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Hello and welcome to World Business Report from the BBC World Service.
I'm Roger Hearing and on this edition...
The latest from Jackson Hole as the world's central bankers gather to discuss global finance.
Also, UN agencies warn that workers need better protection from extreme heat caused by climate change. how Japan is working with Africa on development and investment.
And we're in Edinburgh. as the festival gets underway there, and local accommodation costs go sky high.
The accommodation is the most expensive thing out of the whole budget.
That's all to come. But first, it's that moment in the calendar when the world's leading central bankers, the men and women... who set interest rates, oversee payment systems and support economic growth. gather together in the US Midwest.
Jackson Hole in Wyoming. It's a resort set amongst lakes and mountains, and there are bears...
But it's the bears in the global economy, those who prefer caution to bullish enthusiasm... who are likely to dominate the discussion this year.
All eyes are on the chairman of the US Federal Reserve, Jerome Powell. has his plan for a series of interest rate cuts been thrown off course by recent higher-than-expected inflation readings?
Well, he's been speaking in the last half hour there, and he said...
He said that the effect of tariffs on consumer prices are now clearly visible. but he said we will not allow a one-time increase in the price level to become an ongoing inflation problem.
He also said a lot more. New York business correspondent Erin Delmore.
Erin, thanks for being with us here on World Business Report.
What is it that Jerome Powell is saying, first off, in his... address to this gathering?
What is he trying to put over and how are the markets reading it?
Well, Powell is taking a look at the state of the US economy as a whole.
And he actually started out by comparing this moment to what he saw last year.
Last year, inflation was trending back down toward the Fed's 2 percent target.
The labor market looked like it was staying in balance, but unemployment had shifted just a little bit. and therefore the Fed decided to cut interest rate points.
But he made a clear note that this is just a different environment now.
President Trump has come into office and he's put into place a number of signature economic policies.
And one of them certainly is tariffs, which Chair Powell said...
He expects to be a one-time price increase. but that those increases could take place over time.
One time, he said, does not mean all at once.
And the reason why this is important is because economists have been trying to figure out whether President Trump's tariffs are, as I just said, a one-time price increase, or whether they could be inflationary.
Because When we see price increases take time, work their way through the supply chain, work their way through production... that upward increase in prices can become what we call sticky.
Right. And it can become inflationary. And that's a big worry because that's one of the things that the Fed tries to tamp down.
He also talked about how curtailing of immigration here in the United States is making the labor market extremely tight. and that the president's, you know, he said in a more vague and veiled way, tax cut and spending bill has big implications for economic growth.
Those are President Trump's three big signature moves.
And so in his very Paulinian vague, you know, not pointy way at all.
He talked about the impacts of President Trump's first couple of months of his second term.
Yes, he was opaque as he sometimes can be, but clearly the markets are reading a lot into it.
And I've seen that it seems to be... to be a pretty popular move certainly for banks and co and a suggestion I suppose that they believe that the rate cutting list that he has worked up, his agenda, hasn't shifted that much.
Yeah. The expectation was that the Fed would cut interest rates in September only by about a quarter point. and that maybe there would be a half a point cut over the course of 2025.
Roger, if you and I were having this conversation a year ago, we would have talked about six rate cuts, right?
A number that is far, far, far higher. But as mentioned, there have been a lot of changes to economic policy in the United States, and the Fed has been what Powell calls data dependent. in wait and see mode to see what is happening in the economy before actually changing its own monetary policy.
That expectation holds. If anything, those expectations are now increased. given Powell's speech and what we're seeing are stocks rallying.
I mean, the Dow is up some 700 points now, the S&P up close to 100.
The Nasdaq is up close to 400 points. Markets like what they're hearing because what they're reading in between the lines is that the Fed is probably looking at a September rate cut.
Well, that's what it appears to be. Erin, thank you so much for joining us.
Erin Delmore there on the line from New York.
Well, let's talk to someone who knows a lot about being the governor of a central bank and being involved in all this.
Raghuram Rajan, who was a governor at Reserve Bank of India.
He's now a professor of finance at the University of Chicago's Booth School of Business and joins us now.
Raghuram, thank you for being with us. First of all, I don't know if you were able to hear what Jerome Powell had to say.
