Prices – Page 20 – ReportWire

European Central Bank makes another large interest rate hike

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FRANKFURT, Germany — The European Central Bank piled on another outsized interest rate hike aimed at squelching out-of-control inflation, increasing rates Thursday at the fastest pace in the euro currency’s history and raising questions about how far the bank intends to go with a recession looming over the economy.

The 25-member governing council raised its interest rate benchmarks by three-quarters of a percentage point at a meeting in Frankfurt, matching its record increase from last month and joining the U.S. Federal Reserve in making a series of rapid hikes to tackle soaring consumer prices.

The ECB has now raised rates for the 19-country euro area by a full 2 percentage points in just three months, distance that took 18 months to cover during its last extended hiking phase in 2005-2007 and 17 months in 1999-2000.

Central banks around the world are rapidly raising interest rates that steer the cost of credit for businesses and consumers. Their goal is to halt galloping inflation fueled by high energy prices, post-pandemic supply bottlenecks, and reviving demand for goods and services after COVID-19 restrictions eased. The Fed raised rates by three-quarters of a point for the third straight time last month.

Quarter-point increases have usually been the norm for central banks. But that was before inflation spiked to 9.9% in the eurozone, fueled by higher prices for natural gas and electricity after Russia cut off most of its gas supplies during the war in Ukraine. Inflation in the U.S. is near 40-year highs of 8.2%, fueled in part by stronger growth and more pandemic support spending than in Europe.

Inflation robs consumers of purchasing power, leading many economists to pencil in a recession for the end of this year and the beginning of next year in both the U.S. and the 19 countries that use the euro as their currency.

Markets will be watching ECB President Christine Lagarde’s news conference for clues about how far the bank intends to go.

Analysts at UniCredit said Lagarde was not likely to provide clues about the peak level of rates but “we suspect that she will drop hints pointing to an increasing likelihood that rates will have to be raised into restrictive territory, and a slower pace of hikes following today’s bold move.”

At the last meeting in September, she indicated that three-quarters of a point was not the “norm” but added that decisions are being taking on a meeting-to-meeting basis. Some analysts foresee a half-point increase at the last rate-setting meeting of the year in December and think the bank may pause after that.

The ECB foresees inflation falling to 2.3% by the end of 2024.

Higher rates can control inflation by making it more expensive to borrow, spend and invest, lowering demand for goods. But the concerted effort to raise rates has also raised concerns about their impact on growth and on markets for stocks and bonds. Years of low rates on conservative investments have pushed investors toward riskier holdings such as stocks, a process that is now going into reverse, while rising rates can lower the value of existing bond holdings.

The head of the International Monetary Fund, Kristalina Georgieva, has warned that tightening monetary policy “too much and too fast” raises the risk of prolonged recessions in many economies. The IMF forecasts that global economic growth will slow from 3.2% this year to 2.7% next year.

The ECB’s benchmark for short-term lending to banks now stands at 2%, a level last seen in March 2009.

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October 27, 2022

Gas crunch eases in Europe — but the respite might not last

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FRANKFURT, Germany — Natural gas and electricity prices in Europe have plunged from summer peaks thanks to mild weather and a monthslong scramble to fill gas storage ahead of winter and replace Russian supplies during the war in Ukraine. It’s a welcome respite after Russia slashed natural gas flows, triggering an energy crisis that has fueled record inflation and a looming recession.

Yet experts warn it’s too soon to exhale, even as European governments roll out relief packages for people struggling with high utility bills and work on longer-term ways to contain volatile gas and electricity prices that have shrunk household budgets and forced some businesses to shut down.

Uncertainties include not only the weather but how responsive people will be to appeals to turn down their heating and how much demand there will be from Asian economies for scarce energy supplies. And the war a few hours east is a cauldron of possible unpleasant surprises that could cut energy supplies needed for electricity, heating and factory work and send prices sharply higher.

Persistent unknowns are leaving energy-intensive businesses jittery. They are appealing to governments to help them and their customers weather the energy storm so that disruptions in supplies of everything from glass to plastics to clean hospital sheets do not cascade through the economy.

“We must remember that we are still in a tense situation — an economic war between the European Union and Russia in which Russia has weaponized energy supplies,” said Agata Loskot-Strachota, an energy policy expert at the Center for Eastern Studies in Warsaw, Poland.

