Israel Outsmarts Iran: A Precision Trap That Claimed Top IRGC Commanders

The European Central Bank is approaching its goal for consumer-price growth, President Christine Lagarde said, warning of uncertainty emanating from US tariffs.

“Our primary responsibility at the ECB is price stability, and this is clearly defined in our strategy,” Lagarde told the Xinhua News Agency. “We are within reach of the 2% medium-term inflation target that we have defined as price stability. But we cannot have price stability if we do not have financial stability.”

Lagarde spoke to the Chinese media company a week after the ECB reduced interest rates for an eighth time, to 2%, with officials now saying they’re well placed to tackle the economic challenges ahead. A pause in rate cuts in July is widely expected, though analysts and markets still expect one more reduction by year end.

US President Donald Trump’s erratic trade behavior is one major factor clouding the outlook and potentially stoking prices.

“What will impact one will impact others, and if the situation is not resolved satisfactorily and the uncertainty is not removed, the corporate world will rethink their supply chains,” Lagarde said. “They will rethink their supply and their sourcing, and that will cause more fragility and a period of uncertainty, during which growth will probably be impaired, during which we could have inflationary pressure as a result.”

Source: Bloomberg Europe

Source: Reuters

More than four months into the most aggressive ramp-up in US import duties in the postwar era, there’s barely a trace of tariff-led inflation. One potential explanation some economists are offering: US retailers are absorbing a chunk of the costs.

After a record run of profits, they can afford to. Since Covid, the industry raked in roughly twice as much cash per year as in the preceding decades. In fact, retail has been the single biggest contributor to an economy-wide profit surge, recent research by Ricardo Marto at the Federal Reserve Bank of St. Louis found.

In a sector where margins are typically thin, these numbers count as fat. They may also explain why consumer prices undershot forecasts for a fourth straight month in May, as data showed Wednesday. “It implies more margin squeeze at retailers and less price pass through,” wrote Neil Dutta at Renaissance Macro.

Indeed, that would match calls from President Trump himself. After America’s biggest retailer warned of looming price increases thanks to tariff hikes, he lashed out, telling Walmart to “EAT THE TARIFFS” alongside Chinese suppliers, and spare US consumers from further pain.

Firms that do attempt to protect margins by passing on higher costs risk losing customers, Eliza Winger at Bloomberg Economics says — “especially with inflation-weary shoppers becoming more price-sensitive.” The recent streak of bumper profits should act as a cushion, she says.

Nobody’s sounding the all-clear on tariff inflation just yet. Trump is still threatening new import taxes, and the ones he already imposed could bite harder. But amid criticism from Trump's opponents that tariffs are a tax on consumers, they might turn out to be — at least in part — a tax on corporate earnings too.

Seema Shah at Principal Asset Management expects it’ll be late summer before the trade-war impact starts to show — “either in the profit margin data or the inflation data.”

After tame inflation readings, a rebound in equities and some de-escalation in trade tensions, Goldman Sachs economists say the dangers of a recession in the coming 12 months have receded somewhat, to 30% from 35%.

“While tariff effects seem to have appeared in some categories such as appliances, they have been modest,” Goldman economist David Mericle wrote in a note Thursday. The bank shaved its expectation for the peak inflation rate to 3.4% for mid-2025, from 3.6% before. “A slightly smaller tariff boost to consumer prices also means a slightly smaller hit to real income and consumer spending,” Mericle wrote.

As for financial conditions, Goldman had envisioned a repeat of the trade war in 2019, “when the equity market reacted more negatively to tariff announcements. But at this point, the market’s more relaxed response has lasted long enough that we are taking it on board in our economic forecast.” The bank now sees GDP rising 1.25% this year — measuring the fourth quarter compared with the final three months of 2024. That’s marginally up from 1% previously, but still well down on 2.5% for last year.

Source: Bloomberg Europe

Investing.com -- The European Union’s goods trade surplus with the United States expanded in April despite U.S. tariffs, while exports to China declined for the ninth consecutive month, according to data released Friday by Eurostat.

