Tag Archives: inflation

Powell says Fed ready to intervene if US inflation spirals out of control

Jay Powell, the chair of the Federal Reserve, said the US central bank was ready to intervene if inflation spiralled out of control, but stressed that he expected price increases to ease later in the year.

“Inflation has increased notably and will likely remain elevated in coming months before moderating,” Powell said in prepared remarks released ahead of a hearing at the House financial services committee on Wednesday.

He added that the Fed “would be prepared to adjust the stance of monetary policy as appropriate if we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal”.

Powell’s comments came in the wake of data showing the US consumer price index rose 5.4 per cent in June compared with a year ago, which revived concerns that the US economy may be overheating.

The figures could raise pressure on the US central bank to more rapidly begin the process of slowing the large doses of monetary support it delivered to the economy during the pandemic, starting with a reduction of the $ 120bn in monthly asset purchases.

Although Powell noted the higher inflation figures and insisted the Fed would not be complacent about rising prices, he stuck to his view that the inflation surge was largely temporary, which is shared by many central bank officials.

“Inflation is being temporarily boosted by base effects, as the sharp pandemic-related price declines from last spring drop out of the 12-month calculation,” according to Powell’s remarks.

“In addition, strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind.

“Prices for services that were hard hit by the pandemic have also jumped in recent months as demand for these services has surged with the reopening of the economy,” he added.

During the hearing, Powell is likely to be pressed by Republican lawmakers to explain the Fed’s position on inflation. Republicans are increasingly criticising the White House and Democrats for fuelling rising inflation and higher living costs by way of the $ 1.9tn stimulus legislation passed in March.

Some are also accusing the Fed of being complacent in the face of higher prices, and calling for the rapid removal of monetary stimulus.

But many Fed officials are wary of moving too quickly to pull back their support for the economy. The US labour market is still far short of its pre-pandemic employment levels, and fallout from the coronavirus crisis on a global scale could still pose risks for the American economy.

US government debt extended its rally after Powell’s testimony was released, with the benchmark 10-year bond trading more than 0.4 percentage points lower on the day to 1.37 per cent.

Short-dated Treasuries, which are more sensitive to policy adjustments, also gained. Yields on the two-year note slipped nearly 0.02 percentage points to 0.23 per cent.

During its June meeting, the Fed launched a debate about the timing and conditions of trimming its asset purchases, but Powell suggested a decision was not imminent. The Federal Open Market Committee said it would need to see “substantial further progress” compared to last December on its full employment and price stability goals to move the move.

“While reaching the standard of ‘substantial further progress’ is still a ways off, participants expect that progress will continue,” the Fed chair said in his prepared remarks. “We will continue these discussions in coming meetings. As we have said, we will provide advance notice before announcing any decision to make changes to our purchases.”

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This post originally posted here International homepage

Interest rate warning as inflation increase is ‘coming for your savings’ – act now

Interest rates may be impacted as it was announced today inflation rose to 2.5 percent in the 12 months to June. Interest rates tumbled as a result of the COVID-19 crisis, and the Bank of England’s decision to lower its base rate to 0.1 percent. While the central bank’s base rate has remained the same ever since something which isn’t remaining so static is inflation.

He said: “Rising inflation now risks eating into improved finances, gnawing away at the future spending power of cash left languishing in savings accounts at a time of ultra-low interest rates.

“Don’t be fooled by small rises in cash savings rates: real interest rates on cash savings are negative, once inflation is taken into account.

“It is very wise to have some cash set aside for short-term needs and unforeseen emergencies.

“But holding too much wealth in cash for prolonged periods when the bogeyman of higher inflation is stalking the earth is a sure way to get worse off in real terms.”

Mr Hollands warned inflation could be “coming for savings” and therefore urged thoughtful consideration on the matter.

Highlighting the matter of low interest rates, he suggested an alternative approach which could end up benefitting savers.

