The Fed hesitant to cut interest rates though inflation is nearly back to 2%

Published

2 years ago

February 12, 2024

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WASHINGTON (AP) From Wall Street traders to car dealers to home buyers, Americans are eager for the Federal Reserve to start cutting interest rates and lightening the heavy burden on borrowers.

The Fed is widely expected to do so this year probably several times. Inflation, as measured by its preferred gauge, rose in the second half of 2023 at an annual rate of about 2% the Fed’s target level. Yet this week, several central bank officials underscored that they werent ready to pull the trigger just yet.

Why, with inflation nearly conquered and the Fed’s key rate at a 22-year high, isn’t now the time to cut?

Most of the Fed’s policymakers have said they’re optimistic that even as the economy and the job market keep growing, inflation pressures will continue to cool. But they also caution that the economy appears so strong that there’s a real risk that price increases could spike again.

And some are worried that if they cut rates now and inflation re-accelerates, then the Fed could be forced into an about-face and have to raise rates again.

“History tells many stories of inflation head-fakes,” said Tom Barkin, president of the Federal Reserve Bank of Richmond, in a speech Thursday.

Inflation had seemed defeated in 1986, Barkin noted, when Paul Volcker was Fed chair.

The Fed reduced rates, but inflation then escalated again the following year, causing the Fed to reverse course,” he said.

“I would love to avoid that roller-coaster if we can, said, Barkin, who is among 12 Fed officials who vote on interest rate policy this year.

Several officials have said they want more time to see if inflation continues to subside. In the meantime, they note, the economy is solid enough that it can thrive without any rate cuts. Last month, for example, Americas employers delivered a burst of hiring, and the unemployment rate stayed at 3.7%.

Theyre going to be glacial, and take their time, said Steven Blitz, chief US economist at GlobalData TS Lombard. Theyre willing to say, We dont know, but we can afford to wait so were going to wait. “

The sturdiness of the economy has also raised questions about just how effective the Feds 11 rate hikes have been. If higher borrowing rates are only barely restraining the economy, some officials may conclude that high rates should stay in place longer or that few rate cuts will be needed.

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I dont feel theres a sense of urgency here, Loretta Mester, president of the Cleveland Federal Reserve, told reporters Tuesday. I think later this year, if things evolve as anticipated, we would be able to start moving the rate down.

Yet their caution carries risks. Right now, the economy appears on track for a soft landing,” in which inflation would be defeated without causing a recession or high unemployment. But the longer that borrowing rates stay high, the higher the risk that many companies and consumers would stop borrowing and spending, weakening the economy and potentially sending it into a recession.

High rates could also compound the struggles of banks that are saddled with bad commercial real estate loans, which would be harder to refinance at higher rates.

The high cost of borrowing has become a headache for David Kelleher’s Chrysler-Jeep dealership just outside of Philadelphia. Just 2 1/2 years ago, Kelleher recalled, his customers could get an auto loan below 3%. Now, they’re lucky to get 5.5%.

Customers who had monthly car lease payments of, say, $400 three years ago are finding that with vehicle prices much higher and interest rates up, their monthly payments would be closer to $650. The trend is pushing many of his customers toward lower-priced used cars or no purchase at all.

We need the government to address the interest rates … and understand that theyve accomplished their goal of lowering inflation,” Kelleher said. If interest rates can come down, I think were going to start selling more cars.

Kelleher is likely to get his wish by May or June, when most economists expect the Fed to start reducing its benchmark rate, which is now at about 5.4%. In December, all but two of the 19 policymakers that participate in the Fed’s policy discussions said they expect the central bank to cut rates this year. (Twelve of those 19 actually get to vote on rate policies each year.)

Yet economic growth has accelerated since then. In the final three months of last year, the economy expanded at an unexpectedly strong 3.3% annual rate. Surveys of manufacturers and service-providers, such as retailers, banks, and shippers, also reported that business perked up last month.

Collectively, the latest reports suggest that the economy may not be headed for a soft landing but rather what some economists call a no landing. By that they mean a scenario in which the economy would remain robust and inflation an ongoing threat, potentially stuck above the Fed’s target. Under this scenario, the Fed would feel compelled to keep rates at elevated levels for an extended period.

Powell said last week that while the Fed wants to see continued strong growth, a strong economy does threaten to send inflation up.

I think that is a risk … that inflation would accelerate, Powell said. I think the greater risk is that it would stabilize at a level meaningfully above 2%. … Thats why we keep our options open here and why were not rushing.”

Other officials this week drove home the point that the Fed is trying to balance the risk of cutting rates too soon which might cause inflation to surge again and keeping rates too high for too long, which could trigger a recession.

At some point, the continued cooling of inflation and labor markets may make it appropriate to reduce rates, Andrea Kugler, a recently appointed Fed governor said Wednesday in her first public speech. On the other hand, if progress on disinflation stalls, it may be appropriate to hold the target range steady at its current level for longer.

Some analysts have pointed to signs that the economy is becoming more productive, or efficient, allowing it grow faster without necessarily increasing inflation. Yet productivity data is notoriously hard to measure, and any meaningful improvement wouldn’t necessarily become apparent for years.

