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Economic Indicators

Biden to blast Republicans as having no plan on inflation

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© Reuters. FILE PHOTO: U.S. President Joe Biden arrives to deliver remarks on expanding high-speed internet access, during a Rose Garden event at the White House in Washington, U.S., May 9, 2022. REUTERS/Kevin Lamarque/File Photo

By Trevor Hunnicutt

WASHINGTON (Reuters) – U.S. President Joe Biden will use a speech on inflation on Tuesday as an opportunity to turn his Democratic Party’s top political liability ahead of the midterm elections into an argument against Republicans.

As Americans worry about a spike in inflation that has pushed consumer prices more than 8% higher, the president will highlight a number of his administration’s steps to cut prices.

He is not expected to announce new policy measures in the speech, which comes a day before new consumer price data is expected to show inflation remained elevated through April.

But he is expected to sharpen his attacks on Republicans six months before the Nov. 8 midterm elections, where Democrats want to retain narrow majorities in the Senate and House of Representatives.

“Republicans love to use inflation as a political talking point, but does anyone have a clue what their plan is to bring down prices?” said a White House official who asked not to be named.

Demand stimulated by government spending and savings accumulated during the COVID-19 pandemic have been no match for creaky supply chains and labor shortages, prompting higher inflation globally.

That has created a political problem as American consumers stare down higher grocery and gas bills exacerbated by measures blocking Russian oil and gas after its invasion of Ukraine, actions that Moscow calls “a special operation.”

Fewer than half of U.S. adults – 44% – approve of Biden’s handling of the presidency and they rate the economy as the country’s most important problem, according to a Reuters/Ipsos poll last week.

Republicans are working to capitalize on the issue in the midterms, promoting steps including loosening regulations on oil and gas producers as well as cutting some taxes and government spending. But the party has not endorsed any policy document outlining the steps they would take on inflation.

Biden has sharpened his attack on Republicans in recent days, including dismissing former President Donald Trump’s “Make America Great Again” movement as extreme.

“Voters know that Republican-led states are leading in economic recovery and job creation, and will vote for Republicans and our proven agenda come November,” said Emma Vaughn, a spokesperson for the Republican National Committee.

Economic Indicators

JPMorgan cuts U.S. GDP estimates for 2022 and 2023

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© Reuters. FILE PHOTO: Stacked containers are shown as ships unload their cargo at the Port of Los Angeles in Los Angeles, California, U.S. November 22, 2021. REUTERS/Mike Blake

(Reuters) – JPMorgan (NYSE:JPM) on Wednesday cut its expectation for U.S. real gross domestic product for the second half of 2022 and for 2023.

The firm’s economic and policy research department cut its second half view to 2.4% from 3% and cut its first half 2023 target to 1.5% from 2.1% and for the second half of 2023 it cut its view to 1% from 1.4%.

It said there may be enough of a growth slowdown to lead to a gradual increase in the unemployment rate later next year, helping to relieve some wage pressures that have been building.

“In short, we forecast a soft landing, but are well aware that this outcome has rarely (if ever) occurred,” according to the research led by economist Michael Feroli.

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Economic Indicators

Canada inflation creeps higher in April, economists warn more pinch to come

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© Reuters. FILE PHOTO: Tourists shop for souvenirs in Gastown as the pace of cruise ships arriving in Canadian ports picks up, two years after the industry was shuttered due to the COVID-19 pandemic, in Vancouver, British Columbia, Canada May 13, 2022. REUTERS/Jenn

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By Julie Gordon

OTTAWA (Reuters) – Canada’s annual inflation rate rose faster than expected in April, official data showed on Wednesday, and analysts warned soaring used-car and gasoline prices could stoke the trend, raising pressure on the central bank to tighten policy quickly.

The headline annual inflation rate hit 6.8% in April, Statistics Canada data showed, slightly ahead of analyst forecasts that it would stay flat at 6.7%, instead edging closer to the 6.9% hit in January 1991. It was the 13th consecutive month above the Bank of Canada’s 1-3% control range.

Food and shelter prices surged at rates not seen since the early 1980s, while gasoline price gains slowed slightly from March. Excluding food and energy, inflation was up a still-hefty 4.6%.

“Inflation is spreading much more broadly, and at clear risk of getting firmly entrenched,” said Doug Porter, chief economist at BMO Economics. “Barring a deep dive in oil prices in coming weeks and months, we expect that the worst is yet to come.”

Graphic: Canadian inflation and interest rates – https://graphics.reuters.com/CANADA-ECONOMY/INFLATION/lgpdwekqdvo/chart.png

Porter, in a note, said May inflation could exceed 7%, the highest in nearly 40 years, citing record high gasoline prices in the month and changes to how Statistics Canada tracks the impact of used car prices.

Statscan will reshuffle its baskets with its May release and start using more accurate methods to track used-car prices, which have skyrocketed due to supply chain disruptions which, along with geopolitical conflict, are driving rapid price acceleration globally. This has forced central banks to tighten monetary policy more quickly than they had planned to.

“They have to make sure that it doesn’t morph into an inflationary spiral,” said Jimmy Jean, chief economist at Desjardins Group, of the Bank of Canada’s inflation challenge.

“So the way they’re going to be communicating the next steps will be critical here,” he added.

Last week, Bank of Canada deputy governor Toni Gravelle acknowledged the 1% policy rate was “too stimulative” and reiterated that rates, which were dropped to support the economy during the pandemic, need to be higher.

The central bank is widely expected to make a second 50-basis-point increase on June 1 and money markets are betting the policy rate will be around 3% by year-end.

But Canada’s high debt-to-income level and overheated property market mean the Bank will need to tighten with caution.

“It’s kind of a fine line,” said Darcy Briggs, a portfolio manager at Franklin Templeton Canada. “The trick is to try to get inflation down without creating a lot of havoc. But that’s easier said than done.”

The Canadian dollar was trading down about 0.2% at 1.2835 to the greenback, or 77.90 U.S. cents.

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Economic Indicators

Russian economic growth slows to 3.5% y/y in Q1 – Rosstat

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© Reuters. FILE PHOTO: A general view of city skyline and skyscrapers under construction during sunset as the spread of the coronavirus disease (COVID-19) continues in Moscow, Russia May 16, 2020. REUTERS/Maxim Shemetov

(Reuters) – The Russian economy expanded by 3.5% year-on-year in the first quarter of 2022 after growing 5% in the previous quarter, data from federal statistics service Rosstat showed on Wednesday.

The first quarter is expected to have been the last with sound growth before the Russian economy took a hit from sweeping sanctions for Moscow’s decision to send tens of thousands of troops into Ukraine on Feb. 24.

The economy ministry said this week it expected gross domestic product (GDP) to contract by 7.8% in 2022.

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