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Turkish inflation hits two-decade high of 78.6%

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Rising prices have sparked waves of protests in Turkey ahead of next year’s general election, the toughest of President Recep Tayyip Erdogan’s rule
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Inflation in Turkey in June soared to an annual rate of 78.6 percent — the highest in 24 years, according to official data released Monday — as President Recep Tayyip Erdogan’s unconventional economic policies continued to take their toll.

But independent estimates published by Turkish economists showed prices rising at more than double that figure.

The inflation rate reported by Turkey’s state statistics agency was the highest since the emerging market suffered a currency meltdown during a global financial crisis in 1998.

Inflation had stood at 73.5 percent in May and at 15.0 percent at the start of last year.

Economy Minister Nureddin Nebati on Friday vowed that consumer prices will start dropping in December.

“I promise to you and to the president, we will see a drop in inflation starting in December,” he was quoted as saying by Turkish media.

According to the official data, the surge in inflation in June was driven by a jump of 123.4 percent in the cost of transportation and a 94-percent increase in non-alcoholic drinks.

Turkey’s latest problems began when Erdogan forced the central bank to go through with a series of interest rate cuts last year that he said were part of his “new economic model”.

The policy rate went down despite rising consumer prices.

But the Turkish leader rejects conventional economics and affirms that high interest rates cause prices to rise.

Economists believe his approach has exacerbated the pain felt world-wide from the jump in food and energy prices caused by Russia’s invasion of Ukraine. 

– Questions over data –

However, more and more economists are starting to question Turkey’s official data.

A monthly report release Monday by Turkey’s ENAG group of independent economists showed consumer prices rising by 175 percent in June.

ENAG said prices had risen by 71.4 percent since the start of the year alone.

The Istanbul chamber of commerce said inflation in Turkey’s largest city has reached an annual rate of 94 percent.

“No one actually believes official Turkish data anymore,” said BlueBay Asset Management economist Timothy Ash.

“There is no expectation of anything like a credible policy response.”

Turkey’s official data are turning into a hot political issue ahead of next year’s general election — widely viewed as the toughest of Erdogan’s two-decade rule.

Opposition leader Kemal Kilicdaroglu accused the state statistics agency of “lying”.

“Stop committing crimes for the benefit of President Erdogan,” Kilicdaroglu told the agency on Twitter.

A survey published by the Metropol polling agency on Friday showed 69 percent of respondents believed the unofficial ENAG figure and just 24 percent the one reported by the government.

– ‘Cost-of-living problem’ –

Erodgan has doubled down on his economic approach and hinted that he may want the benchmark interest rate to move even lower in the months to come.

He has also tried to reverse the accompanying drop in his public approval by announcing a rapid series of wage hikes to large parts of the population.

He has bumped up the minimum wage earned by roughly 40 percent of the working Turks from 2,826 liras in late December to 5,500 liras ($325) this month.

The wage is used as the benchmark for a wide range of social benefits across the economy.

Economists warn that substantially raising the pay of so many people is an inflationary measure that should be accompanied by interest hikes or other means of limiting spending.

But Erdogan rejects the very idea that Turkey is suffering from inflation.

“We do not have an inflation problem. We have a cost-of-living problem,” Erdogan said last month.

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Natural disaster losses hit $72 bn in first half 2022: Swiss Re

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'Secondary' natural disasters like floods and storms -- as opposed to major disasters such as earthquakes -- are happening more frequently, according to Swiss Re.
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Total economic losses caused by natural disasters hit an estimated $72 billion in the first half of 2022, fuelled by storms and floods, Swiss reinsurance giant Swiss Re estimated Tuesday.

Though the figure is lower than the $91 billion estimate for the first six months of 2021, it is close to the 10-year average of $74 billion, and the weight is shifting towards weather-induced catastrophes.

“The effects of climate change are evident in increasingly extreme weather events, such as the unprecedented floods in Australia and South Africa,” said Martin Bertogg, Swiss Re’s head of catastrophe perils.

The Zurich-based group, which acts as an insurer for insurers, said the losses were also propelled by winter storms in Europe as well as heavy thunderstorms on the continent and in the United States.

So-called secondary natural disasters like floods and storms — as opposed to major disasters such as earthquakes — are happening more frequently, the reinsurer said.

“This confirms the trend we have observed over the last five years: that secondary perils are driving insured losses in every corner of the world,” Bertogg said.

“Unlike hurricanes or earthquakes, these perils are ubiquitous and exacerbated by rapid urbanisation in particularly vulnerable areas,” he said.

“Given the scale of the devastation across the globe, secondary perils require the same disciplined risk assessment as primary perils such as hurricanes.”

