By Ann Saphir

SAN FRANCISCO (Reuters) -Pandemic-related snarls in global supply chains have mostly receded, but their after-effects still account for a big chunk of excess U.S. inflation, an analysis published Tuesday by the San Francisco Federal Reserve Bank showed.

Supply shortages from supply chain disruptions drove most of the upswing in inflation since April 2021, and the easing of those disruptions since mid-2022 has contributed to the slowdown in inflation since then, the paper showed.

The Fed’s target for inflation, as measured by the personal consumption expenditures price index, is 2%.

A year ago, inflation by that measure reached a peak of 7%, and supply shock pressures contributed about 2.5 percentage points of that, according to the paper. As of March, PCE inflation had fallen to 4.2%, of which supply shocks accounted for around 1.4 percentage points.

Still, wrote San Francisco Fed economists Zheng Liu and Thuy Lan Nguyen, the contribution of supply chain pressures to inflation “remains positive, reflecting the delayed effects of the shock on inflation.”

The analysis is sure to feed into a central debate at the U.S. central bank about how best to bring inflation back down to the 2% target, now that the Fed has lifted its policy target to a 5%-5.25% range.

The San Francisco Fed paper suggests a sizeable further drop in inflation is already baked in due to the delayed effect of now mostly normalized supply chains. “If there are no additional shocks going forward, then supply-chain-driven inflation should vanish by early next year,” the authors said in an emailed response to a Reuters query.

All things equal, that would imply less may be needed from monetary policy to bring inflation back to the Fed’s goal.

But all things may not be equal. Separate research from San Francisco Fed economist Adam Shapiro suggests a handoff from supply-driven inflation to demand-driven inflation, a process that the authors of Tuesday’s paper say negates “a lot of the decline in supply-driven inflation.”

Further, an analysis by former Fed Chair Ben Bernanke and former International Monetary Fund chief Olivier Blanchard suggests that wage growth may take over from supply shortages as a main driver of inflation.

In that narrative, for which Fed Chair Jerome Powell has expressed some sympathy, cooling inflation requires softening in the labor market, which may in turn require further policy tightening.

Other Fed policymakers, including Chicago Fed chief Austan Goolsbee, have taken the view that wage growth says little about the future path of inflation.

Fed policymakers are also weighing other theories about the likely course of inflation, including one, laid out by researchers at the St. Louis Fed and others, that excess savings are feeding price pressures in a way that may persist despite the increase in interest rates.

(Reporting by Ann Saphir; Additional reporting by Howard Schneider; Editing by Andrea Ricci)

By David Ljunggren

OTTAWA (Reuters) – Canada’s national statistics agency on Tuesday revealed new weights for the basket of goods and services in its Consumer Price Index, giving more prominence to changes in the prices of food and gasoline.

The reweighting, which Statistics Canada carries out every year, has historically had only a marginal impact on the headline number. The new basket weights will be applied to May’s inflation data, due out on June 27.

The rebalancing reflects changes in 2022 compared to 2021. Statscan said the alterations were designed to take into account the continuing recovery from the impact of COVID-19.

“Spending that began to gradually shift back towards pre-pandemic patterns in 2021 continued and were more pronounced in 2022, with several sectors inching closer to pre-pandemic basket weight shares,” it said.

COVID-related measures and disruptions to supply chains helped push Canadian inflation up to a near-40 year high of 8.1%in June last year. It has now dropped to 4.4%, still more than double the Bank of Canada’s 2.0% target.

Gasoline prices, pushed higher by increased demand as well as Russia’s invasion of Ukraine, will now account for 4.27% of overall inflation, up from 3.47%.

Gasoline is part of the larger transportation component which, for the second consecutive year, increased the most among the major eight segments, rising to 16.94% from 16.16%.

The food component expanded to 16.13% from 15.75%, reflecting increases in sales at restaurants as lockdown measures were removed.

But the shelter component dropped to 28.22% from 29.67%, in part due to lower costs for rent and other accommodation expenses as the housing market cooled.

DVD players were removed from the 2023 basket as they have become less popular with consumers following the advent of streaming services. Conversely, charcoal barbecues and snow removal equipment were added.

(Reporting by David Ljunggren; editing by Jonathan Oatis)

By Tom Perry, Maya Gebeily and Laila Bassam

BEIRUT (Reuters) -Carlos Ghosn said on Tuesday he will fight “to the end” in a $1 billion lawsuit the former Nissan chairman has brought against the Japanese carmaker, marking his first such challenge.

Ghosn’s lawsuit, which he filed in Lebanon and a copy of which was seen by Reuters, includes allegations of defamation, slander, libel and the fabrication of material evidence by Nissan as well as 12 individuals and two other firms.

