Stubbornly hot US inflation is fuelling bets that the Federal Reserve will become more aggressive about trying to cool price pressures and perhaps ditch its forward guidance by delivering a jumbo-sized interest rate rise in the coming months.
Fed policymakers had already all but promised half-point interest rate rises at their meeting next week and again in late July, following May's half-point increase and the start of balance sheet reductions this month.
That would be more policy tightening in the space of three months than the Fed did in all of 2018.
On Friday, traders of futures tied to the Fed policy rate began pricing in an even bolder path after US Labour Department data showed sharply higher food and record petrol prices pushed the consumer price index (CPI) up 8.6 per cent last month from a year earlier.
A separate University of Michigan survey showed longer-term inflation expectations rising to their highest since 2008.
Prices of Fed funds futures contracts now reflect better-than-even odds of a 75-basis point rate rise by July, with a one-in-four chance of that occurring next week — up from one-in-20 before the inflation report — and a policy rate in at least the 3.25 per cent to 3.5 per cent range at year end.
Yields on the two-year Treasury note, seen as a proxy for the Fed's policy rate, topped 3 per cent for the first time since 2008.
“We believe that today's inflation data — both the CPI and UMich inflation expectations — are game changers that will force the Fed to switch to a higher gear and front-load policy tightening,” wrote Jefferies' Aneta Markowska, who joined economists at Barclays on Friday in forecasting a 75 basis points rate increase at the Fed's June 14 to 15 meeting.
Most economists still expect a half-point rise next week, and more of the same at subsequent meetings through at least September if not further.
Core CPI, which strips out volatile energy and food prices, rose 6 per cent in May, down slightly from April's 6.2 per cent pace but far from the “clear and convincing” sign of cooling price pressures that Fed chairman Jerome Powell has said he needs to see before slowing rate increases.
“Any hopes that the Fed can ease up on the pace of rate hikes after the June and July meetings now seems to be a long shot,” wrote Bankrate chief financial analyst Greg McBride.
Economists at Deutsche Bank concurred, and said they now forecast rates to rise to 4.125 per cent by mid-2023.
Families hunt for bargains amid rising prices globally — in pictures
Fed policymakers at the close of next week's meeting will release their own best guesses of how high they will need to lift short-term rates.
They will also provide forecasts of how much unemployment — now at 3.6 per cent — may need to rise before the economy slows enough to reduce inflation.
In recent weeks, some had expressed the hope that by September their own rate rises, along with easing supply chain pressures and an expected shift in household spending away from scarce goods and towards services, would have started to ease price pressures and allowed them to downshift to smaller rate increases.
Friday's inflation report suggested the opposite.
Used car prices, which had been sinking, reversed course and rose 1.8 per cent from the prior month; airline fares rose by 12.6 per cent from the prior month and 37.8 per cent from a year earlier. Prices for shelter rose 5.5 per cent, the biggest jump in more than 30 years.
The Fed's current policy rate target is now 0.75 per cent to 1 per cent. Fed officials want to get it higher without undermining a historically tight labour market and sending the economy into recession, but accelerating inflation will make that a hard task.
“These are ugly numbers … I’d say we’ll probably be in a recession in the fourth quarter of this year with confirmation in the second quarter of 2023,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
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How Alia's experiment will help humans get to Mars
Alia’s winning experiment examined how genes might change under the stresses caused by being in space, such as cosmic radiation and microgravity.
Her samples were placed in a machine on board the International Space Station. called a miniPCR thermal cycler, which can copy DNA multiple times.
After the samples were examined on return to Earth, scientists were able to successfully detect changes caused by being in space in the way DNA transmits instructions through proteins and other molecules in living organisms.
Although Alia’s samples were taken from nematode worms, the results have much bigger long term applications, especially for human space flight and long term missions, such as to Mars.
It also means that the first DNA experiments using human genomes can now be carried out on the ISS.
