The Federal Reserve’s complacency in the face of US inflationary risks seems false

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Sstatistical oddity or warning of a fundamental change in inflationary weather? We know which side of the debate the US Federal Reserve will land on. He will take a relaxed view that the biggest monthly consumer price hike in the United States since 2008 – 4.2% – is nothing to worry about.

The Fed has pledged to keep interest rates low halfway through on the grounds that an economy in recovery mode is sure to produce some weird data. Inflation fell a year ago at the start of the pandemic, so don’t be fooled by the so-called “base effects”, the argument goes. Do not risk recovery by reacting.

This line of thinking is, of course, credible and has recent history on its side – none of the inflation fears of the past decade have materialized. In this case, one could add that unemployment in the United States is still high at 6.1%, so there should be some slack in the labor market to limit wages. And, if bottlenecks in global chains contribute to a wave of higher prices, companies can eliminate them once they are able to operate normally again.

Convinced? It is too early to make final judgments, but a complacent view of inflation risks already seems wrong.

A surge in commodity prices is in full swing. Stock markets and house prices (in the UK, as well as the US) are already in inflation mode. American companies are talking about difficulties in hiring new staff. Washington is about to launch its massive (and much needed) infrastructure program. If you own a restaurant that has struggled for the past year, why don’t you take a chance and see if customers will pay more?

This debate could turn very quickly. It would take a few more months of data like Wednesday’s. Investors are starting to wonder if the ultra-low interest rates they are semi-promised until 2023 are really going to happen. This is the right question because the answer becomes less and less clear from week to week.

Renishaw founders seek virtuous bidders with deep pockets

Wanted: buyer of a leading UK engineering firm. Must commit to a large research and development budget. Carve-up dealers and private equity vultures should not apply.

That was more or less the unusual presentation made in March by Sir David McMurtry and John Deer, founders of Renishaw, a maker of ultra-precise measuring devices that has enjoyed quiet but spectacular success over the years. The company, based in Wotton-under-Edge in Gloucestershire, is one of the few to make the long journey from the Junior Alternative Investment Market to the FTSE 100. It is valued at £ 4 billion.

McMurtry and Deer hold 53% between them and, having reached their 80s, want to sell. But they don’t want to entrust their creation to just anyone. Potential bidders were told that they should “recognize Renishaw’s value as an innovation-driven company and respect the company’s unique heritage and culture, its commitment to the local communities in which it operates. based ”.

As you might expect, it is difficult to find virtuous bidders willing to pay high prices. Bloomberg reported this week that many obvious candidates, including Schneider Electric from France and Siemens from Germany, are out of the race. Some would have been deterred by the price – Renishaw is valued at around 40 times the profit. Some have been discouraged by the “heritage and culture” clause, which is seen as a strong commitment to maintain Renishaw’s generous approach to capital spending.

The result is that the Renishaw share price is now lower than when the fun started. The share price climbed from £ 58 to £ 70 on the March announcement, but fell to £ 54.30.

McMurtry and Deer seem serious about only selling to an owner who meets the strict criteria, and they obviously don’t need to hunt the last million themselves. On the other hand, they cannot completely ignore the wishes of minority shareholders, some of whom presumably would like to open the auction to everyone. We hope the duo stick to their plan – their position is refreshing.

What now for the wage revolts?

After the excitement of the 40% wage protest at AstraZeneca, the fund management industry’s normal pusillanimous service was restored on Wednesday.

Real estate agent Savills had received ‘top red’ alert status by the Investment Association due to some abrupt maneuvering on executive bonuses, versus just ‘orange’ for Astra, but investors either missed the signal , or have not approved it. The rebels gathered an unimpressive 21%. It’s a reminder that despite all this suffering, the pressure on compensation committees tends to be low.

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