Nevertheless, economists assure that interest rate rises are the best way of controlling inflation. Carlo Altomonte, Economist, Associate Professor of Economics at University Commerciale Luigi Bocconi, SDA Bocconi School of Management, and SDA Bocconi Asia Center told International Finance that increase in interest rate will help reduce inflation but at the cost of a significant slowdown in the economy. Altomonte says, “Banks will have to raise interest rates so much to induce a recession in the economy, which will lower demand, and this will lead to the slowing down of inflation”.

He asserted that for the UK the situation is complicated further by Brexit, which has caused additional value chain disruptions, and hence additional costs. “We did not immediately see the effects of Brexit because its initial consequences almost coincided with the COVID lockdown, but now that demand has returned to pre-pandemic levels, the cost implications of Brexit on prices and inflation are becoming clear”, Altomonte said.

As Carlo Altomonte assures increase in interest will help reduce inflation, contradictory to that, Mario Seccareccia, Economist, Ph.D. Professor Emeritus, Department of the Economics University of Ottawa told International Finance that the higher interest rates can slow down the UK economy, but this will not slow down the underlying inflation rate.

According to Seccareccia, the UK is facing primarily underlying supply-side inflation of an international dimension that central banks cannot control through interest rate policy domestically. “Increasing the interest rate is an extremely inequitable and conflictual solution because it raises the income of interest-income earners in order to compress the income growth rate of wage earners. This is especially problematic since an important arm of government, the BoE, places itself squarely against workers who would have to bear the burden of the adjustment, despite the evidence, that profit markups have risen a great deal and that nominal wages have not grown commensurate with the inflation rate”.

What can the BoE do?
Jyoti Prakash Gadia, Managing Director, Resurgent India says, “There’s not an awful lot that interest rate policy can do about energy prices,” It can‘t create extra gas.” But there is one option. Two factors are contributing to rising inflation: the first is that high energy prices are making people poorer, and the second is that unemployment is unusually low, meaning jobs are very hard to fill. That puts all the power in the hands of workers: if employers can’t fill jobs, they’ll increase wages, which will increase inflation. And that, says Gadia, is something the BoE can control.

“What I think (the BoE) has in mind is trying to ensure that the labour market is sufficiently slack,” he says. Pushing up interest rates means employers have less spare cash to meet employees’ demands for pay rises. Workers having less disposable income brings down demand, which in turn helps to control inflation. But that “does mean more unemployment than there is at the moment, ” Gadia tells International Finance.

What other steps, apart from raising the interest rate, to bring down inflation?
According to Professor Mario Seccareccia there are various anti-inflation policies that do not entail interest rate increases. He says, there is a great deal that fiscal policy can accomplish in the face of inflation. In the short term, it is important to understand the causes behind inflation, and try to understand what can and cannot be fixed. For example, governments should be helping to repair supply chains and transportation networks in the short term, and thinking about how to make our industrial policy resilient to future challenges in the long term.

In times of inflation, governments can think about how to provide public alternatives for high-priced items. For example, if gas prices are going to be high in the long term, governments at all levels should think about how to make it easier and cheaper to get around without needing fossil fuels. This is a more targeted and equitable way of reducing demand for a high-priced good than the central bank model of reducing the money supply.

Governments can also regulate prices. Rent control is a good example of this. Wherever possible, policymakers should think about how to maintain the supply of goods that are price-controlled. In the case of rent control, a solid plan for public investment in non-market and co-op housing would help ensure there was a sufficient supply of affordable rental housing.

Public services also play a big role in making life more affordable for everyone. Government spending on everything from childcare and healthcare to public transit and recreation makes life more affordable for people and makes us all less vulnerable to periods of inflation or economic downturns.

This spending does not have to be funded with borrowing. If policymakers are worried about stimulus spending increasing interest rates, they can fund this spending with the revenue increases they inevitably receive during periods of high inflation. In addition, governments across Canada have cut taxes for corporations and the wealthy over the past 30 years. This means that there is significant room to increase these taxes. Spending that is not funded by borrowing will not be considered inflationary by the central banks, and so won’t prompt them to raise interest rates further. Increasing corporate tax rates and taxes on wealth will also counteract the negative impacts of increasing wealth concentration and inequality.

The post Will a hike in interest rates reduce inflation? appeared first on International Finance.

