US inflation has been lower than standard economic models would predict throughout the current expansion.
Some blame the rise of Amazon for keeping prices low, but there is another so-called "Amazon effect" that might be more relevant for central bankers.
That’s according to a paper presented on Saturday by Harvard Business School economist Alberto Cavallo at the Federal Reserve Bank of Kansas City’s annual symposium in Jackson Hole, Wyoming.
Mr Cavallo's main finding was that competition from Amazon has led to a greater frequency of price changes at more traditional retailers such as Walmart, and also to more uniformity in pricing of the same items across different locations. He found that the shift has led to a greater influence of movements in the US dollar exchange rate and gas prices on retail prices.
“For monetary policy and those interested in inflation dynamics, the implication is that retail prices are becoming less ‘insulated’ from these common nationwide shocks,” Mr Cavallo wrote. “Fuel prices, exchange-rate fluctuations, or any other force affecting costs that may enter the pricing algorithms used by these firms are more likely to have a faster and larger impact on retail prices that in the past.”
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That dynamic may complicate matters for Fed officials as they navigate the signals from unemployment and inflation while setting interest rates. A paper published on Thursday by top staff economists at the Fed’s board of governors in Washington cautioned against focusing too much on inflation and not enough on unemployment.
Part of the rationale is that in an environment like the present, where the relationship between unemployment and inflation seems to be weaker than it has been historically, external shocks to prices unrelated to domestic demand conditions could lead policy makers astray. Fed chairman Jerome Powell cited the Fed staff paper on Friday in a speech at the Jackson Hole conference without offering a full-throated endorsement of its conclusions.
The Cavallo study also showed that from 2008 to 2017, as online purchases accounted for an ever-growing share of total retail sales, the average duration of prices of goods sold at large US retailers like Walmart fell from about 6.5 months to about 3.7 months.
The implications have subtle significance for monetary policy because so-called “sticky prices” - the notion that sellers aren’t able to change prices right away in response to changes in supply and demand - is precisely what gives interest rates power in mainstream models to have any effect on the economy at all. In those models, if prices adjust instantaneously in response to shocks, then there is no role for central bankers to guide supply and demand back into equilibrium.
“For monetary models and empirical work, my results suggest that the focus needs to move beyond traditional nominal rigidities,” Mr Cavallo wrote. “Labour costs, limited information, and even ’decision costs’ [related to inattention and the limited capacity to process data] will tend to disappear as more retailers use algorithms to make pricing decisions.”
Company%C2%A0profile
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
More on Quran memorisation:
'Top Gun: Maverick'
Rating: 4/5
Directed by: Joseph Kosinski
Starring: Tom Cruise, Val Kilmer, Jennifer Connelly, Jon Hamm, Miles Teller, Glen Powell, Ed Harris
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
The low down on MPS
What is myofascial pain syndrome?
Myofascial pain syndrome refers to pain and inflammation in the body’s soft tissue. MPS is a chronic condition that affects the fascia (connective tissue that covers the muscles, which develops knots, also known as trigger points).
What are trigger points?
Trigger points are irritable knots in the soft tissue that covers muscle tissue. Through injury or overuse, muscle fibres contract as a reactive and protective measure, creating tension in the form of hard and, palpable nodules. Overuse and sustained posture are the main culprits in developing trigger points.
What is myofascial or trigger-point release?
Releasing these nodules requires a hands-on technique that involves applying gentle sustained pressure to release muscular shortness and tightness. This eliminates restrictions in connective tissue in orderto restore motion and alleviate pain. Therapy balls have proven effective at causing enough commotion in the tissue, prompting the release of these hard knots.
THE BIO
Favourite car: Koenigsegg Agera RS or Renault Trezor concept car.
Favourite book: I Am Pilgrim by Terry Hayes or Red Notice by Bill Browder.
Biggest inspiration: My husband Nik. He really got me through a lot with his positivity.
Favourite holiday destination: Being at home in Australia, as I travel all over the world for work. It’s great to just hang out with my husband and family.
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
MATCH INFO
Barcelona v Real Madrid, 11pm UAE
Match is on BeIN Sports
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
From exhibitions to the battlefield
In 2016, the Shaded Dome was awarded with the 'De Vernufteling' people's choice award, an annual prize by the Dutch Association of Consulting Engineers and the Royal Netherlands Society of Engineers for the most innovative project by a Dutch engineering firm.
It was assigned by the Dutch Ministry of Defence to modify the Shaded Dome to make it suitable for ballistic protection. Royal HaskoningDHV, one of the companies which designed the dome, is an independent international engineering and project management consultancy, leading the way in sustainable development and innovation.
It is driving positive change through innovation and technology, helping use resources more efficiently.
It aims to minimise the impact on the environment by leading by example in its projects in sustainable development and innovation, to become part of the solution to a more sustainable society now and into the future.
Cricket World Cup League Two
Teams
Oman, UAE, Namibia
Al Amerat, Muscat
Results
Oman beat UAE by five wickets
UAE beat Namibia by eight runs
Namibia beat Oman by 52 runs
UAE beat Namibia by eight wickets
Fixtures
Saturday January 11 - UAE v Oman
Sunday January 12 – Oman v Namibia
Diriyah%20project%20at%20a%20glance
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Dubai works towards better air quality by 2021
Dubai is on a mission to record good air quality for 90 per cent of the year – up from 86 per cent annually today – by 2021.
The municipality plans to have seven mobile air-monitoring stations by 2020 to capture more accurate data in hourly and daily trends of pollution.
These will be on the Palm Jumeirah, Al Qusais, Muhaisnah, Rashidiyah, Al Wasl, Al Quoz and Dubai Investment Park.
“It will allow real-time responding for emergency cases,” said Khaldoon Al Daraji, first environment safety officer at the municipality.
“We’re in a good position except for the cases that are out of our hands, such as sandstorms.
“Sandstorms are our main concern because the UAE is just a receiver.
“The hotspots are Iran, Saudi Arabia and southern Iraq, but we’re working hard with the region to reduce the cycle of sandstorm generation.”
Mr Al Daraji said monitoring as it stood covered 47 per cent of Dubai.
There are 12 fixed stations in the emirate, but Dubai also receives information from monitors belonging to other entities.
“There are 25 stations in total,” Mr Al Daraji said.
“We added new technology and equipment used for the first time for the detection of heavy metals.
“A hundred parameters can be detected but we want to expand it to make sure that the data captured can allow a baseline study in some areas to ensure they are well positioned.”
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
The%20specs
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SERIE A FIXTURES
Saturday (UAE kick-off times)
Atalanta v Juventus (6pm)
AC Milan v Napoli (9pm)
Torino v Inter Milan (11.45pm)
Sunday
Bologna v Parma (3.30pm)
Sassuolo v Lazio (6pm)
Roma v Brescia (6pm)
Verona v Fiorentina (6pm)
Sampdoria v Udinese (9pm)
Lecce v Cagliari (11.45pm)
Monday
SPAL v Genoa (11.45pm)
FROM%20THE%20ASHES
%3Cp%3EDirector%3A%20Khalid%20Fahad%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Shaima%20Al%20Tayeb%2C%20Wafa%20Muhamad%2C%20Hamss%20Bandar%3C%2Fp%3E%0A%3Cp%3ERating%3A%203%2F5%3C%2Fp%3E%0A
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