17/07/2025

BIZ & FINANCE THURSDAY | JULY 17, 2025

17 Fed’s inflation fears start to be realised

o June CPI report shows substantial increases in prices of some imported goods

time when the US central bank will learn if inflation is responding to the tariffs applied on trading partners and various industrial sectors. So far the levies were having only a limited impact on inflation, but economists broadly have expected to see them eventually filter into retail prices. “We know there is a lag between implementation and the inflationary effect,” said Gregory Daco, chief economist at EY-Parthenon. “Businesses manage imports using different processes ... We have not seen the full-blown effects of tariffs on CPI data ... I would expect to start to see more.” Still, “tariff costs are strikingly visible in June’s CPI data”, wrote Samuel Tombs, chief US economist for Pantheon Macroeconomics. Excluding autos, prices for other non-food or energy goods rose at the fastest pace since June, 2022, when the Fed was still in a battle to lower pandemic-era inflation. “Prices rose especially sharply for goods which are primarily imported”, with prices for appliances, sports equipment and toys all rising nearly 2% on the month, he said. – Reuters Global health aid sinks to 15-year low PARIS: Sweeping foreign aid cuts led by the United States will cause international health funding to plummet to the lowest level in 15 years, a study said yesterday, warning the world has entered a new “era of global health austerity”. Money that provides healthcare to some of the poorest and most in-need people across the world has been dramatically slashed this year, led by the administration of US President Donald Trump. The new study published in the prestigious Lancet journal also pointed to recent steep aid cuts announced by the UK, France and Germany. After reaching an all-time high of US$80 billion in 2021 during the Covid-19 pandemic, the total amount of global health aid will sink to US$39 billion this year, the US-led team of researchers estimated. That would be the lowest level since 2009. Such a dramatic change will result in the world entering a new “era of global health austerity”, the authors of the study warned. Sub-Saharan African countries such as Somalia, the war-torn Democratic of Congo and Malawi will be hit worst because most of their health funding currently comes from international aid, according to the study. The funding cuts will have a major impact on the treatment and prevention of a range of diseases, including HIV/AIDS, malaria and tuberculosis, it added The US slashed its global health funding by at least 67% in 2025 compared to last year, according to the research. The UK cut its funding by nearly 40%, following by France with 33% and Germany with 12%. The researchers at the US-based Institute for Health Metrics and Evaluation called for the world to urgently ramp up health aid. They also warned that nations would likely need find other sources of funding. The US foreign aid cuts alone are estimated to result in the preventable deaths of more than 14 million people by 2030, according to a different Lancet study published earlier this month. – AFP

before Trump started his second term. White House press secretary Karoline Leavitt said the fact that core inflation, which excludes food and energy prices, increased less than expected, “proves that President Trump is stabilising inflation”. Core inflation increased at a 2.9% annual rate in June, slightly below the 3% consensus forecast, but slightly faster than in May. Food and energy costs both increased, pushing headline inflation up to 2.7% from 2.4% the month before. “With increases in categories like household furnishings, recreation, and apparel, import levies are slowly filtering through,” wrote Seema Shah, chief global strategist at Principal Asset Management. “It would be wise for the Fed to remain on the sidelines for a few more months at least.” Investors still expect the Fed in September to cut a quarter of a percentage point from the current 4.25% to 4.5% benchmark interest rate maintained since December, but odds of a cut at the upcoming July 29 30 meeting are now below 5%. Fed chairman Jerome Powell had earlier pinpointed this summer as the

September, with a model from CME group showing that decision was seen a near toss-up after being the baseline expectation for the past month or so. In a speech in Washington on Tuesday, Federal Reserve Bank of Boston president Susan Collins warned that she continues to expect the rise in import taxes to push up inflation while pushing down growth and employment. But she added strong balance sheets on both the business and household sides may help absorb the hit and lessen its impact. “The impact of tariffs may be lessened somewhat by an ability for firms to decrease profit margins and for consumers to continue spending, despite higher prices. “As a result, the adverse impact of tariffs on labor market conditions and economic growth may be more limited,” Collins said. Trump on social media said that consumer prices were “LOW” and repeated his call for the Fed to cut rates. The consumer price level was about 1.2% higher in June compared to December, the last full month