It comes shortly after US President Joe Biden visited Saudi Arabia in an effort to personally persuade the nation to pump additional barrels in order to assist in lowering skyrocketing costs.

Since February, crude has routinely traded at more than USD 100 per barrel, increasing the cost of living in many countries.

Importance of this meeting
The 13 core members of the Organization of Petroleum Exporting Countries (OPEC) will take a call on whether to increase oil supplies, according to the White House.

OPEC was established in 1960 as a cartel with the intention of controlling the price and supply of oil globally.

President Joe Biden stated that he anticipates supply to rise after meeting with Saudi Crown Prince Mohammed Bin Salman, the cartel’s largest producer.

Officials from Saudi Arabia have emphasized that any decision to raise supplies would be made after consulting OPEC+.

Russia is a member of OPEC+, a larger group of 23 oil-exporting nations that meets monthly in Vienna to decide how much crude oil to sell on the international market.

How will the oil prices go down?
OPEC+ started a series of cuts back in April 2020 that persisted as demand decreased throughout the coronavirus pandemic. It has been gradually rebuilding this depleted supply since 2021.

OPEC+ decided to slightly increase its production of barrels for the month of August at their most recent meeting.

However, it might not be so simple to just turn the faucets on full. On paper, several cartel members, including Angola, Nigeria, and Malaysia, are already having trouble achieving their current monthly supply targets.

Due to western sanctions, Russian shipments have also decreased concurrently. Meanwhile, Moscow has increased its supplies to clients in Asia, including China and India.

The only two big participants with some extra capacity are the lynchpin Saudi Arabia and its neighbor, the United Arab Emirates.

However, Saudi Arabia’s production goal for August is 11 million barrels per day, which energy analysts believe is already at an extremely high level and leaves little possibility for further rises.

Uncertainty over the demand for energy in the upcoming months, though, might have more of an impact on the couple’s choice.

The conflict in Ukraine, rising interest rates, and the impending recession in many western nations might all significantly reduce demand.

According to experts, these elements can make the group cautious and reticent to significantly raise their performance.

The fact that there are so many unanswered questions worries Saudi Arabia and OPEC+. Nobody has any idea where the oil markets will be in six months or a year, said Karen Young, a senior scholar at the Middle East Institute in Washington, DC.

This means that Saudi Arabia and the United Arab Emirates will need to utilize their extra supply carefully, she added.

They don’t want to be in a position where they use their little spare capacity to ramp up production and are then abruptly left with no flexibility to make adjustments if demand unexpectedly increases or decreases in the future, she continued.

Russia, behind the US and Saudi Arabia, was the third-largest oil producer in the world prior to the invasion of Ukraine. It made roughly 8–10% of the world’s oil supply.

According to market analysts, Russian President Vladimir Putin wants to keep oil prices high in order to continue funding the conflict in Ukraine and fend off the effects of severe western economic sanctions.

Saudi Arabia prioritizes the OPEC+ group’s unity and will refrain from taking any actions that can compromise it.

What will currently happen to the oil prices?
Even though it will grow more slowly than it did this year, OPEC itself predicts that the world’s demand for oil will increase in 2023.

According to its analysts, this will be influenced by developments in the fight against COVID-19 in China.

In the meanwhile, estimates from the US Energy Information Administration and the International Energy Agency indicate that oil demand will continue to rise sharply, despite mounting concerns about inflation in numerous countries and slowing economic growth.

Given capacity restrictions and the lack of investment in downstream and refining, oil producers may be forced to pump oil at a rate that is faster than it has been in the previous five years in order to balance supply and demand.

Ben Cahill, a senior fellow at the Centre for Strategic and International Studies in Washington, said, “There is a lot of volatility in the markets, but not many people predict a prolonged slide below USD 100 a barrel.”

This year, American gas prices have already surpassed a 13-year high.

The post Will Saudi Arabia, UAE bail out from oil crisis? appeared first on International Finance.

The vast total captured by the petrostates and fossil fuel companies since 1970 is USD 52 trillion, providing the power to “buy every politician, every system” and delay action on the climate crisis, said Professor Aviel Verbruggen, the writer of the analysis. Cartels of countries artificially restricting supply inflated the vast profits.

The analysis, based on World Bank data, assesses the “rent” secured by global oil and gas sales, which is the economic term for the unearned profit produced after the total cost of production has been deducted, a British newspaper reported.

