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Cash support for low-income British families for at least 12 months

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The government announced on Tuesday that millions of low-income families in Britain will receive payments of up to £1,350 spread over at least 12 months, as part of its measures aimed at easing the cost of living crisis.

The extra aid was first announced by chancellor Jeremy Hunt in November Autumn statement But the government has not previously specified when the additional money will be paid.

The Department for Work and Pensions said the bulk of the money would consist of £900 cost of living More than 8 million households have paid in three installments over about 12 months from spring 2023.

More than 6m individuals on disability benefits will also get a separate £150 payment this summer, while an estimated 8m pensioners will get an extra £300 next winter.

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“Tackling inflation is this government’s number one priority and is the only way to ease high price pressures, drive long-term economic growth and improve living standards for all,” Hunt said.

According to the latest numbersInflation was at 10.7 percent in November.

The latest support package follows payments of up to £1,200 extra in cash to low-income families last year, and comes as the government faces a wave of industrial action by public sector workers demanding better wages to help them cope with the rising cost of living.

Rishi Sunak, the prime minister, has backed away from wage demands, arguing that large public sector salaries increase the risk of stoking inflation.

Railways will strike this week in a dispute over wages, while members of the Royal College of Nursing will stage a second round of strike on January 18-19 after the government rejected demands for a 19 per cent increase in wages and better working conditions. Ambulance workers at five NHS England boxes will also strike later this month.

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Speaking over the weekend, Sunak said he had taken “difficult but fair decisions to control borrowing and debt,” adding that his government had helped the most vulnerable with higher energy bills.

The government has stressed that the latest payments are on top of other support measures, which include a council tax rebate for some households and a £400 global energy rebate which will run until March.

Work and Pensions Secretary Mel Stride said the latest payments were designed to “protect the most vulnerable”.

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Economic

European stocks fall as the Federal Reserve dampens hopes of interest rate cuts in 2023

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European stocks and futures fell in the United States on Thursday, a day after minutes from a Federal Reserve meeting in December revealed that no central bank officials expected to cut interest rates this year.

The Stoxx Europe 600 regional index fell 0.4 percent, although the index rose more than 3 percent this week, while the FTSE 100 index in London remained flat. Contracts tracking the benchmark Wall Street S&P 500 fell 0.2 percent and those tracking the tech-heavy Nasdaq 100 lost 0.3 percent.

The S&P 500 rose 13 percent between mid-October and the beginning of December as inflation in the world’s largest economy showed signs of slowing. The index has fallen about 5.5 percent since then, however, on the back of hawkish comments from Fed officials, many of whom warned that price growth was still too high to justify lower borrowing costs in 2023.

The minutes of the recent FOMC meeting crystallized those hints, dealing a jab at traders who aren’t convinced that the Fed will keep interest rates around 5 percent to bring inflation down to its target level.

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The final minutes show “no participant anticipated that it would be appropriate to begin cutting the federal funds rate in 2023,” with officials noting that “the restrictive policy stance must be maintained” until economic data provides “confidence that inflation was sustained.” A sustainable downward trajectory to 2 percent, which was likely to take some time.”

Lee Hardman, chief currency strategist at MUFG Bank, said the comments, which were later bolstered by Gita Gopinath, a senior IMF official, “put a huge hurdle for the Fed to pause.” [or] Ending the hiking cycle in the near term,” though he noted that markets remain “skeptical that the Fed will have to raise interest rates above 5 percent as planned.”

In Asia, Hong Kong’s Hang Seng Index added 1.2 percent, bringing its gains since the beginning of November to about 43 percent. “Looking at the difference in the past [with US indices] “And there is likely to be room for further gains,” said Mitul Kotecha, head of emerging markets strategy at TD Securities. But with global equity markets faltering on earnings and growth concerns, it’s questionable how far Hang Seng can deviate from the global trend. “.

China’s CSI 300 index of shares listed in Shanghai and Shenzhen added 1.9 percent, having risen 13 percent since the beginning of November even as the country grapples with an unprecedented Covid-19 outbreak.

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Private sector activity rises in Kenya in December -PMI by Reuters

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© Reuters. FILE PHOTO: A general view shows the Nation Center and Lonrho Africa buildings in the central business district in downtown Nairobi, Kenya, February 18, 2022. REUTERS/Thomas Mukoya

NAIROBI (Reuters) – Kenya’s private sector activity rebounded for the second straight month in December, a survey showed on Thursday, helped by falling inflation, rising demand and favorable weather.

