picture is darker,” he added, citing a series of risks including the likelihood of more large natural disasters caused by climate change.Europe’s economy, in particular, is caught in the middle of growing global tensions. Since Russia invaded Ukraine in February 2022, European governments have frantically scrambled to free themselves from an over-dependence on Russian natural gas.They have largely succeeded by turning, in part, to suppliers in the Middle East.Over the weekend, the European Union swiftly expressed solidarity with Israel and condemned the surprise attack from Hamas, which controls Gaza.Some oil suppliers may take a different view. Algeria, for example, which has increased its exports of natural gas to Italy, criticized Israel for responding with airstrikes on Gaza.Even before the weekend’s events, the energy transition had taken a toll on European economies. In the 20 countries that use the euro, the Fund predicts that growth will slow to just 0.7 percent this year from 3.3 percent in 2022. Germany, Europe’s largest economy, is expected to contract by 0.5 percent.High interest rates, persistent inflation and the aftershocks of spiraling energy prices are also expected to slow growth in Britain to 0.5 percent this year from 4.1 percent in 2022.Sub-Saharan Africa is also caught in the slowdown. Growth is projected to shrink this year by 3.3 percent, although next year’s outlook is brighter, when growth is forecast to be 4 percent.Staggering debt looms over many of these nations. The average debt now amounts to 60 percent of the region’s total output — double what it was a decade ago. Higher interest rates have contributed to soaring repayment costs.This next-generation of sovereign debt crises is playing out in a world that is coming to terms with a reappraisal of global supply chains in addition to growing geopolitical rivalries. Added to the complexities are estimates that within the next decade, trillions of dollars in new financing will be needed to mitigate devastating climate change in developing countries.One of the biggest questions facing policymakers is what impact China’s sluggish economy will have on the rest of the world. The I.M.F. has lowered its growth outlook for China twice this year and said on Tuesday that consumer confidence there is “subdued” and that industrial production is weakening. It warned that countries that are part of the Asian industrial supply chain could be exposed to this loss of momentum.In an interview on her flight to the meetings, Treasury Secretary Janet L. Yellen said that she believes China has the tools to address a “complex set of economic challenges” and that she does not expect its slowdown to weigh on the U.S. economy.“I think they face significant challenges that they have to address,” Ms. Yellen said. “I haven’t seen and don’t expect a spillover onto us.” More

  • 113 Shares149 Views

    in Economy

    Inflation Measure Favored by the Fed Cooled in August

    by

    The Personal Consumption Expenditures Index climbed more slowly, after cutting out food and fuel prices for a sense of the underlying trend.Federal Reserve officials received more good news in their battle against rapid inflation on Friday, when a key inflation measure continued to slow, the latest evidence that a return to normal after the pandemic and higher interest rates are combining to wrestle rapid price increases back to a more normal pace.The Personal Consumption Expenditures Index, which the central bank uses to define its 2 percent inflation goal, is still climbing rapidly on an overall basis. It rose 3.5 percent in August from the previous year, pushed up by higher gas prices, up slightly from 3.4 percent previously.But after stripping out food and fuel costs, both of which are volatile, a “core” measure that Fed officials watch closely appeared much more benign. It picked up by 3.9 percent from a year earlier. Compared with the previous month, it climbed by 0.1 percent, a very muted pace.It’s the latest encouraging sign for Fed policymakers, who have been raising interest rates since March 2022 in a campaign to slow the economy and cool price increases. While economic momentum has held up better than expected, a less ebullient housing market and a grinding return to normalcy in the car market have helped key prices — like automobile and rents — to fade. At the same time, supply chain disruptions that led to shortages and starkly pushed up prices starting in 2021 have gradually cleared up, allowing costs for many goods to stop rising or even come down slightly.Given the progress, central bankers are now contemplating whether they need to raise interest rates further. They left them unchanged and in range of 5.25 to 5.5 percent at their meeting this month, while forecasting that they might make one more rate increase this year. At the same time, given how strong the economy remains, officials have signaled that they may need to leave interest rates set to a high level for longer to ensure that inflation returns to normal in a sustainable way.“We’re taking advantage of the fact that we have moved quickly to move a little more carefully now,” Jerome H. Powell, the Fed’s chair, said during a news conference following the Fed’s meeting last week.The question now is whether inflation can fade fully — getting back to something near the Fed’s 2 percent goal and staying there — without a bigger economic slowdown.Multiple data points and anecdotes, from retail sales figures to some company earnings calls, have suggested that American consumers are managing to keep spending despite higher borrowing costs, which have made it more expensive to make big purchases on borrowed money.Friday’s report showed that personal consumption expenditures climbed 0.4 percent in August from a month before, slightly softer than what economists had expected. Spending eked out a small increase after adjusting for inflation.Historically, it has been difficult for the Fed to wrestle inflation lower without causing a big economic slowdown. Companies will generally raise prices if they can, so it requires slower demand to force them to stop. Fed policy is a blunt tool, so it is hard to calibrate it exactly.But increasingly, central bankers have been signaling that they are hopeful they will be able to pull off a rare “soft landing,” cooling price increases without killing growth.“At the end of the day, we will get inflation back to our target, whatever that takes,” Austan Goolsbee, the president of the Federal Reserve Bank of Chicago, said during a speech this week. “But we also can’t lose sight of the fact that the Fed has the chance to achieve something quite rare in the history of central banks: to defeat inflation without tanking the economy.” More