The study is yet to be published in an academic journal. Still, three experts at the University College London, the London School of Economics, and the thinktank Carbon Tracker confirmed the analysis as accurate, with one calling the total a “staggering number”.

It appears to be the first long-term assessment of the sector’s total profits, with oil rents providing 86% of the total.

“I was really surprised by such high numbers — they are enormous,” said Verbruggen, energy and environmental economist at the University of Antwerp, Belgium, and a former lead author of an intergovernmental panel on climate change report.

“It’s a huge amount of money. You can buy every politician, every system with all this money, and I think this happened. It protects [producers] from political interference that may limit their activities,” he said.

The rents captured by exploiting the natural resources are unearned, Verbruggen said, adding, “It’s real, pure profit. They captured 1% of all the wealth in the world without doing anything for it.”

The average annual profit from 1970-2020 was $1tn but he said he expected this to be twice as high in 2022, a British newspaper reported.

The profit-grabbing is holding back the world’s action on the climate emergency, he said.

“It’s really stripping money from the alternatives. In every country, people have so much difficulty just to pay the gas and electricity bills and oil [petrol] bill, that we don’t have money left over to invest in renewables,” he added.

Verbruggen’s analysis used the World Bank’s oil rent and gas rent data, which the bank compiles country by country and is expressed as a percentage of global GDP. He then multiplied this by the World Bank’s global GDP data and adjusted for inflation to put all the figures in 2020 US dollars.

According to International Monetary Fund, the fossil fuel industry also benefits from subsidies of USD 16 billion a day.

Mark Campanale, at Carbon Tracker, said, “Not only is the scale of these rents eye-watering, but it is salient to note that, in the midst of a cost of the living crisis, caused by record oil and gas prices, this flow of money to a relatively small number of petrostates and energy companies is set to double this year. Shifting to a carbon-neutral energy system based on renewables is the only way to end this madness.”

University College London Professor Paul Ekins said, “Some of the rents go to governments as royalties. But the fact remains that, over the last 50 years, companies have made a huge amount of money by producing fossil fuels, the burning of which is the major cause of climate change. This is already causing untold misery around the world and is a major threat to future human civilization.

“At the very least these companies should be investing a far greater share of their profits in moving to low-carbon energy than is currently the case. Until they do so their claims of being part of the low-carbon energy transition are among the most egregious examples of greenwashing,” he added.

Emissions from the burning of fossil fuels have driven the climate crisis and contributed to worsening extreme weather, including the current heatwaves hitting the UK and many other Northern hemisphere countries. Oil companies have known for decades that carbon emissions were dangerously heating the planet.

Verbruggen said oil-rich nations, such as Russia and those in the OPEC cartel, including Saudi Arabia, kept rents high by restricting supply: “They change the fundamentals of the markets.”

Military action, such as the US-led invasion of Iraq in 2003, and political action, such as the embargo on oil exports from Iran, had also increased the rents, he said.

If all available oil and gas could be freely supplied to the market, the price of conventional oil would be USD 20-30 a barrel, Verbruggen said, compared with about USD 100 today.

May Boeve, the head of the campaign group 350.org, said, “These profits have enabled the fossil fuel industry to combat all efforts to switch our energy systems. We have to dismantle such rent-seeking systems and build our future based on accessible and distributed renewable energy that is more sustainable and democratic in every way.”

The post Oil & gas: What makes this industry most profitable appeared first on International Finance.

A business Ph.D. and fintech entrepreneur who currently runs a multimillion-dollar company states that a recession can provide people with opportunities that in turn will help them get their finances in order.

Here are 18 recession money rules which will come in handy in order to prepare oneself for a recession:

The post 18 tips to overcome potential recession appeared first on International Finance.

The Malaysian prime minister, Ismail Sabri Yaakob has announced that starting June 1 the country would block the export of 3.6 million chickens. This step is being taken to stabilize the food supply.

Due to this move, its neighboring country, Singapore has been put under stress as chicken rice is their national dish.

Singapore sources a third of its poultry from Malaysia. As soon as the consumers heard of this they rushed to stock up on fresh chicken. There were reports that several shelves in the frozen section were already cleared out.

In order to cope with this situation, the Singapore government has asked the consumers to switch to freezing chicken and other alternative meats. It is also looking for fresh markets to source fresh chicken.