The EU’s overall goods trade surplus decreased to €7.4 billion ($8.5 billion) in April 2024, down from €12.7 billion in the same month last year.

The bloc’s goods surplus with the United States continued its upward trend, marking an increase every month since January 2024. Both exports to and imports from the United States rose for the fourth consecutive month in April, though at a slower pace than in previous months.

In March, EU exports to the U.S. surged by 59.5%, suggesting U.S. importers were stockpiling EU and other goods ahead of anticipated tariff increases.

U.S. President Donald Trump has announced wide-ranging tariffs on trade partners and aims to reduce the U.S. goods trade deficit with the EU.

The data comes as trade tensions between major economies continue to affect global commerce patterns, with the EU maintaining its surplus position with the U.S. while facing challenges in its trade relationship with China.

Source: Investing

The sole survivor of the Air India plane crash that killed more than 240 people said on Friday he hardly believed he was alive as he recounted seeing others dying near him as he escaped out of a broken emergency exit.

Ramesh Viswashkumar, who police said was in seat 11A near the emergency exit and managed to squeeze through the broken hatch, was filmed after Thursday's crash limping on the street in a blood-stained T-shirt with bruises on his face.

That social media footage of Viswashkumar, a British national of Indian origin, has been broadcast across India's news channels since the Boeing 787-8 Dreamliner erupted in a ball of fire after it plummeted onto a medical college hostel moments after taking off from Ahmedabad.

It was the worst aviation disaster in a decade and his escape is being hailed as the "miracle of seat 11A" in the British media.

"I don't believe how I survived. For some time I thought I was also going to die," 40-year-old Viswashkumar told Indian state broadcaster DD News from his hospital bed on Friday.

"But when I opened my eyes, I realised I was alive and I tried to unbuckle myself from the seat and escape from where I could. It was in front of my eyes that the air hostess and others (died)."

He was travelling with his brother Ajay, who had been seated in a different row, members of his family have said.

"The side of the plane I was in landed on the ground, and I could see that there was space outside the aircraft, so when my door broke I tried to escape through it and I did," Viswashkumar said.

"The opposite side of the aircraft was blocked by the building wall so nobody could have come out of there."

Viswashkumar suffered burns and bruises and has been kept under observation, an official at the Civil Hospital in Ahmedabad told Reuters by phone, requesting anonymity.

"His escape ... and without any grievous injury, was nothing short of a miracle. He also realises that and is a bit shaken by the trauma of it too,” the official said.

FAMILY HEARTBROKEN OVER BROTHER

Police said some people at the hostel and others on the ground were also killed in the crash. Rescue workers were searching for missing people and aircraft parts in the charred buildings of the hostel on Friday to help find the cause of the crash.

Air India has said the investigation will take time. Planemaker Boeing has said a team of experts is ready to go to India to help in the probe.

Viswashkumar said the plane seemed to come to a standstill in midair for a few seconds shortly after take-off and the green and white cabin lights were turned on.

He said he could feel the engine thrust increasing but then the plane "crashed with speed into the hostel".

At the family home in Leicester, central England, Viswashkumar's cousin Hiren Kantilal said they had spoken with him via video call that morning and relatives were urgently trying to make arrangements to travel to India.

Asked about Viswashkumar's brother, Kantilal said: "We can't describe in the words, we are totally heartbroken."

Indian Prime Minister Narendra Modi, who arrived in his home state of Gujarat to visit the crash site, met Viswashkumar in hospital on Friday.

Source: Reuters

The Federal Reserve is widely expected to hold interest rates steady next week, with investors focused on new central bank projections that will show how much weight policymakers are putting on recent soft data and how much risk they attach to unresolved trade and budget issues.

The release of a series of inflation readings has eased concern that the tariffs imposed by President Donald Trump would translate quickly into higher prices, while the latest monthly employment report showed slowing job growth - a combination that, all things equal, would put the Fed closer to resuming its rate cuts.

Trump has demanded the US central bank lower its benchmark overnight interest rate immediately by a full percentage point, a dramatic step that would amount to an all-in bet by the Fed that inflation will fall to its 2% target and stay there regardless of what the administration does and even with dramatically looser financial conditions.