Killing of Qassem Suleimani
SERIES INFO
Afghanistan v Zimbabwe, Abu Dhabi Sunshine Series
All matches at the Zayed Cricket Stadium, Abu Dhabi
Test series
1st Test: Zimbabwe beat Afghanistan by 10 wickets
2nd Test: Wednesday, 10 March – Sunday, 14 March
Play starts at 9.30am
T20 series
1st T20I: Wednesday, 17 March
2nd T20I: Friday, 19 March
3rd T20I: Saturday, 20 March
TV
Supporters in the UAE can watch the matches on the Rabbithole channel on YouTube
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
Infiniti QX80 specs
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Specs
Engine: 51.5kW electric motor
Range: 400km
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Killing of Qassem Suleimani
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Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
Panipat
Director Ashutosh Gowariker
Produced Ashutosh Gowariker, Rohit Shelatkar, Reliance Entertainment
Cast Arjun Kapoor, Sanjay Dutt, Kriti Sanon, Mohnish Behl, Padmini Kolhapure, Zeenat Aman
Rating 3 /5 stars
A new relationship with the old country
Treaty of Friendship between the United Kingdom of Great Britain and Northern Ireland and the United Arab Emirates
The United kingdom of Great Britain and Northern Ireland and the United Arab Emirates; Considering that the United Arab Emirates has assumed full responsibility as a sovereign and independent State; Determined that the long-standing and traditional relations of close friendship and cooperation between their peoples shall continue; Desiring to give expression to this intention in the form of a Treaty Friendship; Have agreed as follows:
ARTICLE 1 The relations between the United Kingdom of Great Britain and Northern Ireland and the United Arab Emirates shall be governed by a spirit of close friendship. In recognition of this, the Contracting Parties, conscious of their common interest in the peace and stability of the region, shall: (a) consult together on matters of mutual concern in time of need; (b) settle all their disputes by peaceful means in conformity with the provisions of the Charter of the United Nations.
ARTICLE 2 The Contracting Parties shall encourage education, scientific and cultural cooperation between the two States in accordance with arrangements to be agreed. Such arrangements shall cover among other things: (a) the promotion of mutual understanding of their respective cultures, civilisations and languages, the promotion of contacts among professional bodies, universities and cultural institutions; (c) the encouragement of technical, scientific and cultural exchanges.
ARTICLE 3 The Contracting Parties shall maintain the close relationship already existing between them in the field of trade and commerce. Representatives of the Contracting Parties shall meet from time to time to consider means by which such relations can be further developed and strengthened, including the possibility of concluding treaties or agreements on matters of mutual concern.
ARTICLE 4 This Treaty shall enter into force on today’s date and shall remain in force for a period of ten years. Unless twelve months before the expiry of the said period of ten years either Contracting Party shall have given notice to the other of its intention to terminate the Treaty, this Treaty shall remain in force thereafter until the expiry of twelve months from the date on which notice of such intention is given.
IN WITNESS WHEREOF the undersigned have signed this Treaty.
DONE in duplicate at Dubai the second day of December 1971AD, corresponding to the fifteenth day of Shawwal 1391H, in the English and Arabic languages, both texts being equally authoritative.
Signed
Geoffrey Arthur Sheikh Zayed
Arrogate's winning run
1. Maiden Special Weight, Santa Anita Park, June 5, 2016
2. Allowance Optional Claiming, Santa Anita Park, June 24, 2016
3. Allowance Optional Claiming, Del Mar, August 4, 2016
4. Travers Stakes, Saratoga, August 27, 2016
5. Breeders' Cup Classic, Santa Anita Park, November 5, 2016
6. Pegasus World Cup, Gulfstream Park, January 28, 2017
7. Dubai World Cup, Meydan Racecourse, March 25, 2017
UAE currency: the story behind the money in your pockets
White hydrogen: Naturally occurring hydrogen
Chromite: Hard, metallic mineral containing iron oxide and chromium oxide
Ultramafic rocks: Dark-coloured rocks rich in magnesium or iron with very low silica content
Ophiolite: A section of the earth’s crust, which is oceanic in nature that has since been uplifted and exposed on land
Olivine: A commonly occurring magnesium iron silicate mineral that derives its name for its olive-green yellow-green colour
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Pathaan
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Bio:
Favourite Quote: Prophet Mohammad's quotes There is reward for kindness to every living thing and A good man treats women with honour
Favourite Hobby: Serving poor people
Favourite Book: The Alchemist by Paulo Coelho
Favourite food: Fish and vegetables
Favourite place to visit: London
