HOTTER-THAN-EXPECTED INFLATION CLOUDS RATE-CUT OUTLOOK | Kanebridge News
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HOTTER-THAN-EXPECTED INFLATION CLOUDS RATE-CUT OUTLOOK

By JUSTIN LAHART
Wed, Feb 14, 2024 8:56amGrey Clock 4 min

US: Inflation eased again in January but came in above Wall Street’s expectations, clouding the Federal Reserve’s path to rate cuts and potentially giving the central bank breathing space to wait until the middle of the year.

The Labor Department reported Tuesday that consumer prices rose 3.1% in January from a year earlier, versus a December gain of 3.4%. That marked the lowest reading since June.

Still, the consumer-price index was higher than the predicted 2.9%, a disappointment for investors who hope the Fed will cut rates sooner rather than later. Rate cuts tend to help stock prices by boosting economic activity and reducing competition from bonds for investor dollars.

The release gave a nasty jolt to markets. Stocks fell sharply and bond yields rose. The Dow Jones Industrial Average slid more than 500 points, or about 1.4%, its worst one-day decline since March. For all three major U.S. stock indexes, it was their worst performance on a CPI release day since September 2022 , according to Dow Jones Market Data.

The yield on the 10-year Treasury note rose to 4.315%, bringing it to its highest level since the end of November.

Interest-rate futures, which before Tuesday’s report implied the central bank would probably begin cutting rates by its May meeting, now suggest a June start date is more likely.

Where the Fed could go from here

Investors’ belief that Fed cuts were imminent has helped fuel the rally in stocks. The Dow on Monday had hit its 12th record close of 2024.

But Tuesday’s inflation report underscores why Fed officials have been dismissive of such expectations. Some Fed officials have suggested that the pace of improvement over the past six months might overstate underlying progress in containing price pressures.

Officials have said they aren’t ready to entertain rate cuts at their next meeting, March 19-20, because they want to see more evidence that inflation is returning to their 2% target.

Fed Chair Jerome Powell has said officials want to see more evidence that inflation is returning to its 2% goal, which is measured against a separate gauge to be released later this month by the Commerce Department.

“It’s not that the data aren’t good enough. It’s that there’s really six months of data,” Powell said in an interview on “60 Minutes” earlier this month. “It doesn’t need to be better than what we’ve seen, or even as good. It just needs to be good.”

Core prices, which exclude food and energy items in an effort to better track inflation’s underlying trend, were up 3.9% in January. That was equal to December’s gain, which was the lowest since mid-2021.

From a month earlier, overall prices were up a seasonally adjusted 0.3%, and core prices were up 0.4%—larger gains than economists expected.

Two measures of inflation

The Fed’s preferred measure of inflation has been running cooler than the Labor Department’s, and analysts said that could continue in January. The figures released Tuesday calculate medical care and airfares differently, and those categories were especially strong in January. The Labor Department’s measure also puts a much higher weight on shelter costs, which for both owners and renters are derived from rents. Shelter costs accounted for 0.23 percentage point of the monthly gain in overall prices in January. Shelter costs were up 0.6% month over month.

Some Fed officials have said they are looking for evidence that a slowdown in price pressures is broadening beyond goods such as used cars, which have seen prices decline over the past year. Tuesday’s figure showed the opposite: Price declines accelerated for goods while price increases accelerated for services.

And prices are still far above where they were before the pandemic—especially for items   that most Americans buy often, like groceries.

The sting of those past price increases might be part of why so many Americans remain down on the economy . An analysis conducted by Goldman Sachs economists suggests that frustration with high price levels might have contributed to low confidence readings that persisted in the early 1980s even after inflation had slipped sharply.

“It does seem like it takes a while for confidence to recover, in part because people are focused on levels rather than changes,” said Goldman chief economist Jan Hatzius .

The Labor Department’s measure of overall consumer prices was up 19.6% this January from four years earlier, just before the pandemic hit. In contrast, prices were up 8.9% in the four years ended January 2020.

Economists generally expect inflation to cool this year, though they caution the process could be bumpy. Cooling prices for newly signed leases, for example, should eventually translate into lower shelter costs.

“I can tell inflation has gotten better,” said Mike Poore, of Henderson, Ky. “That’s definitely a good thing. It’s a shame it’s not happening quicker.”

The high cost of groceries

A Bank of America Institute analysis of customer data found households tended to make far more transactions a month for food and drinks at restaurants and bars, for groceries and for gasoline than they do for other items. Labor Department figures show that prices in all three of those frequent-transaction categories are higher, relative to before the pandemic, than prices overall.

Research from University of California, Berkeley economist Ulrike Malmendier and three co-authors found that prices for items that people buy more often play an outsize role in framing their inflation expectations. “In terms of what gets ingrained in people’s brains, it’s stuff that they purchase frequently,” she said.

Other research Malmendier has conducted examines the scarring effects of inflation episodes , which can have persistent, and potentially costly, effects on people’s financial decisions. She is heartened by the fact that inflation has retreated relatively quickly from the 9.1% it hit in June 2022 —a contrast to the experience of the late 1970s and early 1980s, when inflation remained elevated for years.

“I’m a little less worried about long-lasting effects than I was in 2022,” she said.



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AACCI’s Strategic Vision for Enhancing Australia-Arab Trade Relations

The Australian Arab Chamber of Commerce & Industry (AACCI) is fostering robust trade relations between Australia and Arab countries.

