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Europe Is Beating Inflation. Why Can’t America Declare Victory?
Inflation has decreased significantly from historically high levels in both the United States and Europe. However, the United States is seeing a delay in progress, as the Federal Reserve is currently anticipated to begin reducing interest rates after the European Central Bank.
In March, the annual US inflation rate, as assessed by the Personal Consumption Expenditures index, increased to 2.7% from 2.5% in February. The Federal Reserve’s objective is to maintain a long-term inflation rate of 2%.
The Consumer Price Index, another indicator of inflation in the United States, has also exhibited a similar increasing trajectory. The Consumer Price Index (CPI) increased by 3.5% in March, compared to the corresponding month in 2023. This is a rise from the 3.2% recorded in February.
Europe Is Beating Inflation. Why Can’t America Declare Victory?
Meanwhile, inside the group of 20 countries that utilize the euro as their currency, the annual consumer price inflation rate has consistently decreased since the beginning of the year. The percentage was 2.4% in March.
Market predictions suggest that the European Central Bank (ECB) is likely to begin reducing interest rates in June, which is three months ahead of the forecasted rate decrease by the Federal Reserve (Fed).
There are even signs that the Federal Reserve may take action that, until recently, seems unimaginable – increase the interest rate for borrowing. In a recent statement, Fed Governor Michelle Bowman expressed her support for a potential increase in interest rates if there is a slowdown or reversal in inflation.
What is the reason the United States has a more significant inflation issue than Europe?
Several economists contend that the disparity in inflation rates between the United States and Europe is insignificant, attributing it to a peculiar aspect of the measurement methods used in the United States.
Europe Is Beating Inflation. Why Can’t America Declare Victory?
In contrast to the European Central Bank’s preferred measure, both the Personal Consumption Expenditures (PCE) and the Consumer Price Index (CPI) take into account the expenditures associated with owning a home, which includes the potential rental income that could be earned if the property was rented out instead of being occupied by the owner.
The plan aims to monitor inflation in the real estate sector, considering the high rate of homeownership among Americans. According to Paul Donovan, the head economist at UBS Global Wealth Management, people actually need to experience these theoretical housing expenses.
The US Consumer Price Index (CPI) assigns a significantly higher weight to owner-occupiers’ housing expenses compared to the Personal Consumption Expenditures (PCE) index. Specifically, the CPI assigns a weight of 32% to these costs, while the PCE assigns a weight of 13%. In contrast, the eurozone’s primary measure of consumer prices does not assign any weight (0%) to owner-occupiers’ housing costs.
Simon MacAdam, deputy chief global economist at Capital Economics, argues that the recent discrepancies between US and eurozone inflation are magnified by this transatlantic discrepancy.
When employing an alternative metric that eliminates hypothetical housing expenses and incorporates additional modifications, MacAdam discovers that core inflation rates, excluding energy and food prices, have exhibited high similarity in the United States and Europe during the previous six months.
“Contrary to recent commentary, the United States does not have a fundamental issue of widespread and excessive price pressure,” he stated in a note last week.
Economies that are moving in different directions or diverging from one other.
If the levels of inflation are essentially comparable on both sides of the Atlantic, then why are their respective central banks planning to initiate interest rate reductions at separate moments?
In essence, as MacAdam succinctly stated, central banks would modify their monetary policies based on the specific measure of inflation they aim to control rather than relying on harmonized or adjusted measures.
However, the situation is more intricate than that. “The divergence between the two sides of the Atlantic, particularly in terms of economic growth, is significant,” stated Carsten Brzeski, the global head of macroeconomic research at ING, in an interview with CNN.
According to the International Monetary Fund, the US economy is projected to see a growth rate of 2.7% this year, while the eurozone is expected to expand by only 0.8%.
In March, US firms experienced a significant surge in hiring, with the addition of 303,000 jobs marking a historic milestone. The United States government has allocated significantly more funds than European governments in recent years to provide support for consumers and businesses throughout the pandemic, resulting in a sustained and strong level of consumer demand in the United States.
Although the initial figures on Thursday indicated a lower-than-anticipated growth rate for the US economy in the first quarter, Treasury Secretary Janet Yellen expressed to Reuters that the economy is still performing quite well.
Europe’s economy has been significantly weakened, partly due to the enduring effects of an oil crisis. Following Russia’s complete invasion of Ukraine in 2022, the prices of natural gas in Europe, which used to rely on Russia for almost 40% of its pipeline gas imports, skyrocketed to unprecedented levels.