  • 113 Shares109 Views

    in Economy

    The Fed’s Preferred Inflation Gauge Ticked Up in July

    by

    Overall inflation climbed to 3.3 percent, from 3 percent previously, underscoring the Fed’s long road back to 2 percent price increases.The Federal Reserve has warned for months that wrestling rapid inflation back to a normal pace was likely to be a bumpy process, a reality underscored by fresh data on Thursday that showed a closely watched inflation gauge picking back up in July.The Personal Consumption Expenditures index climbed 3.3 percent in the year through July, up from 3 percent in the previous reading. While that is down from a peak last summer of 7 percent, it is still well above the 2 percent growth rate that the Fed targets.Central bankers tend to more closely monitor a measure of core inflation that strips out volatile food and fuel prices to give a clearer sense of the underlying price trend. That measure also climbed, touching 4.2 percent after 4.1 percent the previous month.Inflation is expected to slow later this year and into 2024, so Thursday’s report marks a bump in the road rather than a reversal of recent progress toward cooler prices. But as inflation figures bounce around, Fed officials have been hesitant to declare victory.Their wariness has only been reinforced by other recent economic data, which has shown that the economy retains a surprising amount of momentum after a year and half in which Fed policymakers have ratcheted up interest rates. The Fed’s policy rate is now set at 5.25 to 5.5 percent, up from near-zero in March 2022, which is making it more expensive to borrow to buy a house or car or to expand a business.Despite that, the job market has remained strong and consumers continue to shop. An employment report set for release on Friday is expected to show that while businesses added fewer jobs in August, the unemployment rate remained very low at 3.5 percent. And fresh consumption data released Thursday showed that Americans continued to open their wallets: Personal spending climbed by 0.8 percent in July from the month before, more than economists expected and a solid pace. Even after adjusting for inflation, it was up 0.6 percent, a pop from 0.4 percent in the previous report.The tick higher in P.C.E. inflation was widely expected: Various data points that feed into the number, including the Consumer Price Index inflation report, come out earlier in the month. Even so, the measure remains a point of focus on Wall Street and in policy circles because it is the one the Fed uses to define its official inflation goal.Fed officials will be watching data over the next few weeks as they consider what to do with interest rates at their meeting on Sept. 20. Policymakers have said that the meeting is a “live” one, meaning that they could either lift interest rates or keep them on hold, but several have suggested that at this point they feel that they can be patient in making a move.“Given how far we have come, at upcoming meetings we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks,” Jerome H. Powell, the Fed chair, said in a high-profile speech last week.Many investors do anticipate a final rate increase later this year, but later on — perhaps at the central bank’s November gathering. And even if the Fed does not lift borrowing costs in a few weeks, policymakers will release a fresh set of economic projections that will show both whether they expect to nudge rates higher and by how much they expect inflation to slow both by the end of 2023 and into 2024. More

  • 88 Shares179 Views

    in Economy

    Eurozone Inflation Holds Steady at 5.3 Percent

    by

    The NewsConsumer prices in the eurozone rose 5.3 percent in August compared with a year earlier, sticking at the same pace as the previous month and defying economists’ expectations for a slowdown, according to an initial estimate by the statistics agency of the European Union.While inflation has slowed materially from its peak of above 10 percent in October last year, there are signs that some inflationary pressures are persistent, even as bloc’s economy weakens. Food inflation was again the largest contributor to the headline rate, rising 9.8 percent from a year earlier on average across the 20 countries that use the euro currency.Inflation was also given some upward momentum by a jump in energy costs, which rose 3.2 percent in August from the previous month.Core inflation, which strips out food and energy prices, and is used as a gauge of domestic price pressures, slowed to 5.3 percent, from 5.5 percent in July.By Country: Higher energy prices add to inflation pressures in the region’s largest economies.In some of the eurozone’s largest economies, rebounding energy prices offset slowing food inflation. The annual rate of inflation accelerated to 5.7 percent in France and to 2.4 percent in Spain this month.In Spain, inflation had fallen below 2 percent, the European Central Bank’s target, in June, but has since climbed back above it.Inflation in Germany, Europe’s largest economy, was 6.4 percent in August, slowing only slightly from the previous month, as household energy and motor fuel costs increased.What’s Next: The European Central Bank weighs another rate increase.The acceleration of inflation in some of the region’s largest economies arrives two weeks before the European Central Bank’s next policy meeting. As analysts parse the data, the question is whether the reports are troubling enough to persuade policymakers to raise interest rates again at their mid-September meeting. The central bank has raised rates nine consecutive times, by 4.25 percentage points in about a year, and there is growing evidence that higher rates are restraining the economy, particularly as lending declines.Last month, Christine Lagarde, the president of the central bank, said she and her colleagues had “an open mind” about the decision in September and subsequent meetings. Policymakers are trying to strike a balance between raising rates enough to stamp out high inflation, while not causing unnecessary economic pain.“We might hike, and we might hold,” she said. “And what is decided in September is not definitive; it may vary from one meeting to the other.”On Thursday, before the eurozone data was released, Isabel Schnabel, a member of the bank’s executive board, said that “underlying price pressures remain stubbornly high, with domestic factors now being the main drivers of inflation in the euro area.” This meant a “sufficiently restrictive” policy stance was needed to return inflation to the bank’s 2 percent target “in a timely manner,” she added. More