A shopper keeps an eye on food prices at a New York supermarket. AFP
A shopper keeps an eye on food prices at a New York supermarket. AFP
A shopper keeps an eye on food prices at a New York supermarket. AFP
A shopper keeps an eye on food prices at a New York supermarket. AFP

Business

Economy

CPI report: US inflation slows in May as Fed prepares for pause on rate increases

Central bank begins two-day meeting with traders anticipating rates will be held steady

Kyle Fitzgerald
Kyle Fitzgerald
Washington

June 13, 2023

  • English
  • Arabic

Inflation in the US slowed again last month, giving room for the Federal Reserve Board to pause raising interest rates after its two-day meeting on Wednesday.

The consumer price index increased by 0.1 per cent in May after increasing 0.4 per cent in April, data from the Labour Department showed. Prices rose 4 per cent on an annual basis, down from 4.9 per cent in April.

Core inflation, which excludes food and energy, rose 0.4 per cent last month, in line with estimates.

The overall consumer price index was aided by a 3.6 per cent decrease in energy costs. The food index rose 0.2 per cent after a decrease of 0.2 per cent in April.

“Today’s report is good news for hard-working families. It shows continued progress tackling inflation at the same time that unemployment remains at historic lows,” President Joe Biden said.

The latest inflation report arrived as policymakers at the Fed begin their two-day meeting to determine the next steps in tackling inflation.

The Fed has raised its benchmark federal funds rate to the target range of 5 and 5.25 per cent since March of last year in a series of 10 consecutive rate increases.

It has become one of the central bank's most audacious attempts to rein in the high cost of goods since inflation peaked at 9 per cent last summer.

But inflation has gradually declined since then, slowly inching closer to the Fed's 2 per cent target. And while inflation is expected to remain north of 2 per cent by the end of the year, Fed officials are seeing signs that the nation's economy is slowing.

The central bank has been particularly bedevilled by a resilient labour market. Job gains remained robust last month with 339,000 positions added, although wage growth slowed.

The central bank is widely expected to keep rates steady after its two-day meeting on Wednesday, data from the CME Group showed before Tuesday's inflation report.

Traders anticipate that the Fed will take a brief pause in its interest rate increases before issuing another 25 per cent rise in July.

Minutes released from the Fed's meeting last month showed that policymakers “generally agreed” that continuing to raise interest rates “had become less certain”.

How to improve Arabic reading in early years

One 45-minute class per week in Standard Arabic is not sufficient

The goal should be for grade 1 and 2 students to become fluent readers

Subjects like technology, social studies, science can be taught in later grades

Grade 1 curricula should include oral instruction in Standard Arabic

First graders must regularly practice individual letters and combinations

Time should be slotted in class to read longer passages in early grades

Improve the appearance of textbooks

Revision of curriculum should be undertaken as per research findings

Conjugations of most common verb forms should be taught

Systematic learning of Standard Arabic grammar

Breast cancer in men: the facts

1) Breast cancer is men is rare but can develop rapidly. It usually occurs in those over the ages of 60, but can occasionally affect younger men.

2) Symptoms can include a lump, discharge, swollen glands or a rash. 

3) People with a history of cancer in the family can be more susceptible. 

4) Treatments include surgery and chemotherapy but early diagnosis is the key. 

5) Anyone concerned is urged to contact their doctor

 

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.”

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Updated: June 14, 2023, 6:14 AM
InflationFederal Reserve