(Kitco News) In another grilling testimony session, Federal Reserve Chair Jerome Powell admitted that the U.S. central bank underestimated inflation and added that the Fed’s tools wouldn’t resolve a big part of the problem.
Even though the Fed’s resolve to fight inflation is “unconditional,” there is only so much the Fed can do when battling out-of-control price growth, Powell said during his testimony before the U.S. House of Representatives Financial Services Committee Thursday.
“A big part of inflation won’t be affected by our tools, but a big part of it will be,” Powell said. The part that will be impacted by the Fed’s aggressive hiking cycle is demand, which will get suppressed via higher rates, the Fed chair explained.
“Fed isn’t looking for new tools,” he said. “Our tools are blunt, but they are the right tools to deal with demand.”
Powell described that when the Fed raises interest rates and shrinks the balance sheet, rates go up across the economy and financial conditions tighten. More specifically, higher rates will lower demand for durable goods, drive asset prices down and discourage spending, the Fed chair noted.
“Automobiles and other durable goods will be impacted. Asset prices generally. [There will be] a little less spending. And the exchange rate — also has disinflationary effects,” he said.
Powell testified that the Fed intends to bring inflation down to 2% without hurting the labor market too much, but that has become “more challenging” due to external factors like the war in Ukraine, which is driving food and energy prices higher.
On why the Fed underestimated inflation, Powell clarified that the wrong line of thinking was the expectation that the supply chain disruptions would resolve quite quickly.
“The thought was people would come back” as vaccines would get rolled out and “we’ll be done with COVID by the end of the year,” Powell said. “That was the judgment we had to make. We knew it could be wrong. And when it started to look pretty wrong, we pivoted.”
And despite a more complicated path toward the “softish landing” the Fed wants, Powell still estimates for growth to be fairly strong in the second half of the year.
Crypto volatility was another heated topic of discussion during the testimony.
On the regulation front, Powell said that he was encouraged by the many bills Congress is working on. “It is important to get it done quickly. There comes the point that regulation is needed to protect the public. That time is coming for digital finance,” he said.
On the Fed’s central bank digital currency (CBDC), Powell ruled out the option of having a private stablecoin acting as the digital dollar.
“Do we want a private stablecoin to be a digital dollar? The answer is no. It should be government-guaranteed money, not private money created for the benefit of the private issuer,” he said.
As Powell spoke, gold prices declined from their daily highs. August Comex gold futures were last at $1,832.50, down 0.32% on the day. The main downward drivers for gold on Thursday were crude prices, the U.S. dollar, and yields, said Kitco’s senior analyst Jim Wyckoff.
“The key outside markets today see Nymex crude oil prices weaker and trading around $105.25 a barrel. The U.S. dollar index is firmer in midday trading. The yield on the 10-year U.S. Treasury note is fetching 3.05% and has dropped this week,” Wyckoff wrote.
An Internship Can Lay the Foundation for a Great Career
With 2022 “graduation season” behind us, I’d be remiss if I didn’t offer some advice on how an internship (“co-op” back in the day) provides an opportunity to gain transferrable skills and experience, and start building your professional network and kickstart your career.
An internship is so much more than memorizing coffee orders. Your internship experiences—I recommend doing several—can be immensely valuable, offering you a chance to build skills to showcase on your resume and LinkedIn profile and, most importantly, establish professional relationships with professionals in the industry you aspire to become a part of.
As an intern, your goals are:
- Learn what you want and need to know. (TIP: Create a list of what you want to gain from your internship. On your first day, share your list with the person coaching you.)
- Make a positive impression. (Make a strong enough impression, and—fingers-crossed—you’ll likely receive a job offer.)
- Begin building your professional network.
Creating a great impression starts with being relentlessly punctual. Woody Allen said it best, “Eighty percent of success is showing up.” Show up on time, or better yet early. Arrive for meetings before they begin. Complete tasks by their deadlines. Employers value reliable employees. Internships are usually 3 – 4 months long, so give your internship no less than 100%.
“Every job is a self-portrait of the person who did it. Autograph your work with excellence.” – Ted Key, American cartoonist
Take on every task and assignment you’re given with an unwavering commitment to excellence. It’s never beneath you to do what’s asked of you. If you’re asked to make coffee, make the best coffee your colleagues have ever tasted. If asked to create an Excel template, put extra effort into ensuring it’s accurate, aesthetically pleasing, and comprehensive. Continually delivering exceptional results is how you create a reputation (READ: Personal brand) that advances your career forward.
Act when you see a need. (e.g., sign for a package and deliver it directly to the recipient, offer to cover reception during lunch) Don’t wait to be told. Checking your Instagram account while waiting to be given something to do is never a good look. Interns who never sat idle and proactively sought out where they could be of help, or pitched in without being asked, are the ones I remember. Deliver more than expected, do what no one else is willing to do, and you’ll be appreciated and remembered.
As an intern, it’s expected you’ll ask questions… lots of questions.
Asking good questions is the sign of an intellectually curious, diligent person, which is a turn-on. Think—in advance—of questions to ask. Spend time formulating your questions. When meeting with a peer or superior, think of thoughtful questions you can ask to demonstrate you have prepared for the meeting. If you’re in a meeting with management, don’t focus on your answers but on what’s missing. With me, asking the questions no one else is asking (e.g., “How does A relate to B?”, “How has the company dealt with these issues in the past?”) earns lots of points. Elephant-in-the-room questions often steer a group’s thinking and conversation in a more productive direction—this is how you become an influencer.
