Rate hikes ‘likely’ this year in fight against inflation: Feds Jerome Powell

Published

2 years ago

July 4, 2023

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With inflation in the United States still excessive, most Federal Reserve officials expect to raise interest rates further this year, Chair Jerome Powell told a House committee Wednesday.

Inflation pressures continue to run high, and the process of getting inflation back down to 2% has a long way to go, Powell said on the first of two days of semi-annual testimony on Capitol Hill.

Even so, the Fed last week kept interest rates unchanged after 10 straight hikes so it could take time to gauge how higher borrowing rates have affected the economy, Powell said.

The contrast between the Feds stated concern over still-high inflation and its decision to skip a rate hike has heightened uncertainty about its next moves.

The hazier messaging suggests that Powell is seeking to balance competing demands from those Fed officials who want to keep raising rates and others who feel the central bank has done enough.

Asked on Wednesday to clarify last weeks messaging, Powell told the House Financial Services Committee that keeping rates level was consistent with the Feds increasing focus: Slowing the pace of its hikes in order to avoid raising rates higher than needed to reduce inflation and risk causing a deep recession in the process.

It may make sense to move rates higher but to do so at a more moderate pace, Powell said, likening the Feds rate hikes to a journey. As you get closer to your destination, as you try to find that destination, you slow down even further.

Partisan differences over the Feds policies emerged at the hearing, with Rep. Patrick McHenry, the North Carolina Republican who chairs the committee, saying the central bank must remain committed to eliminating this stealth tax on American workers and families, referring to inflation. And I urge you to continue that resolve.

Yet Rep. Maxine Waters of California, the senior Democrat on the panel, said the Fed made the right decision to pause interest rate hikes.

In his remarks Wednesday, Powell also indicated that the Fed chose to keep its key interest rate steady last week so it could assess the impact ofthree large bank failuresthis spring on the banking sector and whether the failures would reduce credit to consumers and businesses and slow the economy.

Despite the Feds focus on combating inflation, Republican committee members spent more time Wednesday questioning Powell about the central banks stance on bank regulation. McHenry suggested that Congress consider removing the Feds authority to regulate banks, if the policymakers take too strict an approach to overseeing small and medium-size lenders and potentially weaken lending.

After this years bank failures, Michael Barr, the Feds top financial regulator, indicated that the central bank might consider raising the level of capital that banks are required to hold in reserve against potential losses as a way to limit further failures.

But some committee Republicans argued Wednesday that requiring banks to hold more funds in reserve would restrict their ability to lend. Small businesses, they warned, would be especially hurt because they depend more on bank loans than do large companies, which can issue their own bonds. Reduced lending, they asserted, would weaken the economy.

Powell responded that any new such rules would likely focus on the largest U.S. banks those with more than $100 billion in assets, like Silicon Valley Bank and the other two institutions that failed. Community banks, by contrast, typically have under $10 billion in assets.

The Fed chair also said it could be several years before such rules would take effect. At the same time, he underscored that there is always a trade-off between requiring banks to hold certain levels of funds in reserve and encouraging lending. The challenge, he said, is to strike the right balance.

With inflation still well above the Feds 2% target, most economists have said they believe that a rate hike at its next meeting in late July is all but assured. What actions the central bank might take after that remains much less clear. The policymakers indicated last week that they expect to raise rates twice more this year. Yet they might not follow through if economic data suggests that inflation is falling quickly back to their target level.

Speaking at a news conference last week, Powell said there were no plans to raise rates at every other meeting or to follow any other particular time frame. Instead, as he reiterated Wednesday, Fed officials will monitor economic data and make their rate decisions meeting by meeting.

The central banks streak of rate increases have madeborrowing for consumersand businesses more expensive across a range of loans, including home and auto loans, credit cards and business borrowing. The goal has been to cool inflation by slowing spending and hiring.

Last year, the Fed jacked up its benchmark rate at a breakneck pace, including by three-quarters of a point on four occasions. Now, with year-over-year inflation having eased from9.1% a year ago to 4%, Powell has indicated that the Fed wants to move much more slowly.

A slower pace of rate increases, Powell has said, could help the Fed achieve a tricky feat: Weaken the economy enough to tame inflation, without undermining it so much as to cause a deep recession.

Yet on Wednesday, Powell repeated a warning he has often made: Defeating inflation wont be painless.

Reducing inflation is likely to require a period of below-trend growth and some softening of labor market conditions, he said.