This, he said, was creating a mixture of investments and cash savings in order to deliver “inflation-beating returns”.

Investment, though, does come with risk, although this can be somewhat mediated depending on the investments a person chooses.

It is seen as one of the key ways individuals can help their money to grow, by taking some chances.

Britons should be aware, however, that investment could mean they get less back than they actually put in.

Investment is also a long-term endeavour, and as a general rule of thumb, people are encouraged to stay invested for at least five years.

This enables them to ride out the peaks and troughs of the market, and hopefully come out financially stronger as a result. 

However, many have suggested the rise to inflation is likely to be a “temporary blip”.

The Bank of England’s Monetary Policy Committee predict a transitory rise of three percent, and appear to be reassuring Britons about increases.

It is thought inflation will settle down of its own accord in due course.

Some, though, aren’t entirely convinced, with Ulas Akincilar, Head of Trading at INFINOX, stating: “Every passing month of rising inflation makes the surge look less like a blip. Inflation still isn’t that high by historical standards – a decade ago CPI was double what it is now – but it is rising alarmingly fast.

“But the annual pace of CPI in June was six times what it was in February, and on a monthly basis prices are now rising five times faster than they did at this time in 2020.

“True, the acceleration looks particularly dramatic when compared to the stagnating prices seen during the most stringent lockdowns.

“An interest rate rise is not yet around the corner, but it is steadily becoming a less distant prospect – and this is injecting momentum into the Pound. After a sluggish start to the week, sterling is back on the front foot.”

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This post originally posted here Daily Express :: Finance Feed

Wall Street closes lower as investors size up earnings, inflation

Stocks gave up early gains and closed broadly lower Tuesday as investors weighed the latest quarterly earnings reports from big United States companies and new data pointing to rising inflation.

The S&P 500 fell 0.4 percent, with most of the companies in the benchmark index losing ground. Banks, industrial stocks and companies that rely on consumer spending accounted for a big share of the decline.

Technology stocks bucked the trend, helping counter some of the broader slide. Small company stocks took some of the heaviest losses.

The pullback brought the major stock indexes slightly below the record highs they set a day earlier. Treasury yields rose.

Investors sized up mixed quarterly earnings reports from Goldman Sachs, JPMorgan Chase, PepsiCo and other big companies. They also got another snapshot of how inflation continues to show up in the economy as a rapid spike in consumer demand and supply constraints translate into higher prices for consumer goods.

The latest report from the US Department of Labor showed yet another increase in consumer prices in June that surprised economists.

“You had the element of just incredible earnings reported for the most recent quarter, but in some of the commentary that came out there were some questions about, ‘OK, what about cost pressures going forward?’” said Alan McKnight, chief investment officer at Regions Asset Management. “Then you pair that with the inflation report today where we see another high print.”

The S&P 500 fell 15.42 points to 4,369.21. The Dow Jones Industrial Average dropped 107.39 points, or 0.3 percent, to 34,888.79. The tech-heavy Nasdaq Composite Index slid 55.59 points, or 0.4 percent, to 14,677.65, while the Russell 2000 index of smaller companies lost 42.96 points, or 1.9 percent, to 2,238.86.

Inflation has been a lingering concern for the markets as investors try to gauge how it will impact everything from the trajectory of the economic recovery from the coronavirus pandemic to what actions the Federal Reserve will take to tackle it.

The Labor Department said Tuesday that prices for US consumers jumped in June by the most in 13 years, extending a run of higher inflation that has been raising concerns on Wall Street that the Federal Reserve might consider withdrawing its low interest rate policies and scaling back its bond purchases earlier than expected.

The US Department of Labor said Tuesday that prices for US consumers jumped by the most in 13 years in June, perpetuating concerns on Wall Street that the Federal Reserve might consider withdrawing its low interest rate policies and scaling back its bond purchases [File: Richard Drew/AP Photo]

Much of the increase in prices for goods, such as used cars, is mostly tied to a surge in demand and lack of supply. But prices for many items, like lumber and other raw materials, either is easing or will ease as suppliers continue to ramp up operations, said Jamie Cox, managing partner at Harris Financial Group.