The good news is natural gas prices on Europe’s TTF benchmark fell on Monday below 100 euros (dollars) per megawatt-hour for the first time since June, a 70% drop from late August highs of nearly 350 euros per megawatt-hour. Electricity prices also fell.

While analysts say lower gas prices are allowing European fertilizer producers to restart operations, there’s no sense of relief for business owners like Sven Paar. His commercial laundry in the German town of Wallduern will use around 30,000 euros worth of natural gas this year to run 12 heavy-duty machines that can wash eight tons of hospital and hotel bedsheets and restaurant tablecloths each day.

His local utility says the bill is rising to 165,000 euros next year. On top of that, Paar says he’s unsettled by a lack of clarity from the German government on whether laundries like his would be considered essential to the economy and spared cutbacks in case of state-imposed rationing. Reports that the utility regulator is working on sorting out the question aren’t enough.

“The problem is, everyone has heard something, and just hearing something doesn’t bring me any planning security,” he said. A letter he sent to the regulator went unanswered.

“That’s the problem, you hope every day that you don’t get a call from someone that says, ‘Tomorrow you aren’t getting any gas,’” he said.

Germany’s hospital association has taken up the issue on behalf of laundries like his, saying hospitals have mostly outsourced their laundry services and would run out of sheets and surgical drapes within a few days without them.

The German government is working to roll out plans to cap gas prices for hard-hit businesses. The association representing smaller businesses says its understanding is that the government would focus any possible rationing on the 2,500 largest gas users in Germany and mostly spare businesses the size of Paar’s.

Helping ease the possibility of rationing is Europe’s underground storage getting filled to 94%, compared with 77% at this time last year, which energy expert Loskot-Strachota called “quite a success.” A big assist has come from mild weather across Europe, with Warsaw, for example, a relatively balmy 18 degrees Celsius (64 degrees Fahrenheit) on Monday.

Germany, once heavily dependent on Russian gas, has filled storage to 97% of capacity, France to 99% and Belgium and Portugal both to 100%. That was achieved by importing record quantities of liquefied natural gas, or LNG, which comes by ship from the U.S. and Qatar instead of by pipeline from Russia, and by increasing pipeline supplies from Norway and Azerbaijan.

The scramble to line up more LNG has led to a backup of tankers off the coast of Spain, a major processor, as orders collide with reduced demand and limited capacity at the country’s import terminals, which turn boatloads of supercooled LNG back into gas that then flows to homes and businesses.

Spanish gas company Enagas warned last week that it may have to delay or stop tankers from unloading LNG because its storage was almost full. Vessel positioning maps showed at least seven LNG tankers anchored close to Spanish shores Tuesday, though it wasn’t clear how many were waiting to unload.

Despite an abundance of LNG and falling prices, Loskot-Strachota said the energy situation remains volatile. She warns that prices for gas to be delivered in December and the 2023 winter months are higher than prices now.

Russian gas has dwindled to a trickle through pipelines in Ukraine and under the Black Sea to Turkey, but losing even the small amount that remains could roil markets. Moscow has blamed the reductions on technical reasons or a refusal to pay in rubles, while European leaders call it blackmail for supporting Ukraine.

EU governments also have been working on proposals including buying gas as a bloc or limiting price swings to ease the energy crisis, although the measures would largely affect next year’s purchases.

Gas use is down 15% in Europe, but that is mostly from factories simply abandoning production that has become unprofitable.

“This is dangerous — this hurts the economy, this hurts Europe,” Loskot-Strachota said.

Whether households will join businesses in cutting back by lowering thermostats and turning off lights cannot be determined until the cold weather comes in earnest. Russia’s willingness to destroy Ukrainian heating and electrical plans shows that Russia is ready to escalate despite battlefield defeats.

The market also is less flexible because gas reserves will be increasingly used as day-to-day base fuel for heating and generating electricity, rather than as a “swing” fuel during times of peak demand such as cold snaps.

“Every event, every problem, weather problem, Russia problem, becomes a factor which sends prices very very high,” Loskot-Strachota said. “I’m very happy that we’re in a calm situation now, but it is nothing that will last for the whole winter.”

———

Raquel Redondo contributed from Madrid.

