FirstFT: IMF warns US inflation has not ‘turned the corner yet’


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Inflation in the US has not “turned the corner yet” and it is too early for the Federal Reserve to declare victory in its fight against soaring prices, a top IMF official has warned.

In an interview with the Financial Times, Gita Gopinath, the fund’s second-in-command, urged the US central bank to press ahead with rate rises this year despite a recent moderation in headline inflation following one of the most aggressive tightening campaigns in the Fed’s history.

“If you see the indicators in the labour market and if you look at very sticky components of inflation like services inflation, I think it’s clear that we haven’t turned the corner yet on inflation,” she said, adding that the fund’s advice to the Fed was to “stay the course”.

The comments from the fund’s deputy managing director come after a flurry of data suggested inflation in the US, Europe and other economies might have peaked, as energy prices fall from recent highs and the cost of goods such as home appliances and used cars starts to decline.

Chief among Gopinath’s concerns is the continued resilience of the labour market, which on average is adding roughly 400,000 jobs each month. The unemployment rate still hovers near historic lows and an acute worker shortage has helped to push wage increases to a level that is far too high for the Fed to hit its 2 per cent inflation target.

1. Sunak promises action on UK growth and NHS delays The UK prime minister yesterday outlined five key promises for the next general election, including expanding the economy and cutting NHS waiting lists. In his first big domestic policy speech as PM, Rishi Sunak said he wanted to deliver “peace of mind” to a country confronted by a recession.

2. ‘Shadow economy’ drives jump in Spain’s tax revenue Spain is enjoying a record surge in tax revenue after the pandemic forced underground business activity out of the shadows. The country’s net tax revenues hit their highest level since records began from January to November last year, jumping 15.9 per cent from the same period in 2021.

3. UK needs ‘war effort’ to cut energy bills To boost energy efficiency and rapidly insulate millions of homes, the House of Commons environmental audit committee has said the UK needs a “war effort”. In a report released today the cross-party group of MPs urged the government to do more to reduce energy demand and speed up the transition to cleaner sources of power.

4. House at impasse as McCarthy fails to clinch Speaker post The US House of Representatives has failed for a second day to select a new Speaker, after California congressman Kevin McCarthy suffered a humiliating setback in more rounds of voting amid sustained opposition from an intransigent group of Republican party rebels.

Kevin McCarthy
Twenty Republican lawmakers voted against Kevin McCarthy in three ballots yesterday © Win McNamee/Getty Images

5. Chinese rival to take iPhone business from Foxconn Apple is expected to enlist Chinese manufacturer Luxshare Precision to produce its premium iPhone models, breaking Foxconn’s hold on production after worker protests over Covid-19 curbs last year. Luxshare has reportedly been producing small numbers of the iPhone 14 Pro Max to compensate for lost production at Foxconn since November.

The day ahead

Funeral of former Pope Benedict The funeral of the first pontiff in 600 years to resign from his post, who died on Saturday at the age of 95, will be held in the Vatican. Pope Francis will preside over the event.

French inflation figures While inflation is falling elsewhere in the eurozone, new data in France are expected to show a small uptick in price growth. French inflation is forecast to peak in the first quarter of 2023, according to the French central bank.

What else we’re reading and looking at

Workers: a photography special In this unique creative package, 11 photographers capture the diverse world of work — of making, caring and serving in the modern world. The collection grapples with the big question of the meaning of work while also documenting the increasingly fragile security of many workers around the world.

A worker taps a furnace at the Ford plant, Dagenham, Essex, in 1954
‘Tapping a Furnace’ at the Ford plant, Dagenham, Essex, in 1954 © Estate of Maurice Broomfield/Maurice Broomfield: Industrial Sublime at the Victoria and Albert Museum (V&A)

The UK’s dream of becoming a ‘science superpower’ George Freeman, the UK’s minister for science, research and innovation, tells the FT that the government’s “entire mission” is to shift the country from being an “academic powerhouse to a science superpower”. But is the financial, regulatory and physical architecture being put in place to realise such an ambition?

How serious is the threat of new Covid-19 variants? At least 15 countries have introduced Covid testing for travellers from China, mostly to ensure that no dangerous new variants go undetected, with the UK Health Security Agency asking hospitals to sequence all viral samples from such patients admitted to hospital with the disease. Are surging infection rates likely to lead to powerful variants from China?

‘The great meeting bloat deserves this Shopify purge’ An announcement this week from the chief operating officer at Shopify, the Canadian ecommerce platform, has enjoyed an enthusiastic response. It called for a meeting purge, prompting Emma Jacobs to ask, have pandemic working patterns raised the number of work gatherings in which nothing is achieved?

Corporate dramas in Hollywood’s age of anxiety Wall Street encouraged the world’s largest entertainment companies to dive into streaming, tearing apart their old business model. Then, writes Anna Nicolaou, investors cooled towards the idea. This and other industry developments led to 2022’s brutal stock market revaluation of the companies that make movies, television, music and news. We can expect more dramas in 2023.

Take a break from the news

The London-based Korean-American chef, restaurateur and author Judy Joo shares her gastronomic guide to New York, including the Jazz Club at the new Aman hotel and some old favourites.

The inside of Tuscan restaurant Fresco
Tuscan restaurant Fresco by Scotto is one of Joo’s longstanding favourites © Eric Striffler

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