US interest rates increased despite worst banking turmoil since 2008

Published

1 year ago

March 22, 2023

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The Federal Reserve – the US central bank, known as the Fed – has increased interest rates for the ninth time in a row.

The rate has been increased by 0.25 percentage points in an effort to bring down inflation, which in the US stood at 6% over the 12 months to February.

A higher increase had been expected prior to the collapse of Silicon Valley Bank, the rescue of regional US banks and the takeover of Credit Suisse.

At the start of this month, before the worst banking turmoil since 2008 began, Fed chair Jerome Powell had floated the idea of a 0.5 percentage points increase, a speeding up of rate increases. Last month the programme of rate hikes was slowed when the Fed instituted a 0.25 percentage points rise.

High interest rates lead to higher profits for lenders but also put pressure on banks as some government bonds, state IOUs, lose value.

Following Wednesday’s increase, US interest rates stand at 4.75% to 5%, up from 4.5% to 4.75% since the last increase in February.

In the US, the interest rate is a range, rather than a single percentage – as in the UK – because the Fed is not permitted to set a specific number.

A target rate is instead set as a guide for banks to follow.

Some economists had expected the Fed to pause rate rises all together.

Addressing banking concerns, the Fed said the US banking system is sound and resilient but the effects of recent developments is unknown.

“Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain.”

Tighter conditions are equivalent to an interest rate hike and perhaps may be more impactful, Mr Powell said.

“Such a tightening of financial conditions would work in the same direction as rate tightening in principle. As a matter of fact, you can think of it as being the equivalent of a rate hike, or perhaps more than that, of course, it’s not possible to make that assessment assessment today with any precision whatsoever.”

Eyes now on the Bank of England after surprise UK inflation figures

Ed Conway

Economics & data editor

@EdConwaySky

A lot of people were looking at what the Federal Reserve were going to do.

Of course they are they are the US central bank, the equivalent obviously of the Bank of England in the UK, and they are deciding not just monetary policy, so interest rates, quantitative easing all of that stuff, but they also monitor and regulate financial stability.

And that’s really important because of course, we all know what’s happened over the course of the last few weeks.

You’ve had big problems in US banks, you’ve had the collapse of Silicon Valley Bank, Silvergate, Signature Bank, some other banks there as well, and a lot of concerns that the intervention from the Fed and its other authorities like the Treasury, and the FDIC (Federal Deposit Insurance Corporation) hasn’t actually helped, it’s made people a little bit more nervous.

So put all of that together and there were some question marks about whether the Federal Reserve was going to raise interest rates as much as a lot of people had expected.

Let’s have a look at the actual rates and what they’ve done.

After financial crisis rates were already pretty low but they went even lower after COVID-19 but they have come up fast in the course of the last year or so, an extraordinary rise, nine increases.

And the question, of course, was whether this latest increase was going to be half a percentage point or a quarter of a percentage point and they’d gone for a quarter so up to 5%.

But this is interesting because a lot of people thought up until quite recently, they were going to go higher, they were going to go up towards well above 5%.

And the reason they haven’t is kind of interesting, because the Federal Reserve and its chairman Jay Powell and in the press conference that followed that decision emphasising the concern was that the financial system is struggling with the impact of these higher interest rates.

And that is basically raising some questions about whether the Fed is going to raise interest rates quite as much as people recently thought.

That’s relevant for the UK because the Bank of England is set to decide on its interest rate, those rates are at a 4% at the moment, a lot of people thought they were going to be maybe paused because of this concern about what’s going on with the financial system.

But then along came those high inflation numbers that we’ve just got, up to 10.4%, higher than expected.

Of course, the bank’s job is to try and target inflation.

So now people think they’re going to raise interest rates in the UK, maybe by a quarter percentage point.

We’ll have to wait and see what they do, we’ll have to wait and see what governor Andrew Bailey has to say about that.

But it is now a tense moment because with these rates quite so high, a lot of people worry that the financial system is starting to squeak a bit.

A rate rethink

Speaking on Wednesday Mr Powell said ongoing interest rate increases are no longer appropriate to bring inflation down to its 2% target. Instead, he said “some” additional raises “may be appropriate”.

Addressing the banking turmoil, he said: “we are committed to learning the lessons from this episode, and to work to prevent episodes from events like this from happening again.”