———

Follow AP’s coverage of the war in Ukraine: https://apnews.com/hub/russia-ukraine

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October 26, 2022

Markets look for answers from the European Central Bank as it preps for a jumbo rate hike

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Christine Lagarde, president of the European Central Bank, is expected to announce another 75 basis points hike.

Bloomberg | Bloomberg | Getty Images

While the European Central Bank is largely expected to announce another rate hike Thursday, market players are seemingly more concentrated on two other policy tools as the region edges toward a recession.

The central bank has been contemplating inflation being at record highs but an economy that is slowing, with many economists predicting a recession before the end of the year. If the ECB takes a very aggressive stance in increasing rates to deal with inflation, there are risks that it tips the economy into further trouble.

Amid this context, the ECB is widely seen raising rates by 75 basis points later this week. This would be the second consecutive jumbo hike and the third increase this year.

“The ECB will likely raise its three policy rates by 75 basis points and suggest that it will go further at its next few policy meetings without providing a clear guidance on the size and number of steps to come,” Holger Schmieding, chief economist at Berenberg, said in a note Tuesday.

Given the inflationary pressures — the September inflation rate came in at 10% — analysts are pricing in at least another 50 basis point hike in December. The bank’s main rate is currently at 0.75%.

“A growing consensus seems to be in favour of having the deposit rate at 2% by the end of the year, implying a 50 basis point hike in December, with a reassessment of the economic and inflation outlook in early 2023,” Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said in a note Friday.

Two big questions

Rates aside, there are two questions on the minds of market players that need answering: When will the ECB start unwinding its balance sheet, in a process known as quantitative tightening, and what will happen to the lending conditions for banks in the near future. The ECB has undertaken years of quantitative easing, where it buys assets like government bonds to simulate demand, following the euro crisis of 2011 and the Covid-19 outbreak in 2020.

“When it comes to QT, boring is beautiful,” Ducrozet said, adding that he expects the process to start in the second quarter of 2023. QT is expected “to be predictable, gradual, and passive, starting with the end of reinvestments under the Asset Purchase Programme (APP) but not actively selling bonds any time soon,” he said.

Camille De Courcel, head of European rates strategy at BNP Paribas, said in a note Monday that the central bank might wait until the December meeting to provide details on QT but that it is likely to start reducing its balance sheet by about 28 billion euros on average per month when it does happen.

But perhaps the biggest uncertainty at this stage is whether lending conditions will change for European banks.

“We think Thursday [the ECB] will unveil a decision on the TLTRO, either its remuneration, or its cost. We think the new measure will only come into effect, in December,” De Courcel said.

The targeted longer-term refinancing operations, or TLTROs, is a tool that provides European banks with attractive borrowing conditions — hopefully giving these institutions more incentives to lend to the real economy.

Because the ECB has been increasing rates faster than the central bank initially expected, European lenders are benefiting from the attractive loan rates via TLTROs while also making more money from the higher interest rates.

“The optics are bad against the backdrop of a historical shock to households’ income, and political pressure cannot be ignored,” Ducrozet said.

The euro traded marginally higher against the U.S. dollar on Wednesday at $0.997. The weakness of the common currency has been a concern for the central bank though it repeatedly states that it does not target the exchange rate.

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October 25, 2022

Sunak to become UK leader at meeting with King Charles III

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LONDON — Rishi Sunak is due to be installed as Britain’s third prime minister of the year by King Charles III on Tuesday, before appointing a Cabinet that will have to wrestle with the U.K.’s economic and political crises.

Sunak, the U.K.’s first leader of color, was selected as leader of the governing Conservative Party on Monday as it tries to stabilize the economy, and its own plunging popularity, after the brief, disastrous term of Liz Truss.

Truss will depart after making a brief public statement outside 10 Downing St., seven weeks to the day after she was appointed prime minister by Queen Elizabeth II. The queen died two days later. Now her son will take over the ceremonial role of accepting Truss’ resignation at Buckingham Palace before asking Sunak to form a government.

Sunak — at 42 the youngest British leader for more than 200 years — must try to shore up an economy sliding toward recession and reeling after his predecessor’s experiment in libertarian economics, while also attempting to unite a demoralized and divided party that trails far behind the opposition in opinion polls.

His top priorities will be appointing Cabinet ministers, and preparing for a budget statement that will set out how the government plans to come up with billions of pounds (dollars) to fill a fiscal hole created by soaring inflation and a sluggish economy, and exacerbated by Truss’ destabilizing economic experiments.