“That’s a problem and it shows up in all kinds of places but it’s not going to be there forever,” Cox said.

Major companies opened up the latest round of corporate earnings, with investors listening closely for clues about how companies have fared during the recovery and how they see the rest of the year unfolding.

Goldman Sachs fell 1.2 percent despite reporting the second-best quarterly profit in the investment bank’s history. JPMorgan Chase dropped 1.5 percent after giving investors a mixed report with solid profits but lower revenue as interest rates fell over the last three months.

“The financials have had that real tailwind of rates going higher,” McKnight said. “We’ve already priced that in. Now it’s almost a ‘show me’ story. Can you actually prove that you can deliver earnings at a much higher clip once we get back to a more normalised environment?”

Conagra Brands slid 5.4 percent for the biggest drop in the S&P 500 after the owner of Chef Boyardee and other packaged food brands gave investors a weak financial forecast, citing inflation pressure. Fastenal, a maker of industrial and construction fasteners, also said it expects more pressure from inflation in product and transportation costs. The stock fell 1.6 percent.

Bond yields reversed course from early trading and rose to 1.42 percent from 1.36 percent late Monday. Overall, yields have been falling for months after a sharp spike earlier in the year.

The calmer bond market is partly signalling more confidence that rising inflation will likely be temporary and tied mostly to the economic recovery.

“That narrative is pretty well anchored and the bond market doesn’t fear the Fed tapering or raising rates,” Cox said.

Solid earnings did help some companies make gains. PepsiCo rose 2.3 percent after beating Wall Street’s second-quarter profit and revenue forecasts.

Boeing fell 4.2 percent after the company announced production cuts for its large 787 airliner because of a new structural flaw in some planes that have been built but not delivered to airline customers.

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This post originally posted here Al Jazeera – Breaking News, World News and Video from Al Jazeera

Sticker shock: what is driving US inflation higher?

Line chart of Year-over-year change (%) showing US consumer price index soars

US consumer prices bounded higher in June at the fastest pace in roughly 13 years, surpassing even the loftiest forecasts, casting a shadow on the Federal Reserve’s claim that the inflation associated with the economic reopening will be purely a “transitory” phenomenon.

The Bureau of Labor Statistics’ consumer price index jumped 0.9 per cent last month from May, up 5.4 per cent over June 2020. Even stripping out volatile items such as food and energy, “core” CPI came in hot at an annual rate of 4.5 per cent.

Here’s what is — and is not — driving the jump:

Used cars

Surging prices for previously-owned vehicles drove the bulk of the increase last month, up 10.5 per cent on the previous month and 45 per cent from June 2020, accounting for a third of the rise in CPI.

Jay Powell, Fed chair, has repeatedly invoked used car prices as evidence for the temporary nature of the current inflation surge, especially in light of the semiconductor shortage that has caused severe disruption to vehicle production.

“Used car prices are going up because of sort of a perfect storm of very strong demand and limited supply,” he said at the press conference following the Fed’s last meeting on monetary policy. “It’s going up at just an amazing annual rate. But we do think that it makes sense that would stop, and that in fact it would reverse over time.”

Powell has also told investors to pay heed to “base effects”, which cause year-over-year increases to look outsized given the collapse in activity at the height of the pandemic last year.

Line chart of US CPI previously-owned cars and truck index (year-over-year change, %) showing Used vehicles price appreciation smashes records

Energy prices

Fuel prices have surged this year as Americans shake off pandemic restrictions and take to the roads again, with energy costs last month rising 1.5 per cent relative to May. On a year-over-year basis, they are up 4.5 per cent.

