The US Federal Reserve should consider pivoting away from its aggressive monetary policy actions as financial conditions have tightened drastically to bring inflation down, the Institute of International Finance (IIF) said.
This emphasis on spot inflation and other data has conditioned markets to react violently to instances where data releases are meaningfully different from consensus, the Washington-based institute said in a report on Friday.
Spot data is derived from actual prices and the IIF said that historically, monetary policy has always been forecast-based, whereby policymakers target inflation two years ahead.
With the sharp rise in US inflation, this forecast-based approach has, at least to some degree, given way to the reaction to spot inflation and other data, it said.
"It is possible that financial conditions have already tightened sufficiently to bring inflation down on a two-year horizon, so reacting to spot data may raise the risk of a hard landing," the IIF economists said.
"It is, therefore, better not to react too much to the ongoing data flow ... this is why a Fed pivot to a slower pace of hikes is warranted in September. Such a pivot would also be consistent with longer-term inflation expectation."
The IIF also cited the latest US jobs report and the dollar's strong jump in reaction as one of the reasons spot data carries risks. US job growth surged in July, as the economy added 528,000 positions, defying all expectations of a slowdown.
The IIF said the the shift was on "full display" in June when Fed chairman Jerome Powell linked the acceleration of Fed hikes to higher-than-expected inflation for May and and rising inflation expectations".
"Financial conditions have tightened drastically, especially in housing, and — more fundamentally — data have gotten noisier in the Covid recovery, so it is not clear to us that high-frequency data surprises carry much information, IIF economists said.
Putting a greater emphasis on forecasts rather than on spot data will mean "it is time for the Fed to pivot — slow the pace of monetary policy tightening going forward", they said.
In July, the US said its economy had shrunk for a second quarter in a row, a “technical recession” according to commonly followed definition, as record-high inflation and aggressive interest-rate increases by the Fed hit businesses and housing demand.
The central bank last month raised interest rates by three quarters of a percentage point, which was its third increase in three months and the biggest since 1994 after inflation climbed again in May, jumping 8.6 per cent on an annual basis.
The rate of inflation, however, eased in July, with falling petrol prices providing some relief for Americans.
Consumer confidence in the housing market, meanwhile, fell to its lowest level since 2011, the mortgage association Fannie Mae said this week.
The IIF last month warned that a risk of a global recession is “rising sharply” amid a combination of shocks, including the effects of the Russia-Ukraine conflict on the eurozone, Covid-19 pandemic-related uncertainty in China and the sharp tightening in US financial conditions.
The global economy is projected to grow 2.3 per cent in 2022, compared with an earlier 4.6 per cent estimate, the IIF said in a May 26 report. It also cut its growth forecast for the eurozone this year to 1 per cent from an earlier 3 per cent estimate, saying it was a “recession call”.
RESULTS
5pm Wathba Stallions Cup Maiden (PA) Dh70,000 (Dirt) 1,400m
Winner Munfared, Fernando Jara (jockey), Ahmed Al Mehairbi (trainer)
5.30pm Handicap (PA) Dh70,000 (D) 1,600m
Winner Sawt Assalam, Szczepan Mazur, Ibrahim Al Hadhrami
6pm Maiden (PA) Dh70,000 (D) 1,800m
Winner Dergham Athbah, Pat Dobbs, Mohamed Daggash
6.30pm Handicap (PA) Dh70,000 (D) 1,800m
Winner Rajee, Fernando Jara, Majed Al Jahouri
7pm Conditions (PA) Dh80,000 (D) 1,800m
Winner Kerless Del Roc, Fernando Jara, Ahmed Al Mehairbi
7.30pm Handicap (TB) Dh70,000 (D) 2,000m
Winner Pharoah King, Pat Dobbs, Doug Watson
8pm Conditions (PA) Dh85,000 (D) 2,000m
Winner Sauternes Al Maury, Dane O’Neill, Doug Watson
Sholto Byrnes on Myanmar politics
BEETLEJUICE BEETLEJUICE
Starring: Winona Ryder, Michael Keaton, Jenny Ortega
Director: Tim Burton
Rating: 3/5
Tax authority targets shisha levy evasion
The Federal Tax Authority will track shisha imports with electronic markers to protect customers and ensure levies have been paid.
Khalid Ali Al Bustani, director of the tax authority, on Sunday said the move is to "prevent tax evasion and support the authority’s tax collection efforts".
The scheme’s first phase, which came into effect on 1st January, 2019, covers all types of imported and domestically produced and distributed cigarettes. As of May 1, importing any type of cigarettes without the digital marks will be prohibited.
He said the latest phase will see imported and locally produced shisha tobacco tracked by the final quarter of this year.
"The FTA also maintains ongoing communication with concerned companies, to help them adapt their systems to meet our requirements and coordinate between all parties involved," he said.
As with cigarettes, shisha was hit with a 100 per cent tax in October 2017, though manufacturers and cafes absorbed some of the costs to prevent prices doubling.
Game Of Thrones Season Seven: A Bluffers Guide
Want to sound on message about the biggest show on television without actually watching it? Best not to get locked into the labyrinthine tales of revenge and royalty: as Isaac Hempstead Wright put it, all you really need to know from now on is that there’s going to be a huge fight between humans and the armies of undead White Walkers.
The season ended with a dragon captured by the Night King blowing apart the huge wall of ice that separates the human world from its less appealing counterpart. Not that some of the humans in Westeros have been particularly appealing, either.
Anyway, the White Walkers are now free to cause any kind of havoc they wish, and as Liam Cunningham told us: “Westeros may be zombie land after the Night King has finished.” If the various human factions don’t put aside their differences in season 8, we could be looking at The Walking Dead: The Medieval Years.
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Abu Dhabi traffic facts
Drivers in Abu Dhabi spend 10 per cent longer in congested conditions than they would on a free-flowing road
The highest volume of traffic on the roads is found between 7am and 8am on a Sunday.
Travelling before 7am on a Sunday could save up to four hours per year on a 30-minute commute.
The day was the least congestion in Abu Dhabi in 2019 was Tuesday, August 13.
The highest levels of traffic were found on Sunday, November 10.
Drivers in Abu Dhabi lost 41 hours spent in traffic jams in rush hour during 2019
Meydan race card
6.30pm: Maiden Dh 165,000 1,600m
7.05pm: Handicap Dh 185,000 2,000m
7.40pm: Maiden Dh 165,000 1,600m
8.15pm: Handicap Dh 190,000 1,400m
8.50pm: Handicap Dh 175,000 1,600m
9.25pm: Handicap Dh 175,000 1,200m
10pm: Handicap Dh 165,000 1,600m
