More rate rises on the way after surprising US inflation numbers

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14th October 2022

Bite-sized business news from the UK and beyond

Good morning Today almost 40 years after it last generated electricity, Battersea Power Station will reopen to the public as a place to live, shop and work. With a cost of £9bn the iconic south London building is the UK’s most expensive historic redevelopment but has faced decades to setbacks and aborted plans including a theme park and a stadium for Chelsea FC.

Today's stories

More rate rises on the way after surprising US inflation numbers
Mark Zuckerberg launches headset to make the metaverse corporate

US ECONOMY
More rate rises on the way after surprising US inflation numbers

What happened?
New figures released yesterday showed that US inflation reached 8.2% in September, a slight drop from August but still higher than analysts expected.

This once again raises expectations of more aggressive interest rate hikes by the central bank in the world’s biggest economy.

US inflation peaked at 9.1% in June and has been falling ever since helped by lower petrol prices
But it’s still well above the target of 2% and core inflation – which strips out food and energy as they tend to be volatile – reached 6.6% in September, the highest in 40 years. Food bills have jumped 13% over the past year, and housing and medical costs are also rising sharply.

This will put more pressure on the Federal Reserve to raise interest rates by 0.75% or even a full percentage point when it next meets in November.

By making loans, mortgages and loans more expensive, the US central bank is aiming to reduce demand for goods and services which should slowdown price increases.

But the Fed has a delicate balancing act. By putting the brakes on economic activity the risk of entering a recession grows. Many economists see that outcome as increasingly likely, since inflation has proven stubbornly resistant to the Fed's efforts so far.

The Fed’s decision will have repercussions in Europe
The US has been quicker to increase interest rates compared to the UK and Eurozone. This has helped the dollar strengthen considerably against the pound and euro as investors flow their cash to US accounts with higher returns.

A weaker currency makes US imports more expensive for Europeans which further fuels inflation. This will put the European Central Bank and Bank of England under pressure to match their US counterpart.

Other stories to keep you in the loop

UK borrowing costs drop as chancellor hints at mini budget U-turn
Government to consider fuel price comparison scheme
Netflix launches £4.99 package with adverts to lure cost-conscious streamers
Retail recovery helps Boots offset slump in pharmacy sales
The Royal Mint posts record profits as investors turn to gold
Deloitte partner leaves after drunken tirade at Ascot

TECH
Mark Zuckerberg launches headset to make the metaverse corporate

What happened?
This week Meta, the company formerly known as Facebook, released its long-awaited new virtual reality headset during its annual developer conference.

Meta is betting that companies will pay $1,500 for the new Quest Pro headset, in a push to bring the metaverse to the corporate world.

How did we get here?
Last year Facebook rebranded as Meta as part of its vision to pivot from social media giant to metaverse pioneer.

What is the metaverse? It’s hard to pin down a set definition as it’s still very early in its development. It doesn't really refer to any one specific type of technology, but rather a broad (and often speculative) shift in how we interact with technology. Currently it’s mostly talked about in the context of mixing digital and physical worlds using virtual and augmented reality.

Meta’s is going all in that immersive augmented and virtual worlds will constitute the next stage of the internet.

CEO Mark Zuckerberg’s new vision for the company was prompted by a slump in its existing platforms as young people fled to competitors like TikTok, and Apple’s new privacy rules took a $10bn bite out of Meta’s advertising business.

The Quest Pro headset includes sensors that help avatars copy facial expressions like smiles or eye-rolls. Reviews note that the VR technology is now good enough to make you feel like you’re actually interacting with other people.

Microsoft has signed on to a partnership that will bring its suite of enterprise products to Meta’s Quest Pro, which should make the VR hardware more useful for businesses.

Yes, but: The use cases for VR at work are still TBD since it’ll take companies adopting new processes (and buying expensive headsets) as many push for back-in-office. But specialised applications might be more interesting: architects, for example, could examine 3D renderings of their buildings together in VR.

Why it matters: Meta is at the forefront of building VR tech for the mass market, but its focus on large companies hints its adoption may begin at work.

Stat of the day

The waiting list for hospital treatment hit a record high of 7m in England in August

Interesting links from around the web

Budget tips when cooking for one
These are the emojis Gen Z is cancelling for good
How much does your home nation actually contribute to the world at large?

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More rate rises on the way after surprising US inflation numbers

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