Consequently, the eurozone experienced significantly greater annual inflation than the PCE. The two rates reached 10.6% and 7.1% in 2022, respectively.
Europe Is Beating Inflation. Why Can’t America Declare Victory?
According to Brzeski, the robustness of the US economy increases the probability of a significant resurgence of high inflation. This is causing the Federal Reserve to be more cautious than the European Central Bank in initiating interest rate reductions during the summer.
Both the United States and the eurozone are currently dealing with labor shortages. This has led firms to increase pay to attract and retain workers, which in turn is contributing to inflation in the services sector. However, in a broader sense, the demand from US consumers seems to be stronger.
“The savings ratio of US households is decreasing, indicating that people in the US are willing to use their savings for spending,” he stated. “Typically, European households tend to be more prudent.”
Davide Oneglia, the director of European and global macroeconomics at research firm TS Lombard, has a comparable perspective. “The US consumer is exhibiting a greater inclination to engage in spending due to a potentially improved outlook for their own employment situation,” he stated in an interview with CNN.
SOURCE – (CNN)
News
Howard Schultz Violated Labor Law By Telling Employee ‘If You’re Not Happy At Starbucks, You Can Go Work For Another Company’
Starbucks’ interim CEO, Howard Schultz, violated federal labor law in 2022 by telling a California barista who expressed concerns about unionization that “if you’re not happy at Starbucks, you can go work for another company.”
The National Labor Relations Board ruled on Wednesday that Schultz’s statement constituted an unconstitutional, coercive threat.
The decision highlights Starbucks’ difficult relationship with organized labor, as more and more employees at its outlets unionize.
Howard Schultz Violated Labor Law By Telling Employee ‘If You’re Not Happy At Starbucks, You Can Go Work For Another Company’
In 2022, as interim CEO, Schultz visited a business event in Long Beach, California, to address and improve working conditions at Starbucks locations. According to the NLRB, Barista Madison Hall attempted to discuss the benefits of unionization as well as Starbucks’ claimed history of unfair labor practices.
“Why are you angry at Starbucks?” Schultz inquired. He stated that the occasion was not the appropriate forum for discussing union problems before remarking on working elsewhere. The administrative law decision states that he “had an angry expression on his face.” The NLRB ruling maintains an administrative law judge’s decision from October 2023.
Starbucks issued a statement expressing its disagreement with the board’s decision. “Our focus remains on training and supporting our managers to ensure respect for our partners’ right to organize, and we are making progress in our discussions with Workers United,” a business representative said in a statement Thursday.
Though Schultz stepped down from his third term as CEO in March 2023, he remains involved with the company. When he retired from Starbucks’ board of directors in September, the business named him “lifelong chairman emeritus.”
“We note that the judge identified the Respondent’s highest official, interim CEO Schultz, as a ‘legendary leader,’ a status that would exacerbate the coercive nature of Schultz’s statement,” the ruling read.
Since the first Starbucks branch in Buffalo, New York, unionized in 2021, the coffee business has been embroiled in hundreds of labor battles over alleged union-busting practices. In June, the Supreme Court heard Starbucks v. McKinney, a case involving seven employees who were fired after attempting to form a union. The Supreme Court agreed with Starbucks.
An NLRB administrative law judge earlier stated that Starbucks had engaged in “egregious and widespread misconduct” in its dealings with employees involved in unionization efforts at Buffalo outlets, including the first site to unionize. Starbucks dispatched high-level executives into Buffalo-area stores on a “relentless” campaign, according to the judge, which “likely left a lasting impact as to the importance of voting against representation.”
Starbucks stated at the time that it is “considering all options to obtain further legal review,” and that “we believe the decision and remedies ordered are inappropriate given the record in this matter.”
Howard Schultz Violated Labor Law By Telling Employee ‘If You’re Not Happy At Starbucks, You Can Go Work For Another Company’
The NLRB ordered Starbucks on Wednesday to stop threatening to terminate employees for unionizing and to post a notice of employee rights in all of its Long Beach outlets.
“We are pleased to see the NLRB continuing to advocate for workers and their legal right to organize. At the same time, we’re looking ahead and proud to be on a new journey with the firm,” said Michelle Eisen, co-chair of Starbucks Workers United’s national organizing committee and bargaining delegate, in a statement to CNN on Thursday.