Petrol prices climbed 2.5 per cent in June from May. Demand for petrol reached a record weekly high ahead of the Fourth of July holiday, helping push national average fuel prices to about $ 3.10 a gallon. That is the highest in nearly seven years and 40 per cent higher than this time last year. Prices are even higher in big metro areas, with drivers paying well over $ 4 a gallon at the pump in California.

There may not be much relief on the horizon for consumers. Fuel prices are up on the back of strong global crude prices, which have topped $ 70 a barrel in recent weeks, the highest since 2018.

Travel

The loosening of Covid-19 lockdowns also fuelled another bumper month for airfares and hotel prices. Between May and June, prices for airfares jumped 2.7 per cent, while hotel charges bounded 7.9 per cent higher. Since June 2020, the sectors have seen increases of roughly 25 per cent and 17 per cent, respectively.

Car rental costs have also ballooned, with consumers facing prices in June that were 5.2 per cent higher than the previous month.

“With these increases, the price index for hotels is now well above its pre-Covid level, while the price index for airfares still has some further room to run,” said Ellen Zentner, chief US economist at Morgan Stanley. “While pandemic-sensitive price increases should eventually begin to contribute less to the overall CPI, there is still scope for significant contributions to linger.”

Rents

One area of concern for economists was a pick-up in owners’ equivalent rent, which measures what homes would rent for.

As the “largest and most sticky component of the CPI”, according to Aneta Markowska, chief economist at Jefferies, it suggests inflationary pressures are beginning to broaden out beyond the areas most sensitive to the pandemic recovery.

Prices rose by 0.3 per cent month-over-month in June, in line with the increase in May, but were elevated enough to generate attention. Compared to June 2020, prices are higher by 2.3 per cent.

“CPI rents are slow to adjust to reality as individual properties are surveyed only once every six months,” Markowska said. “Recent gains in market rents point to continued [or] significant upside in the coming months. So even, if used car prices reverse, putting downward pressure on the CPI, rents will be pushing in the opposite direction.”

Line chart of US CPI owners' equivalent rent (year-over-year change, %) showing Inflationary pressures begin to broaden out

Services

Not all sectors of the economy are contributing to the boom in prices. Medical expenses and the cost of household furnishings were among a small number of important sectors where prices decreased last month.

But it has become far more expensive to eat out, with food prices away from home 0.7 per cent higher than the previous month. Compared to the same time last year, costs are 4.2 per cent higher.

Andrew Hunter, senior US economist at Capital Economics, said the increase provided “clear evidence that the severe labour shortages and resulting upward pressure on wages in the leisure sector [are] feeding through. Both trends look to have much further to run.”

As such, economists warn it is becoming increasingly difficult to dismiss the risk that inflation could be more persistent than initially expected.

“The most spectacular increases remain in those reopening categories, so it is fair to say the bulk of the increases are transitory,” said Stephen Stanley, chief economist at Amherst Pierpont. “But the problem is when you are running at this pace, you are still left with some pretty hefty increases . . . and some of the underlying categories are starting to show acceleration.”

Additional reporting by Justin Jacobs

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This post originally posted here International homepage

New concern for Biden: Could Larry Summers be right about inflation?

There is a new fear circulating inside the West Wing of the White House: Maybe Larry Summers was right.

The former Treasury secretary has been warning since February that President Joe Biden’s big-spending agenda was creating the risk of an inflation spike this year, potentially cutting into the economic recovery from the Covid-19 pandemic.

For the moment at least, Summers is looking prescient.

The government said Tuesday the consumer price index rose 5.4 percent in June from the same month last year, the biggest jump since 2008, as costs for everything from used cars and trucks to restaurant meals and hotel stays continued to soar. It marked the second straight month of sharply higher prices. June prices also unexpectedly rose 0.9 percent from May, undercutting the argument that the price increases only look bad in comparison to last year, when the pandemic was raging.

Tuesday’s number beat Wall Street expectations and sparked fears that the Federal Reserve might have to act faster than anticipated to pump the brakes on the economy to prevent a runaway rise in prices.