The statement, set to feature tax increases and spending cuts, is currently due to be made in Parliament on Monday by Treasury chief Jeremy Hunt — if Sunak keeps him in the job.

Sunak, who was Treasury chief himself for two years until July, said Monday that Britain faces “a profound economic challenge.”

Sunak becomes prime minister in a remarkable reversal of fortune just weeks after he lost to Truss in a Conservative election to replace former Prime Minister Boris Johnson. Party members in the summer chose her tax-cutting boosterism over his warnings that inflation must be tamed.

Truss conceded last week that she could not deliver on her plans — but only after her attempts triggered market chaos and worsened inflation at a time when millions of Britons were already struggling with soaring borrowing costs and rising energy and food prices.

The party is now desperate for someone to right the ship after months of chaos under Truss and Johnson, who quit in July after becoming mired in ethics scandals.

Sunak was chosen as Conservative leader after becoming the only candidate to clear the hurdle of 100 nominations from fellow lawmakers to run in the party election. Sunak defeated rival Penny Mordaunt, who may get a job in his government, and the ousted Johnson, who dashed back from a Caribbean vacation to rally support for a comeback bid but failed to get enough backing to run.

As well as stabilizing the U.K. economy, Sunak must try to unite a governing party that has descended into acrimony as its poll ratings have plunged.

Conservative lawmaker Victoria Atkins, a Sunak ally, said the party would “settle down” under Sunak.

“We all understand that we’ve now really got to get behind Rishi — and, in fairness, that’s exactly what the party has done,” she told radio station LBC.

———

Follow all AP’s reporting on British politics at https://apnews.com/hub/british-politics

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October 25, 2022

Australia to reveal economic plan for deteriorating outlook

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CANBERRA, Australia — Australia’s new government on Tuesday will propose an economic plan to steer the nation through rising inflation and interest rates while reigning in debt.

Treasurer Jim Chalmers will deliver his center-left Labor Party’s first annual budget for the fiscal year that began in July.

It will be the first budget by a Labor government in nine years and must contend with unprecedented levels of debt as a result of the COVID-19 pandemic.

Chalmers said rising inflation was the primary influence on how he drafted his economic blueprint.

“The budget will be solid, sensible and suited for the times. It will recognize that in a time of extreme global uncertainty, our best defense is a responsible budget at home,” Chalmers told reporters.

“The budget has three objectives: responsible cost-of-living relief, strengthening the economy and beginning the hard yards of budget repair,” he added.

The previous conservative government had forecast in its last budget in March a 78 billion Australian dollar ($49 billion) deficit in the current fiscal year.

The new government’s forecast more than halves that deficit to AU$36.9 billion ($23.3 billion) thanks mainly to higher prices for commodities including iron ore and coal.

However, slowing economic growth was expected to add to the longer-term difficulty of repaying debt.

The March budget forecast that gross debt as a share of the economic growth would peak in mid-2025 at 44.9%, or AU$1.117 trilllion ($709 billion).

The budget will help families by increasing child care subsidies and gradually increasing paid parental leave entitlements from 18 to 26 weeks, the government said.

Prime Minister Anthony Albanese said the budget would provide cost-of-living relief for families without fueling inflation.

“The priority will be on measures that boost the economy, that boost productivity. Cheaper child care does just that. So does paid parental leave,” Albanese said.

The government will need to get its budget measures through the Parliament, where compromises may need to be made.

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October 24, 2022

Global shares mixed after China economy slows, HK down 6.4%

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TOKYO — Global shares were mixed, while Hong Kong’s benchmark plunged 6.4% on Monday as dismay over a lack of fresh policy initiatives from a Chinese Communist Party congress overshadowed a report that the No. 2 economy grew at a faster pace in the last quarter.

The dollar rose to nearly 150 yen, a day after the Japanese central bank reportedly again moved to stem the yen’s decline.

Britain’s FTSE 100 slipped 0.7% to 6,918.15 after former Prime Minister Boris Johnson announced he will not run to lead the Conservative Party. Former Treasury chief Rishi Sunak is now the favorite to replace Liz Truss, who quit last week after her tax-cutting economic package caused turmoil in financial markets.

