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close video Fed is going to keep raising rates, Jim Rickards warns

Strategic Intelligence editor Jim Rickards discusses the Fed’s decision to raise rates by 25 basis points, arguing that policymakers are “determined” to get inflation under control.

The worst banking crisis since the Great Recession could severely tighten credit for U.S. households and businesses, taking a toll on economic growth.

The turmoil that has engulfed the financial system following the stunning collapse of Silicon Valley Bank and Signature Bank has raised the prospect among economists that lending standards will become drastically more restrictive in coming months. 

"Tighter conditions can happen and occur outside the official tightening of the Fed funds rate. There are so many other variables," Jeffrey Roach, chief economist at LPL Financial, told FOX Business. "A banking crisis, in essence, can tighten conditions… I think it’s fair to say that the current banking crisis could also be an equivalent to say, a 50-basis-point rate hike."

During a credit crunch, banks significantly raise their lending standards, making it difficult to acquire a loan. Borrowers may have to agree to more stringent terms like high interest rates as banks try to reduce the financial risk on their end. Fewer loans, in turn, would lead to less big-ticket spending by consumers and businesses. 

FUND MANAGERS WORRY SYSTEMIC CREDIT CRUNCH COULD CRASH US MARKETS

Employees walk outside the shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023, in Santa Clara, California. (Justin Sullivan/Getty Images / Getty Images)

Gregory Daco, chief economist at the consulting firm EY-Parthenon, said he thinks tighter credit will constrain "business investment, employment growth and consumer spending in the coming months." 

While that could help the Federal Reserve in its fight to tamp down stubbornly high inflation, it also raises the risk of a recession this year. 

"The odds of a recession have risen due to heightened financial market volatility, tightening credit conditions and economic uncertainty," Daco said. "While labor market conditions still look relatively resilient, an abrupt shift in sentiment along with a rapid tightening of financial conditions could push the economy into a recession with businesses and consumers retrenching."

JEROME POWELL'S FAVORITE BOND MARKET GAUGE FLASHES RECESSION WARNING SIGN

Chairman Jerome Powell acknowledged during the Fed's two-day meeting last week that upheaval within the financial sector could tighten credit for American households. He suggested that stricter lending standards could have a similar effect on inflation that a rate increase can.

"Such a tightening in financial conditions would work in the same direction as rate tightening," Powell said. "You can think of it as being the equivalent of a rate hike or perhaps more than that."

Jerome Powell, chairman of the U.S. Federal Reserve, speaks during at a news conference in Washington, D.C., Wednesday, March 22, 2023. (Al Drago/Bloomberg via Getty Images / Getty Images)

His comments came shortly after policymakers delivered another quarter-percentage point rate hike, lifting the benchmark funds rate to a range of 4.75% to 5%, the highest since 2007. It marked the ninth consecutive rate increase aimed at combating high inflation.

Fed officials are in the midst of the most aggressive tightening campaign since the 1980s as they try to crush inflation still running about three times higher than the pre-pandemic average. Before the spate of bank collapses earlier in March, the Fed had considered raising rates by a half-percentage point in the face of strong economic data, Powell said Wednesday.

But fears over a broader financial crisis complicated the Fed's efforts, because the rapid rise in interest rates played a direct role in the failure of Silicon Valley Bank. Increasing interest rates threatens to exacerbate instability within the financial system. Powell said it is too soon to say how banking sector stress will affect the broader economy.

YELLEN SAYS US WILL TAKE MORE ACTION TO PROTECT SMALLER BANKS IF NEEDED

"Financial conditions seem to have tightened and probably by more than the traditional indexes say," he said. "The question for us, though, is how significant will that be – what will be the extent of it, and what will be the duration of it?

 "We’ll be looking to see how serious is this and does it look like it’s going to be sustained. And, if it is, it could easily have a significant macroeconomic effect, and we would factor that into our policy decisions."

Pedestrians near the U.S. Treasury building in Washington, D.C., Dec. 30, 2022. (Ting Shen/Bloomberg via Getty Images / Getty Images)

SVB largely catered to tech companies, venture capital firms and high net worth individuals who were pulling cash at a rapid pace as the once red-hot tech sector cooled. When the bank announced it was trying to raise capital from investors and that it would take a $1.3 billion loss on long-term securities that had tumbled in value amid higher interest rates, depositors panicked and a bank run ensued.