Still, maybe the economy can take higher interest rates than we thought in 2019 before the pandemic, said Eric Swanson, an economist at the University of California, Irvine.

If so, that might not just delay the Fed’s rate cuts, but result in fewer of them. Fed officials are still saying they plan to cut rates perhaps three times this year, below the five or six that some market analysts foresee.

World

Moving in the shadows: Why tanker seized by US off Venezuela was ‘spoofing’ its location

Published

2 hours ago

December 12, 2025

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Moving in the shadows: Why tanker seized by US off Venezuela was 'spoofing' its location

An oil tanker seized by the US off the Venezuelan coast on Wednesday spent years trying to sail the seas unnoticed.

Changing names, switching flags, and vanishing from tracking systems.

That all came to an end this week, when American coast guard teams descending from helicopters with guns drawn stormed the ship, named Skipper.

A US official said the helicopters that took the teams to the tanker came from the aircraft carrier USS Gerald R Ford.

The sanctioned tanker

Over the past two years, Skipper has been tracked to countries under US sanctions including Iran.

TankerTrackers.com, which monitors crude oil shipments, estimates Skipper has transported nearly 13 million barrels of Iranian and Venezuelan oil since 2021.

And in 2022, the US Treasury Office of Foreign Assets Control (OFAC) placed Skipper, then known as Adisa, on its sanctions list.

But that did not stop the ship’s activities.

In mid-November 2025, it was pictured at the Jose Oil Export Terminal in Venezuela, where it was loaded with more than one million barrels of crude oil.

It left Jose Oil Export Terminal between 4 and 5 December, according to TankerTrackers.com.

And on 6 or 7 December, Skipper did a ship-to-ship transfer with another tanker in the Caribbean, the Neptune 6.

Ship-to-ship transfers allow sanctioned vessels to obscure where oil shipments have come from.

The transfer with Neptune 6 took place while Skipper’s tracking system, known as AIS, was turned off.

Dimitris Ampatzidis, senior risk and compliance manager at Kpler, told Sky News: “Vessels, when they are trying to hide the origin of the cargo or a port call or any operation that they are taking, they can just switch off the AIS.”

Matt Smith, head analyst US at Kpler, said they believe the ship’s destination was Cuba.

Around five days after leaving the Venezuelan port, it was seized around 70 miles off the coast.

Moving in the shadows

Skipper has tried to go unnoticed by using a method called ‘spoofing’.

This is where a ship transmits a false location to hide its real movements.

“When we’re talking about spoofing, we’re talking about when the vessel manipulates the AIS data in order to present that she’s in a specific region,” Mr Ampatzidis explained.

“So you declare false AIS data and everyone else in the region, they are not aware about your real location, they are only aware of the false location that you are transmitted.”

When it was intercepted by the US, it was sharing a different location more than 400 miles away from its actual position.

Skipper was manipulating its tracking signals to falsely place itself in Guyanese waters and fraudulently flying the flag of Guyana.

“We have really real concerns about the spoofing events,” Mr Ampatzidis told Sky News.

“It’s about the safety on the seas. As a shipping industry, we have inserted the AIS data, the AIS technology, this GPS tracking technology, more than a decade back, in order to ensure that vessels and crew on board on these vessels are safe when they’re travelling.”

Dozens of sanctioned tankers ‘operating off Venezuela’

Skipper is not the only sanctioned ship off the coast of Venezuela.

According to analysis by Windward, 30 sanctioned tankers were operating in Venezuelan ports and waters as of 11 December.

The tanker seizure is a highly unusual move from the US government and is part of the Trump administration’s increasing pressure on Venezuelan President Nicolas Maduro.

In recent months, the largest US military presence in the region in decades has built up, and a series of deadly strikes has been launched on alleged drug-smuggling boats in the Caribbean Sea and eastern Pacific Ocean.

In the past, Mr Ampatzidis explained, actions like sanctions have had a limited effect on illegally operating tankers.

But the seizure of Skipper will send a signal to other dark fleet ships.

“From today, they will know that if they are doing spoofing, if they are doing dark activities in closer regions of the US, they will be in the spotlight and they will be the key targets from the US Navy.”

The Data X Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.

UK

Man found guilty of murdering wife in rare retrial

Published

2 hours ago

December 12, 2025

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Man found guilty of murdering wife in rare retrial

A 52-year-old carpenter from Surrey has been found guilty of murdering his wife in a rare retrial, eight years after being acquitted.

Robert Rhodes killed his estranged wife, Dawn Rhodes, by slitting her throat with a knife at their family home in Redhill, Surrey, in June 2016.

He was previously found not guilty after a trial at the Old Bailey in 2017, where he convinced jurors that he had acted in self-defence during an argument.

It has since emerged that this was a “cover-up”, after the couple’s child came forward with new evidence that Rhodes killed Ms Rhodes, and they were involved in the murder too.

In 2021, the child, who was under the age of 10 at the time of the murder, told police they had been manipulated into lying about the true version of events by their father.

