There are no short-term solutions to inflation

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The risk of permanent inflation is rising again this week. The US publishes inflation figures for August tomorrow and economists polled by Reuters expect the CPI to fall 0.1 percent month-on-month, after remaining flat in July, with an annual reading of 8.1 percent for August, down from 8.5. percent a month ago.

However, we don’t expect such positive news to temper the Fed’s aggressive push to tame cost-of-living increases. President Jay Powell and Vice President Lyle Brainard pledged last week to continue raising interest rates, bolstering expectations that a third straight increase of 0.75 percentage points will be implemented later this month.

The mood was reversed in the currency markets, with the dollar beginning the week on a dovish note as traders priced in policy differences between the Fed and other central banks.

Meanwhile, India has imposed export controls on various types of rice in a bid to support food security and curb its inflation rate, due to supply disruptions caused by the Covid-19 pandemic and the war in Ukraine. However, the move is also likely to fuel inflation elsewhere – given that rice is one of the most popular staple foods eaten globally.

The invasion of Ukraine continues to fuel rising commodity and energy costs, hurting Europe especially. Although the surprisingly rapid success of Ukrainian forces in retaking territory from Russian forces raised hopes of a turning point in the nearly seven-month-old conflict, the war and its impact on the global economy are far from over.

Ukraine’s military success is throwing the conflict into a more dangerous phase as Russia tries to regroup and possibly escalate its attacks, according to Financial Times columnist Gideon Rachman. All of this means that we must prepare for many more months of turbulent times.

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Need to know: Economics

China has emerged as a competitor to the International Monetary Fund in the volume of emergency loans provided to countries at risk of the financial crisis. The data shows that Pakistan, Sri Lanka and Argentina together have received more than $32 billion since 2017.

There is a sense of enlightened self-interest at work here. Analysts said the goal of emergency lending in most cases is to prevent defaults on infrastructure loans granted under China’s Belt and Road Initiative. However, senior FT trade writer Alan Petty warns that the lack of oversight on these two-way lending arrangements is a real risk (premium subscribers only).

The latest in UK and Europe

The British economy stagnated in the three months to July, with output flat during the period, down from 0.3 percent growth in the three months to April.

There was better news in the long-running battle between the UK and the EU over the Northern Ireland protocol, as Brussels presented a plan to reduce customs checks across the Irish Sea to just a few trucks a day.

Maros Shevsowicz, the European Union’s president for Brexit, said he hoped the proposal would pave the way for an agreement with newly appointed British Prime Minister Liz Truss on post-Brexit trade arrangements in Northern Ireland.

latest global

The renminbi is on its way to its biggest-ever annual decline against the dollar despite Beijing taking its strongest steps to stem the currency’s decline. The Covid shutdown and faltering economic growth helped put more pressure on the Chinese currency.

An 8.7 per cent drop against the dollar this year (to 6.96 renminbi) puts the renminbi on track for its biggest annual decline since China abandoned its long-term currency peg and moved to a managed floating exchange rate in 2005.

Need to know: Business

The energy crisis should be a catalyst for regulatory reform for the sector, along the lines of more aggressive bank oversight after the 2008 financial crisis, Financial Times Deputy Editor Patrick Jenkins wrote in today’s Inside Business column.

In the meantime, companies are doing what they can to reduce the discomfort. Our reporters report that some of Europe’s most energy-intensive industries – including some of the world’s largest steelmakers – are finding ways to reduce their energy use.

Home appliance maker Electrolux has warned that high inflation has made people reluctant to spend on new washing machines and other white goods. The company, which is making significant cost cuts as a result, said the problem was exacerbated by high inventory levels at retailers. He warned that the profits of the third quarter will decline significantly compared to the second quarter.

Wall Street is launching a counterattack in its war with Silicon Valley for talent, drawing in computer engineers frustrated with hiring freezes and layoffs among embattled cryptocurrency and tech projects, according to Financial Times reporters in New York.

world of work

According to Financial Times columnist Pelita Clark, corporate headshots are being taken seriously. Clicking on the LinkedIn gymnastics profile picture of Klarna co-founder and CEO Sebastian Simyatkowski is perhaps the most extreme example.

Making yourself indispensable at work may seem like a good career move, but the truth is that it’s a curse, leading to burnout and resentment toward your colleagues, explains Miranda Green.

Covid cases and vaccinations

Total global cases: 601.3mn

Total doses given: 12.6 billion

Get the latest photo around the world through our website vaccine tracker

Some good news. . .

The tiny particle that can travel through concrete can save many lives, and detect flaws inside buildings before they collapse. Jeff Mano explains the magic of muons.

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Climate chart: an explanation – Identify the most important weather data for the week. Register here

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