It was also the first time since December that the Fed issued interest rate projections.

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GDP, a measure of economic output and of economic health, will be just 0.4% this year, Mr Powell said, and is forecast to increase to 1.2% next year, well below the growth rate many politicians would hope for.

The unemployment rate is expected to rise to 4.5% at the end of this year and 4.6% at the end of next year.

US

P Diddy: ‘Gut-wrenching’ video appears to show Sean Combs assaulting singer Cassie in 2016

Published

8 hours ago

May 18, 2024

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P Diddy: 'Gut-wrenching' video appears to show Sean Combs assaulting singer Cassie in 2016

“Gut-wrenching” CCTV footage which appears to show Sean Combs attacking singer Cassie in a Los Angeles hotel “has only further confirmed the disturbing and predatory behaviour” of the rapper, her lawyer has said.

The 54-year-old, whose homes in Los Angeles and Miami were raided by Homeland Security Investigations agents in March, has faced a series of public allegations of physical and sexual violence.

Footage obtained by CNN appears to show Combs – also known as P Diddy and Puff Daddy – wearing only a white towel as he punches and kicks Cassie in a Los Angeles hotel hallway on 5 March 2016.

The R&B singer, whose legal name is Cassandra Ventura, was his protege and girlfriend at the time.

The footage also shows Combs shoving and dragging her across the floor, as well as throwing a vase in her direction.

It closely resembles the description of an incident at the now-closed InterContinental Hotel in Los Angeles described in a lawsuit filed by Cassie in November that alleged years of sexual abuse and other violence from Combs.

The case was settled the day after it was filed.

Several more lawsuits were filed in the following months, along with a federal criminal sex-trafficking investigation that led authorities to raid Combs’ mansions in Los Angeles and Miami.

Representatives for Combs did not immediately comment on the video. He has previously denied the allegations in the lawsuits and his lawyers have said he denies any wrongdoing.

Cassie’s lawyer said: “The gut-wrenching video has only further confirmed the disturbing and predatory behaviour of Mr Combs.

“Words cannot express the courage and fortitude that Ms Ventura has shown in coming forward to bring this to light.”

According to NBC News, Sky News’ US partner, if Cassie were to make a complaint the LAPD could investigate, but charges would likely be declined by the district attorney because California law has a one-year statute of limitations for assault and the alleged incident happened nearly eight years ago.

CNN did not say how it obtained the video, but noted it verified the location it was shot by comparing the footage to publicly available images of the InterContinental Hotel.

US

Man sentenced to 30 years for bludgeoning Nancy Pelosi’s husband with hammer

Published

11 hours ago

May 18, 2024

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Man sentenced to 30 years for bludgeoning Nancy Pelosi's husband with hammer

The man convicted of attacking then-US House speaker Nancy Pelosi’s husband with a hammer has been sentenced to 30 years in prison.

David DePape, 44, was found guilty last November of attempted kidnapping of a federal official and assault on the immediate family member of a federal official.

Judge Jacqueline Scott Corley handed down the sentence of 30 years in prison after prosecutors asked for a 40-year prison term.

DePape was given 20 years for one count and 30 years for another count, to run concurrently. He was also given credit for the 18 months he has been in custody.

DePape admitted during trial testimony he broke into the Pelosis’ San Francisco home on 28 October 2022 intending to hold Ms Pelosi hostage and “break her kneecaps” if she lied to him.

He also admitted bludgeoning Paul Pelosi with a hammer after police showed up, saying his plan to end what he viewed as government corruption was unravelling.

The attack on Mr Pelosi, who was 82 at the time, was captured on police body camera.

Defence lawyers argued DePape was motivated by his political beliefs, not because he wanted to interfere with Ms Pelosi’s official duties as a member of Congress, making the charges against him invalid.

One of his lawyers said during closing arguments that DePape was caught up in conspiracy theories.

Plans to wear inflatable unicorn costume during interrogation

During the trial, the Canadian, who moved to the US more than 20 years ago, testified he believed news outlets repeatedly lied about former president Donald Trump.

DePape also told jurors he had planned to wear an inflatable unicorn costume and record his interrogation of the Democratic speaker, who was not at home at the time of the attack, to upload it online.