Within days, U.S. regulators took extraordinary steps to contain the fallout from the bank's collapse and shore up wavering confidence in the financial system, including protecting all deposits at the two institutions – even those holding funds that exceeded the FDIC's $250,000 insurance limit. 

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The Fed also launched a new emergency backstop for lenders to help them meet deposit withdrawals under favorable terms. 

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Donald Trump confirms he will sue the BBC over Panorama edit – despite broadcaster’s apology

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Donald Trump confirms he will sue the BBC over Panorama edit - despite broadcaster's apology

Donald Trump has said he will sue the BBC for between $1bn and $5bn over the editing of his speech on Panorama.

The US president confirmed he would be taking legal action against the broadcaster while on Air Force One overnight on Saturday.

“We’ll sue them. We’ll sue them for anywhere between a billion (£792m) and five billion dollars (£3.79bn), probably sometime next week,” he told reporters.

“We have to do it, they’ve even admitted that they cheated. Not that they couldn’t have not done that. They cheated. They changed the words coming out of my mouth.”

Mr Trump then told reporters he would discuss the matter with Prime Minister Sir Keir Starmer over the weekend, and claimed “the people of the UK are very angry about what happened… because it shows the BBC is fake news”.

Separately, Mr Trump told GB News: “I’m not looking to get into lawsuits, but I think I have an obligation to do it.

“This was so egregious. If you don’t do it, you don’t stop it from happening again with other people.”

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BBC crisis: How did it happen?

The Daily Telegraph reported earlier this month that an internal memo raised concerns about the BBC’s editing of a speech made by Mr Trump on 6 January 2021, just before a mob rioted at the US Capitol building, on the news programme.

The concerns regard clips spliced together from sections of the president’s speech to make it appear he told supporters he was going to walk to the US Capitol with them to “fight like hell” in the documentary Trump: A Second Chance?, which was broadcast by the BBC the week before last year’s US election.

Following a backlash, both BBC director-general Tim Davie and BBC News chief executive Deborah Turness resigned from their roles.

‘No basis for defamation claim’

On Thursday, the broadcaster officially apologised to the president and added that it was an “error of judgement” and the programme will “not be broadcast again in this form on any BBC platforms”.

A spokesperson said that “the BBC sincerely regrets the manner in which the video clip was edited,” but they also added that “we strongly disagree there is a basis for a defamation claim”.

Earlier this week, Mr Trump’s lawyers threatened to sue the BBC for $1bn unless it apologised, retracted the clip, and compensated him.

The US president said he would sue the broadcaster for between $1bn and $5bn. File pic: PA
Image:
The US president said he would sue the broadcaster for between $1bn and $5bn. File pic: PA

Legal challenges

But legal experts have said that Mr Trump would face challenges taking the case to court in the UK or the US.

The deadline to bring the case to UK courts, where defamation damages rarely exceed £100,000 ($132,000), has already expired because the documentary aired in October 2024, which is more than one year.

Also because the documentary was not shown in the US, it would be hard to show that Americans thought less of the president because of a programme they could not watch.

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Sky’s Katie Spencer on what BBC bosses told staff on call over Trump row

Newsnight allegations

The BBC has said it was looking into fresh allegations, published in The Telegraph, that its Newsnight show also selectively edited footage of the same speech in a report broadcast in June 2022.

A BBC spokesperson said: “The BBC holds itself to the highest editorial standards. This matter has been brought to our attention and we are now looking into it.”

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UK

Rail worker who protected passengers during mass stabbing on Huntingdon train discharged from hospital

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Rail worker who protected passengers during mass stabbing on Huntingdon train discharged from hospital

The train crew member who was seriously injured while trying to protect passengers during a mass stabbing has been discharged from hospital.

Samir Zitouni, 48, known as Sam, was working on board the London North Eastern Railway (LNER) train from Doncaster to London when the attack began in Cambridgeshire on Saturday 1 November.

LNER said Mr Zitouni, who has worked for the firm for more than 20 years, was credited with helping to save multiple lives.

Mr Zitouni had been in a critical condition, having suffered multiple injuries in the incident, but was discharged on Saturday.

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Mahmood praises rail worker

His family said: “We are so grateful for the outpouring of support from the public, and very touched by all the kind words about Sam’s brave actions on the night of the attack.

“While we are really happy to have him home, he still has a significant recovery ahead and we would now like to be left in privacy to care for him as a family.”

