Inflation in the US eased more than expected last month, fuelling hopes that the Federal Reserve is close to cutting interest rates.
The Consumer Price Index (CPI) decreased 0.1 per cent in June, data from the Labour Department showed. On an annual basis, CPI inflation rose 3.0 per cent, down from 3.3 per cent in May. It marked the third straight month of moderating inflation.
Core inflation, which does not include food and energy, fell from 3.4 per cent to 3.3 per cent.
Economists had predicted headline CPI inflation would drop to 3.1 per cent on an annual basis, according to a median estimate compiled by FactSet. Core CPI was expected to rise 3.4 per cent.
“This morning's CPI report was arguably the most encouraging one the FOMC has received since it began its inflation fight nearly two and a half years ago,” Wells Fargo economists Sarah House and Michael Pugliese wrote to investors, referring to the policy-setting Federal Open Market Committee.
The Fed has held its benchmark rate steady at 5.25 to 5.50 per cent since last July. Central banks in the UAE and Saudi Arabia, which follow the Fed's lead, have also maintained their own interest rates since then.
Fed Chairman Jerome Powell told politicians in congressional testimony on Wednesday that he has seen “considerable progress” in bringing inflation closer to the central bank's 2 per cent target, but added “more good data” was required before moving on rate cuts.
While he declined to offer a timetable on when this would happen, traders expect the Fed will make an initial rate cut in September before potentially two additional quarter-point cuts in their November and December meetings, according to CME Group data.
Mahmoud Alkudsi, senior market analyst at ADSS, said “expectations are growing for an impending monetary policy pivot”.
“With inflation cooling off from the higher levels earlier in the year, the Federal Reserve will gain greater confidence in its current road map, with the coveted 2 per cent target growing closer,” Mr Alkudsi wrote to clients.
And in a further clue that the Fed sees the economy as cooling, Mr Powell described the labour market as “strong, but not overheated”. While the US jobs market added a healthy 206,000 positions last month, the unemployment rate unexpectedly ticked up to 4.1 per cent.
Unlike other central banks, the Fed has a dual mandate of maintaining price stability and maximum employment.
Mr Powell touched on the two-sided risks the US central bank faces. Holding rates for either too long or not long enough both threaten the health of the economy, either by steering it into a recession and causing an unwanted sharp rise in unemployment, or seeing inflation rise again.
“We're very much aware that we have two-sided risks now … and we're determined to balance those as best we can,” Mr Powell said.
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
Ticket prices
- Golden circle - Dh995
- Floor Standing - Dh495
- Lower Bowl Platinum - Dh95
- Lower Bowl premium - Dh795
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City's slump
L - Juventus, 2-0
D - C Palace, 2-2
W - N Forest, 3-0
L - Liverpool, 2-0
D - Feyenoord, 3-3
L - Tottenham, 4-0
L - Brighton, 2-1
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L - Bournemouth, 2-1
L - Tottenham, 2-1
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
The lowdown
Badla
Rating: 2.5/5
Produced by: Red Chillies, Azure Entertainment
Director: Sujoy Ghosh
Cast: Amitabh Bachchan, Taapsee Pannu, Amrita Singh, Tony Luke
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Company%20Profile
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The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
On sale: Now
If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