Softer labor market conditions would include rising layoffs and a higher unemployment rate. Fed officials, though, have said they hope to curb inflation mainly by reducing the number of open jobs rather than through mass layoffs.

Cutting demand for workers would allow employers to slow their wage increases, thereby helping keep a lid on inflation.

Last week, 12 of the 18 Feds policymakers indicated that they envision at least two more rate hikes this year, and four predicted one additional increase. Only two officials forecast that the central bank will keep its key rate at its current level of 5.1% through years end.

UK

Bereaved parents campaign for tougher laws on unlicensed driving

Published

2 hours ago

February 4, 2025

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Bereaved parents campaign for tougher laws on unlicensed driving

Harry Parker was just 14 years old when he was hit and killed by a car on his way to school in Swindon.

“He was a lovely lad, full of life. A football fanatic,” said Harry’s dad, Adam. “He would always make people smile and just have a good time. He was my right hand man. Daddy’s boy.”

His mum Kelly says the memory of what happened that day in November 2022 is seared into her mind.

“I can remember walking into that room now, he was in resus, lying on a trolley. He was just absolutely lifeless. I pushed all the doctors away, I pushed everyone out the way and just went to him and said ‘Harry, please, come on son, you’ve got me. We can do this together’.

“But half an hour later, the doctors came through and told us the devastating news that there was nothing anybody could do for him. As a nurse I’m at the hospital every day, helping people. I love that, that’s my job. But I couldn’t help my son. Nobody could.

“The hardest part was when we had to say goodbye to him. We had to make the decision to turn the life support machine off. Harry was in the middle, me and his dad lay on each side of him, holding him so tight and feeling his heart beat, until we felt the very last beat.”

The driver of the car didn’t have a licence, insurance, or stop at the scene.

But two years after Harry’s death the Crown Prosecution Service told his parents that they were dropping the charges.

They said: “We examined this case in great detail – including obtaining the advice of a forensic collision expert – and it has become clear that there is not enough evidence to demonstrate that this collision could reasonably have been avoided, and therefore that the driving was careless.”

For Adam and Kelly it was a huge blow.

“I was enraged, angry,” said Adam. “I just wanted to lash out. But there’s no point in doing that. The only way to win this fight is to go through the legal procedures and do this properly. I can’t believe that the law is so lenient on people who haven’t got a licence.”

There is no current national data on the number of unlicensed drivers, though past research by the Department for Transport estimated they commit 9.3% – or nearly 1 in 10 – of all motoring offences. It was thought there could be as many as 470,000 on the roads.

In 2006 the Labour government introduced a new offence of causing death while driving without a licence or insurance, punishable by up to two years in prison.

But in 2013 the Supreme Court ruled that, due to the way the legislation was worded, prosecutors still had to prove the driving was at fault – thus rendering the new law fairly redundant, as a driver could then be charged by careless or dangerous driving.

The judges were concerned about faultless drivers being charged if a drunk pedestrian fell into the road in front of them, or if someone attempted suicide by jumping out into the road.

The Parkers’ local MP, Will Stone, believes the law needs to be changed to reflect the spirit and intention of the 2006 legislation.

He has a Ten Minute Rule Bill today – a motion to seek MPs’ permission to introduce a bill to make the case for a new law.

Labour MP Mr Stone is hoping the government will adopt the bill as part of their forthcoming road safety strategy.

“What we’re specifically looking to do with the Harry Parker Bill, is that if a driver without a licence crashes into somebody and it results in death, it would automatically be deemed careless,” he said.

“There is clearly a loophole in the rules. You need a driving licence to drive. Therefore, choosing to go without one is careless by default. You shouldn’t be on the road because you don’t have the requirements to operate a car, and I think that is a safety risk.“

The Department of Transport said: “Every death on our roads is a tragedy and our thoughts remain with the family and friends of Harry Parker.

“The government takes road safety seriously, and we are committed to reducing the number of those killed and injured on our roads.”

Adam Parker now spends every morning on the road outside Harry’s school, making sure all the pupils get across safety. He and Kelly are campaigning to raise awareness of road safety, hoping that Harry’s legacy will be to protect other children.

“You shouldn’t send your child off to school, planning what you’re going to cook them that evening, planning what they’re going to have for their birthday in five days time, but it doesn’t happen because someone just hits him,” said Kelly. “We don’t want any other parents to have to go through this.”