A Nissan spokesperson said it will not be commenting.

“We have a long battle in front of us. We are going to fight it to the end,” Ghosn told Reuters in Lebanon, where he has lived since fleeing Japan hidden in a box aboard a private jet.

Ghosn’s lawsuit seeks $588 million in lost remuneration, and another $500 million in moral damage.

“What I am asking for is only a little compensation compared to what they’ve done to me,” the 69-year-old, wearing a blue open-necked shirt, said during an interview in Beirut.

Once a global car industry titan, Ghosn was arrested in Japan in late 2018 and charged with under-reporting earnings, breach of trust and misappropriation of company funds.

He denied the charges and said his detention was part of a plot against him by Nissan.

Ghosn fled Japan in December 2019 as he awaited trial and after arriving in his childhood home of Lebanon said he was escaping a “rigged” justice system and would clear his name.

Tokyo prosecutors have previously said Ghosn’s allegations of a conspiracy were false.

‘HAVE TO PAY’

Asked whether he would expand his legal action to include Renault, part of the alliance with Nissan which he masterminded, Ghosn said his focus was currently on Nissan.

“I’m not precluding anything for the future. Today we are concentrating on the Nissan plot,” he said.

If found guilty, Nissan “will have to pay”, Ghosn said.

“It’s a large company and they have assets everywhere and you can go after their assets anywhere, so this is not a joke,” he said. “I hope they are going to provision this amount of money and I hope they are going to talk to their shareholders about what is happening and why this is happening,” he said.

Ghosn, who holds French, Lebanese and Brazilian citizenships, said he has not left Lebanon since 2019 because of an Interpol Red Notice issued by Japan.

“I’m stuck here. I cannot make a complaint of this size in another country,” he said, adding that putting his case together had taken his legal team time as they reconstituted the facts.

A judicial source in Lebanon said the prosecutor has scheduled a court session on Sept. 18 to begin proceedings.

Ghosn said documents had been taken from his home in Lebanon under false pretences on the day of his arrest in Japan and shared with Japanese authorities.

His lawsuit alleges that “the sanctity of a residence” had been violated and says crimes were committed in Lebanon, Japan, France, Brazil, the United States and the Netherlands.

“I have the intention get my rights back, to repair my reputation,” he said. “I am going to dedicate all the time necessary for the truth to prevail.”

(Reporting by Maya Gebeily, Laila Bassam, Tom Perry in Beirut and Daniel Leussink in Japan; Writing by Tala Ramadan and Tom Perry; Editing by Kirsten Donovan, Louise Heavens, David Goodman and Alexander Smith)

By Valerie Insinna

PARIS (Reuters) – Lockheed Martin has raised concerns with the U.S. Defense Department and Federal Trade Commission (FTC) about L3Harris’s acquisition of Aerojet Rocketdyne, Lockheed’s chief operating officer said on Tuesday.

Frank St John told Reuters that Lockheed, Aerojet’s biggest customer, wanted L3Harris to ensure access to rocket motors, fair pricing and IP protections, adding that it had received “little response” from L3Harris over its concerns.

“To date, we’ve been unable to gain a commitment from L3Harris for those provisions as a merchant supplier,” St John said in an interview at the Paris Airshow.

“This is really concerning to us because they are going to be vital to meeting the increasing demand that we’re seeing on multiple weapons systems,” such as the Javelin missile launcher and Patriot air defense system.

If L3Harris continues to be unresponsive, Lockheed wants the Defense Department or FTC to put in place a mechanism to guarantee access to technology, St John said.

A spokesperson for L3Harris did not comment on the concerns raised by Lockheed directly but said: “We are in an FTC process and expect the transaction to close the second half of 2023.”

The FTC declined to comment, Aerojet Rocketdyne referred requests for comment to L3Harris and Defense Department did not immediately respond to emailed requests for comment.

L3Harris said in December it would buy Aerojet for $4.7 billion in cash as it looks to tap into rising demand for missiles because of the Ukraine conflict.

Lockheed previously attempted to buy Aerojet in a $4.4 billion deal, but walked away from the acquisition in February 2022 after the FTC sued to block the deal, citing concerns that Lockheed could hinder competitors’ fair access to Aerojet products.

RTX executives, who opposed Lockheed’s failed bid for Aerojet, have signalled they would not do the same in L3Harris’ case, with RTX CEO Greg Hayes saying that L3Harris is not a competitor in the missile business in an interview with trade publication Defense One.

RTX Chief Operating Officer Chris Calio told Reuters in an interview on Monday that “any transaction that can bring investment, capability and capacity would be helpful. I don’t think status quo is an option.”

(Reporting by Valerie Insinna; Editing by Mark Potter and Barbara Lewis)