Summers has vexed the White House and infuriated Democrats with his repeated alarms about Biden’s plans to spend trillions of dollars more in federal money, though he favors more infrastructure investment.

He has been among the loudest voices in Democratic circles in cautioning about the risk of a prolonged spike in prices. The White House has mostly dismissed his concerns, saying prices will ease later this year, a view shared by Fed Chair Jerome Powell, who will testify before Congress this week.

For his part, Summers now says he’s more concerned than he was when he first issued his warnings.

“These figures and labor market tightness and the behavior of housing markets and asset prices are all rising in a more concerning way than I worried about a few months ago,” he said in an interview on Tuesday. “This raises my degree of concern about an economic overheating scenario. There are huge uncertainties in the outlook, but I do believe the focus of concern right now should be on overheating.”  

While there is clearly some growing trepidation among senior White House aides, officials maintain that the year-on-year numbers appear worse than they are given that they’re up from the depressed price levels at this time in 2020.

The situation will improve, they say, as the economy fully reopens this fall, supply chain issues get resolved and more workers re-enter the labor market when emergency supplemental unemployment benefits expire in early September.

White House officials also note that bond market investors on Wall Street don’t seem worried about runaway prices, given the low yields on Treasury bonds.

“All of these data points need to be put into the context of an economy that is recovering rapidly as the U.S. is leading the world in terms of growth,” a senior administration official said of the latest inflation figures.

The official, who was not authorized to speak on the record, dismissed claims that Summers has been vindicated. “Those most concerned about the inflation picture would tell a story about a spiral that would be hard to stop,” the official said. “That view is in no way vindicated by what we’ve seen in recent months and in fact the opposite is true.”

Powell, a Republican who is in line to be renominated this year for another term as Fed chair, says the rise in inflation will be “transitory” and that interest rates can remain at historically low levels well into next year and perhaps beyond.

While some other central bank officials are now pushing for rate hikes sooner to prevent a potentially damaging spiral in costs that would hammer consumers, Powell has delivered a consistent message of calm. He will appear before Congress in a pair of highly anticipated hearings beginning Wednesday before the House Financial Services Committee and before the Senate Banking Committee on Thursday.

Republicans, who have been hammering the Biden administration over rising prices, will likely pepper Powell with questions about the inflation numbers and suggest they mean Biden’s spending plans should be tightly reined in beyond basic infrastructure investments.

Meanwhile, consumers are showing concern. A June survey from the New York Fed released on Monday showed that consumers expect prices to jump 4.8 percent over the next year, the highest reading ever for a survey that dates to 2013.

Tuesday’s numbers are not likely to ease that anxiety. Even after stripping out volatile food and energy prices, costs rose 4.5 percent, the highest rate since 1991 and well above estimates of 3.8 percent. Rising housing costs contributed to the inflation bump, jumping 0.5 percent over last month, the biggest gain since 2005.

Still, many economists say it’s too soon to suggest that inflation is really rising in a dangerous way.

“We are still in a wait-and-see mode on whether it’s transitory,” said Diane Swonk, chief economist at Grant Thornton LLP. “Powell will be in the hot seat on Capitol Hill because inflation is a highly political issue, even if this is just transitory. Nobody likes inflation.”

Summers says inflation concerns should temper Biden’s ambitions for massive spending increases but not block investments that could enhance productivity in the economy.

“The investments on which Biden is focused are essential to the future of the country,” he said. “The focus should be on those investments like infrastructure that will increase economic supply potential. Inflation fears should shape economic policies but it would be tragic if they stopped us from making urgently needed public investments.”  

Victoria Guida contributed to this story.

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This post originally posted here Politics, Policy, Political News Top Stories

Pace of US inflation picks up again in test for Fed

The breakneck pace of US consumer price increases seen since the start of the year accelerated in June in a challenge to the Federal Reserve’s case that the burst of inflationary pressures accompanying the economic reopening will prove temporary.