France’s CAC 40 rose nearly 0.6% in early trading to 6,068.71. Germany’s DAX added 0.6% to 12,807.23. The future for the Dow industrials was down 0.4% and that for the S&P 500 shed 0.5%.

Beijing’s report that the Chinese economy gained momentum in the last quarter was better than expected and up from the previous quarter’s 0.4%, but that was among the slowest expansions in decades as the country wrestled with repeated closures of cities to fight virus outbreaks.

There were no new market-boosting initiatives from the Communist Party congress, where Xi Jinping, the most powerful leader in decades, gained a free hand in setting policy. The ruling party named a seven-member Standing Committee made of Xi’s allies and dropped supporters of free enterprise like Premier Li Keqiang, the party’s No. 2 before the party’s once in five years congress.

Xi wants a bigger Communist Party role in business and technology development. That has prompted warnings tighter control of entrepreneurs who generate jobs and wealth will depress growth that already was in long-term decline.

The 6.4% plunge in Hong Kong’s Hang Seng index, to 15,180.69, took it to its lowest level since 2006.

The Shanghai Composite index shed 2.0% to 2,977.56.

Xi also gave no sign of plans to change the severe “zero-COVID” strategy that has crimped business and trade. He indicated no changes in policies straining relations with Washington and Asian neighbors.

Japan’s benchmark Nikkei 225 added 0.3% to finish at 26,974.90. Australia’s S&P/ASX 200 gained 1.5% to 6,779.40. South Korea’s Kospi gained 1.0% to 2,236.16.

Wall Street ended last week with a broad rally, with technology stocks, retailers and health care companies powering a big share of the gains.

The S&P 500 rose 2.4%, notching a weekly gain of 4.7%, its biggest such gain since June. The Dow climbed 2.5% and the Nasdaq composite added 2.3%. The Russell 2000 index rose 2.2%.

Investors have been focusing on corporate earnings as they search for clues about how inflation and rising interest rates are shaping global economies.

The Federal Reserve is expected to raise interest rates another three-quarters of a percentage point at its meeting in November. That’s triple the size of the Fed’s usual move.

In currency trading, the U.S. dollar rose to 149.28 Japanese yen from 147.65 yen. The Bank of Japan was reported to have intervened Friday to prop up the yen after the dollar rose above the 150 yen level. The dollar fell after the reported intervention but bounced back.

The euro cost 98.25 cents, down from 98.62 cents.

The dollar has gained in strength as the U.S. Federal Reserve has raised interest rates to fight inflation. Its growing strength against the yen and other currencies has added to inflationary pressures in those countries by pushing up the costs of imports and of debt repayments.

In energy trading, benchmark U.S. crude fell $1.32 to $83.73 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, declined to $1.29 to $92.21 a barrel.

———

Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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October 24, 2022

France to Pay Part of Companies’ Electricity Bills

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By Joshua Kirby

The French government will cover a part of companies’ electricity bills, with big energy firms asked to contribute to the cost, a minister told TV station BFM Business late Sunday.

An “electricity guarantee” for 2023 will be finalized soon, and will cover part of any amount paid above a reference price fixed by the government, according to Energy Transition Minister Agnes Pannier-Runacher.

Energy companies making large profits will be asked to provide a contribution in relation to the reference price, the minister said, adding that the relevant legal proposition will be made very soon.

The move comes amid surging energy prices across Europe following a stoppage of natural-gas flows from Russia. In France, supply has also been threatened by strikes at nuclear reactors owned by national utility Electricite de France SA.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

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October 24, 2022

Migrants feel inflation’s squeeze twice — at home and abroad

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Dubai, UNITED ARAB EMIRATES — In nearly every corner of the globe, people are spending more on food and fuel, rent and transportation.

But inflation isn’t affecting people equally. For migrants with relatives relying on money they send back, higher prices are pinching families twice: at home and abroad.

Migrant workers who send cash to loved ones overseas are often saving less because they’re forced to spend more as prices rise. For some, the only option is hustling harder, working weekends and nights, taking on second jobs. For others, it means cutting back on once-basic things like meat and fruit so they can send what’s left of their savings to family back home, some of whom are struggling with hunger or conflict.

“I used to save something, about $200 weekly. Now, I can barely save $100 per week. I live by the day,” said Carlos Huerta, a 45-year-old from Mexico working as a driver in New York City.