Earlier this month, LNER said he has been a “valued member” of staff for over 20 years, working on board as a customer experience host.

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Train mass stabbing: A timeline of events

David Horne, managing director at LNER, said: “In a moment of crisis, Sam did not hesitate as he stepped forward to protect those around him.

“His actions were incredibly brave, and we are so proud of him, and of all our colleagues who acted with such courage that evening. Our thoughts and prayers remain with Sam and his family. We will continue to support them and wish him a full and speedy recovery.”

The attack is understood to have started shortly after the train left Peterborough, with passengers pulling the emergency alarms on the LNER service.

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Police believe train attacker filmed waving knife

Train driver Andrew Johnson, who served in the Royal Navy for 17 years, contacted a signaller and requested an unscheduled stop at Huntingdon station.

11 people were treated in hospital after the mass stabbing – nine were initially reported as having life-threatening injuries.

Anthony Williams, 32, was remanded into custody at Peterborough Magistrates’ Court on November 3, charged with 10 counts of attempted murder over the incident.

He will appear at Cambridge Crown Court on 1 December.

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US

Trump to push ahead with BBC lawsuit: Three experts on why he might struggle to win

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Trump to push ahead with BBC lawsuit: Three experts on why he might struggle to win

Donald Trump has confirmed he plans to sue the BBC for between $1bn and $5bn over the editing of his speech in a Panorama news programme.

The corporation said it was an “error of judgement” to splice two sections of his speech together, and the programme will “not be broadcast again in this form on any BBC platforms”.

“We have to do it, they’ve even admitted that they cheated,” the US president told reporters overnight on Saturday.

“Not that they couldn’t have not done that. They cheated. They changed the words coming out of my mouth.”

However, the lawsuit will not be easy, according to three experts who have spoken to Sky News.

“Filing a lawsuit is easy,” said Mark Stevens, media law solicitor at Howard Kennedy, to Sky presenter Samantha Washington.

“Winning one is, in this case, like trying to lasso a tornado: technically possible, but you’re going to need more than a cowboy hat.”

So why would this case be so hard to win?

Where did the damage occur?

The Panorama episode was not aired in the US, which may make Mr Trump’s case harder.

“For a libel claim to succeed, harm must occur where the case is brought,” said Mr Stevens.

“It’s hard to argue [for] that reputational damage in a jurisdiction where the content wasn’t aired.”

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BBC crisis: How did it happen?

The president will also have to show that his reputation suffered actual harm.

“But his reputation was pretty damaged on this issue before,” said Mr Stevens.

“There have been judicial findings, congressional hearings, global media coverage around 6 January. Laying that responsibility for any further harm at the door of the BBC seems pretty tenuous.”

Was the mistake malicious?

In order to sue someone for libel in the US, you have to prove they did it on purpose – or with ‘malicious intent’.

That might be hard to prove, according to Alan Rusbridger, editor of Prospect magazine and former editor-in-chief of the Guardian.

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‘Trump suing BBC is just noise and bluster’

“I just don’t think that he can do that,” he said.

Since 1964, US public officials have had to prove that what was said against them was made with “knowledge that it was false or with reckless disregard for the truth”.

“The reason for that, when the Supreme Court passed this in 1964, is the chilling effect on journalism,” said Mr Rusbridger.

“If a journalist makes a mistake, [and] this clearly was a mistake, if that ends up with their employers having to pay $1bn, $2bn, $3bn, that would be a dreadful chill on journalism.

“Unless Trump can prove that whoever this was who was editing this film did it with malice, the case is open and shut.”

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Is he suing for too much money?

Mr Trump says he’s going to sue for between $1bn and $5bn, figures former BBC legal correspondent Clive Coleman described as “very fanciful”.

“That, I think, is very fanciful because he will have to show that he has suffered billions of dollars worth of reputational damage.

“We know that this was back in 2020 when the speech was made. He went on to be successful in business and, of course, to be re-elected as US president.”

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‘Trump faces some really big hurdles’ in suing BBC

However, Mr Coleman did suggest the BBC should try to “bring this to an end as speedily as possible”.

“Litigation is always a commercial decision and it’s a reputational decision,” he said.

“The legal processes towards a court case are long and arduous and this is going to blow up in the news pretty regularly between now and then.”

Other news organisations facing litigation by Mr Trump have settled out of court for “sums like $15m, $16m”, according to Mr Coleman.

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