from Forbes Breaking News
Argentina Devalues Currency by 50% in ‘Shock’ Measure Against Hyperinflation
Argentina devalued its currency by more than 50 percent Tuesday in a set of “shock” measures aimed at reviving a crumbling economy and tackling triple-digit inflation.
by News Wires
France24
The government of President Javier Milei, a libertarian who swept from obscurity to the top office vowing to chainsaw spending, also announced cuts to generous state subsidies and a halt to all new public construction projects.
In a pre-recorded video message, Economy Minister Luis Caputo took pains to explain to Argentines the causes of their decades of recurrent economic crises, debt, inflation and fiscal deficits.
Annual inflation is currently at 140 percent and poverty levels at 40 percent in Latin America’s third-biggest economy.
The government coffers are also empty, and Milei has repeatedly said: “There is no money.”
PIMCO Adds Bond Exposure Outside the U.S. On Inflation Risks
by Davide Barbuscia
The Globe and Mail
U.S. bond giant PIMCO said on Wednesday it is increasing its bond exposure in developed markets outside the United States as inflation could complicate the shift of the Federal Reserve to lower interest rates.
The $1.9 trillion asset manager expects an easing in central bank policies to bolster bonds in markets such as Australia, Canada, the United Kingdom and the euro zone, but is underweight U.S. fixed income as economic growth in America may continue to be accompanied by rising price pressures.
“The global economic and market outlook suggests diverging paths among regions and sectors,” portfolio managers Erin Browne and Emmanuel Sharef wrote in an asset allocation outlook report.
“In fixed income markets, we’re adding to our investments in select countries outside the U.S. where easier monetary policy this year is likely to boost bonds,” they said.
Lag Effects From the Past Are Driving Inflation Today
by Neil Irwin
Axios
It has been three long years since inflation first ripped upward. But the inflation data in 2024 is, in important ways, being driven by that initial series of economic disruptions that took place in 2021 and 2022.
Why it matters: In one sense, this is good news — it implies that once these lag effects have worked through the system, inflation should settle lower without much additional economic pain.
- As Goldman Sachs economist Ronnie Walker writes in a recent note, “the remaining hot inflation appears to be lagged catch-up inflation, not reheating inflation.”
Yes, but: The bad news is that it implies the inflation of the last few years has, cumulatively, been worse than earlier data implied.
Stocks Slip, Dollar Gains as Market Awaits Inflation Data
by Herbert Lash and Harry Robertson
Reuters.com
NEW YORK/LONDON, May 8 (Reuters) – Global equity markets mostly faltered on Wednesday as investors await fresh inflation data to better assess the likelihood of Federal Reserve interest rate cuts, while the dollar edged higher on expectations of U.S. economic out-performance.
European stocks rose to a record high, boosted by company earnings, but stocks on Wall Street slid as a downbeat forecast from Uber (UBER.N), opens new tab knocked its shares down 5.7% and made the ride-hailing firm one of the biggest decliners on the S&P 500.
The yen weakened for a third day and kept investors wary of intervention from Japanese authorities, while crude oil edged up from near two-month lows. In Europe, the Swedish crown was under pressure after the central bank cut rates as expected and said two more cuts were likely this year if inflation remained mild.
Here’s How Inflation Erodes Your Savings and What You Can Do to Stop It
Inflation wears away your purchasing power, meaning the dollars you save today will be worth less in the future.
by Emily Batdorf
Yahoo! Finance
Inflation has been all over the news over the last couple of years. Even if you’re not tired of hearing about it, you’re probably sick of higher prices at the grocery store and gas pump.
As of March 2024, the U.S. inflation rate was 3.5% for the previous 12 months. Although inflation has cooled following the 40-year high of 9.1% in 2022, it’s still above the Federal Reserve’s long-term target of 2%, which it considers ideal for employment and stable prices.
Not only can inflation negatively impact the economy as a whole, but it can also make it tough for the average consumer to save. Let’s take a closer look at how inflation affects savings and what you can do to combat it.