Across the Atlantic, Lissa Jataas, 49, sends about 200 euros ($195) from her desk job in Cyprus to family in the Philippines each month. To save money, she looks for cheaper food at the grocery store and buys clothes from a charity shop.

“It’s about being resilient,” she said.

Economies reeling from the shocks of the COVID-19 pandemic and effects of climate change were hit again by Russia’s war in Ukraine, which sent food and energy prices soaring.

Those costs plunged 71 million more people worldwide into poverty in the weeks following the February invasion, which cut off critical grain shipments from the Black Sea region, according to the United Nations Development Program.

When food and fuel prices shoot up, the money people can send to relatives doesn’t go as far as it once did. The International Monetary Fund estimates that global inflation will peak at 9.5% this year, but in developing countries, it’s much higher.

“Poorer people are spending far more of their income on food and energy,” said Max Lawson, head of inequality policy at anti-poverty organization Oxfam.

He said inflation is “pouring fire” on inequality: “It’s almost like poor people are kind of like a sponge that are meant to absorb the economic shock.”

Mahdi Warsama, 52, came to the U.S. from Somalia as a teenager. An American citizen who works for the nonprofit Somali Parents Autism Network, he sends anywhere from $3,000 to $300 a month to relatives in Somalia, sometimes borrowing money to send what relatives need for medical bills and other emergencies.

Warsama, who splits his time between Columbus, Ohio, and Minneapolis, estimates he sent $1,500 last month to help his relatives pay for necessities like food and water for themselves and their livestock.

Thousands of people have died in a drought gripping Somalia, with the U.N. saying half a million children are at risk of death due to malnutrition or near famine.

“Just as we have inflation in the United States, in Somalia, it’s even worse,” he said, adding that sacks of rice, sugar and flour that once cost $50 are now $70.

He’s changed his spending habits, is looking for ways to earn more and monitors interest rate hikes and inflation — something he never did before this year.

“I am more determined to work harder and make more money,” Warsama said. “I have to be more mindful, the fact that I have to help my relatives back home.”

In New York, Huerta has been living apart from his wife and kids for nearly 20 years, picking up jobs from washing dishes to driving executives — whatever it takes to earn enough.

He said he sends about $200 a week to his wife and mother in Puebla, Mexico. Huerta also learned to paint houses, so if there’s no demand for a chauffeur, he can still earn around $150 a day.

With earnings of about $3,600 a month and rent for his Queens apartment going up, Huerta said he’s switched out steak for chicken, eats less fruit as prices skyrocketed and canceled his cable.

For Jaatas, who has lived in Cyprus for almost two decades, the six relatives she supports in the Philippines are not only facing rising costs but are reeling from the aftermath of a typhoon that knocked out water and electricity.

“We really like to help our family back home regardless of whatever disaster or shortcomings,” she said.

Analysis by the Carnegie Endowment for International Peace says the Philippines is the most food-insecure country in emerging Asia due to its reliance on imported food.

Ester Beatty, who heads a chapter of the European Network of Filipino Diaspora in Cyprus, said it’s common for Filipinos to work Sundays in the Mediterranean island nation as they seek extra income to support relatives back home struggling to afford staples like rice and sugar.

In developing countries, it’s estimated that lower-income families spend over 40% of their household earnings on food even with government subsidies, said Peter Ceretti, an analyst tracking food security at risk advisory firm Eurasia Group.

Ali el-Sayyed Mohammed, 26, came to the United Arab Emirates in February after several years searching for work in Egypt.

“Life is expensive and wages don’t cover enough so I took the step of leaving,” he said. “It was a hard decision at first, but the situation left me with no choice.”

With his father deceased, Mohammed is the family’s breadwinner, supporting three sisters and his mother. He hails from Beheira, a Nile Delta province that has seen many of its young men leave, sometimes embarking on deadly voyages across the Mediterranean Sea in search of work in Europe.

With around $1,000 saved up, Mohammed came to Dubai and crashed with friends until he landed a job at one of the city’s most popular Egyptian restaurants, Hadoota Masreya.

The rising cost of living in Egypt, though, has made his goals of saving enough to help his sister get married next year or secure his own future even harder. Egypt’s inflation has climbed to about 16% as the currency’s value has dropped, making life for millions of Egyptians living in poverty even more difficult.

“I have a lot of staff whose families rely on the income they make from the restaurant and a big portion of their incomes are sent back home so people there can live,” said Mohamed Younis, manager at Hadoota Masreya.

