Why Inflation Around the World Just Won’t Go Away | Kanebridge News
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    HOUSE MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $1,526,212 (+1.41%)       Melbourne $950,600 (-0.81%)       Brisbane $848,079 (+0.39%)       Adelaide $783,680 (+0.69%)       Perth $722,301 (+0.42%)       Hobart $727,777 (-0.40%)       Darwin $644,340 (-0.88%)       Canberra $873,193 (-2.75%)       National $960,316 (+0.31%)                UNIT MEDIAN ASKING PRICES AND WEEKLY CHANGE     Sydney $711,149 (+0.79%)       Melbourne $480,050 (-0.07%)       Brisbane $471,869 (+1.52%)       Adelaide $395,455 (-0.79%)       Perth $396,215 (+0.44%)       Hobart $535,914 (-1.67%)       Darwin $365,715 (+0.11%)       Canberra $487,485 (+1.06%)       National $502,310 (+0.25%)                HOUSES FOR SALE AND WEEKLY CHANGE     Sydney 8,985 (+170)       Melbourne 11,869 (-124)       Brisbane 8,074 (+47)       Adelaide 2,298 (-22)       Perth 6,070 (+20)       Hobart 993 (+24)       Darwin 282 (-4)       Canberra 809 (+43)       National 39,380 (+154)                UNITS FOR SALE AND WEEKLY CHANGE     Sydney 7,927 (+125)       Melbourne 6,997 (+50)       Brisbane 1,822 (+3)       Adelaide 488 (+5)       Perth 1,915 (-1)       Hobart 151 (+3)       Darwin 391 (-9)       Canberra 680 (+5)       National 20,371 (+181)                HOUSE MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $750 (-$20)       Melbourne $580 ($0)       Brisbane $590 (+$10)       Adelaide $570 (-$5)       Perth $600 ($0)       Hobart $550 ($0)       Darwin $700 (+$5)       Canberra $670 (+$10)       National $633 (-$1)                    UNIT MEDIAN ASKING RENTS AND WEEKLY CHANGE     Sydney $700 (-$20)       Melbourne $558 (+$8)       Brisbane $590 ($0)       Adelaide $458 (-$3)       Perth $550 ($0)       Hobart $450 ($0)       Darwin $550 ($0)       Canberra $540 (-$10)       National $559 (-$4)                HOUSES FOR RENT AND WEEKLY CHANGE     Sydney 5,224 (-134)       Melbourne 5,097 (+90)       Brisbane 3,713 (-84)       Adelaide 1,027 (-3)       Perth 1,568 (-46)       Hobart 471 (-3)       Darwin 127 (+13)       Canberra 658 (-32)       National 17,885 (-199)                UNITS FOR RENT AND WEEKLY CHANGE     Sydney 8,171 (-343)       Melbourne 5,447 (-170)       Brisbane 1,682 (-22)       Adelaide 329 (+3)       Perth 561 (-11)       Hobart 159 (-6)       Darwin 176 (+16)       Canberra 597 (-12)       National 17,122 (-545)                HOUSE ANNUAL GROSS YIELDS AND TREND         Sydney 2.56% (↓)       Melbourne 3.17% (↓)     Brisbane 3.62% (↑)        Adelaide 3.78% (↓)       Perth 4.32% (↓)     Hobart 3.93% (↑)      Darwin 5.65% (↑)      Canberra 3.99% (↑)        National 3.43% (↓)            UNIT ANNUAL GROSS YIELDS AND TREND         Sydney 5.12% (↓)       Melbourne 6.04% (↓)       Brisbane 6.50% (↓)     Adelaide 6.02% (↑)        Perth 7.22% (↓)     Hobart 4.37% (↑)      Darwin 7.82% (↑)        Canberra 5.76% (↓)       National 5.79% (↓)            HOUSE RENTAL VACANCY RATES AND TREND       Sydney 1.0% (↑)      Melbourne 0.7% (↑)      Brisbane 0.8% (↑)      Adelaide 0.4% (↑)        Perth 0.4% (↓)       Hobart 1.2% (↓)     Darwin 0.5% (↑)      Canberra 1.5% (↑)      National 0.8% (↑)             UNIT RENTAL VACANCY RATES AND TREND         Sydney 1.3% (↓)     Melbourne 1.6% (↑)      Brisbane 0.9% (↑)      Adelaide 0.5% (↑)      Perth 0.7% (↑)      Hobart 2.2% 2.0% (↑)      Darwin 1.0% (↑)        Canberra 1.7% (↓)     National 1.3% (↑)             AVERAGE DAYS TO SELL HOUSES AND TREND       Sydney 27.0 (↑)        Melbourne 28.3 (↓)     Brisbane 32.3 (↑)      Adelaide 26.3 (↑)      Perth 34.9 (↑)        Hobart 33.4 (↓)     Darwin 48.7 (↑)        Canberra 27.6 (↓)     National 32.3 (↑)             AVERAGE DAYS TO SELL UNITS AND TREND         Sydney 27.0 (↓)       Melbourne 29.0 (↓)     Brisbane 33.0 (↑)        Adelaide 27.5 (↓)     Perth 38.2 (↑)      Hobart 33.4 (↑)      Darwin 48.3 (↑)      Canberra 33.2 (↑)      National 33.7 (↑)            
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Why Inflation Around the World Just Won’t Go Away

