FirstFT: Jay Powell dismisses claims of Fed complacency on inflation

Jay Powell fended off a barrage of questions from testy Republicans and anxious Democrats in Congress yesterday as he sought to ease concerns over the Federal Reserve’s response to surging US inflation.

The Fed chair pushed back against suggestions that the central bank might be complacent about inflation risks during his appearance at the House financial services committee. During the three hour-long virtual hearing he largely stuck to his view that the inflation increases would be transitory and eventually subside.

A surge in the pace of price growth on both sides of the Atlantic has revived economists’ concerns about the risk of overheating.

Data published this week showed that US consumer prices rose 5.4 per cent in June compared with a year earlier, the fastest pace since 2008. In the UK, inflation hit 2.5 per cent in the same period, its highest level since 2018, official figures confirmed yesterday. What is driving the price increases? Our economics teams in the US and Europe explain.

Line chart of Annual % change in consumer prices showing The pace of price growth picks up

US government debt rallied and the dollar weakened as Powell tried to ease concerns about the inflation surge. My colleague Robert Armstrong chews over the latest comments from the Fed chair in today’s Unhedged email and assesses their impact on the bond market. (Sign up here)

Five more stories in the news

1. Facebook: FTC chair should step back from antitrust case The social media platform has requested that Lina Khan, the new chair of the Federal Trade Commission, step back from deciding whether to pursue an antitrust case against the tech group. For the latest tech news, subscribe to Chris Nuttall’s #techFT newsletter.

2. China warns of economic uncertainty The pace of China’s economic recovery rose modestly in the second quarter as signs of sluggishness in the world’s second-biggest economy stoked expectations of greater policy support. Read the full report on China’s latest GDP release here.

3. Democrats eye carbon border tax Democratic lawmakers are drawing up plans for a tax on imports from carbon-polluting countries to help pay for a $3.5tn package in new government spending on everything from universal childcare to an expansion of public healthcare benefits.

  • In other climate change news the EU has unveiled sweeping plans to become the world’s first mover on achieving net-zero emissions to limit global warming.

4. UAE and Saudi close to agreeing oil output deal The United Arab Emirates and Saudi Arabia have reached the outline of a deal that would unlock an agreement by Opec and its allies to raise oil production, delegates and advisers to the group have told the FT. Last week oil prices hit their highest level since 2018 after Opec failed to reach agreement.

5. South Africans reel from riots In the past few days, South Africa has come closer to social breakdown than at any point since the end of apartheid almost three decades ago. Rioting, triggered by last week’s arrest of former president Jacob Zuma, has left more than 70 dead and devastated Africa’s most industrialised economy.

Plumes of smoke seen outside a shopping centre in Durban as a barricade burns © Andre Swart/AP

Coronavirus digest

  • Wells Fargo, Citigroup and JPMorgan together closed more than 250 branches in the first half of the year, as US lenders bet that much of the foot traffic that went digital during lockdowns will never return.

  • More than 700 workers at the UK’s largest car factory are self-isolating as the Delta variant of coronavirus wreaks havoc across the country’s industry and businesses.

  • Covid-19 has led to falls in childhood vaccinations, the WHO has warned.

Follow the latest with our coronavirus live blog and sign up for our Coronavirus Business Update newsletter for more Covid-19 news.

The day ahead

Merkel makes last official US trip Angela Merkel makes what is likely to be her final official visit to the White House after 16 years as German chancellor. In a meeting with Joe Biden the two leaders are likely to discuss defence spending, China, and the thorny issue of the German-backed Nord Stream 2 pipeline.

Jay Powell’s second day of testimony The Federal Reserve chair presents his semi-annual report on monetary policy to the Senate committee on banking, housing and urban affairs.

Morgan Stanley earnings Morgan Stanley will close out this week’s US bank earnings announcements. It follows Bank of America and Citigroup, which reported declining revenues yesterday.

Private members’ club goes public The Membership Collective Group, owner of private members’ club Soho House, is expected to start trading today on the New York Stock Exchange after selling shares at $14 apiece in an initial public offering, securing it a valuation of $2.8bn.

What else we’re reading

The former plastic surgeon behind ‘stablecoin’ Tether As the world’s largest cryptocurrency pegged to other assets, Tether is a lubricant for investors moving in and out of more volatile crypto money — but it is also deeply controversial. At its centre is a man named Giancarlo Devasini.

Can Chicago thrive in a work-from-home world? There’s a lot riding on where Chicago goes next, writes columnist Patti Waldmeir, and two factors will help determine its fate: remote working and urban crime.

Cuba needs fresh thinking If the country’s largest protests in decades were spontaneous, the government’s response was anything but, writes the FT’s Michael Stott. The response was as old as the challenges facing the single-party state: a failed economy and an ossified political system.

The brittle facade of Vladimir Putin’s Russia Vladimir Putin will happily steal Russia’s future to safeguard his own position, writes Philip Stephens. That is what he is doing by throwing in his lot with Xi Jinping’s China — he will be gone before Russia pays the price.

What Utoya massacre survivors know 10 years on “22 Juli” has become as infamous as 9/11 is in the US. Due to the tight-knit nature of Norway, one newspaper estimated as many as one in four Norwegians knew somebody affected. Here’s how the attacks, Norway’s deadliest violence since the second world war, changed their lives.

Thank you to readers who took our poll yesterday. Fifty-nine per cent said the Tokyo Olympics should not proceed as planned because of Covid-19.

Beauty

Five eco sunscreens How do you curb your plastic use? Take sunscreen — 72 per cent of which contains microplastics. And that’s not including the packaging. Here’s how to soak up the sun — without a hint of plastic.

View original post