The restaurant recently increased wages to keep up with the rising cost of living, he said.

Younis said growing numbers of Egyptian men are reaching out in search of work. Younis manages a YouTube channel called “Restaurant Clinic” that gives advice in Arabic on succeeding in the restaurant industry. He warns that moving to the UAE comes with risks because finding a job takes time and money.

Back in Minnesota, 36-year-old school bus driver Mohamed Aden says he moonlights as an Uber driver to support his wife, children and siblings who fled Somalia for Kenya due to violence in his homeland.

With no work authorization in Kenya, his family relies on the money he sends — nearly half of his $2,000 in monthly earnings.

But he’s paying more for gas, and food prices are higher in Kenya, so the money doesn’t go as far.

Aden tries to visit Kenya each December during the cold Minnesota winter.

“This year, I can’t because of inflation,” he said. “I’m the only one here, feeding the family … but I will go back when I get the money.”

———

Ahmed reported from Minneapolis, Torrens from New York and Hadjicostis from Nicosia, Cyprus.

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October 23, 2022

Mortgage industry group predicts recession next year, expects mortgage rates to come back down from 7%

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NASHVILLE, Tenn. — A mortgage industry group is expecting a recession to hit the U.S. economy.

“We’re forecasting a recession for next year,” Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, said Sunday during the industry group’s annual conference in Nashville, Tenn.

“The upside of that potentially for the industry is, that’s the thing that’s likely going to bring rates down a little bit,” he added.

Also see: Mortgage bankers forecast rates to drop to 5.4% in 2023. Here’s what that means for home prices.

In a statement, Fratantoni said the MBA’s forecast calls for a recession in the first half of 2023, and predicts the unemployment rate will rise from 3.5% to 5.5% by the end of next year.

“We’re beginning to see some significant signs of softening in the labor market,” Frantantoni said.

He expects companies to no longer be scrambling to fill job openings, and that hiring will eventually cool off.

On average in 2023, expect the economy to lose 25,000 jobs per month, he said, and end the year with employment at 5.5%.

That’s in stark contrast to the latest unemployment rate in September, which was 3.5%, according to the Bureau of Labor Statistics.

“So a very, very different job market to today,” Frantantoni said. “I do expect the next couple of months are gonna be a pretty abrupt transition.”

With a recession on the horizon, expect mortgage rates to come down to close to 5.4% at the end of next year, he said, versus the 7%-plus rates that the market is seeing today.

“We are holding to our view that this is a spike right now, driven by financial-market dislocation, heightened level of volatility in the market and this global slowdown we’re about to experience, the likelihood of recession in the U.S. will begin to pull this number,” Fratantoni said.

Mike Fratantoni, senior vice president and chief economist for the MBA, speaks in Nashville on Sunday.

AARTHI SWAMINATHAN

Given the massive rise in rates this year, with the 30-year fixed rate averaging 6.94% last week as compared to 3.85% a year ago, many potential home buyers have decided to wait as their projected monthly mortgage payments have become unaffordable.

Home sales have plunged, and are dragging down home prices. Sellers are also making more concessions in their attempts to woo buyers.

As a result of the slowdown, the MBA is expecting total mortgage origination volume to fall to $2.05 trillion in 2023 from the $2.26 trillion expected in 2022.

They’re also expecting purchase originations to drop 3%, and refinances by 24%.

Fratantoni also expects delinquencies to rise from 40-year lows.

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October 23, 2022

Biden juggling long list of issues to please Dem coalition

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WASHINGTON (AP) — President Joe Biden wants to tame inflation. He wants Congress to protect access to abortions. He wants to tackle voting rights. And he’s taking on China, promoting construction of new factories, addressing climate change, forgiving student debt, pardoning federal marijuana convictions, cutting the deficit, working to lower prescription drug prices and funneling aid to Ukraine.

Biden is trying to be everything to everyone. But that’s making it hard for him to say he’s focused on any single issue above all others as he tries to counter Republican momentum going into the Nov. 8 elections.

“There’s no one thing,” Biden said Wednesday when questioned about his top priority. “There’s multiple, multiple, multiple issues, and they’re all important. … We ought to be able to walk and chew gum at the same time. You know, that old expression.”