Roughly a year into their campaign against high inflation, policy makers are some way from being able to declare victory

Tue, Jun 20, 2023 8:52amGrey Clock 5 min

FRANKFURT—The world’s central banks underestimated inflation last year. They are trying not to make the same mistake twice.

Across affluent countries, central bankers are sharply lifting inflation forecasts, penciling in further interest-rate increases and warning investors that interest rates will stay high for some time. Some have set aside plans to keep interest rates on hold.

Roughly a year into their campaign against high inflation, policy makers are some way from being able to declare victory. In the U.S. and Europe, underlying inflation is still around 5% or higher even as last year’s heady increases in energy and food prices fade from view. On both sides of the Atlantic, wage growth has stabilised at high levels and shows few signs of steady declines.

Indeed, the impact of the past year’s aggressive interest-rate increases seems to be ebbing in places, with signs that housing markets are stabilising and unemployment is resuming its decline. Growth softened in the eurozone, which has entered a technical recession, but the economic bloc still added nearly a million new jobs in the first three months of the year, while the U.S. economy has recently added some 300,000 jobs a month. Canada, Sweden, Japan and the U.K skirted recessions after growth unexpectedly rebounded. Business surveys suggest a relatively buoyant outlook.

All that puts major central banks in a tricky spot. They need to decide if inflation has stalled way above their 2% target, which could require much higher interest rates to fix, or if inflation’s decline is only delayed.

Get the call wrong, and they could push the rich world into a deep recession or force it to endure years of high inflation.

“It’s not an enviable situation that central banks are in,” said Stefan Gerlach, a former deputy governor of Ireland’s central bank. “You could make a major mistake either way.”

The difficulty is compounded by central banks having missed the rise of inflation in the first place, he said. These so-called policy errors hurt the standing of officials and might lead them to second-guess their decisions, as both sides of the inflation debate battle over why economists have been so wrong-footed on inflation.

The Federal Reserve last week held interest rates steady but signalled two more increases this year, which would lift U.S. rates to a 22-year high. Price inflation in core services excluding housing, a closely watched gauge of underlying price pressures, “remains elevated and has not shown signs of easing,” the Fed wrote in its semiannual monetary policy report last week.

Central banks in Australia and Canada recently surprised investors with interest-rate increases, the latter after a months-long pause. The European Central Bank last week increased interest rates by a quarter percentage point and indicated it would continue to push them higher at least through the summer. “We are not thinking about pausing,” ECB President Christine Lagarde said.

The Bank of England showed a readiness to pause its long series of interest rate rises since the start of the year, but it is now expected to raise its key interest rate for a 13th consecutive time this week as wage and consumer-price growth prove sticky. Investors anticipate five further rate increases that would take the bank’s key rate to 5.75%.

