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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.

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Zoe Ball to leave her BBC Radio 2 breakfast show – and will be replaced by Scott Mills

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Zoe Ball to leave her BBC Radio 2 breakfast show - and will be replaced by Scott Mills

Zoe Ball is leaving her BBC Radio 2 breakfast show after six years.

The 53-year-old, who recently lost her mother to cancer, will present her last show on Friday, 20 December.

BBC Radio 2 presenters Zoe Ball and Scott Mills leaving Wogan House.
Pic: PA
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Ball leaves Wogan House with her replacement, Scott Mills. Pic: PA

She said she was leaving to focus on family, but will remain part of the Radio 2 team and will give further details next year.

Announcing the news on her Tuesday show, she said: “After six years of fun times alongside you all on the breakfast show, I’ve decided it’s time to step away from the early alarm call and start a new chapter.

“You know I think the world of you all, listeners, and it truly has been such a privilege to share the mornings with you, to go through life’s little ups and downs, we got through the lockdown together, didn’t we?

“We’ve shared a hell of a lot, the good times, the tough times, there’s been a lot of laughter. And I am going to miss you cats.”

Scott Mills will replace Ball on the breakfast show following her departure next month.

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“Zoe and I have been such good friends now for over 25 years and have spent much of that time as part of the same radio family here at Radio 2 and also on Radio 1,” he said.

“She’s done an incredible job on this show over the past six years, and I am beyond excited to be handed the baton.”

Hugging outside the BBC building on the day of the announcement, Ball said she was “really chuffed for my mate and really excited about it”.

Ball was the first female host of both the BBC Radio 1 and Radio 2 breakfast shows, starting at the Radio 1 breakfast show in 1998, and taking over her current Radio 2 role from Chris Evans in 2020 after he left the show.

She took a break from hosting her show over the summer, returning in September.

Ahead of her stint in radio, Ball – who is the daughter of children’s presenter Johnny Ball – co-hosted the BBC’s Saturday morning children’s magazine show Live & Kicking alongside Jamie Theakston for three years from 1996.

She has two children, Woody and Nelly, with her ex-husband, DJ and musician Norman Cook, known professionally as Fatboy Slim.

Ball said in her announcement her last show towards the end of December will be “just in time for Christmas with plenty of fun and shenanigans”.

“While I’m stepping away from the Breakfast Show, I’m not disappearing entirely – I’ll still be a part of the Radio 2 family, with more news in the New Year,” she added.

“I’m excited to embrace my next chapter, including being a mum in the mornings, and I can’t wait to tune in on the school run!”

Helen Thomas, head of Radio 2, said: “Zoe has woken up the nation on Radio 2 with incredible warmth, wit and so much joy since January 2019, and I’d like to thank her for approaching each show with as much vim and vigour as if it were her first. I’m thrilled that she’ll remain an important part of the Radio 2 family.”

Mills, 51, got his first presenting role aged just 16 for a local station in Hampshire, and went on to present in Bristol and Manchester, before joining BBC Radio 1 in 1998.

He’s previously worked as a cover presenter on Radio 2, but this is his first permanent role on the station.

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Over 100 politicians from multiple countries condemn China over detention of tycoon Jimmy Lai

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Over 100 politicians from multiple countries condemn China over detention of tycoon Jimmy Lai

More than 100 politicians from 24 different countries, including the UK, the US and the EU, have written a joint letter condemning China over the “arbitrary detention and unfair trial” of Jimmy Lai, a tycoon and pro-democracy campaigner.

The parliamentarians, led by senior British Conservative MP Alicia Kearns, are “urgently” demanding the immediate release of the 77-year-old British citizen, who has been held in solitary confinement at a maximum security prison in Hong Kong for almost four years.

The letter – which will be embarrassing for Beijing – was made public on the eve of Mr Lai’s trial resuming and on the day after British Prime Minister Keir Starmer met Chinese President Xi Jinping on the sidelines of a G20 summit of economic powers in Brazil.

It also comes as Hong Kong jailed 45 pro-democracy activists.

The group of politicians, who also include representatives from Canada, Australia, Spain, Germany, Ukraine and France, said Mr Lai’s treatment was “inhumane”.