Biden’s exhaustive to-do list is a recognition that the coalition of Democratic voters he needs to turn out Election Day is diverse in terms of race, age, education and geography. This pool of voters has an expansive list of overlapping and competing interests on crime, civil rights, climate change, the federal budget and other issues.

The Republican candidates trying to end Democratic control of Congress have a far more uniform base of voters, allowing them to more narrowly direct messaging on the economy, crime and immigration toward white voters, older voters, those without a college degree and those who identify as Christian.

In the 2020 election, AP VoteCast suggests, Biden drew disproportionate support from women, Black voters, voters younger than 45, college graduates and city dwellers and suburbanites. That gave Biden a broader base of support than Republican Donald Trump and it also is a potential long-term advantage for Democrats as the country is getting more diverse and better educated.

But in midterm elections that normally favor the party not holding the White House, it requires Biden to appeal to all those constituencies.

“Coherence and cohesion have always been a challenge for the modern Democratic Party that relies on a coalition that crosses racial, ethnic, religious and class lines,” said Daniel Cox, a senior fellow in polling and public opinion at the conservative American Enterprise Institute. “It takes considerable political talent to maintain a coalition with diverse interests and backgrounds. Barack Obama managed to do it, but subsequent Democrats have struggled.”

Biden devoted his public remarks this past Tuesday to abortion, Wednesday to gasoline prices, Thursday to infrastructure and Friday to deficit reduction, student debt forgiveness and historically Black colleges and universities. In most of his public speeches, Biden says he understands the pain caused by consumer prices rising 8.2% from a year ago and that he’s working to lower costs.

Cox said there are signs that Biden’s 2020 coalition is fracturing, with younger liberal voters not that enamored with him, and he does not appear to have done much to shore up Hispanic support.

But compared with 2016, when Trump won the presidency, Biden made relative progress with one prominent bloc that generally favors Republicans: white voters without a college degree, as he won 33% of their votes compared with 28% who supported Hillary Clinton in 2016, according to a 2021 analysis by the Pew Research Center.

Keeping those voters in the Democratic coalition could be essential for maintaining control of the Senate.

Biden has traveled repeatedly to Pennsylvania, campaigning on Thursday for Senate nominee John Fetterman with the goal of picking up a seat in the state. Fetterman, with his sweatshirts and shorts, exudes a blue-collar image, a contrast with the Republican nominee, Dr. Mehmet Oz, who rose to fame as a TV show host.

“Democrats need to hold on to as much of that bloc as possible, especially in key whiter states like Pennsylvania, Ohio and Wisconsin,” said William Frey, a senior fellow at the Brookings Institution.

The test for Democrats is how to address broader concerns about the economy and inflation that affect everyone, while also highlighting the specific issues that could energize various segments of their base.

That can involve trade-offs.

As Republicans have made crime a national issue, Biden’s message that he backs the police could help with those white voters. But it could also turn off younger voters in Senate races in Georgia and Florida who believe the police are part of the problem on civil rights, said Alvin Tillery Jr., a professor at Northwestern University and director of its Center for the Study of Diversity and Democracy.

Tillery said he doesn’t know how the president can bridge those differences, though Biden could be in a better position to focus on the policing overhaul that Democrats tried to negotiate with Republicans — only to be unable to reach a consensus that would be able to clear a GOP filibuster.

“Maybe they’ve blunted some Republican attacks, but they’ve also softened support for people who turned out for them in the 2020 election,” Tillery said. “I don’t know how they solve for that, except to say they need to be more vigorous in saying the things they wanted to achieve were blocked in the Senate.”

Tillery added the overarching challenge might be that people view inflation as a domestic phenomenon, rather than a global one. Republicans are blaming high prices on Biden’s $1.9 trillion coronavirus relief from 2021, whereas recent months have also shown that inflation is a worldwide trend driven in part by the aftermath of the pandemic and Russia’s invasion of Ukraine, causing prices for energy and food to rise.

“The reality is — like all presidents — he is a victim of things beyond his control,” Tillery said. “Inflation is a problem globally. It’s much worse in other parts of the world, but he can’t message that way.”

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Follow AP’s coverage of the elections at: https://apnews.com/hub/2022-midterm-elections

Check out https://apnews.com/hub/explaining-the-elections to learn more about the issues and factors at play in the 2022 midterm elections.

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October 23, 2022