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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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Business

A pub a day to close this year, industry body warns as it calls for cut to tax burden

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A pub a day to close this year, industry body warns as it calls for cut to tax burden

An industry body has warned that the equivalent of more than one pub a day is set to close across Great Britain this year.

According to the British Beer and Pub Association (BBPA), an estimated 378 venues will shut down across England, Wales and Scotland.

This would amount to more than 5,600 direct job losses, the industry body warns. It has called for a reduction in the cumulative tax and regulatory burden for the hospitality sector – including cutting business rates and beer duty.

The body – representing members that brew 90% of British beer and own more than 20,000 pubs – said such measures would slow the rate at which bars are closing.

BBPA chief executive Emma McClarkin said that while pubs are trading well, “most of the money that goes into the till goes straight back out in bills and taxes”.

“For many, it’s impossible to make a profit, which all too often leads to pubs turning off the lights for the last time,” she said.

“When a pub closes, it puts people out of a job, deprives communities of their heart and soul, and hurts the local economy.”

She urged the government to “proceed with meaningful business rates reform, mitigate these eye-watering new employment and EPR (extended producer responsibility) costs, and cut beer duty”.

“We’re not asking for special treatment, we just want the sector’s rich potential unleashed,” she added.

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The government has said it plans to reform the current business rates system, saying in March that an interim report on the measure would be published this summer.

From April, relief on property tax – that came in following the COVID-19 pandemic – was cut from 75% to 40%, leading to higher bills for hospitality, retail and leisure businesses.

The rate of employer National Insurance Contributions also rose from 13.8% to 15% that month, and the wage threshold was lowered from £9,100 to £5,000, under measures announced by Rachel Reeves in the October budget.

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US

Gaza permanent ceasefire ‘questionable’, says senior Israeli official

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Gaza permanent ceasefire 'questionable', says senior Israeli official

A senior Israeli official has issued a less-than-optimistic assessment of the permanency of any ceasefire in Gaza.

Speaking in Washington on condition of anonymity, the senior official said that a 60-day ceasefire “might” be possible within “a week, two weeks – not a day”.

But on the chances of the ceasefire lasting beyond 60 days, the official said: “We will begin negotiations on a permanent settlement.

“But we achieve it? It’s questionable, but Hamas will not be there.”

Israeli Prime Minister Benjamin Netanyahu is due to conclude a four-day visit to Washington later today.

There had been hope that a ceasefire could be announced during the trip. US President Donald Trump has repeatedly stated that it’s close.

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Netanyahu arrives in US for ceasefire talks

Speaking at a briefing for a number of reporters, the Israeli official would not be drawn on any of the details of the negotiations over concerns that public disclosure could jeopardise their chances of success.

The major sticking point in the talks between Hamas and Israel is the status of the Israel Defence Forces (IDF) inside Gaza during the 60-day ceasefire and beyond, should it last longer.

The latest Israeli proposal, passed to Hamas last week, included a map showing the proposed IDF presence inside Gaza during the ceasefire.

Read more: What is the possible Gaza hostage and ceasefire deal?

Israeli military vehicles stand near the Israel-Gaza border, in Israel.
Pic: Reuters
Image:
Pic: Reuters

This was rejected by Hamas and by Trump’s Middle East envoy, Steve Witkoff, who reportedly told the Israelis that the redeployment map “looks like a Smotrich plan”, a reference to the extreme-right Israeli finance minister, Bezalel Smotrich.

The official repeated Israel’s central stated war aims of getting the hostages back and eliminating Hamas. But in a hint of how hard it will be to reconcile the differences, the official was clear that no permanent ceasefire would be possible without the complete removal of Hamas.

“We will offer them a permanent ceasefire,” he told Sky News. “If they agree. Fine. It’s over.

“They lay down their arms, and we proceed [with the ceasefire]. If they don’t, we’ll proceed [with the war].”

On the status of the Israeli military inside Gaza, the official said: “We would want IDF in every square meter of Gaza, and then hand it over to someone…”

He added: “[We] don’t want to govern Gaza… don’t want to govern, but the first thing is, you have to defeat Hamas…”

Smoke rises in Gaza after an explosion, as seen from the Israeli side of the Israel-Gaza border.
Pic: Reuters
Image:
Pic: Reuters

The official said the Israeli government had “no territorial designs for Gaza”.

“But [we] don’t want Hamas there,” he continued. “You have to finish the job… victory over Hamas. You cannot have victory if you don’t clear out all the fighting forces.

“You have to go into every square inch unless you are not serious about victory. I am. We are going to defeat them. Those who do not disarm will die. Those who disarm will have a life.”