Swiss Re said floods in India, China and Bangladesh confirm the growing loss potential from flooding in urban areas.

Man-made catastrophes such as industrial accidents added on a further $3 billion of economic losses to the $72 billion from natural disasters, taking the total to $75 billion — which is down on the $95 billion total for the first half of 2021.

– Insured losses at $38 bn –

Total insured losses stood at $38 billion: $3 billion worth of man-made disasters and $35 billion worth of natural catastrophes — up 22 percent on the 10-year average, said the Swiss reinsurer, warning of the effects of climate change.

February’s storms in Europe cost insurers $3.5 billion, according to Swiss Re estimates.

Australia’s floods in February and March set a new record for insured flood losses in the country at so far close to $3.5 billion — one of the costliest natural catastrophes ever in the country.

Severe weather and hailstorms in France in the first six months of the year have so far caused an estimated four billion euros ($4.1 billion) of insured market losses.

The Swiss group also mentioned the summer heatwaves in Europe, which resulted in fires and drought-related damage, without providing estimates at this stage.

A warming climate is likely to exacerbate droughts and thereby the likelihood of wildfires, causing greater damage where urban sprawl grows into the countryside, Swiss Re said.

“Climate change is one of the biggest risks our society and the global economy is facing,” said the group’s chief economist Jerome Jean Haegeli.

“With 75 percent of all natural catastrophes still uninsured, we see large protection gaps globally exacerbated by today’s cost-of-living crisis.”

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Stock trading platform Robinhood axes staff

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Stock trading platform Robinhood will cut its workforce by 23 percent
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Robinhood on Tuesday said it is laying off nearly a quarter of its employees as inflation and a crypto market crash cripple activity on the stock trading platform.

Dismissal emails went out to 23 percent of workers, referred to internally as “Robinhoodies,” in a cost-cutting move that the Silicon Valley-based company said will leave it with about 2,600 employees.

Internet giants whose business boomed during the pandemic have taken a hit from inflation, the war in Ukraine, supply-line trouble and people returning to pre-Covid lifestyles.

Robinhood earlier this year cut nine percent of its staff, but that wasn’t enough, chief executive Vlad Tenev said in a blog post.

“Since that time, we have seen additional deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash,” Tenev said.

“This has further reduced customer trading activity and assets under custody.”

Meanwhile, financial services regulators in the state of New York on Tuesday announced that Robinhood’s cryptocurrency unit will pay a $30 million penalty for failing to meet mandatory standards for cyber-security and fighting money laundering.

The failure “resulted in significant violations” of state regulations, said state superintendent of financial services Adrienne Harris.

Flaws at Robinhood Crypto meanwhile stemmed from “significant shortcomings” in management that included failure to foster “an adequate culture of compliance” with banking rules, regulators said.

Robinhood associate general counsel Cheryl Crumpton said the company is “pleased” the matter is resolved in a settlement.

“We have made significant progress building industry-leading legal, compliance, and cybersecurity programs, and will continue to prioritize this work to best serve our customers,” Crumpton said in response to an AFP inquiry.

Robinhood layoffs will be concentrated in operations, marketing, and program management, Tenev said.

“In the short seven years since Robinhood launched to the world, we have adapted to challenges and forced the financial industry to adapt to us,” Tenev said.

“We’ve overcome many obstacles and have emerged from each a stronger and more resilient company,” he said.

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Uber posts quarterly loss, but revenue exceeds expectations

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Revenue more than doubled to $8.1 billion in the three months through June
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Uber on Tuesday reported better-than-expected revenue in the second quarter, fueled by strong demand for the San Francisco-based company’s ride-hailing and food delivery services.

Revenue more than doubled to $8.1 billion in the three months through June — a 105 percent increase. Though it still posted a net loss of $2.6 billion, investors reacted positively: shares shot up more than 12 percent, to $27.58, in pre-market trading.

The company posted $1.8 billion in revenue from its freight operations. It also said the boost in revenue was partially explained by a change in how it accounts for its rides business in Britain. 

Uber notched gains in monthly active platform consumers, gross bookings and trips compared with a year ago, reflecting higher demand but also a higher number of drivers for its signature ride service and food delivery operations.

Uber CEO Dara Khosrowshahi said both consumers and earners were at “all-time highs.”

“Last quarter I challenged our team to meet our profitability commitments even faster than planned — and they delivered,” Khosrowshahi said in a statement.

Uber primarily attributed its loss to the falling value of its investments in financially strapped companies such as Singapore’s VTC Grab, US self-driving vehicle start-up Aurora and Indian food delivery service Zomato.

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