“He is being tried on trumped-up charges arising from his peaceful promotion of democracy, his journalism and his human rights advocacy,” they wrote in the letter, which has been seen by Sky News.

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Starmer meets Chinese president

“The world is watching as the rule of law, media freedom and human rights in Hong Kong are eroded and undermined.

“We stand together in our defence of these fundamental freedoms and in our demand that Jimmy Lai be released immediately and unconditionally.”

Sir Keir raised the case of Mr Lai during remarks released at the start of his talks with Mr Xi on Monday – the first meeting between a British prime minister and the Chinese leader in six years.

The prime minister could be heard expressing concerns about reports of Mr Lai’s deteriorating health. However, he did not appear to call for his immediate release.

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From October: ‘This is what Hong Kong is’

Ms Kearns, the MP for Rutland and Stamford in the East Midlands, said the meeting had been an opportunity to be unequivocal that the UK expects Mr Lai to be freed.

“Jimmy Lai is being inhumanely persecuted for standing up for basic human values,” she said in a statement, released alongside the letter.

“He represents the flame of freedom millions seek around the world.

“We have a duty to fight for Jimmy Lai as a British citizen, and to take a stand against the Chinese Community Party’s erosion of rule of law in Hong Kong.

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“This letter represents the strength of international feeling and commitment of parliamentarians globally to securing Jimmy Lai’s immediate release and return to the UK with his family.”

Mr Lai was famously the proprietor of the Chinese-language newspaper Apple Daily in Hong Kong, which wrote scathing reports about the local authorities and the communist government in mainland China after Britain handed back the territory to Beijing in 1997.

The tabloid was a strong supporter of pro-democracy protesters who took to the streets of Hong Kong to demonstrate against the government in 2019.

But the media mogul was arrested the following year – one of the first victims of a draconian new security law imposed by the Chinese Communist Party.

His newspaper was closed after his bank accounts were frozen.

Mr Lai has since been convicted of illegal assembly and fraud. He is now on trial for sedition over articles published in Apple Daily.

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World

Hong Kong jails 45 pro-democracy activists after accusing them of trying to overthrow the city’s government

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Hong Kong jails 45 pro-democracy activists after accusing them of trying to overthrow the city's government

Forty-five pro-democracy activists have been jailed in Hong Kong’s largest ever national security trial.

The activists sentenced with jail terms ranging from four years to ten years were accused of conspiracy to commit subversion after holding an unofficial primary election in Hong Kong in 2020.

They were arrested in 2021.

Hong Kong authorities say the defendants were trying to overthrow the territory’s government.

Democracy activist Benny Tai received the longest sentence of ten years. He became the face of the movement when thousands of protesters took to the city’s streets during the “Umbrella Movement” demonstrations.

However, Hong Kong officials accused him of being behind the plan to organise elections to select candidates.

Tai had pleaded guilty, his lawyers argued he believed his election plan was allowed under the city’s Basic Law.

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Another prominent activist Joshua Wong received a sentence of more than four years.

Joshua Wong was sentenced to more than four years Pic: AP
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Joshua Wong was sentenced to more than four years Pic: AP

Wong became one of the leading figures in the protests. His activism started as a 15 year old when he spearheaded a huge rally against a government plan to change the school curriculum.

Then in 2019 Hong Kong erupted in protests after the city’s government proposed a bill that would allow extradition to mainland China. It peaked in June 2019 when Amnesty International reported that up to two million people marched on the streets, paralysing parts of Hong Kong’s business district.

The extradition bill was later dropped but it had ignited a movement demanding political change and freedom to elect their own leaders in Hong Kong.

China’s central government called the protests “riots” that could not continue.

Hong Kong introduced a national security law in the aftermath of the protests.

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A woman is taken away by police outside the court Pic: Reuters
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A woman is taken away by police outside the court Pic: Reuters

The US has called the trial “politically motivated”.

Dozens of family and friends of the accused were waiting for the verdict outside the West Kowloon Magistrates Court.

British citizen and media mogul Jimmy Lai is due to testify on Wednesday.

Meeting on the sidelines of the G20 in Brazil, British Prime Minister Keir Starmer told China’s President Xi Jinping he’s concerned about the health of Lai.

He faces charges of fraud and the 2019 protests. He has also been charged with sedition and collusion with foreign forces.

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