Why does inflation rise

Share to Twitter Share to Linkedin Topline The Federal Reserve’s “heightened sensitivity” to rising inflation expectations could be triggered by a barrage of political ad campaigns that are expected to highlight surging consumer prices ahead of the midterm elections in November, analysts at Goldman Sachs warned on Friday, adding that the central bank may feel “compelled” to keep hiking rates aggressively. Key Facts With the midterm elections looming in November, surging consumer prices will be a major issue for voters—especially as long-term inflation expectations have surged in recent months, according to the latest consumer sentiment survey released by the University of Michigan on Friday. Meanwhile, the Federal Reserve watches long-term inflation expectations closely, and used it in its decision earlier this month to raise interest rates by 75 basis points—the largest increase since 1994. The central bank’s “strong reaction” to the … [Read more...] about Political Ads Targeting Inflation Ahead Of Midterm Elections Could Force The Fed To Keep Hiking Rates: Goldman Sachs

- A + A MUMBAI/BUENOS AIRES/LONDON (June 27): It only took 24 hours last month for Prime Minister Narendra Modi's government in India — the world's second-largest producer of wheat — to shelve its plans to "feed the world". In April, Modi had said publicly that the world's most populous democracy was ready to fill part of the gap left by Ukraine in global grains markets by increasing its wheat exports, following five consecutive record harvests. India traditionally exports only a modest amount of wheat, retaining most of its crop for domestic consumption. On May 12, India's Ministry of Commerce & Industry said it was preparing to send delegations to nine countries to export a record 10 million tonnes of wheat this fiscal year — sharply up the previous season. But a barrage of alarming data changed all that. First came a downward revision to India's wheat crop in early May as a sudden heatwave hammered yields. Then data on May 12 showed inflation in the nation … [Read more...] about Food export bans, from India to Argentina, risk fueling inflation

Borrowing costs of Indian states are likely to rise in the coming weeks as the Reserve Bank of India ’s (RBI) rate hike cycle becomes more entrenched and the supply of state papers rises, money market experts and bankers told Moneycontrol on June 27. A majority of those expect the yield on the 10-year state development loan (SDL) to rise above 8 percent in the coming weeks. “In the first quarter of this fiscal year, supply of debt was limited. But in the second half of this fiscal year, we expect state debt supply to rise and that should put upward pressure on (state) bond yields,” said Ritesh Bhusari, deputy general manager, treasury, at South Indian Bank. To put in perspective, the cut-off yield for 10-year SDL ranged from 7.83 percent to 7.86 percent at an auction on June 21, according to data from the RBI. Prior to that, at an auction on June 14, Tamil Nadu’s 10-year paper was sold at a cut-off yield of 7.94 percent, while Haryana’s 10-year bond was sold at 7.95 percent. … [Read more...] about States’ borrowing cost set to rise on higher debt supply, RBI’s rate cues, experts say

Electricity meter on a building in Seoul on Monday. The government announced that it is raising utility rates, including the electricity rate, due to rising international energy prices and won falling against the dollar. [YONHAP] Electricity rates will increase by 5 won per kilowatt-hour from next month, the Ministry of Trade, Industry and Energy announced Monday. This is the sharpest increase since a new billing system went into effect in 2021. Gas rates will also be increasing, by 1.11 won per megajoule. The government has been forced to increase rates as oil prices increase globally and as the won falls against the dollar. Electricity is currently billed at 88.3 won ($0.07) per kilowatt hour for the first 200 kilowatt-hours per month, 182.9 won per kilowatt-hour for 201 to 400 kilowatt-hours and 275.6 won per kilowatt-hour above 400 kilowatt-hours. Gas is currently 15.88 won per megajoule. The changes are expected to hit households already struggling with high … [Read more...] about Electricity rates to increase by 5 won per kilowatt-hour

- A + A BANGKOK (June 27): A tightening of Thai monetary policy will be conducted so it does not disrupt the recovery of Southeast Asia's second-largest economy, central bank officials said on Monday, reinforcing market expectations of interest rate hikes later this year. Thailand's economy will continue growing this year and next, driven by domestic demand and tourism, and could beat forecasts despite a risk that inflation will be higher than expected, Bank of Thailand (BOT) officials told an analysts' meeting. The BOT will try to prevent the economy from overheating, which would cause demand-driven inflation, by gradually shifting from the current very accommodative policy, assistant governor Piti Disyatat told the meeting. The BOT's task was to help the economy take off smoothly, he said. "It's a challenge for monetary policy to release the accelerator pedal appropriately and timely so that the recovery has good momentum," Piti said, referring to the current … [Read more...] about Thai central bank says policy tightening will not disrupt economy recovery

