Macro Bites – Musalem Says Further Rate Hikes Are Needed to Curb Inflation

Saudi authorities said on Monday ‌they were extending the suspension of operations at the international airport in the capital, Riyadh, after deadly weekend attacks by Yemen's Iran-aligned Houthis.  Operations at King Khalid International Airport, Saudi Arabia's second-busiest airport after Jeddah, were suspended ​to "allow for the completion of procedures to ensure the safety and operational readiness of ​the airport's facilities."  The ⁠airport has been shut since an attack on Saturday that killed 13 people and wounded ​more than 300, the deadliest in the kingdom in more than a decade. On Sunday, another ​attack killed one person and injured nearly a dozen others.

The European Commission announced Friday that it had chosen ‌46 strategic raw material projects to benefit from faster permitting and help in bidding for public and private funding, as the bloc races to diversify supply chains and reduce reliance on China.  The Commission hopes prioritizing projects will ​help the bloc meet targets set out in its 2024 Critical Raw Materials Act, under which the ‌EU ⁠aims to mine 10%, process 40% and recycle 25% of its annual needs by 2030.

The U.S. Department of Energy on Saturday announced it is allowing ExxonMobil and BP America to borrow up to 2 million barrels each of crude oil from the Strategic Petroleum Reserve to address supply disruptions in the Gulf from Hurricane Isaias.  Exxon and BP must return any borrowed crude oil with additional premium barrels in 2027. The department said this will help strengthen the reserve without putting extra costs on taxpayers. “With this emergency exchange, the Energy Department is acting swiftly to help maintain refinery operations, limit disruptions to fuel supplies, and ensure American families and businesses continue to have access to affordable, reliable, and secure energy”, U.S. Secretary of Energy Chris Wright said.

St. Louis Fed President Musalem [2028 FOMC Voter] said the Fed will need to raise rates again to bring inflation back to its 2% target, although he declined to say what policymakers should do at their meeting later this month. "To bring inflation back to target in a timely manner, more monetary policy firming will be required…If a timely manner is something like 18 months, that kind of suggests that rates ought to be going up further in an appropriate period of time in the next six to nine months.”  Musalem said the rise in real yields did not reflect a loss of confidence in the Fed but competition for capital from the tech sector and the budget deficit, which he said has been on an unsustainable path for the better part of two decades.

The projects are spread across 16 EU countries and cover 15 of the EU's list of 17 strategic raw materials including copper, lithium, nickel, cobalt, manganese, graphite, rare earths, magnesium and tungsten.  The Commission noted, "The 46 ​new projects are expected ​to require around $23.7B in capital investment, mobilized from a combination of public and private sources."

Chile’s SERNAGEOMIN mining regulator announced Chilean State miner Codelco partially suspended operations at its El Teniente mine on Sunday after a landslide left two workers dead while one survived. A landslide struck three workers from contractor Aura Ingeniería SA while they were inspecting the south pit sector.

"Operations in the south pit sector of the mining operation will be suspended," SERNAGEOMIN said.