Yet the president's push to rewrite the rules of global trade remains a work in progress. Since the Fed's last policy meeting in May, the administration delayed until next month a threatened round of global tariffs that central bank officials worry could lead to both higher inflation and slower growth if implemented; trade tensions between the US and China have eased but not been resolved; and the terms of a massive budget and tax bill under consideration in Congress are far from settled.

When Fed officials issued their last set of quarterly projections in March, anticipating two quarter-percentage-point rate cuts this year, Fed Chair Jerome Powell noted the role that inertia can play in moments when the outlook is so unclear that "you just say 'maybe I'll stay where I am,'" a sentiment that may last as long as the tariff debate remains unresolved.

"Recent Fed commentary has reinforced a wait-and-see approach, with officials signaling little urgency to adjust policy amid increased uncertainty around the economic outlook," Gregory Daco, chief economist at EY-Parthenon, wrote in the run-up to the Fed's June 17-18 meeting. Daco said he anticipates the median rate projection among the Fed's 19 policymakers to still show two rate cuts in 2025, with an overall tone of "cautious patience" and "little in the way of forward guidance" given the uncertainty weighing on households and businesses.

That view aligns roughly with what investors in contracts tied to the Fed's policy rate currently expect, though pricing shifted towards a possible third rate cut this week after data showed consumer and producer prices both increased less than expected in May. While year-over-year inflation measured by the Fed's preferred Personal Consumption Expenditures Price Index is around half a percentage point above the central bank's target, recent data show it running close to 2% for the past three months once the more volatile food and energy components are excluded.

The unemployment rate, meanwhile, has remained at 4.2% for the past three months.

'Becoming increasingly clear'

The Fed's policy rate was set in the current 4.25%-4.5% range in December when the US central bank cut it by a quarter of a percentage point in what officials at the time expected would be a steady series of reductions in borrowing costs spurred by slowing inflation. The trade policy Trump pursued after he returned to office on January 20, however, raised the risk of higher inflation and slower growth, an outcome that would put the Fed in the uncomfortable position of having to choose whether to focus on keeping inflation at its 2% target or supporting the economy and sustaining low unemployment.

The risk of that worst-of-both-worlds outcome has eased since the early spring, when Trump's "Liberation Day" slate of global tariffs caused a market backlash and led to widespread forecasts of a US recession before the president backed down.

In its most recent analysis, Goldman Sachs analysts lowered the odds of a recession to around 30% and said they now see a bit less inflation and slightly higher growth this year.

Yet that analysis did not prompt a shift in the investment bank's Fed rate outlook, which currently expects higher inflation numbers over the summer to sideline the central bank until December.

The Fed itself may see its median rate projection fall to a single quarter-percentage-point cut this year if only due to the passage of time, noted Tim Duy, chief US economist at SGH Macro Advisors.

With three fewer months in the year to make changes in policy and so many major issues outstanding, "if the Fed retained two cuts ... it would have more confidence in those two cuts than in March," Duy wrote. "But ... participants have less confidence in rate cuts since 'Liberation Day,' and that should be reflected" in the new projections.

It would only take two officials to change their outlooks for the Fed's projected rate reductions to shift more toward next year.

There's another scenario, one in which the weak pass-through from tariffs to inflation is due to weakening demand as consumers pay more for imported goods by cutting back on services, a dynamic that may already be developing.

The retail sales report for May, which is due to be released next week ahead of the Fed meeting, may provide insight into that issue. But Citi economists say they think weakening demand will keep inflation down, lead to rising unemployment, and prompt the central bank to cut rates faster than expected, beginning in September and continuing at each meeting from there into 2026.

"Tariffs may eventually boost some goods prices, but the broad-based slowing in core services inflation will make this a one-time price increase," the Citi analysts wrote. "Markets have yet to internalize that softer demand will lead to cooler inflation but also to rising unemployment ... The path to Fed rate cuts is becoming increasingly clear."

Source: Theedgemarkets