A rail strike in the United States that threatened widespread economic damage was averted after companies and union negotiators reached a tentative agreement. Two years of bargaining came down to the wire on Thursday at midnight.
Locomotive engineers and conductors had threatened to shut down trains that transport roughly 30% of US freight, a move that would have cost the economy about $2 billion per day and fueled inflationary pressures as rising prices continue to weigh on investors.
The agreement was reached on Thursday morning, just hours before a critical deadline that would have allowed workers to strike, and it had already begun to affect rail service across the United States.
It came after Mr Biden’s labour secretary, Martin J. Walsh, brokered all-night talks between unions and industry leaders. A person familiar with the discussions said Mr Biden called in around 9 p.m. to help avert a strike, Wednesday, says NY Times.
A rail strike, which could cost the economy $2 billion per day, could start this week.
It would have been the week’s second economic shock. The August inflation figures, released Tuesday, dashed hopes for a quick drop in consumer prices.
A rail strike would exacerbate inflation. Stockpiles of gasoline, fertiliser, food, consumer goods, and automobiles will dwindle as trains are halted, says Barrons.
Inflation and Emerging Markets
After Russia invaded Ukraine, emerging markets were very resilient at first.
Rising commodity prices meant the war was a positive terms of trade shock, which helped many EM currencies appreciate, especially across Latin America.
That picture changed in June when US core inflation surprised on the high side, which prompted the Fed to step up the pace of tightening to 75 bps per meeting.
There’s no denying that the optics of this week’s upside core CPI surprise are ugly, but the details of that release continue to point to slowing inflation momentum.
“We therefore remain in the camp that the Fed is at risk of overtightening. Beyond a now inevitable 75 bps hike next week, it’s time to slow down. Such a dovish “pivot” should help emerging markets recover,” says the International Institute of Finance.
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