US interest rates increased despite worst banking turmoil since 2008

Published

2 years ago

March 22, 2023

admin

The Federal Reserve – the US central bank, known as the Fed – has increased interest rates for the ninth time in a row.

The rate has been increased by 0.25 percentage points in an effort to bring down inflation, which in the US stood at 6% over the 12 months to February.

A higher increase had been expected prior to the collapse of Silicon Valley Bank, the rescue of regional US banks and the takeover of Credit Suisse.

At the start of this month, before the worst banking turmoil since 2008 began, Fed chair Jerome Powell had floated the idea of a 0.5 percentage points increase, a speeding up of rate increases. Last month the programme of rate hikes was slowed when the Fed instituted a 0.25 percentage points rise.

High interest rates lead to higher profits for lenders but also put pressure on banks as some government bonds, state IOUs, lose value.

Following Wednesday’s increase, US interest rates stand at 4.75% to 5%, up from 4.5% to 4.75% since the last increase in February.

In the US, the interest rate is a range, rather than a single percentage – as in the UK – because the Fed is not permitted to set a specific number.

A target rate is instead set as a guide for banks to follow.

Some economists had expected the Fed to pause rate rises all together.

Addressing banking concerns, the Fed said the US banking system is sound and resilient but the effects of recent developments is unknown.

“Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain.”

Tighter conditions are equivalent to an interest rate hike and perhaps may be more impactful, Mr Powell said.

“Such a tightening of financial conditions would work in the same direction as rate tightening in principle. As a matter of fact, you can think of it as being the equivalent of a rate hike, or perhaps more than that, of course, it’s not possible to make that assessment assessment today with any precision whatsoever.”

Eyes now on the Bank of England after surprise UK inflation figures

Ed Conway

Economics & data editor

@EdConwaySky

A lot of people were looking at what the Federal Reserve were going to do.

Of course they are they are the US central bank, the equivalent obviously of the Bank of England in the UK, and they are deciding not just monetary policy, so interest rates, quantitative easing all of that stuff, but they also monitor and regulate financial stability.

And that’s really important because of course, we all know what’s happened over the course of the last few weeks.

You’ve had big problems in US banks, you’ve had the collapse of Silicon Valley Bank, Silvergate, Signature Bank, some other banks there as well, and a lot of concerns that the intervention from the Fed and its other authorities like the Treasury, and the FDIC (Federal Deposit Insurance Corporation) hasn’t actually helped, it’s made people a little bit more nervous.

So put all of that together and there were some question marks about whether the Federal Reserve was going to raise interest rates as much as a lot of people had expected.

Let’s have a look at the actual rates and what they’ve done.

After financial crisis rates were already pretty low but they went even lower after COVID-19 but they have come up fast in the course of the last year or so, an extraordinary rise, nine increases.

And the question, of course, was whether this latest increase was going to be half a percentage point or a quarter of a percentage point and they’d gone for a quarter so up to 5%.

But this is interesting because a lot of people thought up until quite recently, they were going to go higher, they were going to go up towards well above 5%.

And the reason they haven’t is kind of interesting, because the Federal Reserve and its chairman Jay Powell and in the press conference that followed that decision emphasising the concern was that the financial system is struggling with the impact of these higher interest rates.

And that is basically raising some questions about whether the Fed is going to raise interest rates quite as much as people recently thought.

That’s relevant for the UK because the Bank of England is set to decide on its interest rate, those rates are at a 4% at the moment, a lot of people thought they were going to be maybe paused because of this concern about what’s going on with the financial system.

But then along came those high inflation numbers that we’ve just got, up to 10.4%, higher than expected.

Of course, the bank’s job is to try and target inflation.

So now people think they’re going to raise interest rates in the UK, maybe by a quarter percentage point.

We’ll have to wait and see what they do, we’ll have to wait and see what governor Andrew Bailey has to say about that.

But it is now a tense moment because with these rates quite so high, a lot of people worry that the financial system is starting to squeak a bit.

A rate rethink

Speaking on Wednesday Mr Powell said ongoing interest rate increases are no longer appropriate to bring inflation down to its 2% target. Instead, he said “some” additional raises “may be appropriate”.

