In recent weeks, members of the US Federal Reserve’s rate setting committee and regional presidents of the central bank have used interviews and speaking events to signal to the market that monetary stimulus may start to be withdrawn sooner rather than later.
Since June last year, the Fed has been buying at least $80 billion of Treasuries and $40bn of mortgage-backed securities every month and pledged to do so until “substantial further progress” had been made towards achieving the twin goals of low unemployment and average inflation at 2 per cent.
As Covid-19 vaccines were distributed and movement restrictions were eased, the US economy grew 6.5 per cent in the second quarter of this year and inflation surged to its highest level in more than a decade. That raised questions about whether the Fed was behind the curve in continuing to pump significant liquidity into the financial system.
However, job growth was weaker than expected in April and May and policymakers were confident that the surge in inflation was due to reopening friction and supply chain disruptions that would prove transitory.
Nevertheless, most Federal Open Market Committee, or FOMC, members agreed in July that “substantial further progress” had been achieved in meeting the Fed’s inflation goal, but not on the employment front.
However, better-than-expected jobs data in July would have provided greater confidence about the labour market, with 943,000 new jobs added and the unemployment rate falling to 5.4 per cent, from a pandemic peak of 14.8 per cent last April.
If the economy continues to improve and the pace of job growth is maintained, then the Fed could start to taper asset purchases before the end of this year, rather than in early 2022. This has been the message communicated by several Fed presidents and FOMC members over the past few weeks.
However, recent data in the US and other major economies suggests that economic growth has already peaked and the spread of the Delta variant of the coronavirus may weigh on growth in the coming months.
US consumers bought fewer goods in July than they did in June while consumer sentiment in August fell to its lowest level since the start of the pandemic last year.
In some US states, hospital admissions due to Covid-19 have now exceeded the previous peak. While this has not yet led to tighter restrictions being imposed by the federal government, some airlines are reporting weaker domestic travel demand and some businesses are delaying the return of employees to offices.
The Delta variant poses a risk to economic activity outside the US as well. Last week, the Reserve Bank of New Zealand kept its benchmark interest rate on hold instead of raising it as expected after the country went into lockdown following the first community transmission of Covid-19 in six months.
Restrictions have also been extended in Australia, Japan and other South-East Asian countries as case numbers have surged.
In China, a relatively small number of Delta variant cases precipitated lockdowns in several provinces and resulted in a terminal at the Ningbo-Zhoushan port, the world’s third busiest, being shut down in early August. Retail sales, exports and imports all slowed in China in July.
Global growth concerns and the potential impact of the Delta variant on economic activity have also affected financial markets.
Job growth was weaker than expected in April and May and policymakers were confident that the surge in inflation was due to reopening friction and supply chain disruptions that would prove transitory
Khatija Haque,
chief economist and head of research at Emirates NBD
The benchmark 10-year US Treasury yield, an important indicator of risk appetite and investor sentiment, is down by about half a percentage point since the end of March, even as the Fed looks set to taper its asset purchases sooner rather than later. When risk appetite increases, the price of 10-year Treasuries drops and yields rise.
Commodity prices – including oil prices – have declined as demand expectations are revised lower and supply is set to increase.
All eyes are now on the Jackson Hole Economic Symposium, an annual central banking conference, which takes place from August 26 to August 28 and where Fed chairman Jerome Powell is scheduled to speak.
He may offer further clues about how the FOMC is thinking about monetary policy and the risks to the economic outlook at this juncture. However, the earliest that the FOMC can actually announce a change in its asset purchases is at its next meeting that runs from September 21 to September 22.
Khatija Haque is the chief economist and head of research at Emirates NBD
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
How much do leading UAE’s UK curriculum schools charge for Year 6?
- Nord Anglia International School (Dubai) – Dh85,032
- Kings School Al Barsha (Dubai) – Dh71,905
- Brighton College Abu Dhabi - Dh68,560
- Jumeirah English Speaking School (Dubai) – Dh59,728
- Gems Wellington International School – Dubai Branch – Dh58,488
- The British School Al Khubairat (Abu Dhabi) - Dh54,170
- Dubai English Speaking School – Dh51,269
*Annual tuition fees covering the 2024/2025 academic year
Why it pays to compare
A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.
Route 1: bank transfer
The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.
Total cost: Dh567.25 - around 2.9 per cent of the total amount
Total received: €4,670.30
Route 2: online platform
The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.
Total cost: Dh74.10, around 0.4 per cent of the transaction
Total received: €4,756
The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.
'Nightmare Alley'
Director:Guillermo del Toro
Stars:Bradley Cooper, Cate Blanchett, Rooney Mara
Rating: 3/5
How to register as a donor
1) Organ donors can register on the Hayat app, run by the Ministry of Health and Prevention
2) There are about 11,000 patients in the country in need of organ transplants
3) People must be over 21. Emiratis and residents can register.
4) The campaign uses the hashtag #donate_hope
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