“We’ve still been going up, the ECB is still going up, everybody’s still going up, and the U.S. economy is still ripping along for the most part,” Fed Governor Christopher Waller said on Friday in a moderated discussion in Oslo.

British lawmakers have been running low on patience. The committee of lawmakers responsible for scrutinising the central bank Tuesday called for an independent review of its inflation forecasts, with a view to finding out what went wrong.

With economic signals mixed, central banks are entering a new phase: They need to wait long enough for past rate rises to filter through the economy without underestimating inflation again.

There are good reasons to wait. For one thing, the savings accumulated by households and businesses during the pandemic might have supported spending and countered the impact of rising borrowing costs. Businesses are highly profitable, which has enabled them to retain workers in a tough economy. As savings are depleted, spending will fall and inflation might resume its decline.

Interest-rate increases might also only just be starting to bite. Businesses and households might not respond when borrowing costs increase from zero to 1%, but they might cut spending more when rates rise to 5%. “It might be highly nonlinear,” said Gerlach.

Crucially, economies are still recovering from the pandemic. The delayed reopening of China’s economy supported growth around the world and might get a boost with fresh stimulus measures.

Many close-contact services such as restaurants and retail still have room to rebound following their huge plunge during the period of lockdowns and social distancing, according to Holger Schmieding, chief economist at Berenberg Bank. In the U.K., output of consumer-facing services is still 8.7% short of its prepandemic level, while the output of all other sectors is 1.7% higher.

Stronger spending on consumer-facing services will damp the impact of interest-rate rises for a time. But those effects won’t last long if economic growth continues to soften, which should reduce incomes and spending.

“The main point now is the transmission of our past monetary decisions, which are strongly reflected in financial conditions, but whose economic effects could take up to two years to be fully felt,” said François Villeroy de Galhau, who sits on the ECB’s rate-setting committee as Bank of France governor, on Friday.

Other considerations, however, suggest that inflation could remain sticky.

Some Fed officials believe that interest rates are hitting the economy more quickly than in the past, meaning that previous increases may already have worked through the system—and even more are needed.

Why might that be? Central bankers now state clearly what they are doing and what they intend to do in future, enabling investors to react immediately, Waller argued on Friday. In rate-hiking cycles as recently as the 1990s, the Fed didn’t even inform investors of its latest policy decisions. As a result, the yield on 2-year U.S. Treasury notes had increased by 200 basis points in March 2022, before the Fed increased rates at all, Waller said.

Moreover, new central-bank policies might damp the impact of interest-rate increases. Bundesbank economists argued in a recent paper that as rates rise, banks are earning more on their large stock of excess reserves parked with central banks, which reflect central banks’ large-scale asset-purchase programs. That helps banks to continue to extend loans.

Crucially, businesses and households might have adjusted to a new world of soaring prices by permanently changing their behaviour. If so, it could be very costly to return to the old world of low and stable inflation, requiring much higher interest rates, said Joerg Kraemer, chief economist at Commerzbank in Frankfurt.

Households and businesses need to respond aggressively or risk deep losses in purchasing power. Businesses can easily justify increasing their prices further if everyone else is doing the same. Trade unions are fighting to compensate employees in ways not seen in decades and attracting new members.

These changes mean that central banks will need to act more forcefully, pushing economies into a deeper downturn to break the new inflationary mind-set, Kraemer said. The ECB, for example, might need to increase its policy rate to 5% from the current level of 3.5%, he said.

For now, investors appear to doubt the hawkish tone emanating from central banks. Stock markets are resilient on both sides of the Atlantic, and investors are pricing in interest-rate cuts in the U.S. and Europe next year. That may be a mistake, according to some economists.

“The bottom line is that inflation at 5% remains too high, and it is clear that markets are under appreciating the Fed’s commitment to get inflation back to 2%,” said Torsten Slok, chief economist at Apollo Global Management.


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First, the good news for office landlords: A post-Labor Day bump nudged return-to-office rates in mid-September to their highest level since the onset of the pandemic.