Both Rhodes and the child were found with knife wounds at the scene, which were initially claimed to have been inflicted in an attack by Ms Rhodes.

The child’s new account stated that after Rhodes killed his wife, he inflicted two wounds to his scalp before instructing the child to inflict two more on their father’s back. He then cut his own child’s arm so deeply that it required stitches under general anaesthetic.

Under the double jeopardy rule a person cannot be tried twice for the same crime, unless new and compelling evidence comes out after an acquittal or conviction for serious offences.

On Friday, jurors at Inner London Crown Court convicted Rhodes of murder and child cruelty.

He was also found guilty of perverting the course of justice and two counts of perjury.

Rhodes will be sentenced on 16 January.

What is the law on double jeopardy?

The double jeopardy rule is a legal principle that prevents a person from being tried twice for the same crime after they have been acquitted or convicted.

It’s a protection for that person from harassment. However, the law permits a retrial where someone was acquitted of a serious offence, but new and compelling evidence has since come to light which indicates the person might actually be guilty.

In this case, the new evidence from the child was compelling enough for the Court of Appeal to quash the acquittal and a retrial to take place.

Crucially, the child’s evidence was so compelling that the Court of Appeal agreed Rhodes needed to be tried again.

Surrey Police told Sky News that the child, who was of primary school age at the time and is below the age of criminal responsibility, was “groomed” by Rhodes into lying.

The Crown Prosecution Service said “the child’s part in the plan was that they would distract the mother by saying to the mother ‘hold out your hands, I’ve got a surprise for you’, and the child would then put a drawing into the hands of the mother”.

Rhodes then cut his wife’s throat. She was found lying face down in a pool of blood in the dining room.

Libby Clark, specialist prosecutor for the Crown Prosecution Service’s South East Area Complex Casework Unit, said the child showed “great bravery and strength” in coming forward with the truth.

She said: “The child has grown up with the dawning realisation, I would say, that they were part of a plan. They were complicit in the murder of the mother, Dawn Rhodes.”

Legal commentator Joshua Rozenberg said there are “very few cases” where a retrial like this happens.

He said: “It’s very unusual. I don’t think there’s been a case that I can think of where a witness who was present at the scene of the crime has come forward and given evidence, which has led to a conviction.”

Politics

US financial markets ‘poised to move on-chain’ amid DTCC tokenization greenlight

Published

3 hours ago

December 12, 2025

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US financial markets ‘poised to move on-chain’ amid DTCC tokenization greenlight

Traditional financial markets are moving rapidly onchain as the US Securities and Exchange Commission chair doubled down on the idea of an “innovation exemption” to accelerate tokenization.

“U.S. financial markets are poised to move on-chain,” wrote Paul Atkins, chair of the SEC, in a Friday X post, adding that the agency is “embracing new technologies to enable this onchain future.”

His comments come shortly after the SEC issued a “no action” letter to a subsidiary of the Depository Trust and Clearing Corporation (DTCC), enabling it to offer a new securities market tokenization service.

The DTCC plans to tokenize assets, including the Russell 1000 index, exchange-traded funds tracking major indexes and US Treasury bills and bonds, which Atkins called an “important step towards onchain capital markets.”

“On-chain markets will bring greater predictability, transparency, and efficiency for investors,” he said.

However, the green light for the DTCC’s pilot is only the beginning, as the SEC will consider an innovation exemption to enable builders to start “transitioning our markets onchain,” without being burdened by “cumbersome regulatory requirements,” added Atkins.

Atkins pledged to encourage innovation as the industry moves toward onchain settlement, which would mean settling transactions on a blockchain ledger, removing intermediaries, enabling 24/7 trading and faster transaction finality.

Cointelegraph has contacted the SEC for comment on the details and timeline of an innovation exemption for tokenization.

Atkins first proposed an innovation exemption for tokenization during his remarks at the Crypto Task Force Roundtable on DeFi on June 9.

The SEC’s no-action letter means that the agency won’t take enforcement action if the DTCC’s product operates as described. The DTCC provides clearing, settlements and trading services as one of the most important infrastructure providers for US securities.

Asset tokenization involves minting tangible assets on the blockchain ledger, offering more investor access through fractionalized shares and 24/7 trading opportunities.

DTCC pilot and RWA builders push more TradFi onchain

Crypto analysts have praised the SEC’s move to allow the DTCC’s new market tokenization service, which will award tokenized assets the same entitlements and investor protection mechanisms as traditional assets.

“Not sure people fully appreciate how quickly financial markets are heading towards full tokenization… Moving even faster than I expected,” wrote ETF analyst Nate Geraci, in a Friday X post.

Over the past few months, the SEC issued two no-action letters: one for a Solana-based decentralized physical infrastructure network (DePIN) project, and a second no-action letter in September that allowed investment advisers to use state trust companies as crypto custodians.

Meanwhile, crypto projects continue to raise funds to build the infrastructure necessary for tokenized onchain markets.

On Tuesday, asset tokenization network Real Finance closed a $29 million private funding round to build an infrastructure layer for real-world assets (RWAs) that can boost institutional participation.