Addressing the banking turmoil, he said: “we are committed to learning the lessons from this episode, and to work to prevent episodes from events like this from happening again.”

It was also the first time since December that the Fed issued interest rate projections.

Listen and subscribe to The Ian King Business Podcast here

GDP, a measure of economic output and of economic health, will be just 0.4% this year, Mr Powell said, and is forecast to increase to 1.2% next year, well below the growth rate many politicians would hope for.

The unemployment rate is expected to rise to 4.5% at the end of this year and 4.6% at the end of next year.

US

YouTuber Jake Paul beats Mike Tyson as boos heard during controversial fight

Published

5 hours ago

November 16, 2024

admin

YouTuber Jake Paul beats Mike Tyson as boos heard during controversial fight

YouTuber-turned-boxer Jake Paul has defeated one of the greatest-ever fighters, former heavyweight world champion Mike Tyson, who is more than twice his age.

Paul, 27, won the bout via a unanimous points decision at the AT&T Stadium in Arlington, Texas – home of the Dallas Cowboys and the biggest NFL stadium in the US.

The fight was already controversial but then arguably failed to live up to the hype. Boos were heard from the crowd in the final two rounds, after a perceived lack of action.

Afterwards, the pair heaped praise on each other. Paul said: “This man is an icon and it’s just an honour to be able to fight him. And he’s obviously the toughest, baddest man on the planet.”

Tyson, 58, described Paul as a “good fighter” but dismissed the suggestion he was out to prove something.

“I didn’t prove nothing to anybody, only to myself,” he said.

Boxing careers compared

This was not Paul’s first professional fight. The American YouTube star made his debut in 2020, and his most high-profile clash was last year against Tyson Fury’s brother Tommy Fury, which he lost by a split decision.

The so-called “Problem Child” has since defeated former UFC contender Nate Diaz, professional boxer Andre August, former Gold Gloves champion Ryan Bourland and most recently MMA fighter Mike Perry.

In contrast, “Iron Mike” Tyson was ranked among the best heavyweight boxers of all time.

During his career, he knocked out 44 opponents – retiring from professional boxing in 2005 after defeat against Kevin McBride.

He returned to the ring in 2020 for a bout against fellow boxing icon Roy Jones, which ended in an unofficial draw.

‘Someone’s getting put to sleep’

Earlier this week, Paul said he believed the bout would not go the distance. “No, someone’s getting put to sleep,” he said. “It’s going to be a war, and we’re both heavy hitters. It’s not going the full 16 minutes.”

Tyson said: “I’ve been through so many ups and downs since my last fight with Kevin McBride.

“I’ve been in rehab. I’ve been in prison, been locked up. Never in a million years did I believe I’d be doing this.”

Several states would not allow the bout to go ahead, and the Texas Athletic Commission only agreed to the fight if there were changes, due to Tyson’s age.

It limited the contest to eight rounds lasting a maximum of two minutes instead of three. Both boxers were also required to wear heavier gloves, designed to lessen the force of punches.

The fight was initially scheduled for 20 July, but was postponed when Tyson suffered an ulcer flareup.

Taylor defends title

Meanwhile, among the undercard fights, Irish boxer Katie Taylor successfully defended her super lightweight world title against Puerto Rico’s Amanda Serrano.

But it was tight. Taylor claimed the rematch 95-94 for all three judges in an epic battle.

The bout came two and a half years after the pair fought at Madison Square Garden, which Taylor won on a split decision.

Bout suffered from buffering

Earlier in the evening thousands of Netflix users in the US reported problems with the coverage, with some posting on social media about buffering.

At one point, more than 98,000 people had reported issues according to Downdetector, which tracks outages.

US

Matt Gaetz: Speaker Mike Johnson will request report into Trump’s attorney general pick is kept secret

Published

5 hours ago

November 16, 2024

admin

Matt Gaetz: Speaker Mike Johnson will request report into Trump's attorney general pick is kept secret

US House Speaker Mike Johnson has said he will “strongly request” a report into allegations of sex trafficking against Matt Gaetz, who is the president-elect’s choice of attorney general, should not be released.

Mr Johnson said he was against publishing the House Ethics Committee report on Mr Gaetz, 42, who if approved by the Senate will become the nation’s top prosecutor once Donald Trump is sworn in as president on 20 January.