TIP: When you hear someone ask a great, conversation-altering question, write it down and reflect on what made it great.
Ask at least one authentic question in every meeting you attend. By following this advice, you’ll become comfortable asking questions in a group setting, hone your ability to ask questions that lead to real insight, and reveal your intellectual curiosity.
The most valuable benefit of an internship is it offers the ideal setting to establish professional relationships you can leverage throughout your career, whether job hunting or seeking advice. Since internships don’t last long, interns tend to focus solely on their work and only form connections with their immediate colleagues and fellow interns. Don’t be that intern! Cultivate as many professional relationships throughout the company as possible.
Don’t be shy to introduce yourself to Senior Managers, Directors, and VPs—they were once in your shoes. Invite colleagues whom you notice management hold in high regard to lunch. Ask them questions. (Who doesn’t like to talk about themselves and their successes?) Offer to help where you can.
TIP: Observe great relationship-builders and learn from them. I recommend reading The Connector’s Way: A Story About Building Business One Relationship at a Time, by Patrick Galvin.
An internship is hard work that’ll pay off. Only doing what’s expected of you won’t get you noticed; you’ll be just another intern. Go above and beyond, from arriving on time to doing exemplary work (Yes, that includes getting coffee orders right.) and maximizing your internship opportunities.
Nick Kossovan, a well-seasoned veteran of the corporate landscape, offers advice on searching for a job. You can send Nick your questions at email@example.com.
Russia To Take Over Whole Sakhalin-2 Project – OilPrice.com
A newly set up state Russian company will take over the rights and obligations of Sakhalin Energy Investment Co., the joint venture running the Sakhalin-2 oil and gas project, Reuters reported today.
This could mean a forced exit from the project for Shell and Japan’s Mitsui and Mitsubishi, which are minority shareholders in Sakhalin Energy Investment Co.
Shell already said it would leave the project a few months ago and has since then been looking for buyers for its stake in Sakhalin-2. According to earlier reports, a sale could be made to a group of Indian companies.
The Japanese companies, however, have not announced intentions to leave the project. In fact, earlier this year, Japan’s economy, trade and industry minister, Koichi Hagiuda, said that the Sakhalin-1 and Sakhalin-2 projects “are essentially important for energy security because the projects allow Japan to procure supplies below the market price, especially amid current high energy prices.”
Despite its participation in Western sanctions against Russia, Japan continues to buy liquefied natural gas from Sakhalin-2. Although it has stated its intention to step up the intake from alternative sources, a complete suspension of Russian energy imports seems unlikely at this point.
Japan has also signaled it had no intention of leaving the energy projects in Russia that it participates in, but following the latest news, it might be forced to do so.
Reuters noted in its report that Mitsubishi was discussing the presidential decree that contained the ownership change with its partners in Sakhalin-2.
The project, per Reuters, accounts for 4 percent of the global annual supply of liquefied natural gas. Its main buyers are Japan—until recently the world’s biggest LNG importer—as well as China and South Korea, which also buy oil from the Sakhalin-2 development.
According to some analysts, the exit of the Western and Asian partners will eventually lead to tighter LNG supply due to the lack of expertise and parts. At the same time, selling the gas would become harder because of the state’s control of the project, Saul Kavonic from Credit Suisse told Reuters.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
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Gold prices remain down but making a move back to $1800 as ISM manufacturing PMI falls to 53 – Kitco NEWS
(Kitco News) – The gold market continues to push back towards $1,800 an ounce as the U.S. manufacturing sector sees weaker than expected growth in June, the Institute for Supply Management (ISM).
Friday, the ISM said that its manufacturing Purchasing Managers Index dropped to a reading of 53%, down from May’s reading of 56.1. The data missed expectations as economists were looking for a decline to 54.6%.
The report said this is the lowest PMI reading since June 2020.
““The U.S. manufacturing sector continues to be powered — though less so in June — by demand while held back by supply chain constraints,” said Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, in the report.
The gold market has been seeing solid technical selling pressure after falling through $1,800 an ounce in overnight action; however, the disappointing economic data from the U.S. is helping the precious metal retrace some of its losses. August gold futures last traded at $1,795.70 an ounce, down 0.64% on the day.
Looking at some of the components of the index, the report said that the New Orders Index dropped to 49.2%, down from the previous level of 55.1%. At the same time, the Production Index increased o a reading of 54.9%, down from May’s reading of 54.2%.
The report also highlighted a further contraction in in the labor market. The Employment Index dropped to a reading of 47.3%, down from May’s reading of 49.6%.
It’s not just manufacturing that is losing momentum. The report highlighted a drop in inflation pressures, which could be seen as a negative for gold. The report said that the Prices Index fell to 78.5%, down from May’s reading of 82.2%.
Although the latest disappointing economic data raises the risk that the U.S. economy falls into a recession; however, Andrew Hunter, Senior U.S. Economist at Capital Economics, said that the U.S. economy has room to slow without triggering a recession.
“While the ISM index lends support to concerns that aggressive Fed tightening will drive a sharp slowdown in the economy, the details suggest that slowdown could result in a faster drop-back in inflation than many are now assuming,” he said.
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