Do you read it the same way? Do you think that this is, in terms of a central banker sitting there and saying, well, for the moment we're data-driven?
And the data does not suggest that inflation is running out of control.
I think that's what he conveyed to the market.
I think the operative words the market latched onto was The shifting balance of risks may warrant adjusting our policy stance.
Now, some people could look at the word may and say he still retains the right to to not change the policy stance But the markets basically took this as the certainty of a September rate cut.
Now, I think he was very careful throughout his speech to say there are still risks of higher inflation.
But he seemed to suggest that he was at this point putting more weight on the fact that the labor markets were weak.
And that might imply that the risks of inflation are lower than previously thought.
Now, one of the big issues he didn't put weight on was the fact that inflation has barely budged downwards in the last six months and more.
And it's still too high for the Fed, but that's not what he put weight on.
And the markets, I think, took that also. as a suggestion the Fed is going to be more dovish.
Now, all these talks are very interesting... because you're gathering together people who are in the same field.
They're the central bankers of the world gathering together, and I guess... comparing notes.
They all obviously have different economies to deal with, but a lot of the same headwinds, not least, of course. with the new tariff environment that's spread around the world now.
So Raghuram, do you think that this weighs heavy on them when they're trying to work out, all these central bankers, how to... guides the growth of their own economies.
Well, it is a new world, right? We haven't had such a significant increase in tariffs from one of the biggest importing countries or the biggest importing country for close to 80, 90 years.
So in that sense, this is a new world they're dealing with.
It's different for the US where the tariffs are going to increase prices.
It's the opposite for the rest of the world where the tariffs in the U.S., will essentially slow down demand and could have disinflationary effects in economies elsewhere, especially if Chinese goods, which don't have a home any longer to the same extent in the US, find their way into other economies.
So central banks have different problems.
In the US, It may be a little more inflation than anticipated, The rest of the world, it may be a little more disinflation than anticipated.
That's interesting. So do you expect some of the big players, perhaps the ECB?
Bank of England, Bank of Japan, to be thinking more in terms of dealing with disinflation at this point.
I think so. I think it gives them more room to cut rates I think this is especially pronounced for the developing economies and the emerging markets where growth has been very tepid and central banks have more room to cut now.
And what about your own area, India, of course, where you came from?
What is the thinking there? Because that's an economy that's been caught quite badly by tariffs. but is making new inroads perhaps into dealing with China.
What's the pressure there in terms of rates?
I think the... The Reserve Bank has more room at this point, especially given the fact that tariffs are going to affect demand for Indian goods.
Of course, the hope in India is that these 50 percent threatened tariffs don't actually come about and there's some negotiation that happens over the next few weeks.
But certainly if the tariffs go to that level, it is problematic for Indian growth. and the Reserve Bank will have more room to cut rates.
I'm sure they'll all be talking about it around the dining tables.
Jackson Hole, thank you so much for being with us.
Raghuram Rajan there, former governor at the Reserve Bank of India.
Well, let's hear now how the markets have been responding to all this.
We heard a little bit earlier from Erin.
Randip Sumel joins us now, Fund Manager at M&G Investments.
Randip, thanks for being with us. First of all, we were seeing...
I've certainly seen headlines about bank shares going up, spot gold also.
How has the market taken what Jerome Powell had decided?
Hi, Roger. I mean, in a word, positively, my screen is all green.
As I'm looking down on it today, obviously the US has been the most positive country We've seen the NASDAQ approaching 2% for today and Dow's coming up to 2% as well.
But even across Europe, half a percent to a percent, the markets are viewing this as very, very strong and positive for equities.
Well, one area that isn't looking very positive this morning is Germany.
Its GDP latest figures looking pretty grim.
Graham Randeep, I mean, is there a sense that the biggest economy in Europe is also now the biggest drag, really, on the euro economy?
I mean, Germany had a bit of a bounce when we saw a new government come in.
We saw a new government formed. pretty quickly and then they got their stimulus package through, that stimulus hasn't actually hit the ground yet.
So Germany, unlike the rest of Europe, is actually low levels of national debt.
Whereas in the UK, we're above 100%. So they have the ability to stimulate the economy.
But as yet, That process that needs to go through to get the cash onto the ground hasn't occurred.
