Pressure mounts on the ECB | FinancialTimes

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Good evening

Another day, another “worse than expected” data.

Today’s episode announced that inflation in the eurozone had risen from 8.9% to a new high of 9.1% in August, which put pressure on the European Central Bank to it announces a more aggressive tightening of monetary policy next week.

The data fueled further selling in European bond markets as investors braced for bigger interest rate hikes. Economists now predict that inflation will hit 10% this year and will stay higher for longer than originally expected.

Soaring energy costs were the main driver of today’s rise, but the core reading, which excludes this and other volatile items such as food, still rose more than expected by 4.3%, against 4% in July. On the positive side, wholesale energy prices fell from record highs following the announcement of an EU plan to moderate electricity prices by delinking them from the spiraling cost of electricity. gas.

Inflation in Germany, the euro zone’s largest economy, hit a 40-year high of 8.8%, despite government measures such as cutting taxes on fuel and energy bills and subsidizing train fares. Bundesbank chief Joachim Nagel recently suggested double-digit levels were likely this year, for the first time since 1951.

Meanwhile, in the UK, inflation could hit 13% next month after a ruling by the Office for National Statistics that a £400 rebate on household energy bills would not affect its calculation . Goldman Sachs yesterday beat Citigroup’s forecast for inflation of 18.6% in January, when energy prices are expected to rise further, with a forecast of more than 20%.

Chief economic commentator Martin Wolf lays out the challenge facing central bankers, unable to solve the central problem of the energy shock: how to stave off the ‘calamity’ of high and unstable 1970s-style inflation without causing a downturn unnecessarily deep.

Today’s data follows hawkish inflation-fighting rhetoric from central bankers meeting in Jackson Hole, Wyoming last week.

Above the meeting, reports US economics editor Colby Smith, reigned a sense that the world and the economic relationships that underpinned it had fundamentally changed. Some believe that the forces that previously controlled prices, such as globalization and an abundant supply of labor, have reversed.

Or, as ECB Executive Board Member Isabel Schnabel puts it, we risk moving from the last two decades of the “Great Moderation” into a new era: the Great Volatility.

Compare international trends with our global inflation tracker.

Recent news

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Need to know: the economy

Europeans fear gas supplies intensified when Russia halted flows through the Nord Stream 1 gas pipeline for three days of maintenance, while in Germany some companies halted production as prices soared. Shell said Europe may have to get used to several years of rationing, but some relief is on the way from China, which is reselling its excess liquefied natural gas.

Latest for UK and Europe

Five more sleeps before the UK has its new Prime Minister! Candidate Rishi Sunak continued her attacks on her rival (and favourite) Liz Truss’ economic plans, while Truss faced a backlash over her VAT cut plans. But looking at that nightmarish inbound bin, you wonder why anyone would want the job. . .

The signs of economic tightening are growing and growing. UK credit card loan rose at the fastest pace in 17 years last month as consumers battened down the hatches, while other data showed shoppers increasingly selling at own brand grocery store.

Line chart of annual % change showing credit card borrowing in the UK last month grew at the fastest annual rate since 2005

Finding solace from your local drinker could also be problematic: directing ad channels say many face closure unless the government helps pay crippling energy bills. Local stores facing the same problem. The most depressing news of all: English councils are getting ready”heat banks» for those who cannot afford to heat their homes.

Latest World

Chinese manufacturing activity fell for the second consecutive month in August after drought caused power cuts.

The IMF approved a payment of $1.1 billion to Pakistan as part of a $7 billion bailout to help avoid default. The country, already in serious economic difficulties, had to deal with devastating floods which killed more than 1,000 people and destroyed 1 million homes.

The “theft” staged by a bank customer to gain access to his savings has brought to light the suffering faced by Lebanon, where a financial meltdown is now in its third year. Three quarters of the population have been plunged into poverty, while the country’s currency has lost more than 90% of its value.

Need to know: company

The problems facing the “buy now, pay later” sector were highlighted by the quadrupling of losses of the Swedish company Klarna.

Another darling of the pandemic has fallen back to earth. social media group Instantaneous announced a 20% reduction in its workforce due to lower advertising demand.

The head of HRCthe world’s largest building materials company, told the FT that the industry faced a ‘second wave’ of inflation as cost increases extended beyond energy to wages and salaries. raw materials.

The darkening economic outlook is likely to dampen the appetite for travel this winter, leaving Airlines companies faced with a gloomy winter in addition to the upheavals of recent months. Italy is in talks to sell a majority stake in ITA Airways, the successor company to bankruptcy Alitaliato Delta Air Lines, Air France-KLM and a US private equity firm.

Cruise ship demand is approaching pre-pandemic levels, as our Big Read explains, but the industry is facing resistance from environmental activists and some port cities who say travelers are doing little to disembark other than take photos.

The world of work

Come to the office regularly and make sure people see you, do your job well during agreed hours (rather than constantly slacking off), and most importantly, do it discreetly. Columnist John Gapper has some advice for those considering “quiet stop”.

hybrid workers, meanwhile, face greater scrutiny from UK tax authorities, including whether those working overseas become liable to pay income tax and social security outside the country.

The resurgence of union activity is reshaping the relationship between bosses and workers, says Taylor Nicole Rodgers, US labor and equality correspondent, guest on the latest Working It podcast.

Covid cases and vaccinations

Total number of global cases: 596.3mn

Total doses administered: 12.6 billion

Get the latest global picture with our vaccine tracker

Some good news

Once turned off big blue butterflyreintroduced to the UK in 1983, flew in its highest numbers on record this summer, following a successful long-term conservation project by the Royal Entomological Society.

Big blue butterfly
A large blue butterfly in one of two new colonies reintroduced to a National Trust site in the Cotswolds of England © David Simcox

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