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US Federal Reserve chairman Jerome Powell outlined his most aggressive approach to taming inflation to date, potentially endorsing two or more half percentage-point interest rate increases while describing the labour market as overheated.
“I would say that 50 basis points will be on the table for the May meeting,” Mr Powell said at a panel discussion hosted by the International Monetary Fund on Thursday in Washington, which also included European Central Bank president Christine Lagarde and other officials.
Demand for workers is “too hot, you know; it is unsustainably hot", he said.
The Fed chief is taking direct aim at strong demand that the central bank wants to cool.
It is a strategy that bears considerable risk for US workers and the economy’s overall growth prospects in the coming months, as well as for the Fed itself in a year of midterm congressional elections, with inflation a major concern among ordinary Americans.
“This is going to be a very close call on whether we get a recession or not,” said Ethan Harris, head of global economics at Bank of America Securities.
“They have to get monetary policy into tight territory and they probably need to get some kind of rise in the unemployment rate.”
Mr Powell also reinforced expectations for another half-point increase in June by citing minutes from last month’s policy meeting that said many officials had noted “one or more” 50 basis-point increases could be appropriate to curb the hottest inflation in four decades.
“There is something in the idea of front-end loading” moves if appropriate, “so, that points in the direction of 50 basis points being on the table”, Mr Powell said.
Investors are betting on half-point increases in May, June and possibly July. Rising yields, in turn, have unsettled the stock market, with the S&P 500 Index closing down 1.5 per cent on Thursday.
Mr Powell’s St Louis Fed colleague James Bullard has also opened a debate about doing a more aggressive 75 basis-point increase if needed, while even normally dovish officials such as San Francisco’s Mary Daly have said that a “couple” of half-point moves look likely.
Mr Powell “approved a 50 basis-point hike in May, but I think June is also there and maybe even more”, said Yelena Shulyatyeva, senior US economist for Bloomberg Economics.
To some, it is too little, too late. Critics say that US central bankers are caught in a policy bind of their own making.
Prices began to accelerate in the fourth quarter of 2021, when employers shrugged at the latest wave of the coronavirus and added more than a 500,000 workers each month to their payrolls.
Wage gains picked up and demand strengthened, broadening inflation pressures throughout the economy even as the Fed continued to add stimulus by holding rates near zero and buying bonds.
Policymakers last year wanted to avoid pre-emptive tightening but the combination of fiscal stimulus, monetary support and a bounce-back in demand put them behind inflation pressures that were well under way.
The consumer price index rose 8.5 per cent in March from a year earlier, the most since 1981; the Fed’s target is based on a separate measure known as the personal consumption expenditures price index, which rose 6.4 per cent for the year through February.
Russia’s military offensive in Ukraine is expected to raise food and energy prices further.
Now, Fed officials are scrambling to raise interest rates to a level that does not add further stimulus, and possibly push forward into restrictive territory.
The Fed will no longer forecast relief from goods prices and improving supply chains, Mr Powell said, which could be an acknowledgement that pressures have also disbursed into service prices as well.
“I just don’t understand why they did this,” Mr Harris said. “They had many chances to take the off-ramp and they never did.”
Another uncertainty in policy strategy is what happens to financial conditions when officials start running assets off their balance sheet.
Fed officials have signalled this process will be announced in May, with the run-off stepping up to $95 billion a month combined for Treasuries and mortgage-backed securities.
There is no reliable estimate about how much tightening the run-off will add, Ms Shulyatyeva said.
How the UAE gratuity payment is calculated now
Employees leaving an organisation are entitled to an end-of-service gratuity after completing at least one year of service.
The tenure is calculated on the number of days worked and does not include lengthy leave periods, such as a sabbatical. If you have worked for a company between one and five years, you are paid 21 days of pay based on your final basic salary. After five years, however, you are entitled to 30 days of pay. The total lump sum you receive is based on the duration of your employment.
1. For those who have worked between one and five years, on a basic salary of Dh10,000 (calculation based on 30 days):
a. Dh10,000 ÷ 30 = Dh333.33. Your daily wage is Dh333.33
b. Dh333.33 x 21 = Dh7,000. So 21 days salary equates to Dh7,000 in gratuity entitlement for each year of service. Multiply this figure for every year of service up to five years.
2. For those who have worked more than five years
c. 333.33 x 30 = Dh10,000. So 30 days’ salary is Dh10,000 in gratuity entitlement for each year of service.
Note: The maximum figure cannot exceed two years total salary figure.
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
SNAPSHOT
While Huawei did launch the first smartphone with a 50MP image sensor in its P40 series in 2020, Oppo in 2014 introduced the Find 7, which was capable of taking 50MP images: this was done using a combination of a 13MP sensor and software that resulted in shots seemingly taken from a 50MP camera.
Sholto Byrnes on Myanmar politics
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Day 5, Abu Dhabi Test: At a glance
Moment of the day When Dilruwan Perera dismissed Yasir Shah to end Pakistan’s limp resistance, the Sri Lankans charged around the field with the fevered delirium of a side not used to winning. Trouble was, they had not. The delivery was deemed a no ball. Sri Lanka had a nervy wait, but it was merely a stay of execution for the beleaguered hosts.
Stat of the day – 5 Pakistan have lost all 10 wickets on the fifth day of a Test five times since the start of 2016. It is an alarming departure for a side who had apparently erased regular collapses from their resume. “The only thing I can say, it’s not a mitigating excuse at all, but that’s a young batting line up, obviously trying to find their way,” said Mickey Arthur, Pakistan’s coach.
The verdict Test matches in the UAE are known for speeding up on the last two days, but this was extreme. The first two innings of this Test took 11 sessions to complete. The remaining two were done in less than four. The nature of Pakistan’s capitulation at the end showed just how difficult the transition is going to be in the post Misbah-ul-Haq era.
UAE currency: the story behind the money in your pockets
Other acts on the Jazz Garden bill
Sharrie Williams
The American singer is hugely respected in blues circles due to her passionate vocals and songwriting. Born and raised in Michigan, Williams began recording and touring as a teenage gospel singer. Her career took off with the blues band The Wiseguys. Such was the acclaim of their live shows that they toured throughout Europe and in Africa. As a solo artist, Williams has also collaborated with the likes of the late Dizzy Gillespie, Van Morrison and Mavis Staples.
Lin Rountree
An accomplished smooth jazz artist who blends his chilled approach with R‘n’B. Trained at the Duke Ellington School of the Arts in Washington, DC, Rountree formed his own band in 2004. He has also recorded with the likes of Kem, Dwele and Conya Doss. He comes to Dubai on the back of his new single Pass The Groove, from his forthcoming 2018 album Stronger Still, which may follow his five previous solo albums in cracking the top 10 of the US jazz charts.
Anita Williams
Dubai-based singer Anita Williams will open the night with a set of covers and swing, jazz and blues standards that made her an in-demand singer across the emirate. The Irish singer has been performing in Dubai since 2008 at venues such as MusicHall and Voda Bar. Her Jazz Garden appearance is career highlight as she will use the event to perform the original song Big Blue Eyes, the single from her debut solo album, due for release soon.