The S&P Global (NYSE: Kenya) Purchasing Managers’ Index (PMI) jumped to 51.6 in December from 50.9 the previous month. Readings above 50.0 indicate growth in business activity, while readings below that indicate contraction.

“Companies that saw a rise in activity reported higher sales, increased marketing, favorable weather conditions and slowing inflationary pressures,” S&P Global said in comments accompanying the survey.

The survey showed an improvement in commercial activity in the sectors of agriculture, manufacturing, wholesale and retail trade, while it decreased in services and construction.

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Data from the statistics office showed inflation fell to 9.1% year-on-year in December from 9.5% in the previous month.

“Moderate inflation is likely to be one of the few positive factors in the second half of 2023, with fewer supply chain disruptions, favorable weather conditions, and lower energy prices,” Mullalo Madula, an economist at Stanbic Bank, who is participating in the survey, said. He said.

However, private factors, including taxes, are likely to disrupt inflation in the first half of the year.

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Investors should act as if the Fed is no longer in place

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The writer is the chief global investment officer at Credit Suisse

In keeping with the good traditions of the financial industry, this is the time of year to speculate on the health of the global economy and what to do with the collective wisdom of investors.

Digging into the economic and investment forecasts of various banks and asset managers, many have noted an overwhelming consensus that a recession will occur next year in the world’s largest economy.

According to this text, a recession in the United States in 2023 should lead to a rapid slowdown in inflation, allowing for Federal Reserve To stop raising prices and then – at a later stage – to start lowering prices to get us out of trouble. This scenario is familiar from the American recessions of the early 1990s, 2001, and 2008. What always follows is a stock market rally, and investors live again for another cycle.

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However, it is somewhat inconvenient that both market watchers and market participants are currently converging on this rather optimistic assessment, not least because widely agreed-upon market opinions are usually so wrong. We must be missing something. So, what could go wrong with this text? At what point do we go from “it’s the same this time” to “it’s different this time”?

There are strong reasons to expect consensus. Growth has already slowed rapidly. The Eurozone and the UK are already in recession and growth in the US has slowed considerably. US inflation has peaked and the Fed is determined to battle it out, which means it could drop further. This economic outlook is also priced in steadily by the financial markets.

The most obvious sign is certainly the strongly inverted yield curve where short-term bond prices are higher than longer-term maturities. Since the 1960s, this has been a reliable indicator of an impending recession. At the same time, an inverted yield curve is also a reflection of market participants’ expectations that inflation rates are likely to decline and that the central bank will – at some point – cut interest rates to support growth again or calm market turmoil. Thus, the fact that the curve is so inverted at the moment also means that investors expect inflation to return to normal quickly and that the Fed may be able to cut interest rates sooner rather than later.

However, there are also factors at odds with current consensus expectations that are worth examining. First, when it comes to growth, the US recession could come significantly later than many expect. The US economy is not as exposed to interest rate hikes by the Fed as it was in the past. Nowadays, homeowners mostly have fixed-rate mortgages, and companies have used the low interest rates of yesteryear for long-term financing.

Households and businesses will feel the impact of higher prices later than usual. So while growth is already weak, falling into an outright recession could be like waiting for Godot. This is in stark contrast to the rapid recession/rapid recovery pattern that markets seem to expect.

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Second, when it comes to inflation, it may turn out to be more entrenched than expected. Wage growth inflation in particular appears to be steadily due to a shortage of skilled workers. The new multipolar world order will force structural changes on the economy, such as the need to rebuild reliable supply chains closer to home, which often come with higher prices. Likewise, the urgent need to decarbonise can exacerbate “green inflation,” that is, higher prices for environmentally friendly goods and services.

All of this means that inflation rates can come down much more slowly than many of us (including central banks) would like. The Fed may end up in a position where it will have to keep interest rates high because of inflation – even as a recession begins.

This can be negative for stock markets, as the initial market recovery after a recession is often the result of interest rate cuts. The Fed’s “mode” – the Fed’s willingness to prop up markets in times of volatility – will disappear forever, and the way out of recession will be fiscal rather than monetary.

These reasons make the current market consensus very uncomfortable. We risk being in a longer period of weak growth, high inflation and weak equity markets than we have been during previous slowdowns. Thus, investors are advised to keep their portfolios diversified, including a reasonable allocation of fixed income. Alternative investments such as hedge funds or private equity can be a way to manage portfolio risk.

In fact, investors should continue to be cautious next year and act as if the Fed is no longer in place. This means that it is really different this time.

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