Prosecutors said he had rope and zip ties with him, and detectives found body cameras, a computer and a tablet.

‘A tremendous shock’

Mr Pelosi also testified at the trial, recalling how he was awakened by a large man bursting into the bedroom and asking: “Where’s Nancy?”

He said he responded that his wife was in Washington and DePape said he would tie him up while they waited for her.

“It was a tremendous sense of shock to recognise that somebody had broken into the house, and looking at him and looking at the hammer and the ties, I recognised that I was in serious danger, so I tried to stay as calm as possible,” Mr Pelosi told jurors.

State court charges

DePape is also charged in state court with assault with a deadly weapon, elder abuse, residential burglary and other felonies. Jury selection for that trial is expected to start on Wednesday.

Mr Pelosi suffered two head wounds in the attack, including a skull fracture. His right arm and hand were also injured.

US

Scottie Scheffler: Golf star ‘rattled’ and ‘in shock’ after being arrested by police

Published

11 hours ago

May 18, 2024

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Scottie Scheffler: Golf star 'rattled' and 'in shock' after being arrested by police

World number one golfer Scottie Scheffler says he was “rattled” and “in shock” after he was arrested and charged by police this morning.

The 27-year-old reportedly tried to get around a traffic jam caused by a fatal accident near the Valhalla Golf Club in Louisville, Kentucky, at around 6am local time (11am UK time) on Friday.

He is due to appear in court on Tuesday after being charged with second-degree assault of a police officer, third-degree criminal mischief, reckless driving, and disregarding signals from officers directing traffic.

Scheffler was released at 8:40am local time (1:40pm UK time) and allowed to return to the golf course to play his second round of the PGA Championship, where he currently sits three shots off the lead.

Speaking to reporters after his round, Scheffler said: “It was a chaotic situation and a big misunderstanding. My head is still spinning.

“I spent some time warming up in a jail cell, which was a first for me.

“I was pretty rattled, to say the least… I was never angry, I was just in shock. I was shaking for about an hour.

“Coming out here and trying to play today was definitely a challenge, but I did my best to control my mind and control my breathing… just try to play golf.

“I knew there was going to be a lot of distractions… but to be honest, it was great having the fans behind me. I felt they were really glad to have me out here competing today.”

Police earlier released a mugshot taken of Scheffler while he was wearing an orange jailed-issued jumpsuit.

The fatal crash occurred this morning when a bus struck and killed a man as he was crossing the road near the front gate of the Valhalla Golf Club.

Tournament officials said they were “devastated” by the death of local man John Mills, who was working for an on-site vendor at Valhalla.

Scheffler, who was not involved in the accident, was allegedly trying to drive around the crash site when he failed to stop for a police officer.

An officer is then said to have grabbed on to Scheffler’s car.

The golfer drove around 10 to 20 yards before stopping his vehicle at the entrance to Valhalla, according to an ESPN reporter Jeff Darlington who was on the scene.

Darlington said: “At that point the police officer instructed Scheffler to get out of the car.

“He rolled down the window, the police officer grabbed his arm and started pulling at it. He reached inside, opened the car door, pulled Scheffler out, pushed him up against the car, immediately placed him in handcuffs.”

According to the police report, a detective stopped Scheffler’s car and “attempted to give instruction”.

The report continued: “Subject refused to comply and accelerated forward, dragging Detective Gillis to the ground. Detective Gillis suffered pain, swelling and abrasions to his left wrist and knees.

“He was transported to the hospital for further medical treatment by emergency medical personnel. Detective Gillis’ uniform pants, valued at approximately $80, were damaged beyond repair.”

In a statement, Scheffler’s attorney Steve Romines said the player was proceeding as directed by a traffic officer and is alleged to have disregarded signals from another officer “in the confusion”.

“Multiple eyewitnesses have confirmed that he did not do anything wrong but was simply proceeding as directed,” the statement added.

“He stopped immediately upon being directed to and never at any point assaulted any officer with his vehicle. We will litigate this matter as needed.”

Speaking after a second round, Scheffler expressed his sympathies to the family of Mr Mills.

“I can’t imagine what they’re going through this morning,” Scheffler said.

“My situation will get handled… I can’t get into what transpired… my heart goes out to the family.”