US interest rates increased despite worst banking turmoil since 2008

Published

2 years ago

March 22, 2023

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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.

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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

Virginia Giuffre, who accused Prince Andrew of sexual assault, has died, her family says

Published

13 hours ago

April 26, 2025

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Virginia Giuffre, who accused Prince Andrew of sexual assault, has died, her family says

Virginia Giuffre, who accused Prince Andrew of sexual assault, has died aged 41.

In a statement to Sky’s US partner network NBC News on Friday, her family said she took her own life in the Perth suburb of Neergabby, Australia, where she had been living for several years.

“It is with utterly broken hearts that we announce that Virginia passed away last night at her farm in Western Australia,” her family said.

“She lost her life to suicide, after being a lifelong victim of sexual abuse and sex trafficking.

“Virginia was a fierce warrior in the fight against sexual abuse and sex trafficking. She was the light that lifted so many survivors.

“In the end, the toll of abuse is so heavy that it became unbearable for Virginia to handle its weight.”

Police said emergency services received reports of an unresponsive woman at a property in Neergabby on Friday night.

“Police and St John Western Australia attended and provided emergency first aid. Sadly, the 41-year-old woman was declared deceased at the scene,” a police spokeswoman said.

“The death is being investigated by Major Crime detectives; early indication is the death is not suspicious.”

Sexual assault claims

Ms Giuffre sued the Duke of York for sexual abuse in August 2021, saying Andrew had sex with her when she was 17 and had been trafficked by his friend, the billionaire paedophile Jeffrey Epstein.

The duke has repeatedly denied the claims, and he has not been charged with any criminal offences.

In March 2022, it was announced Ms Giuffre and Andrew had reached an out-of-court settlement – believed to include a “substantial donation to Ms Giuffre’s charity in support of victims’ rights”.

She stuck by her version of events until the end

Of the many dozens of victims of Jeffrey Epstein, it was Virginia Giuffre who became the most high-profile.

She was among the loudest and most compelling voices, urging criminal charges to be brought against Epstein, waving her right to anonymity in 2015.

She told how he and Ghislaine Maxwell groomed her and “passed around like a platter of fruit” to be used by rich and powerful men.

But her name and face became known around the world after she accused Prince Andrew of sexually abusing her when she was 17 years old.

The picture of her together with the prince and Maxwell at the top of a staircase, his hand around her waist, is the defining image of the whole scandal.

Prince Andrew said he had no memory of the occasion. But Giuffre stuck by her version of events until the end.

‘An incredible champion’

Sigrid McCawley, Ms Giuffre’s attorney, said in a statement that she “was much more than a client to me; she was a dear friend and an incredible champion for other victims”.

“Her courage pushed me to fight harder, and her strength was awe-inspiring,” she said. “The world has lost an amazing human being today.”

“Rest in peace, my sweet angel,” she added.

Dini von Mueffling, Ms Giuffre’s representative, also said that “Virginia was one of the most extraordinary human beings I have ever had the honour to know”.

“Deeply loving, wise, and funny, she was a beacon to other survivors and victims,” she added. “She adored her children and many animals.

“She was always more concerned with me than with herself. I will miss her beyond words.

“It was the privilege of a lifetime to represent her.”

Ms Giuffre said at the end of March she had four days to live after a car accident, posting on social media that “I’ve gone into kidney renal failure”. She was discharged from hospital eight days later.

Raised mainly in Florida, she said she was abused by a family friend early in life, which led to her living on the streets at times as a teenager.

She said that in 2000, she met Ghislaine Maxwell, a British socialite who was convicted in 2021 on federal sex trafficking and conspiracy charges and was sentenced to 20 years in prison.

Ms Giuffre said Maxwell then introduced her to Epstein and hired her as his masseuse, and said she was sex trafficked and sexually abused by him and associates around the world.

‘A survivor’

After meeting her husband in 2002, while taking massage training in Thailand at what she said was Epstein’s behest, she moved to Australia and had a family.

She founded the sex trafficking victims’ advocacy charity SOAR in 2015, and is quoted on its website as saying: “I do this for victims everywhere.

“I am no longer the young and vulnerable girl who could be bullied. I am now a survivor, and nobody can ever take that away from me.”

:: Anyone feeling emotionally distressed or suicidal can call Samaritans for help on 116 123 or email jo@samaritans.org in the UK. In the US, call the Samaritans branch in your area or 1 (800) 273-TALK.