The consumer price index rose last month at the fastest pace since August 2008, up 5.4 per cent from the previous year. That is well above the 5 per cent rise reported in May and the 4.9 per cent increase that economists had forecast.

On a monthly basis, data released by the Bureau of Labor Statistics showed price gains of 0.9 per cent, the biggest one-month jump since June 2008.

Stripping out volatile items like food and energy, “core” CPI rose from 3.8 per cent in May relative to the year before to 4.5 per cent in June.

Investors, economists and policymakers have scrutinised incoming inflation figures amid a fierce debate about the risk of runaway consumer prices fuelled by ultra-accommodative fiscal and monetary policy.

Price jumps have so far been most significant for sectors directly affected by the coronavirus pandemic. Travel-related expenses, such as airfares, have soared, while a semiconductor shortage has contributed to a jump in used car prices. 

One-third of the rise in the CPI last month stemmed from a record jump in previously-owned vehicle prices, according to the Bureau of Labor Statistics, which appreciated 10.5 per cent in June from the previous month.

The US central bank has long characterised elevated inflation prints as “transitory”, which will fade as Covid-19 lockdowns ease further and supply catches up with pent-up demand. Joe Biden’s administration shares this view, and a White House official expressed confidence that inflationary pressures would soon abate.

Market measures of inflation expectations also reflect ebbing concerns about runaway consumer prices, with long-dated metrics running below their short-term counterparts. But some investors warn that higher inflation could persist for longer than many anticipate.

“Most of the increase in the monthly metrics still look related to massive supply-demand imbalances in categories that were ‘closed’ in 2020: used cars, hotel rooms, travel costs, and so forth,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott. “Supply will eventually normalise in these categories, but it could take longer than common sense suggests, meaning that somewhat elevated inflation prints could last until 2022.”

US government bonds pared back recent gains after Tuesday’s release, sending yields higher from the recent lows seen since the Fed’s meeting on monetary policy in June, which raised the prospect of a quicker withdrawal of accommodation than initially expected.

The benchmark 10-year note traded 0.02 percentage points higher before settling around 1.38 per cent.

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This post originally posted here International homepage

Inflation summer vs. recovery summer: Biden fights to win the narrative

Employment growth may be disappointing to some economists, but Biden officials note that wages are rising. Inflation is hitting consumers, but the Federal Reserve considers it transitory. Homeowners may have to wait months for furniture and appliance deliveries, but that’s because the economy is roaring back faster than predicted. And the administration wants to pour trillions more into the economy, with child-care options, free pre-school and other benefits for workers, especially at the lower end of the income scale.

“From the start, we were clear that inflation would firm as the rescue plan got shots in arms and checks in pockets,” said Jared Bernstein, a member of Biden’s Council of Economic Advisers. “The reason these price pressures are upon us is getting lost: There’s an extremely robust recovery afoot, with strong job creation and wage gains for workers who finally have some bargaining clout.”

The extent to which Biden and the White House can pull off this argument — and actually deliver on their promises — will determine whether a recent dip in the president’s approval rating proves to be temporary or portends a slide that could put the Democrats in serious jeopardy heading in the 2022 midterms.

A Monmouth University poll this month showed Biden’s approval rating slipping to 48 percent from 54 percent in April, with 47 percent of Americans “very concerned” about rising prices. According to aggregate poll numbers from FiveThirtyEight, 52.7 percent of voters approve of the job Biden is doing, down from his 55 percent high early this year.

Economists suggest that while the declines are small, they reflect growing anxiety about higher prices and the possible impact of Biden’s big spending plans.

“The issue right now is really about people’s psyches and how they are feeling about this and how persistent all these higher prices will be,” said Rubeela Farooqi, chief U.S. economist at research firm High Frequency Economics. “For the White House it’s a tricky situation and all they can do is stick to their messaging that this is all temporary and will ease up. But if it doesn’t, the Federal Reserve will have to act and that will certainly slow down the economy.”

