The inflation genie

Subsidizing food and energy barely makes a dent. [View in browser]( [Bloomberg]( Follow Us [Get the newsletter]( Governments around the world are finding out just how hard it is to change a narrative. Inflation is indeed running rampant in many places, but inflation expectations — or the worry that prices may climb ever higher — even more so. Those perceptions are perhaps fanned by central banks racing to raise interest rates: The European Central Bank has committed to a quarter-point increase next month, while Australia hiked rates 50 basis points — the biggest increase in 22 years. Key reading: - [Stagflation Danger Spurs World Bank to Cut Global Growth Outlook]( - [Biden Says Inflation Is ‘Bane of Our Existence’ on Kimmel Show]( - [Draghi’s ECB Consigned to History as Hawks Seize Policy Controls]( - [Already at Record, UK Petrol Price Soars by Most in 17 Years]( - [Charting the Global Economy: Inflation Hits a Record in Europe]( US Treasury Secretary Janet Yellen is warning that inflation is likely to stay high, having admitted she was wrong last year to describe big price increases as “transitory.” The next round of US data is due out today. Newspapers are splashed with dire warnings. The cost of filling up a standard car in the UK surged by the most in 17 years, adding to the woes facing UK Prime Minister Boris Johnson. The owner of British discount retailer Poundland warned that consumers are cutting back on essential items. Government messaging that economies are actually in decent shape carries little weight in the face of such headlines. Subsidizing food and energy barely makes a dent when people are convinced that prices are spiraling out of control. Part of the problem lies with misjudging demand and the ferocity with which it has returned as the pandemic wanes, sparking labor shortages alongside higher prices. Transport strikes in Europe, and now Asia, are a symptom of that. Early-stage summer travel is a mess in many places as airlines and airports struggle to cope. That leaves political leaders grappling with a toxic soup of overwhelmed services, disgruntled commuters, worried mortgage holders and anxious shoppers, and attempting to shut the barn door after the horse has bolted. “Inflation is the bane of our existence,” US President Joe Biden lamented this week. He may have included himself in that calculation as he counts the days to the midterm elections.  — [Rosalind Mathieson]( Commuters wait for buses during strikes on the underground rail service in London on Monday. Photographer: Jason Alden/Bloomberg Click [here]( for this week’s most compelling political images and share this newsletter with others. They can sign up [here](. Global Headlines Insurrection evidence | House lawmakers investigating the Jan. 6, 2021 attack on the US Capitol detailed then-President Donald Trump’s efforts to undo his election loss during a televised hearing. The [evidence](, more of which will be presented over the coming weeks, could focus new attention on the assault ahead of midterm congressional ballots and add fresh detail to a record Trump will have to confront if he runs for re-election in 2024. - The hearing included [testimony]( from an injured US Capitol Police officer, footage of Trump supporters storming Congress and a video deposition of Trump’s daughter, Ivanka, who said she believed there was no evidence of fraud sufficient to change the election’s outcome. Cash call | Ukraine must clinch a new loan [program]( with the International Monetary Fund, Finance Minister Serhiy Marchenko said in a Bloomberg Radio interview, as efforts to fight off invading Russian forces push its budget and international reserves to the limit. Kyiv needs more aid from its longstanding donor, and preliminary discussions on a new assistance package are under way, he said. - The European Union’s executive arm is expected to recommend next week that Ukraine be [granted]( candidate status, a key step on the long path to membership, sources said. - Follow our rolling coverage of the war [here](. Many companies buy certificates from clean power providers, called renewable energy credits, allowing them to claim they’re using carbon-free power. A new analysis finds that when those are removed from firms’ carbon accounting, many are no longer on track to meet [climate]( goals pegged to the Paris Agreement’s aims of limiting global warming to 1.5° or 2° Celsius. Competing visions | US Defense Secretary Lloyd Austin and Chinese Defense Minister Wei Fenghe held their first in-person [meeting]( and are due to deliver speeches at the IISS Shangri-La Dialogue in Singapore, which starts today. The US is seeking to use the three-day conference to push back against growing Chinese influence in the region, while also establishing guardrails to prevent competition from getting out of hand. - US [relations]( with China are likely in the worst state since former President Richard Nixon’s historic 1972 visit helped re-establish diplomatic ties, the current American ambassador said. Best of Bloomberg Opinion - [Hawks Summon Shadows of Europe’s Debt Crisis: John Authers]( - [Ukraine Needs a Marshall Plan for Rebuilding: Therese Raphael]( - [China’s Big Problem That Xi Jinping Can’t Solve: Shuli Ren]( Airport chaos | Europe’s aviation industry is struggling to overcome crippling staff shortages and [labor strife](, forcing airlines to cancel hundreds of flights ahead of the peak summer period. Disruptions have been particularly bad in the UK, though European hubs such as Amsterdam, Frankfurt and Paris have also been plagued by delays and the fallout from strikes. Workers strike at Charles De Gaulle Airport near Paris yesterday. Photographer: Geoffrey Van Der Hasselt/AFP/Getty Images Explainers you can use - [Insurrection? Sedition? Incitement? A D.C. Riot Guide]( - [Where Are We in Hunting for the Coronavirus’s Origin?]( - [Why the Yen Is So Weak and What That Means for Japan]( A bad look | South African President Cyril Ramaphosa suspended the nation’s graft ombudsman a day after she started probing his alleged [concealment]( of a robbery of more than $4 million at his game farm. While he has denied wrongdoing and Public Protector Busisiwe Mkhwebane has been accused by lawmakers of misconduct, analysts say the timing of the move against her reflects poorly on the government. Bloomberg TV and Radio air Balance of Power with [David Westin]( weekdays from 12 to 1 p.m. ET, with a second hour on Bloomberg Radio from 1 to 2 p.m. ET. You can watch and listen on Bloomberg channels and online [here]( or check out prior episodes and guest clips [here](. News to Note - Senators negotiating new gun [legislation]( are proposing billions in federal programs for mental health services and school security, as well as grants to states to enact so-called red flag laws. - The UK is making last-minute [tweaks]( to planned legislation to override a portion of its Brexit deal, as the EU prepares to relaunch legal proceedings as part of the bloc’s response to the move. - Chinese President Xi Jinping underscored the need to maintain social stability while balancing the [twin goals]( of snuffing out cases of Covid-19 and bolstering the economy, as strict lockdowns spark sporadic unrest and online outrage. - Prime Minister Fumio Kishida came under [pressure]( to further open Japan’s borders, as the relaxation of measures against Covid-19 appeared to fall short of a pledge made in London last month. Pop quiz, readers (no cheating!). In which country are at least four children of men accused of stealing billions of dollars from public coffers running for high office? Send your answers to balancepower@bloomberg.net. And finally ... Chilean President Gabriel Boric marked his first international summit with an embarrassing gaffe, wrongly accusing the US government of being absent at the signing of an agreement on ocean protections. Boric made the mistake at the Summit of the Americas in Los Angeles yesterday, as US climate envoy John Kerry looked on from a few chairs away. “I just have one question,” Kerry joked in response. “Where’s the beer?” Read our summit coverage [here](. Kerry signs the agreement during the Summit of the Americas. Photographer: Kyle Grillot/Bloomberg Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. 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