Two of the US Federal Reserve's most outspoken policy hawks on Friday pushed back on the view the US central bank missed the boat in the fight against high inflation, citing a tightening of financial conditions that started well before the Fed began raising interest rates in March.
"How far behind the curve could we have possibly been in terms of time if, using forward guidance, one views rate hikes effectively beginning in September 2021?" Fed governor Christopher Waller said, noting yields on the two-year Treasury note rose last autumn as the Fed began to signal the end of its super-easy policy.
The move reflected the equivalent of two Fed rate hikes through December, he said.
Speaking at the same Stanford University conference, titled "How monetary policy got behind the curve“, St Louis Fed president James Bullard argued the Fed is "not as far behind the curve as you might have thought".
Earlier this week the Fed raised its policy rate to a range of 0.75 per cent to 1 per cent. Critics say that is far too low to fight inflation running at three times the Fed's 2 per cent target.
Mr Bullard said he agrees, calling inflation "far too high", and called for rates to rise "expeditiously“, to perhaps 3.6 per cent, to bring inflation under control. But he noted markets are already pricing much of that increase in.
Traders of rate futures are currently pricing in a Fed funds rate of 3 per cent to 3.25 per cent by year-end.
"It's going in the right direction ... hopefully we'll be able to get away from this behind-the-curve characterisation soon," Mr Bullard said.
The two were among the first Fed policy makers last year to call for a rapid removal of easy monetary policy and a quicker start to raising interest rates.
Mr Bullard, in fact, dissented on the Fed's March quarter-point rate hike as too little.
But both joined their colleagues in approving the half-point rate hike delivered this week. Fed chairman Jerome Powell, speaking after the rate decision was announced, signalled further increases ahead, including half-point rate hikes in both June and July.
Mr Waller used his talk on Friday to trace how economic data first seemed to ratify, then challenge, his own view from last spring: that inflation would prove transitory as supply chains healed and one-time fiscal stimulus faded, and that the labour market was primed to roar back as Covid-19 receded.
Most of his colleagues shared in the first view; opinions were more divided on the second. In the end, Mr Waller said, inflation proved to be much higher and more persistent than he had thought.
At the same time he described the "punch in the gut" he felt as two weaker-than-expected monthly jobs reports in August and September seemed to undercut the thesis of labour market healing.
As it turned out, later data revisions showed the US labour market had been stronger than the real-time data suggested.
"If we knew then what we know now, I believe the [Fed] would have accelerated tapering and raised rates sooner," Mr Waller said. "But no one knew, and that’s the nature of making monetary policy in real time."
By early November, most policymakers had come around to the view that high and rising inflation would not drop quickly enough on its own, and business demand for workers was far outpacing a slow-to-recover labor market supply.
"It was at this point ... that the FOMC pivoted," Mr Waller said. The Federal Open Market Committee is the Fed's policy-setting body.
The conference featured several former Fed policymakers and economists who argued that the Fed had fallen so far behind the curve that it would almost surely end up causing a recession as it sought to catch up by raising rates faster.
Former Fed vice chairman of supervision Randal Quarles, who says he was the Fed's most hawkish member until Waller joined late last year, told the conference that in hindsight it's clear "it would have been better to start raising rates last September".
It wasn't a failure of nerve, or politics, or stupidity, he said on Friday. "It was a complicated situation with little precedent, and people make mistakes."
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MATCH INFO
Southampton 0
Manchester City 1 (Sterling 16')
Man of the match: Kevin de Bruyne (Manchester City)
Analysis
Members of Syria's Alawite minority community face threat in their heartland after one of the deadliest days in country’s recent history. Read more
Zayed Sustainability Prize
In numbers: China in Dubai
The number of Chinese people living in Dubai: An estimated 200,000
Number of Chinese people in International City: Almost 50,000
Daily visitors to Dragon Mart in 2018/19: 120,000
Daily visitors to Dragon Mart in 2010: 20,000
Percentage increase in visitors in eight years: 500 per cent
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Five films to watch
Castle in the Sky (1986)
Grave of the Fireflies (1988)
Only Yesterday (1991)
Pom Poki (1994)
The Tale of Princess Kaguya (2013)
Mohammed bin Zayed Majlis
Who's who in Yemen conflict
Houthis: Iran-backed rebels who occupy Sanaa and run unrecognised government
Yemeni government: Exiled government in Aden led by eight-member Presidential Leadership Council
Southern Transitional Council: Faction in Yemeni government that seeks autonomy for the south
Habrish 'rebels': Tribal-backed forces feuding with STC over control of oil in government territory
Zayed Sustainability Prize
Timeline
2012-2015
The company offers payments/bribes to win key contracts in the Middle East
May 2017
The UK SFO officially opens investigation into Petrofac’s use of agents, corruption, and potential bribery to secure contracts
September 2021
Petrofac pleads guilty to seven counts of failing to prevent bribery under the UK Bribery Act
October 2021
Court fines Petrofac £77 million for bribery. Former executive receives a two-year suspended sentence
December 2024
Petrofac enters into comprehensive restructuring to strengthen the financial position of the group
May 2025
The High Court of England and Wales approves the company’s restructuring plan
July 2025
The Court of Appeal issues a judgment challenging parts of the restructuring plan
August 2025
Petrofac issues a business update to execute the restructuring and confirms it will appeal the Court of Appeal decision
October 2025
Petrofac loses a major TenneT offshore wind contract worth €13 billion. Holding company files for administration in the UK. Petrofac delisted from the London Stock Exchange
November 2025
180 Petrofac employees laid off in the UAE
The biog
Marital status: Separated with two young daughters
Education: Master's degree from American Univeristy of Cairo
Favourite book: That Is How They Defeat Despair by Salwa Aladian
Favourite Motto: Their happiness is your happiness
Goal: For Nefsy to become his legacy long after he is gon
Secret Nation: The Hidden Armenians of Turkey
Avedis Hadjian, (IB Tauris)
Tonight's Chat on The National
Tonight's Chat is a series of online conversations on The National. The series features a diverse range of celebrities, politicians and business leaders from around the Arab world.
Tonight’s Chat host Ricardo Karam is a renowned author and broadcaster who has previously interviewed Bill Gates, Carlos Ghosn, Andre Agassi and the late Zaha Hadid, among others.
Intellectually curious and thought-provoking, Tonight’s Chat moves the conversation forward.
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The biog
Name: Salvador Toriano Jr
Age: 59
From: Laguna, The Philippines
Favourite dish: Seabass or Fish and Chips
Hobbies: When he’s not in the restaurant, he still likes to cook, along with walking and meeting up with friends.
What vitamins do we know are beneficial for living in the UAE
Vitamin D: Highly relevant in the UAE due to limited sun exposure; supports bone health, immunity and mood.
Vitamin B12: Important for nerve health and energy production, especially for vegetarians, vegans and individuals with absorption issues.
Iron: Useful only when deficiency or anaemia is confirmed; helps reduce fatigue and support immunity.
Omega-3 (EPA/DHA): Supports heart health and reduces inflammation, especially for those who consume little fish.