Mon, May 20, 2024 5 min

In an era where global trade and international relationships are more crucial than ever, the Australia Arab Chamber of Commerce & Industry (AACCI) serves as a bridge, for cooperation and growth between Australia and the Arab nations. Led by its Chairman, Mr. Mohamed Hage, the AACCI has taken on projects aimed at strengthening relationships and fostering development across borders.

This exclusive interview explores the initiatives implemented by the AACCI to expand its presence and influence in the region including the significant establishment of a new operational hub in Dubai. We also delve into how the Chamber embraces education through training and research, its participation in major international exhibitions, and its active support for both large corporations and small businesses.

Looking towards tomorrow, Mr. Mohamed shares his vision for broadening AACCI’s reach emphasizing the importance of the on-ground operations and cultural understanding in building business connections.

-Could you elaborate on the Australia Arab Chamber of Commerce & Industry, including its objectives and main areas of focus?

The Australia Arab Chamber of Commerce & Industry (AACCI) plays a fundamental role, in promoting business partnerships and trade between Australia and the 22 Arab countries. As a member of the Union of Arab Chambers affiliated with the Arab League, AACCI focuses on strengthening trade and investment ties, across these countries.

To nurture these connections effectively AACCI has outlined four objectives: facilitating trade and investment activities, certifying documents, educating stakeholders, and offering marketing assistance.

Our initiatives are designed not only to empower trade and investment endeavors but to also ensure engagement with specific sectors that drive these activities. With an understanding of the characteristics, strengths and preferences of each country, AACCI prides itself on its specialized knowledge customized to suit the distinct business environments of these nations.

– As the AACCI approaches its 50th anniversary, what have been some of the key milestones and achievements?

I believe one of AACCI’s accomplishments is the opportunities it has opened up for numerous Australian companies to access markets, in the region. Moreover, the strong bilateral trade relationship that has developed between Australia and the 22 Arab nations over the five decades has led to trade transactions amounting to billions of dollars.

This extensive trade covers industries such as food and beverages, luxury hotels and many more services. Each successive generation, within AACCI has built upon the foundation laid by its predecessors enriching their knowledge base and expanding their range of services.

– How does the AACCI leverage its diverse leadership team to enhance trade and investment opportunities between Australia and the Arab region?

Since taking on the role of chairman, my main focus has been on expanding our presence in the region. This led to the idea of opening an office in Dubai, which symbolizes our dedication to deepening our engagement in that area. We have successfully secured the license to open our first office in Dubai after 50 years, which will serve as a gateway to the GCC and North Africa.

I strongly believe that building two-way trade and investment ties requires more than a degree of business connectivity; it demands having local representatives present in each region. With trends emphasizing strategies the value of face-to-face engagements cannot be overstated.

Setting up offices in the region is essential for the Chamber to truly serve as a link and support system for business activities. Ultimately this expansion will bring benefits to our members and partners by providing them with access, to dynamic markets and diverse prospects.

– Can you discuss the significance of AACCI’s role in cultural and business exchanges between the two regions?

The importance of understanding cultures in our operations cannot be overstated. To address this, we have included a training platform within the Chamber to strengthen our cultural awareness initiatives. This new program offers our members access to modules on our website focusing on global business practices.

Furthermore, we have set up a Center of Excellence specifically dedicated to researching areas like food security and cultural awareness. These research endeavors are essential for promoting knowledge between the two regions.

By combining the resources of the Center of Excellence, our training resources, and the forthcoming local office in Dubai, we’re providing cultural awareness not only in the region but also in Australia. This approach ensures that our members are well equipped and knowledgeable boosting their effectiveness and involvement, in markets.

– What is the objective of your on-ground presence at conferences and events?

Participating in conferences and on ground events is very important for increasing awareness in industries like construction where knowledge of opportunities in the Arab world may not be widespread. When we see projects such as NEOM or notice the construction boom happening in the region it becomes important for organizations like the Chamber of Commerce to highlight these prospects. By taking part in large scale expos such as the Sydney Build Expo we position ourselves at the forefront of these advancements.

Our presence at these events enables interaction giving entrepreneurs a chance to visit our booth engage in discussions and learn more about the region in an approachable and personalized manner. This plays a role in simplifying the process and making opportunities concrete.

– With such a diverse membership base, how does AACCI tailor its services to meet the needs of both large corporations and small startups?

When it comes to discussing business it’s important to grasp how influence and vision come into play. Businesses looking to expand are often motivated by a desire to achieve something whether they are big companies or small enterprises. Small businesses typically aim to raise their brands profile while larger corporations seek recognition and market dominance.

Standing out in this area can be tough mainly because the key driving force is the passion to showcase the brand and products on a platform. This determination serves as a motivator for entrepreneurs.

At the Chamber we make a point of recognizing the needs of both big and small players by understanding each members individual situation. We ensure that every member is well informed about the opportunities and risks that come with expanding. For small businesses, this means being aware of the financial demands, while large businesses are advised on the necessity of both financial and emotional resilience.

– How does AACCI plan to expand or evolve its services in the coming years to further support its members?

The importance of having resources on the ground cannot be emphasized enough. Having local staff is key to establishing connections with the communities we serve. Without a presence in the area staying updated on events and activities becomes quite challenging.

This is why, as I’ve mentioned before, we have established an office in Dubai, staffed with personnel dedicated to supporting our members. This local office will help us effectively bridge the gap between Australia and the Arab world. And our members will benefit from insights and assistance from someone who truly knows the landscape.

In Australia we have equipped offices throughout the country staffed by individuals who play a significant role in our operations. This strong domestic network complements our efforts ensuring that we provide support to our members both locally and globally. This strategic approach is crucial, for nurturing business relationships and fostering continental understanding.

 

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