Now the bad: Office attendance in big cities is still barely half of what it was in 2019, and company get-tough measures are proving largely ineffective at boosting that rate much higher.

Indeed, a number of forces—from the prospect of more Covid-19 cases in the fall to a weakening economy—could push the return rate into reverse, property owners and city officials say.

More than before, chief executives at blue-chip companies are stepping up efforts to fill their workspace. Facebook parent Meta Platforms, Amazon and JPMorgan Chase are among the companies that have recently vowed to get tougher on employees who don’t show upIn August, Meta told employees they could face disciplinary action if they regularly violate new workplace rules.

But these actions haven’t yet moved the national return rate needle much, and a majority of companies remain content to allow employees to work at least part-time remotely despite the tough talk.

Most employees go into offices during the middle of the week, but floors are sparsely populated on Mondays and Fridays. In Chicago, some September days had a return rate of over 66%. But it was below 30% on Fridays. In New York, it ranges from about 25% to 65%, according to Kastle Systems, which tracks security-card swipes.

Overall, the average return rate in the 10 U.S. cities tracked by Kastle Systems matched the recent high of 50.4% of 2019 levels for the week ended Sept. 20, though it slid a little below half the following week.

The disappointing return rates are another blow to office owners who are struggling with vacancy rates near record highs. The national office average vacancy rose to 19.2% last quarter, just below the historical peak of 19.3% in 1991, according to Moody’s Analytics preliminary third-quarter data.

Business leaders in New York, Detroit, Seattle, Atlanta and Houston interviewed by The Wall Street Journal said they have seen only slight improvements in sidewalk activity and attendance in office buildings since Labor Day.

“It feels a little fuller but at the margins,” said Sandy Baruah, chief executive of the Detroit Regional Chamber, a business group.

Lax enforcement of return-to-office rules is one reason employees feel they can still work from home. At a roundtable business discussion in Houston last week, only one of the 12 companies that attended said it would enforce a return-to-office policy in performance reviews.

“It was clearly a minority opinion that the others shook their heads at,” said Kris Larson, chief executive of Central Houston Inc., a group that promotes business in the city and sponsored the meeting.

Making matters worse, business leaders and city officials say they see more forces at work that could slow the return to office than those that could accelerate it.

Covid-19 cases are up and will likely increase further in the fall and winter months. “If we have to go back to distancing and mask protocols, that really breaks the office culture,” said Kathryn Wylde, head of the business group Partnership for New York City.

Many cities are contending with an increase in homelessness and crime. San Francisco, Philadelphia and Washington, D.C., which are struggling with these problems, are among the lowest return-to-office cities in the Kastle System index.

About 90% of members surveyed by the Seattle Metropolitan Chamber of Commerce said that the city couldn’t recover until homelessness and public safety problems were addressed, said Rachel Smith, chief executive. That is taken into account as companies make decisions about returning to the office and how much space they need, she added.

Cuts in government services and transportation are also taking a toll. Wait times for buses run by Houston’s Park & Ride system, one of the most widely used commuter services, have increased partly because of labor shortages, according to Larson of Central Houston.

The commute “is the remaining most significant barrier” to improving return to office, Larson said.

Some landlords say that businesses will have more leverage in enforcing return-to-office mandates if the economy weakens. There are already signs of such a shift in cities that depend heavily on the technology sector, which has been seeing slowing growth and layoffs.

But a full-fledged recession could hurt office returns if it results in widespread layoffs. “Maybe you get some relief in more employees coming back,” said Dylan Burzinski, an analyst with real-estate analytics firm Green Street. “But if there are fewer of those employees, it’s still a net negative for office.”

The sluggish return-to-office rate is leading many city and business leaders to ask the federal government for help. A group from the Great Lakes Metro Chambers Coalition recently met with elected officials in Washington, D.C., lobbying for incentives for businesses that make commitments to U.S. downtowns.

Baruah, from the Detroit chamber, was among the group. He said the chances of such legislation being passed were low. “We might have to reach crisis proportions first,” he said. “But we’re trying to lay the groundwork now.”


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