This article first appeared in The Edge Malaysia Weekly, on June 20, 2022 - June 26, 2022. - A + A IF Bank Negara Malaysia’s eight-member monetary policy committee (MPC) raises the overnight policy rate (OPR) by 25 basis points (bps) at its next scheduled meeting on July 6, it will mark its first back-to-back increase since mid-2010, when interest rates were normalised following the recovery from the 2008 global financial crisis. It will not be the first central bank to do so. Compared with just a month ago, more economists now (at the time of writing) reckon that a 25bps hike will happen in July, but many still think a pause is possible in July ahead of the Hari Raya Aidiladha celebrations. In any case, at least one more rate increase (if not two) is expected to take place by the conclusion of the Sept 8 meeting to bring the OPR to at least 2.25% (if not 2.5%), consensus data show. “Our house has also shifted expectations for Bank Negara to frontload … [Read more...] about The State Of The Nation: What the Fed’s 75bps hike and near 4% terminal rate mean for the OPR

A version of this story first appeared in CNN Business' Before the Bell newsletter. Not a subscriber? You can sign up right here . You can listen to an audio version of the newsletter by clicking the same link. London (CNN Business) Europe and the United States have barred the import of Russian oil to cut off a crucial revenue source for the Kremlin. But the plan to pile pain on President Vladimir Putin, forcing him to reconsider his war in Ukraine, hasn't worked . Russia's government is making just as much money from energy exports as it was before the invasion. Meanwhile, inflation is surging globally, adding to political pressure on heads of state such as US President Joe Biden, British Prime Minister Boris Johnson and French President Emmanuel Macron. That's forcing leaders from top economies who have gathered in Germany for a G7 meeting to consider a new route: slapping price caps on Russian crude . "The goal here is to starve Russia, … [Read more...] about Price cap on Russian oil could shake up the market

Reserve Bank of India The central bank is fighting twin battles at this point. It needs to control inflation that is way above its mid-term target of 4 percent and has been consistently above the upper band of 6 percent. On the other hand, the nascent recovery seen on the economic growth, needs to be supported. The central bank-led monetary policy committee (MPC) clearly misjudged the inflation trajectory for a prolonged period in its bid to support growth recovery. The stance remained accommodative for a long time which led to differences even within the panel. In May, the rate-setting panel then embarked on a catch-up game by initiating sharp rate hikes in two rounds, totaling 90 basis points (bps). One basis point is one hundredth of a percentage point. The MPC has signalled to take the rate back to pre-pandemic levels. The repo rate, which is currently at 4.9 percent, can go up by at least 100 basis points, according to economists considering the inflation … [Read more...] about Banking Central| Where will the repo rate settle ultimately?

- A + A KUALA LUMPUR (June 27): Costlier crude oil along with a stronger US dollar will erode Spritzer's Bhd profit margin, the bottled water producer admitted. "Costlier oil will translate into costlier PET resin, which is the main raw material used in making the [plastic] bottles. "PET resin is normally quoted in US dollar so a stronger US dollar would mean we will have to pay more for our PET resin," a company representative said in a brief email reply to theedgemarkets.com recently, when asked about the impact of surging oil prices on its manufacturing costs. According to the US-based PET Resin Association, PET — which is short for polyethylene terephthalate, the chemical name for polyester — is a clear, strong, and lightweight plastic made from crude oil and ethane extracted from natural gas that is widely used for packaging food and beverages, especially convenience-sized soft drinks, juices and water. Following Russia's incursion into Ukraine, oil prices … [Read more...] about Spritzer admits costlier crude oil, stronger US dollar will erode its profit margin

Electricity meter at a building in Seoul on Monday. Utility prices are to be hiked starting next year but after ther presidnetial election in March. [YONHAP] Utility bills are going up after the presidential election in March. Electric bills will be 5.6 percent higher than this year’s, which will translate into an additional 1,950 won per month for a family of four -- and possibly more. The electric bill comes in three parts. The average annual base rate is usually determined once a year. But according to the Korea Electric Power Corp. (Kepco) on Monday, the government decided to raise the annual average fuel costs twice next year -– once in April and again in October. Each hike will be 4.9 won per kilowatt hours, bringing the total increase to 9.8 won per kilowatt for the whole of 2022. The second part of the bill is a quarterly charge based on the average fuel cost for the previous three months and that depends on international fuel prices, which have been volatile. … [Read more...] about Electric bills going up after presidential election