On the future of Gaza, the official ruled out the possibility of a two-state solution “for the foreseeable future”.

“They are not going to have a state in the foreseeable future as long as they cling to that idea of destroying our state. It doesn’t make a difference if they are the Palestinian Authority or Hamas, it’s just a difference of tactics.”

Read more:
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On the most controversial aspect of the Gaza conflict – the movement of the population – the official predicted that 60% of Palestinians would “choose to leave”.

But he claimed that Israel would allow them to return once Hamas had been eliminated, adding: “It’s not forcible eviction, it’s not permanent eviction.”

Critics of Israel’s war in Gaza say that any removal of Palestinians from Gaza, even if given the appearance of being “voluntary,” is in fact anything but, because the strip has been so comprehensively flattened.

Reacting to Israeli Defence Minister Katz’s recent statement revealing a plan to move Palestinians into a “humanitarian city” in southern Gaza, and not let them out of that area, the official wouldn’t be drawn, except to say: “As a permanent arrangement? Of course not.”

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UK

‘A constant game of cat and mouse’: Inside the police crackdown on illegal moped delivery drivers

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'A constant game of cat and mouse': Inside the police crackdown on illegal moped delivery drivers

The first thing you notice when immigration officers stop a possible illegal moped delivery driver is the speed in which the suspect quickly taps on their mobile.

“We’re in their WhatsApp groups – they’ll be telling thousands now that we’re here… so our cover is blown,” the lead immigration officer tells me.

“It’s like a constant game of cat and mouse.”

Twelve Immigration Enforcement officers, part of the Home Office, are joining colleagues from Avon and Somerset Police in a crackdown on road offences and migrants working illegally.

Police chase suspected illegal immigrant working as a delivery drivers

The West of England and Wales has seen the highest number of arrests over the last year for illegal workers outside of London.

“It is a problem… we’re tackling it,” Murad Mohammed, from Immigration Enforcement, says. He covers all the devolved nations.

“This is just one of the operations going on around the country, every day of the week, every month of the year.”

Murad Mohammed from Immigration Enforcement
Image:
Murad Mohammed, from Immigration Enforcement, says his team are attempting to tackle the issue

Just outside the Cabot Circus shopping complex, we stop a young Albanian man who arrived in the UK on the back of a truck.

He’s on an expensive and fast-looking e-bike, with a new-looking Just Eat delivery bag.

He says he just uses it for “groceries” – but the officer isn’t buying it. He’s arrested, but then bailed instantly.

A man inspects the Just Eat food delivery bag of a suspected illegal immigrant working as a delivery driver

We don’t know the specifics of his case, but one officer tells me this suspected offence won’t count against his asylum claim.

Such is the scale of the problem – the backlog, loopholes and the complexity of cases – that trying to keep on top of it feels impossible.

This is one of many raids happening across the UK as part of what the government says is a “blitz” targeting illegal working hotspots.

Angela Eagle, the border security and asylum minister, joins the team for an hour at one of Bristol’s retail parks, scattered with fast food chains and, therefore, delivery bikes.

Angela Eagle, Minister for Border Security and Asylum
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Border security and asylum minister, Angela Eagle, speaks to Sky News

She says arrests for illegal working are up over the last year by 51% from the year before, to more than 7,000.

“If we find you working, you can lose access to the hotel or the support you have [been] given under false pretences,” she said.

“We are cracking down on that abuse, and we intend to keep doing so.”

A suspected illegal immigrant working as a delivery driver being arrested

There are reports that asylum seekers can rent legitimate delivery-driver accounts within hours of arriving in the country – skipping employment legality checks.

Uber Eats, Deliveroo, and Just Eat all told Sky News they’re continuing to strengthen the technology they use to remove anyone working illegally.

But a new Border Security Bill, working its way through Parliament, could see companies fined £60,000 for each illegal worker discovered, director disqualifications and potential prison sentences of up to five years.

“I had them all in to see me last week and I told them in no uncertain terms that we take a very tough line on this kind of abuse and they’ve got to change their systems so they can drive it out and off their platforms,” the minister tells me.

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The gig economy – so prevalent in every city – creates another incentive for those wanting to risk their lives coming to the UK illegally.

More than 20,000 migrants have crossed the English Channel to the UK in 2025 – a record number at this point of the year.

A suspected illegal immigrant working as a delivery driver holds his helmet

For some of those who arrive, a bike and a phone provide a way to repay debts to gang masters.

There were eight arrests today in Bristol, one or two taken into custody, but it was 12 hours of hard work by a dozen immigration officers and the support of the police.

As two mopeds are pushed onto a low-loader, you can’t help but feel, despite the best intentions, that at the moment, this is a losing battle.

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