US

Trump met with Zelenskyy ahead of Pope’s funeral

Published

14 hours ago

April 26, 2025

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Trump met with Zelenskyy ahead of Pope's funeral

Donald Trump has met Volodymyr Zelenskyy ahead of the Pope’s funeral, Vatican sources have told Sky News.

The US and Ukrainian presidents had a “very productive discussion”, according to a White House Official, and have also agreed to hold further talks after the service.

They are among world leaders, including Sir Keir Starmer and Emmanuel Macron, who are attending the funeral of Pope Francis.

Follow live updates: Zelenskyy among world leaders joining thousands of mourners

There was applause from some of those gathered in St Peter’s Square when the Ukrainian leader walked out.

The former British ambassador to Russia Sir Tony Brenton said the event presents diplomatic opportunities, including the “biggest possible meeting” between Mr Trump and Mr Zelenskyy.

He told Sky News it could mark “an important step” in starting the peace process between Russia and Ukraine, and is their first face-to-face meeting after a very public row between the presidents at the White House in February.

The bilateral meeting comes after Mr Trump’s peace negotiator Steve Witkoff held talks with Vladimir Putin at the Kremlin.

They discussed “the possibility of resuming direct negotiations between Russia and Ukraine”, Kremlin aide Yuri Ushakov said.

Russia and Ukraine have not held direct talks since the early weeks of the war, which began in February 2022.

Mr Trump has claimed a deal to end the war is “very close” and has urged Mr Zelenskyy to “get it done” in a post on his Truth Social platform.

He has previously warned both sides his administration would walk away from its efforts to achieve a peace if the two sides do not agree a deal soon.

Meanwhile, the Polish Armed Forces said a Russian military helicopter violated its airspace over the Baltic Sea on Friday evening, in a post on X.

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US

Donald Trump says Russia and Ukraine are ‘very close to a deal’ – and says ‘two sides should now meet’

Published

1 day ago

April 25, 2025

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Donald Trump says Russia and Ukraine are 'very close to a deal' - and says 'two sides should now meet'

Donald Trump has said Russia and Ukraine are “very close to a deal” with “most of the major points agreed” – as he called for the two sides to meet.

Shortly after arriving in Rome for Pope Francis’s funeral, the US president said high-level officials should now meet to “finish [the deal] off”.

“A good day in talks and meetings with Russia and Ukraine,” Mr Trump wrote on his Truth Social platform.

“They are very close to a deal, and the two sides should now meet, at very high levels, to ‘finish it off’.

“Most of the major points are agreed to. Stop the bloodshed, NOW. We will be wherever is necessary to help facilitate the END to this cruel and senseless war!”

Throughout the week, the US president has criticised both Ukraine and Russia for failing to agree to a peace deal.

On Wednesday, he accused Mr Zelenskyy of harming talks on Truth Social, saying “the man with ‘no cards to play’ should now, finally, GET IT DONE”.

A day later, after nine people were killed in Kyiv after a Russian missile and drone strike, Mr Trump said: “Vladimir, STOP! 5000 soldiers a week are dying. Let’s get the Peace Deal DONE!”

The president and other officials have also threatened to withdraw from negotiations if no progress is made toward a deal.

It comes after Mr Trump’s envoy Steve Witkoff met Vladimir Putin in Moscow to discuss a US-brokered peace plan for Ukraine.

The talks allowed Russia and the United States to “further bring their positions closer together” on “a number of international issues”, a Kremlin aide said.

Speaking earlier on the flight to Italy, Mr Trump said he hadn’t been fully briefed on Mr Witkoff and Mr Putin’s meeting – but added it was a “pretty good meeting”.

Russia and Ukraine have not held direct talks since the early weeks of the war, which began in February 2022.

Ukraine has repeatedly said it would not accept a deal conceding land or handing over sovereignty to Russia.

However, Mr Trump said in an interview with TIME magazine that “Crimea will stay with Russia,” describing the region as a place where Moscow has “had their submarines” and “the people speak largely Russian”.

“Zelenskyy understands that, and everybody understands that it’s been with them for a long time,” he added. “It’s been with them long before Trump came along.”

When asked on Friday about Mr Trump’s comments, Mr Zelenskyy did not want to comment but repeated that recognising occupied Ukrainian territory as Russian is a red line.