It will probably happen next year. And I think then we're likely to see a bit more of an uplift in the German economy.
Do you really think it will work? Because I mean, I've lost count of the number of times people said, oh, this latest thing. that's going to come through from the government is going to make a difference.
But people still saying that it's an economy that essentially the working plan it has doesn't really work anymore.
I mean, they've clearly been hit by tariffs.
It is more of an industrial and manufacturing economy that's been hit by slowdown in China and then President Trump's tariff, I have no doubt that the stimulus will work.
It's just a question of how much it will offset everything else.
The second and the ongoing issue that Germany has is the high energy costs, which at this moment aren't going away. and again is making their economy more uncompetitive.
Well, talking of effects on competition, Randy, let's talk about...
Now, it's the German Postal Services Group.
Now, they've joined what seems to be a big sort of international movement now. to change the way they deal with parcels because of US policy.
Tariffs, shipment of standard parcels for businesses are going to be suspended. because really they're just very worried about what's going to happen to low-value packages, how it's all going to work.
The current Trump administration has removed the de minimis allowment of packages going into the US. that don't face a tariff.
They've stated so far that anything with a value of less Anything above that will face a duty.
This affects some 4 million tariffs going into the US.
And it's not just DHL, it's Royal Mail. It's the Dutch provider, Taiwan, South Korea, all of them, Canada, they're all having to look new policies and how they actually fill out the forms and pay these tariffs.
So a lot of them are suspending deliveries for a week next week.
This comes into effect on the 29th of August. until they decide how best to handle this.
Thanks, Randeep. Randeep Somal there of M&G Investments, giving us a sense of some of the... perhaps lesser known, impacts of those tariffs.
For many people around the world, working outside in extreme weather isn't a choice, but increasingly there's concern that countries and companies... aren't taking the risks seriously enough, particularly when it comes to heat.
According to a report just published by the World Health Organization, the World Meteorological Organization, governments and employers must act. urgently.
The report says around half the global population is suffering negative consequences of high temperatures. threatening long-term health and economic security, and all potentially, of course, because of what's happening with the climate. talk to Andreas Floris, founder and director of the FameLab.
At the University of Thessaly in Greece it's a research unit that studies how heat affects the human body, particularly in the workplace.
Andreas, thank you for being with us here on World Business Report.
What are the real effects of extreme heat?
I mean, obviously, it's not great to work outside. physically enduring when you're being absolutely heated up.
But is there more to it than that? Absolutely it is.
Thank you for the invitation. It is very detrimental both for heat... but also it has other effects that many of us don't really realize.
What he does, it impacts our nervous system.
So think about somebody working in a hot environment is like somebody driving a car while being drunk.
And this is because heat makes us feel that everything is fine, but in fact they're not.
Our brain does not work as well. We cannot analyze situations.
We cannot think clearly. We cannot... respond our reaction time drops and this that's how that's why we see for example accidents happening more in a hot environment.
That's why we also see a lot of reduced productivity So our brain tells us to slow down because it cannot process so many things so fast as if we were in a warm in a cool environment.
And that's why we see also translating into GDP losses, and more and more we actually see that in the bottom line of employers.
Yeah. And I mean, I suppose there's several sorts of it.
There's dry heat and then there's humid heat.
And a lot of people say working in humidity is actually worse.
Absolutely. And that's why in this report we're proposing that we shouldn't be looking at temperature only as I know everybody's used to that, but it seems that humidity wind and also solar radiation.
So it's not the same as working under the sun or working in the shade. to take all these factors into account and we use some new metrics The best one is called wet bulb globe temperature.
And this is like an equation. you put everything in and it gives you a number.
And we see that this number tells us much more than just temperature about how the body feels.
And it's a much better indicator both of health but also productivity.
But Andreas, I suppose people will say, well, yes, it would be better if we didn't have to work in these conditions, but sometimes we do.
So what about mitigation? Is there a clear science about mitigating the effects?
Absolutely. And in this report, we provide solutions because, of course, as you said, seeing the problem is one thing, but finding solutions is the most important.
So we provide solutions, evidence based, and as cheap and as climate-friendly possible solutions at three levels, both for at the national level for policymakers, ministers, At the regional level, for let's say city planners, regional governors, and also at the workplace level for employers.