Why has Malaysia suspended the export of Chicken?
Malaysia has banned the export of Chicken as the world is currently grappling with soaring food prices which the ongoing Ukraine-Russia war may have fueled. This measure has been taken to boost food supply and at the same time curb prices amid public anger.

Several small poultry farmers in Malaysia who used to supply chicken to Singapore have also been affected by introducing this step. They are now having issues with keeping their business alive.

The exact duration of this ban has not been mentioned. However, it is expected that it might take at least one month to normalize.

The post Malaysia suspends chicken export amidst rising food prices, Singapore suffers appeared first on International Finance.

According to people familiar with business predictions, who wish to be anonymous, the company asked suppliers to keep the previous year’s target of around 220-million iPhones unchanged in 2022. However, the demand for Apple products in the current market exceeds the supply.

The mobile industry has had a terrible start in 2022, with output forecasts falling across the board. Inflation at its highest level in decades, a war in Ukraine, and supply chain disruptions all threaten to dampen sales in 2022.

Strategy Analytics estimated that smartphone sales might decline by almost 2% in 2022, and TrendForce’s full-year production prediction has been reduced twice in recent weeks.

Analysts from IDC and Bloomberg Intelligence both predicted 240 million iPhones earlier in 2022.

The California-based firm declined to comment on the outlook, which might alter in the coming months, depending on the economy and supply restrictions. Apple does not reveal its production targets or iPhone sales since 2019.

Apple’s shares dropped by almost 1.8% in premarket trading on Thursday.

The company had already warned that supply issues would reduce sales by $4 billion to $8 billion in the current quarter, owing to Covid-19 lockdowns causing production lines in China to stutter. Overall smartphone market shipments fell by 11% in the first quarter, and the third biggest smartphone manufacturer has reported a decline in revenue. Apple, however, is confident that its product sales will remain unaffected for too long, owing to its wealthy customer base and flourishing app ecosystem.

The entire tech industry is preparing for a slowdown in consumer spending as the cost of everyday necessities rises due to rising gasoline and materials prices.

Linda Sui, senior director at Strategy Analytics, said that geopolitical issues, price inflation, component shortages, exchange rate volatility, and covid disruption would continue to weigh on the smartphone market in the first half of 2022 before it eases out in the second half.

The post Apple to keep iPhone production target unchanged in 2022 appeared first on International Finance.

The surge in inflation was fuelled primarily by rising food prices and the dissipation of previous mobile charge cuts. The economists think that Japan’s price rises will speed to the central bank’s 2% objective in the coming months.

Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute said that the nationwide inflation may rise to 2% in April-June. He also added that inflation may not keep accelerating further as the pace of the energy price is slowing.

The increase in the Tokyo core consumer price index (CPI) was quicker than the median market prediction of 1.8%, followed by a 0.8% rise in March. The index excludes fresh food, which is a variable factor but includes energy goods.

In the overall reading, Tokyo’s CPI climbed 2.5% in April from the previous year, the sharpest rate of inflation since October 2014. The report indicated that the fading effect of last year’s mobile fee reduction pushed up the total CPI by 0.80 points, while non-fresh food costs pushed it up by 0.17 points.

According to a government official, to-go sushi packages, hamburgers and bread saw the biggest price hikes among food items in April. Also because of the government’s fuel subsidy schemes to cut gasoline and other energy expenses, energy prices in Tokyo grew 24.6% year-on-year in April, slower than in March. Posting the first increase since March, the core CPI in Tokyo excluding fresh food and energy items rose 0.8% in April.

The post Tokyo consumer prices rise at the fastest pace in seven years appeared first on International Finance.

In this system, solar panels are fitted into the house along with the air source heat pump. The heat pump and panels work together along with the passive heating system. A network of pipes wrapped around in concrete will store heat in the summers. In winters, it will slowly release the heat.

According to a report on the BBC website, because of the heat pump and solar panels, energy bills have been reduced substantially. But a lot can still be done.

The family believes that they would like to have a battery storage facility where some of the solar energy can be stored. This energy will then be useful during the night. But because of the cost issue, they are unable to do this.

According to the data available in the government records, almost 85% of UK homes still use mains gas for heat. By doing this, it leaves them at the mercy of volatile international gas markets which then dictate pricing.

In the month of April, the energy price cap was raised by 54% and almost 22 million people’s bills were set to rise.

The post How people in UK are cutting heating bills appeared first on International Finance.