Sky-High Inflation Forces Argentina to Circulate First 10,000-Peso Notes
New bills worth $11 aim to help population avoid having to carry bricks of cash
by Ciara Nugent
FT
Argentina’s central bank has put the country’s first 10,000 peso notes into circulation, in a long-awaited step to streamline the nation’s cumbersome use of large heaps of cash following the collapse of their currency.
The new notes, worth $11 at the country’s official exchange rate, are five times more valuable than the previous largest note, of 2,000 pesos — which began circulating last year and remains relatively rare — and 10 times more valuable than the more common 1,000-peso note.
Cash payments remain popular in Argentina, where many retailers prefer to receive funds immediately amid chronic economic instability, and others operate off the books. Residents are forced to carry large wads of bills to make small payments, and backpacks of them to make larger ones.
What to Expect from the Next CPI Report
by Simon Moore
Forbes
The next Consumer Price Index release for April 2024 is expected to continue the pattern of relatively higher inflation as seen so far this year. If so, it’s likely to provide support for the Federal Reserve holding back on interest rate cuts until July or later.
Release Timing
On May 15 the U.S. Bureau of Labor Statistics will release CPI data for the month of April at 8:30 a.m. ET. This will be the first of two CPI releases before the next Federal Open Market Committee meeting on June 12. However, that subsequent CPI release will come on the morning of the FOMC’s decision day. Due to lack of progress on disinflation so far in 2024, the FOMC isn’t expected to cut interest rates until July at the earliest, and quite possibly later.
Fed’s Kashkari Cites High Risk Inflation is “Settling”
by Reuters
Kitco
WASHINGTON, May 7 (Reuters) – The strength of the U.S. housing market and potentially stalled progress on inflation means monetary policy may not be as tight as Federal Reserve officials think it is, Minneapolis Federal Reserve President Neel Kashkari said in a new essay, opens new tabon Tuesday that raises the possibility price pressures are “settling” to a level above the Fed’s 2% target.
Wrongly estimating how current policy is affecting the economy “could explain the constellation of data we are observing,” particularly in housing but more broadly in ongoing economic growth, Kashkari wrote. Housing in particular is “proving more resilient to…tight policy than it generally has in the past,” depriving the Fed of what is typically a key channel for the impact of high interest rates to be felt.
Trump Tariffs Drive Inflation? Big Short’s Steve Eisman Says That’s ‘Ridiculous’
by John Carney
Breitbart.com
Steve Eisman, best known for his “Big Short” bet against subprime mortgages, said that the idea tariffs imposed by Donald Trump will drive up inflation is “ridiculous.”
The Neuberger Berman Group portfolio manager said in a Bloomberg TV interview on Tuesday that he expects that if Donald Trump is re-elected as president, he will impose tariffs on goods from China. But he does not believe that higher import duties will increase inflation.
“Do I think that Donald Trump will increase tariffs on China? Sure. Do I think that would have a massively inflationary impact on the U.S.? I think that’s ridiculous,” Eisman said.
President Donald Trump has said he is considering tariffs on almost all imported goods. He has also said he plans to raise the tariffs he imposed on Chinese goods. Critics charge that these would moves would raise consumer prices, although recent history shows that the earlier round of tariffs did not raise consumer prices.
Get Ready for Weaker Growth and Higher Inflation. The Consensus Was Wrong.
by Daniel Lacalle
Mises.org
The weak GDP figure for the first quarter came with a double negative: poor consumer spending and exports, plus a rise in core inflation. The US administration’s enormous fiscal stimulus underscores the importance of considering the weaker-than-expected data.
A deceleration in consumer spending, a decline in the personal savings ratio to 3.6%, and poor exports added to a set of figures for investment that were also negative when we looked at the details.
The gross domestic product is much weaker than the headlines suggest. If we look at consumption, both durable and non-durable goods were flat or down, while the only item that increased modestly was the services factor. Residential and intellectual property boosted investment, while equipment remained weak in the past two quarters. The slump in export growth coincided with a significant increase in imports, which weakened the trade deficit. Government spending continues to rise, albeit at a slower pace, and becomes the main factor to disguise what is evidently a concerning level of growth for a leading economy with enormous potential.