So we tell each different stakeholder what they need to do to address the problem.
Well, give me an example. I mean, I suppose you say, well, you put a hat on, maybe.
You're working in the hot sun. It's obvious.
But is it more than that? Absolutely. So let's say at the work site level, we've seen that simply changing your clothing changing the color or the texture of your clothing can have tremendous impact on how you feel how tired you are at the end of the day. what the temperature of your body is and how productive you are, or simply giving people more water.
We've seen that this very cheap obviously solution just giving one glass of water every hour or more if needed, can increase productivity by 5% to 8%.
So we are now trying to provide evidence-based quantitative solutions to both convince and workers, but also employers, that their bottom line can be significantly improved if they invest in these solutions.
And they really briefly need to invest money, essentially, to make it work.
Oh, absolutely. And I'm sure that employers hearing us right now are thinking, okay, how much is this going to cost me?
So what we've seen is that for every pound you invest in this as an employer, First of all, you get your pound back, but also you get between 2 to 10 cents back.
In addition, as profit, because your productivity increases of all your employees, but also you reduce absenteeism and healthcare Well, well worth doing.
Andreas, thank you so much for being with us.
Andreas Floris there. You're with World Business Report from the BBC World Service.
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Now Africa's relations with the big global economies have often been dominated by aid rather than trade.
But the latest meeting in Yokohama of the Tokyo International Conference on African Development has been keen to reverse that.
The declaration of the TICAD 9, as it's known, emphasised industrial cooperation but also pushed free trade. at a time of growing global tariff barriers.
South African President Cyril Ramaphosa spoke to the delegates.
We gather at a critical time where global economic uncertainty The reshaping of trade and new industrial revolutions demand bold action and strategic collaboration.
Africa must not merely react to these forces, We must react by shaping them.
Ramaphosa, but how far can Africa shape these forces, especially in its relations with major economies?
Well, I've been asking Nena Lili Mwafu, who's a vice president of the African Development Bank, about the continent's relationship. with Japan.
We think that Japan has over time proven to be a key development and important development partner.
Currently, Japan is the second largest non-African shareholder at the bank and overall the fifth largest out of 81 countries.
And this is for the bank. And for the African Development Fund, they are the fifth largest contributor out of 34 participants.
This year's thing is co-creation with Africa.
I like that word, with. They're not saying that they are co-creating for Africa.
They want to partner. But tell me about this conference, if I may interrupt you briefly.
The conference and the statement that's come out of it.
How will it actually change the relationship between Africa and Japan?
Like I have said, I think that the Japanese government is very interested in working with Africa.
We had over 40 countries represented. At this time, the governments didn't think that the Japanese government is very serious, many of them wouldn't have come We had representations from very key African countries at the level of the head of state.
We think that the declaration about working with Africa, is very, very important.
And it speaks to the mind of the Japanese government and the importance they attach to And this is a relationship based on trade rather than aid, effectively.
Well, it could be trade, it could be aid, but I can tell you that so far we have seen Japan being a key partner for Africa.
Last year alone, the projects that we co-financed with other development partners, the highest co-finance that we had, was Japan, was JICA with about 650 million that they put into projects. that the bank also co-financed with them.
During this tick at nine, We have the enhanced private sector assistance that we have from Japan.
In fact, we've had it. Six series of it.
We signed the sixth one. They clearly stated that working with Japan, that we are going to be co-financing projects. of up to 5.5 billion within the next three years before the next ticket.
So, I think In the geopolitics of today, there's a lot of talk about trade, but a lot of things go hand in hand with trade.
During this tickered nine, there were a lot of Japanese companies that had exhibition.
And I recall one of them very interesting because they were serving tea. and coffee and other things from Africa.
And I'm asking them, how can you Japanese?
They said, no, they have farms in Africa. that grow those things and they process those things and they bring them to Japan.
That is the kind of trade we want. We want partners that will come and transform our local produce so that Africans can take advantage of the job opportunities and economical development opportunities of the added value And I think at the end of the day, the African governments are... are waking up to the fact that they don't want trade that is based on just primary products.
We want trade that is based on value addition.
This is a bit of a difference from, say, the trade relationship with China.
China has invested a lot in Africa. but not much of it in value added.
