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.

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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.

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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.

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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)

LONDON — British competition officials announced on Wednesday that they will closely examine recent artificial intelligence agreements made by Microsoft and Amazon. This investigation is prompted by fears that these partnerships may impede competition within the AI business.

The Competition and Markets Authority is currently investigating Microsoft’s collaboration with Mistral AI in France and the company’s recruitment of crucial personnel from Inflection AI, another startup. The agency has also announced a separate investigation into Amazon’s $4 billion purchase of Anthropic, a San Francisco-based company.

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Microsoft And Amazon Face Scrutiny From UK Competition Watchdog Over Recent AI Deals

Due to the increasing interest in generative artificial intelligence (AI) among the public and businesses, major technology corporations have been investing substantial amounts of money into startups. However, these investments have also caught the attention of antitrust authorities.

The regulatory body in the United Kingdom announced that it is inviting feedback from “interested third parties” to determine whether to conduct a comprehensive inquiry into potential antitrust violations.

“We will evaluate, in a fair and unbiased manner, whether each of these three agreements comply with the merger regulations in the United Kingdom and, if they do, whether they have any influence on competition within the country,” stated Joel Bamford, the executive director of mergers at the regulatory body.

Microsoft has committed to supplying the necessary information to the watchdog to facilitate its investigations.

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Microsoft And Amazon Face Scrutiny From UK Competition Watchdog Over Recent AI Deals

“The company stated that it believes that common business practices like hiring talented individuals or making a partial investment in an AI startup encourage competition and should not be considered equivalent to a merger.”

Microsoft has recruited Mustafa Suleyman, one of the co-founders of Google’s DeepMind AI research lab, to lead its consumer artificial intelligence division. Additionally, Microsoft hired the chief scientist and several top engineers and researchers from Inflection, Suleyman’s AI startup.

Earlier this year, Microsoft partnered with Mistral, which has quickly gained popularity in France’s AI industry since its establishment last year. Microsoft had previously collaborated with OpenAI, the creator of ChatGPT, which is also under investigation by the CMA.

Mistral expressed its unwavering dedication to collaborating with the CMA during this procedure to guarantee the preservation of its long-term autonomy and market access.

Meanwhile, Amazon has invested billions to acquire a minority share in Anthropic. The two businesses are working together to create foundation models, the basis for the generative AI systems that have gained worldwide recognition.

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Microsoft And Amazon Face Scrutiny From UK Competition Watchdog Over Recent AI Deals

Amazon stated that it is unprecedented for the CMA to review a collaboration of this nature. “In contrast to partnerships between other AI startups and large technology companies, our collaboration with Anthropic involves a restricted investment, does not grant Amazon a position as a board director or observer, and allows Anthropic to continue running its models on various cloud providers.”

The CMA has announced an increase in its examination of the foundation models industry following the release of a report that emphasized the potential for dominant corporations to enhance their positions through partnerships with significant AI players.

SOURCE – (AP)

The United Nations (U.N.) Gaza The United Nations has urged for a thorough and reliable investigation into the mass graves discovered at two prominent hospitals in war-ravaged Gaza, which were seized by Israeli troops.

According to U.N. spokesman Stephane Dujarric, credible investigators must be granted access to the locations. Additionally, Dujarric emphasized the importance of ensuring the safety of journalists in Gaza so that they may accurately report on the facts.

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UN Calls For Investigation Into Mass Graves Uncovered At Two Gaza Hospitals Raided By Israel

Volker Türk, the U.N. human rights chief, expressed his deep shock at the destruction of the Shifa medical complex in Gaza City and Nasser Hospital in Khan Younis. He also mentioned the disturbing finding of mass graves in and around these facilities after the departure of the Israeli forces.

The individual demanded impartial and open inquiries into the fatalities, emphasizing that “considering the current atmosphere of exemption from punishment, this should involve investigators from the international community.”

“Hospitals are afforded significant protection under international humanitarian law,” Türk stated. “The deliberate act of killing civilians, detainees, and individuals who are unable to participate in combat is considered a war crime.”

Vedant Patel, the spokesperson for the U.S. State Department, expressed deep concern over the accusations of mass graves at the hospitals and confirmed that U.S. officials have formally requested information from the Israeli government.

The Israeli military has excavated the bodies that Palestinians had previously buried as part of their efforts to locate the remains of hostages taken by Hamas during their attack on October 7th, which initiated the war. The soldiers conducted a thorough examination of the bodies in a dignified manner and promptly returned those that did not belong to Israeli hostages to their original location.

The Israeli military asserts that it eliminated or apprehended numerous militants who had sought refuge within the two hospital complexes, although these assertions could not be independently confirmed.

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UN Calls For Investigation Into Mass Graves Uncovered At Two Gaza Hospitals Raided By Israel

On Monday, the Palestinian civil defense in the Gaza Strip said that they had discovered 283 corpses in a makeshift cemetery located within the primary hospital in Khan Younis. This cemetery was established during the recent period of Israeli forces surrounding the hospital. According to the group, during that period, individuals could not inter the deceased in a designated burial ground and instead excavated graves within the hospital premises.

According to the civil defense, certain corpses were identified as individuals who were slain during the hospital siege. Additional casualties occurred as a result of the Israeli military’s incursion into the hospital.

The hospital strikes have decimated Gaza’s health sector, which is already struggling to handle the increasing casualties resulting from more than six months of warfare, according to Palestinian health officials.

The matter of who is eligible or responsible for an investigation remains uncertain.

Dujarric stated that for the United Nations to carry out an investigation, authorization from one of its main bodies is required.

“I believe it is not appropriate for anyone to make premature judgments about the outcomes or the individuals responsible,” he stated. “I believe that the investigation should have both access and credibility.”

Karim Khan, the head prosecutor of the International Criminal Court, emphasized the importance of investigating any offenses committed by Hamas terrorists and Israeli forces during his visit to Israel and the West Bank in December.

According to Dujarric, the unearthing of the graves serves as an additional justification for implementing a cease-fire, resolving the conflict, ensuring increased humanitarian access and the delivery of essential products, providing enhanced protection for hospitals, and securing the release of Israeli prisoners.

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UN Calls For Investigation Into Mass Graves Uncovered At Two Gaza Hospitals Raided By Israel

The Hamas assault that initiated the conflict resulted in the deaths of over 1,200 individuals, predominantly non-combatants, and the abduction of roughly 250 captives. Israel reports that the terrorists currently have approximately 100 hostages and the remains of over 30 additional individuals in their possession.

Local health authorities report that over 34,000 Palestinians have died as a result of Israel’s military campaign in Gaza to eradicate Hamas. Approximately two-thirds of the casualties are comprised of children and women. The devastation of Gaza’s two major cities has resulted in a humanitarian crisis, causing almost 80% of the population in the area to seek refuge in other sections of the besieged coastal enclave.

SOURCE – (AP)