SOURCE | CNN
News
Tesla Recalls 27,000 Cybertrucks Due To A Rearview Camera Issue
Tesla is recalling around 27,000 Cybertrucks due to a rearview camera issue that delays the image being presented on the dashboard, increasing the danger of a collision.
According to a National Highway Traffic Safety Administration (NHTSA) report, the rearview display may appear blank for up to 8 seconds when the Cybertruck is in reverse. That is far over the two seconds required by US federal safety regulations.
Tesla Recalls 27,000 Cybertrucks Due To A Rearview Camera Issue
Tesla has issued a free, over-the-air software update to address the issue. Drivers can also reverse the Cybertruck by “performing a shoulder check and using their mirrors,” according to the NHTSA.
This is the fifth recall for the electric vehicle, which was released last year. The most recent recall, in June, concerns the truck’s large single windshield wiper and a piece of plastic trim along the edge of the truck bed that might become loose and detach from the vehicle while driving.
In April, the trucks were recalled because the accelerator pedal could become stuck when depressed. Tesla launched a software recall in January for 2.2 million of its cars, including Cybertrucks, due to warning light letters that were too small to read. That issue was likewise resolved with an over-the-air software upgrade.
Tesla Recalls 27,000 Cybertrucks Due To A Rearview Camera Issue
The company delivered approximately 463,000 automobiles worldwide in the third quarter, rising 6% from the previous year’s sales number and 4% from the second quarter of this year.
SOURCE | CNN
News
The Biden Administration can go Ahead With Student Loan Forgiveness, Says a Federal Judge.
(VOR News) – A temporary restraining order that was obtained against the expansive new student loan forgiveness system that was planned by the administration of Vice President Joe Biden will be allowed to expire by a federal judge.
Injunction was issued against the program that was being proposed. It is possible that the execution of this strategy may reduce the suffering of tens of millions of people in the United States of America.
There is a possibility that the idea might be beneficial to as many as three out of every four people who are now in possession of federal student loans, as stated by an estimate that was provided by the Center for American Progress.
This happens because the student loan plan takes into account government initiatives.
A victory was granted to the administration of Vice President Joe Biden, according to an announcement made by United States District Judge Randal Hall in Georgia before the close of the day on Wednesday. The previous Republican president, George W. Bush, was the one who appointed Hall to his current post. Hall now serves in that capacity.
In the next few weeks leading up to the election that will take place in November, it is quite likely that Vice President Joe Biden will press forward with the proposition that his administration has offered to cancel student loans. There is a chance that this will occur given the verdict.
A new condition has emerged as a result of a lawsuit that was filed against the aid package by seven states that are run by Republicans. This lawsuit was filed against the aid package after it was submitted.
There are a number of states that have ruled that the debt cancellation scheme that is now being carried out by the United States Department of Education is illegal. These states include Alabama, Arkansas, Florida, Georgia, Missouri, North Dakota, and Ohio, amongst others.
The conclusions of Hall, on the other hand, indicate that Georgia did not have the legal jurisdiction to launch a legal action against the relief plan. As a result, the state was unable to fulfill the duty of the forum for the application.
The judge made an order that the case be relocated to Missouri because the states argue that the notion that was proposed by Biden would be most detrimental to Mohela, which is the Missouri Higher Education Loan Authority.
Which is responsible for servicing student loans?
The judge issued the order as a result. The United States Department of Education’s spokesman applauded the judge’s finding that Georgia had “no legal basis” to pursue the action; yet, the spokesperson also criticized the Republican drive to prevent relief from being granted. The verdict made by the judge was lauded by the authorized spokesperson.
This case is the outcome of an ongoing campaign by Republican elected officials who, according to what they claimed, seek to prevent millions of their own people from having breathing room on their student loans. This campaign is the cause of this complaint.
That campaign is reflected in this lawsuit that has been filed. “The fact remains that this lawsuit reflects an ongoing effort.”
Our efforts to improve the flawed student loan system and to provide support and relief to borrowers all throughout the country are not going to be abandoned, and we are not going to stop up on providing these services. We have declared our intention to carry on with our work.
Under the plan that was proposed by Vice President Joe Biden, student debt would be forgiven for four different groups of borrowers:
Those who owe more than they initially took out; those who have been in repayment already for decades; students who attend schools with a low financial value; and those who are eligible for loan forgiveness under an existing program but have not yet implemented the program.
SOURCE: CNBC
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