You have to realise that Africa needs every partner.
The development needs of Africa are huge.
China comes. Depending on the assistance they give is based on the agreement with the governments.
Others are there. It's not only China. The Europeans are there.
The Americans are there. Russia is there.
Brazil is there. Japan is there. South Korea is there as a very strong partner.
And each one of them brings something. At the end of the day, diplomatic and trade relations is that each party is looking at what favors them.
If the Africans... Think of what favors them and they think that trade favors them or those that come to build roads favor them. and they negotiate on the basis of that, and they're happy with it, fine.
So, Africa needs all development partners.
Africa needs as many of them as possible in whatever form they can.
One, we are asking African governments to make sure that is bringing some developments to the people, is creating job opportunities It's creating economic opportunities.
It's supporting Africa in economic development.
Nena, Lily and Mwafufo of the African Development Bank there.
Now in Scotland's capital Edinburgh there's something of a festival atmosphere right now.
Every August, the Edinburgh Festival Fringe and the International Festival take over the city's streets. as well as showcasing comedy, music and drama, but also huge economic benefits.
But when tourism goes up, so does the cost of accommodation.
So how are visitors, performers and locals dealing with rising prices?
The BBC's Cameron Angus Mackay reports. Artist and filmmaker Alison Jackson is performing at the Festival Fringe and renting accommodation in Edinburgh.
The accommodation is the most expensive thing out of the whole budget.
In August, the population of Edinburgh doubles to nearly one million, creating fierce competition for hotels. and spare rooms.
15 people up here from London. We're staying in Edinburgh for a short time because of the cost. of the accommodation is so horrendously high.
The living situation is certainly not glamorous.
You know, it's like big brother. Everyone's stuffed together.
Summer hotel prices in the city are among the most expensive in the world.
The average vacation let in August is more than $370 a night. up 24% from last year.
That's according to short-term rental tracking site Pricelabs.
Here's Tony Lancaster, chief executive of the Festival Fringe Society.
He's one of the main organisers. The supply and demand equation has fallen out of kilter.
Demand is high and growing, but on the supply side of things, it's been throttled a little bit.
The work that we're doing and the conversations we're having with the council is to explore how we can unthrottle that and increase the amount of housing that is available.
Three years ago, the Scottish Government introduced a licensing scheme for anyone letting out accommodation on a short term basis. term basis.
Edinburgh City Council chose to planning requirements in an effort to tackle the capital's shortage of affordable housing.
It has been a complete own goal. And regrettably, Scotland has held up an example of terrible practice.
That's Fiona Campbell, Chief Executive of the Association of Scottish Self-Caterers.
She claims the rules have made the city more expensive by making the pool of official short-term lets smaller.
It actually hasn't done anything other than hugely escalate the costs. for accommodation in Edinburgh.
Because the sector has had to constrict, they've either closed down because it's too difficult to get a license or planning has shut them down.
Previously, there was no black market. Now they're about market is booming.
Let's hear the council's perspective. Here's leader Jane Marr.
The main reason that we introduced the short-term lets policy was to avoid a situation where...
The city centre becomes a hollowed-out place. a place where nobody really lives, because I think what visitors want is to see a vibrant city centre.
But is the council enforcing its policy and addressing concerns about a black market?
Enforcing this kind of legislation is always a challenge because, of course, being under a funded council, we don't always have the resources to be able to do that. but we're making every effort to make sure that we... enforce the rules in the city. to make it easier for people to rent out accommodation during the festivals to free up more rooms, but costs are still high.
$450 a night for a two-bedroom, two-bath.
It's an apartment. You know, we have a washer-dryer, TV's in the bedrooms.
A growing number of performers are staying in university accommodation.
The Fringe Society is working with Queen Margaret University to facilitate a more affordable artist village styled on the Olympics.
Here's Tony Lancaster again. For £300 a week, some amazing rooms specifically for artists.
It's a really nice, strong community that's been established at Queen Margaret.
University. For thousands of performers and visitors in August, overnight accommodation is still expensive despite changes to the rules but with four universities in Edinburgh It's hoped student accommodation is one option that could make the Edinburgh festivals more sustainable in the years ahead.
Cameron Angus Mackay reporting there from Edinburgh and the Festival.
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