On Friday, the Commerce Department reported that the “core personal consumption expenditures” price index — a key inflation indicator that the Fed uses to set policy — rose 3.4 percent in May from the same time last year, the biggest increase since 1992. Overall prices are up 3.9 percent from last year, the biggest gain since 2008 when oil prices soared. Personal income declined 2 percent in May but that largely resulted from an inflated April number when stimulus checks went out.

The inflation figures were not above Wall Street expectations and partly reflected the depressed state of the economy last year. But they are nonetheless being felt by consumers who face higher prices on cars, ride-sharing services, hotels, food, gas and other items even as the pace of jobs returning from the pandemic has slowed down. And employers are struggling to find the workers they need to serve increasing consumer demand, a trend that worries White House officials.

The hope inside the West Wing is that by the end of the summer, when enhanced federal unemployment benefits are scheduled to expire, workers currently sitting on the sidelines will pour back into the labor market, easing some of the pressure on employers to offer outsized bonuses and other perks just to get people back to work.

It’s a tricky calculus since the administration wants to see higher wages for workers but not the kind that can send inflation spiraling and force the Fed to bump up interest rates faster than it wants to and potentially choke off growth.

Biden himself surprised some economists on Thursday when he said the problem with the labor shortage was a lack of better pay.

“It was legitimate questions you were asking me,” he said. “‘Well, you know, guess what? Employers can’t find workers.’ I said, ‘Yeah. Pay them more.’ This is an employee’s bargaining chip now what’s happening. [Companies are] going to have to compete and start paying hardworking people a decent wage.”

That sentiment reflects the thinking of progressives in the Democratic Party. But there is significant concern among economists that overly generous jobless benefits are at least part of what is keeping workers away from the labor force and that higher wages — while generally welcome — can stoke inflation.

And Republicans continue to seize on the inflation numbers to suggest that Biden’s spending plans and the easy money policies from the Fed risk even higher prices that could slam consumers and undercut growth that is expected to be robust both this year and next.

Rep. Kevin Brady of Texas, the top Republican on the tax-writing House Ways and Means Committee, tweeted on Friday that Biden was “blowing it” on the economy: “549,000 fewer jobs in 2021 than last 5 mos ’20; Prices rising twice as fast as paychecks … Inflation highest in 13 years.”

Republicans are also continuing to hammer away at higher gas prices, a sensitive spot for Democrats especially as Americans hit the road this summer for vacations and family visits long-postponed by the pandemic.

Rep. Jim Jordan of Ohio, the ranking Republican on the House Judiciary Committee, tweeted this week: “Average gas price: June 2020: $ 2.21 June 2021: $ 3.07 President Biden’s economy!”

That prompted a sharp retort from White House Press Secretary Jen Psaki, indicating the administration is sensitive to the impact that higher fuel prices can have on overall consumer sentiment.

“You forgot to mention that gas prices are the same now as they were in June 2018. Or that this time last year unemployment was 11.1% — today it’s 5.8%,” Psaki tweeted back at Jordan.

Senior White House economic officials argue that while they are keeping a sharp eye on prices — and are a bit worried about job market trends — they do not believe inflation will continue to spike upward. Instead, they say they will step up their efforts to address supply chain issues while making the case that the economy is coming back and any pain from price hikes this summer will prove fleeting.

But that is at least as much a hope as it is a certainty. The U.S. is clearly not on the cusp of 1970s-style runaway inflation. But it is teetering close to a tipping point that could be politically perilous for the White House and congressional Democrats.

“A lot of this stuff isn’t fully biting yet,” said Richard Bernstein, founder of investment firm Richard Bernstein Advisors.

“Gas prices as a percentage of wages are no place near where it starts biting. The key thing will be whether wages are going up faster than inflation. If they are, people tend to feel good even if they have to pay more. If they are not, we are back to talking about the ‘Misery Index’ and that’s a serious political problem.”