Environment

US solar module production capacity reaches 50+ GW

Published

3 hours ago

February 4, 2025

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US solar module production capacity reaches 50+ GW

US solar module production — Photo: First Solar

The US solar manufacturing industry just hit a historic milestone: Domestic solar module production capacity has surpassed 50 gigawatts (GW). If all these factories ran at full capacity, they could produce enough modules to meet the country’s entire solar demand.

This achievement signals a shift in the US solar industry, which has historically depended on imports for key components.

According to the Solar Energy Industries Association’s (SEIA) Supply Chain Dashboard, companies have announced plans for 56 GW of new solar cell production in the US, 24 GW of wafer production, and 13 GW of ingots. Meanwhile, domestic solar tracker manufacturing capacity has now topped 80 GW.

SEIA president and CEO Abigail Ross Hopper said:

Reaching 50 GW of domestic solar manufacturing capacity is a testament to what we can achieve with smart, business-friendly public policies in place.

The US is now the third-largest module producer in the world because of these policy actions.

This milestone marks progress for the solar industry and reinforces the essential role energy policies play in building up the domestic manufacturing industry that American workers and their families rely on.

SEIA first set a goal in 2020 to reach 50 GW of US solar module production capacity by 2030 – enough power output to match 27 Hoover Dams. That goal spans the entire solar supply chain, from modules and cells to ingots, wafers, polysilicon, trackers, and inverters.

At the time, the US had only 7 GW of domestic module production and no manufacturing for critical upstream components like ingots and wafers. Fast forward to today, and the industry looks a lot different. Two new US solar cell factories – one in Georgia and another in South Carolina – have already come online in the past few months, helping to fill in the gaps.

SEIA’s strategy has focused on building out domestic module production first to create demand for upstream components. Thanks to policy incentives that SEIA helped advocate for such as the advanced manufacturing production tax credit, companies are now investing in every part of the solar supply chain.

Another win came when SEIA pushed for solar ingot and wafer production to qualify for a 25% investment tax credit under the CHIPS and Science Act of 2022. That move is helping build out the US solar supply chain even further. Since the passage of key federal energy policies, US solar module manufacturing has grown five-fold.

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Technology

Asia tech stocks rise after Trump pauses tariffs on Canada and Mexico

Published

3 hours ago

February 4, 2025

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Asia tech stocks rise after Trump pauses tariffs on Canada and Mexico

Meituan Dianping application icons are displayed on an Apple Inc. iPhone in Hong Kong, China, on Friday, March 23, 2018.

Justin Chin | Bloomberg | Getty Images

Asian tech stocks rose Tuesday, following news that U.S. president Donald Trump had paused tariffs on Mexico for a month, while also postponing tariffs on Canadian exports.

Gains were broad-based across tech stocks in Japan, South Korea and Hong Kong, and came as their counterparts in the U.S. cut their losses on Monday, following tariff announcements that came late in the day.

Japanese Semiconductor players Advantest and Lasertec led gains among the country’s tech stocks, rising 5% and 4.81%, respectively.

Other Japanese tech companies also rose. Tokyo Electron was up 2.82%, Renesas Electronics gained 2.99% while SoftBank Group advanced 1.53%.

Taiwanese chip company TSMC and manufacturer Foxconn rose 2.8% and

Tech stocks in Asia had come under pressure after Chinese startup DeepSeek launched a free, open-source language model that challenged the supremacy of the U.S.-led AI ecosystem. These stocks subsequently rebounded last week, but the rally mostly got stalled Monday over tariff worries.

South Korean tech stocks were also trading higher on Tuesday, with Samsung Electronics gaining 4.13% and SK Hynix rising marginally, up 0.63%.

The latest gains are a reversal from the weakness seen in both stocks last Friday when the South Korean market re-opened after a four-day break. Shares in Samsung Electronics have also been under pressure after its fourth-quarter profit missed estimates on the back of higher costs.

Chinese tech major Tencent’s shares rose 3.07% in HongKong, while shopping platform Meituan’s stock advanced 5.06%, electronic vehicle maker BYD rose 4.22%, Xpeng was trading 14.46% higher and Li Auto gained 9.35%.

Chinese AI-linked stocks also rose with Alibaba up 3.09% and Kingsoft Cloud rose 7%.

The gains in Chinese companies come even as U.S. tariffs on CnaChina are set to kick in. Trump will reportedly speak with President Xi Jinping this week, signaling the intent to avoid a broader tariff war between the world’s top two economies.

Correction: The story has been updated to reflect that the U.S. has paused tariffs on Canada and Mexico.