WASHINGTON: Rising prices across an array of goods from coffee to audio equipment to home furnishings pulled inflation higher in June in what economists see as evidence of the Donald Trump administration’s increasing import taxes passing through to consumers. Overall consumer prices rose 0.3% in June, a roughly 3.5% annual rate, after a 0.1% increase in May. Economists – and Fed officials – say they were expecting inflation to gather pace this summer as the lagged impact of tariffs gets passed along by businesses, and the June data suggest central bank policymakers in particular may remain reluctant to cut interest rates until more information is at hand. The tariff price shock could ultimately prove a temporary, one-time adjustment. But with the final tariff levels still being considered by Trump, and steeper levies threatened as of Aug 1, the inflation outlook remains unsettled.

“Today’s report showed that tariffs are beginning to bite,” said Omair Sharif, head of Inflation Insights. “Apparel prices rose, household furnishing prices jumped ... and recreation commodities increased.” Those are heavily imported items and the increases were substantial. Prices for audio-video equipment rose 1.1% over the month and have risen 11.1% on a year over year basis, the largest jump ever in a category where globalisation had generally meant steady or falling prices. It will likely strike a note of caution for the Fed, which has been facing almost daily criticism from Trump for not cutting interest rates, a step central bankers have been reluctant to take until it is clear where the tariffs will leave the US economy. Yields on US Treasury securities rose to their highest in about a month, and interest rate futures reflected growing uncertainty that the Fed would resume rate cuts in

Trump and other attendees taking part in the Pennsylvania Energy and Innovation Summit. – REUTERSPIC

Trump unveils investments to power AI boom PITTSBURGH: US President Donald Trump went to Pennsylvania on Tuesday to announce US$92 billion in energy and infrastructure deals intended to meet big tech’s soaring demand for electricity to fuel the AI boom. Generative AI requires enormous computing power, mainly to run the energy-hungry processors from Nvidia, the California-based company that has become the world’s most valuable company by market capitalization.

Ruth Porat, Google’s president and chief investment officer. The search engine giant also announced a partnership with Brookfield Asset Management to modernise two hydropower facilities in Pennsylvania, representing 670 MW of capacity on the regional grid. Investment group Blackstone pledged more than US$25 billion to fund new data centres and energy infrastructure. US Senator David McCormick, from Pennsylvania, said the investments “are of enormous consequence to Pennsylvania, but they are also crucial to the future of the nation”. His comments reflect the growing sentiment in Washington that the United States must not lose ground to China in the race to develop AI. “We are way ahead of China and the plants are starting up, the construction is starting up,” Trump said. – AFP

Officials expect that by 2028, tech companies will need as much as five gigawatts of power for AI – enough electricity to power roughly five million homes. Top executives from Palantir, Anthropic, Exxon and Chevron attended the event. The funding will cover new data centres, power generation, grid infrastructure, AI training, and apprenticeship programs. Among investments, Google committed US$25 billion to build AI-ready data centres in Pennsylvania and surrounding regions. “We support President Trump’s clear and urgent direction that our nation invest in AI ... so that America can continue to lead in AI,” said

Trump made the announcement at the inaugural Pennsylvania Energy and Innovation Summit at Carnegie Mellon University, with much of the talk about beating China in the global AI race. “Today’s commitments are ensuring that the future is going to be designed, built and made right here in Pennsylvania and right here in Pittsburgh, and I have to say, right here in the United States of America,”Trump said at the event. The tech world has fully embraced generative AI as the next wave of technology, but fears are growing that its massive electricity needs cannot be met by current infrastructure, particularly in the United States.