Author: Ben White
This post originally appeared on Politics, Policy, Political News Top Stories

'Hidden tax!' – how to 'minimise exposure' as UK inflation rate surges

The latest figures, released on Wednesday, revealed the rate of inflation has surpassed the Bank of England’s target of two percent. It comes as investors have been watching the rising rate of inflation closely for several months now.

The news was further bad news for savers, amid a low interest rate environment and the rate of inflation more than doubling in April 2021 – when it increased by 0.7 percent to 1.5 percent.

But what does the rate of inflation mean for other aspects of personal finance – such as investments?

The impact of rising prices upon households’ investments is something Tom Stevenson, investment director for Personal Investing at Fidelity International, has explored this week.

He has also suggested a number of steps people can take to protect their personal finances.

READ MORE: State pension payments can be increased – are you among 1 in 4 over 65s unaware of option?

“How can you protect your portfolio from the ravages of inflation? Rising prices are a kind of hidden tax,” Mr Stevenson said.

“And, as with any tax, there are things you can do to minimise your exposure.

“Some assets are more vulnerable to inflation than others.

“Principally, anything which pays a fixed income and/or offers a fixed capital return.

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“Bonds are the obvious case in point here.

“Bonds, which pay a fixed income (or coupon as it is sometimes called), become less valuable to an investor as interest rates rise.

“That is reflected in a rising yield and a falling price. Bond investors hate inflation.”

So, what about the impact of inflation on shares?

“Shares are traditionally a much better home for your money in a modestly inflationary environment,” he said.

“That’s particularly true if, as now, inflation is the consequence of rising demand rather than a supply shock such as the oil price hikes in the 1970s.

“Companies can pay a higher dividend if their profits rise which provides some protection to investors.

“They can also raise their prices if demand allows, securing the profits out of which they pay their dividend.

“Only when inflation rises to historically high levels can it also cause a problem for investors in shares.”

Mr Stevenson suggested there are various forms of action to take.

“Review your portfolio to make sure it’s well-diversified across a range of assets.

“As well as bonds and shares, a well-diversified portfolio will hold other assets, some of which also have a good track record of hedging against moderate levels of inflation.

“These include infrastructure (where income streams can sometimes have an explicit inflation link), real estate (where rents can rise in a strong economy) and commodities, including gold.”

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This post originally appeared on Daily Express :: Finance Feed

Inflation fears push gold & silver to three-month highs

Gold and silver prices have jumped to their highest levels in over three months as the latest dip in US Treasury yields and concerns about growing Covid-19 cases in Asia continue boosting demand for the safe-haven assets.

“It seems inflation fears are finally translating into higher precious-metals prices, and ETF [exchange-traded fund] investors are starting to swing into net buyers again,” John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia told Bloomberg.

Spot gold was trading at around $ 1,860 an ounce on Wednesday, after hitting $ 1,875 earlier in the week – the highest price seen since late January. Meanwhile, silver reached $ 28.75 an ounce – its highest level since February – before dropping to $ 27.82, according to Bloomberg Commodity Overview.
Also on rt.com Weaker dollar & coronavirus surge boost gold’s safe-haven appeal 
“Treasury yields are falling and, on the other hand, there seem to be fears about virus resurgence in Singapore, Taiwan, and the broader Asian-Pacific markets … driving up demand for safety,” Margaret Yang, a strategist at DailyFX said, as cited by India’s NDTV.

On Monday, Federal Reserve Vice Chairman Richard Clarida said the US economy hadn’t hit the benchmark of “substantial further progress” needed for the regulator to start scaling back asset purchases. In an attempt to protect the national economy in the face of the coronavirus pandemic, the Fed has been buying $ 80 billion in treasuries and $ 40 billion of asset-backed mortgages a month, while keeping the interest rate close to zero.

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Author: RT
This post originally appeared on RT Business News