That’s despite Mr Gaetz having previously faced a nearly three-year Justice Department investigation into sex trafficking allegations involving a 17-year-old girl. He denies the allegations and has not faced criminal charges.

Mr Gaetz has also never worked as a prosecutor and has only worked in law for a few years at a local level.

He stepped down from Congress after Mr Trump announced him as his attorney general pick.

His resignation brought the investigation by the House Ethics Committee to an end – two days before it had been expected to release its report into the trafficking claims.

House Speaker Mr Johnson, a Louisiana Republican, said of the probe: “I’m going to strongly request that the Ethics Committee not issue the report, because that is not the way we do things in the House.”

Politicians of both parties on the Senate Judiciary Committee have said they want to see the report on Mr Gaetz, as part of a Senate confirmation process for cabinet nominees that would start next year with public hearings.

Democrats have described the MAGA loyalist as “a gonzo agent of chaos” and his appointment a “red alert moment for our democracy”, while some Republican senators have also raised doubts about his suitability for the role.

Mr Johnson said he planned to urge House Ethics Committee chairman Michael Guest not to provide the report to the Senate Judiciary Committee.

“The rules of the House have always been that a former member is beyond the jurisdiction of the Ethics Committee,” said Mr Johnson, who returned on Friday morning from meeting Mr Trump at the president-elect’s Mar-a-Lago resort in Florida.

“I think it’s a terrible breach of protocol and tradition and the spirit of the rule,” he added. “I think that would be a terrible precedent to set.”

Mr Johnson had said on Wednesday that as Speaker he could not be involved in deciding whether or not to release the report.

US

Malcolm X family brings $100m lawsuit against FBI, CIA and NYPD over ‘conspiracy to assassinate’ civil rights leader

Published

5 hours ago

November 16, 2024

admin

Malcolm X family brings 0m lawsuit against FBI, CIA and NYPD over 'conspiracy to assassinate' civil rights leader

A $100m (£79m) lawsuit has been brought against the CIA, FBI and New York Police Department (NYPD) who are accused of being involved in the 1965 assassination of civil rights leader Malcolm X.

The case, which has been filed in a federal court in Manhattan, New York, alleges that the agencies were aware of the assassination, they were involved in the plot and failed to stop the killing.

The legal action has been brought by Malcolm X’s three daughters along with his estate.

The NYPD and CIA have not yet responded to the claims while the FBI said it was “standard practice” not to comment on litigation.

Nicholas Biase, a spokesperson for the US Department of Justice, which is also included in the lawsuit, declined to respond.

Malcolm X was 39 when he was shot dead on 21 February 1965 on stage by three gunmen as he prepared to speak at the Audubon Ballroom in Manhattan.

At a news conference in New York on Friday, to announce the details of the lawsuit, attorney Benjamin Crump said: “The government fingerprints are all over the assassination of Malcolm X.

“We believe we have the evidence to prove it.”

For decades, questions have arisen over who was behind his murder.

Malcolm X rose to prominence as the national spokesman of the Nation of Islam, an African-American Muslim group which supported black separatism.

He broke away from the group in 1964 and moderated some of his earlier views on racial separation, which angered Nation of Islam members and resulted in death threats.

Three men were convicted of his murder but two of them were cleared in 2021 after investigators took a fresh look at the case. They concluded some evidence was shaky and authorities had held back some information.

In the lawsuit, which began its process in 2023, it is alleged the NYPD coordinated with federal law enforcement agencies to arrest the activist’s security guards days before the assassination.

It also claims police were intentionally removed from inside the ballroom where Malcolm X was killed and that federal agencies had personnel, including undercover agents, at the site but failed to protect him.

The lawsuit goes on to allege a “corrupt, unlawful, and unconstitutional” relationship between law enforcement and “ruthless killers… which was actively concealed, condoned, protected, and facilitated by government agents”.

Referring to Malcolm X’s family, the lawsuit states: “They did not know who murdered Malcolm X, why he was murdered, the level of NYPD, FBI and CIA orchestration, the identity of the governmental agents who conspired to ensure his demise, or who fraudulently covered up their role.”