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Fed’s Daly backs gradual interest rate cuts as inflation ‘confidence’ mounts

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Fed’s Daly backs gradual interest rate cuts as inflation ‘confidence’ mounts

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The US Federal Reserve needs to take a gradual approach to lowering borrowing costs, one of its top officials has said, as the world’s leading central bankers prepare to gather at an annual meeting in Wyoming this week.

Mary Daly, president of the San Francisco Fed, told the Financial Times that recent economic data have given her “more confidence” that inflation is under control. It is time to consider adjusting borrowing costs from their current range of 5.25 per cent to 5.5 per cent, she said.

Her call for a “prudent” approach pushed back on economists’ concerns that the world’s largest economy is heading for a sharp slowdown that warrants rapid cuts in interest rates.

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The speed with which US rates will ease from their 23-year high will be a central question on the lips of policymakers when they gather later this week at the Kansas City Fed’s annual retreat in Jackson Hole, Wyoming.

Fed chair Jay Powell’s speech there on Friday will be closely scrutinised by investors keen to hear how he plans to pull off a soft landing, completing the fight against inflation without crashing the economy.

Daly, who votes on the Federal Open Market Committee, played down the need for a dramatic response to signs of a weakening labour market, saying the US economy was showing little evidence of heading for a deep downturn. The economy was “not in an urgent place”, she said.

“Gradualism is not weak, it’s not slow, it’s not behind, it’s just prudent,” she said, adding the that labour market — while slowing — was “not weak”.

Investors are betting on a rate cut at next month’s Fed meeting, in what would be the first drop in interest rates in four years. Markets are pricing in about a 70 per cent chance of a quarter-point cut, while a minority of investors expect a half-point move.

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Markets expect US interest rates to end 2024 a full percentage point below their current level, implying one extra-large cut in the final three meetings of the year.

The Bank of England, European Central Bank and Bank of Canada have already lowered borrowing costs, but relatively high US inflation readings at the start of this year forced the Fed to wait.

Consumer price figures last week showed inflation fell to 2.9 per cent in the year to July, a three-year low. The Fed’s preferred gauge of underlying price pressures, the price index on core personal consumption expenditures, rose at an annual rate of 2.6 per cent in June. Headline PCE inflation, on which the 2 per cent target is based, was 2.5 per cent in June.

“After the first quarter of this year, inflation has just been making gradual progress towards 2 per cent,” Daly said, speaking on Thursday. “We are not there yet, but it’s clearly giving me more confidence that we are on our way to price stability.”

With inflation in retreat and the labour market coming into better balance, the central bank has to “adjust the policy rate to fit the economy we have and the one we expect to have”.

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Daly said the Fed wanted to loosen the “restrictiveness” of its policy, while still maintaining some restraint to “fully get the job done” on inflation.

The Fed did not “want to overtighten into a slowing economy”, she said. She later added that failing to adapt policy to progress on inflation and lower growth was a “recipe for getting the result we don’t want, which is price stability and an unstable and faltering labour market”.

Her remarks chime with those of Atlanta Fed president Raphael Bostic, who recently told the FT that waiting too long to lower interest rates “does bring risk”.

July’s weak jobs report raised concerns over the health of the US economy and helped trigger a global sell-off in equities that sparked calls for emergency rate cuts. But this week’s surprisingly strong retail sales report tempered fears of a US recession.

Daly said businesses were generally not resorting to lay-offs. Instead they were cutting discretionary spending to adapt to what was no longer a “frothy world” of “unbridled growth”.

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Trump’s attorney general pick to face scrutiny on first day of Senate hearing

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Trump’s attorney general pick to face scrutiny on first day of Senate hearing

Pam Bondi, Donald Trump’s nominee for attorney general, is expected to face scrutiny on Wednesday during the first day of her confirmation hearing about her ability to resist the White House from exerting political pressure on the justice department.

The hearing, before the Senate judiciary committee, comes at a crunch time for the department, which has faced unrelenting criticism from Trump after its prosecutors charged him in two federal criminal cases and is about to see Trump’s personal lawyers in those cases take over key leadership positions.

Bondi, the first female Florida attorney general and onetime lobbyist for Qatar, was not on the legal team defending Trump in those federal criminal cases. But she has been a longtime presence in his orbit, including when she worked to defend Trump at his first impeachment trial.

She also supported Trump’s fabricated claims of election fraud in 2020, which helped her become Trump’s nominee for attorney general almost immediately after Matt Gaetz, the initial pick, withdrew as he found himself dogged by a series of sexual misconduct allegations.

That loyalty to Trump has raised hackles at the justice department, which prides itself on its independence from White House pressure and recalls with a deep fear how Trump in his first term ousted top officials when they stopped acquiescing to his demands.

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Trump replaced his first attorney general, Jeff Sessions, after he recused himself from the investigation into the Trump campaign’s contacts with Russia and, later, soured on his last attorney general, Bill Barr, after he refused to endorse Trump’s false 2020 election claims.

Bondi is also expected to be questioned about her prosecutorial record as the Florida attorney general and possible conflicts of interest arising from her most recent work for the major corporate lobbying firm Ballard Partners.

During her tenure as Florida attorney general, in 2013, Bondi’s office received nearly two dozen complaints about Trump University and her aides have said she once considered joining a multi-state lawsuit brought on behalf of students who claimed they had been cheated.

As she was weighing the lawsuit, Bondi’s political action committee received a $25,000 contribution from a non-profit funded by Trump. While Trump and Bondi both deny a quid pro quo, Bondi never joined the lawsuit and Trump had to pay a $2,500 fine for violating tax laws to make the donation.

As the chair of Ballard’s corporate regulatory compliance practice, Bondi lobbied for major companies that have battled the justice department she will be tasked with leading, including in various antitrust and fraud lawsuits.

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Bondi was a county prosecutor in Florida before successfully running for Florida attorney general in 2010 in part due to regular appearances on Fox News.

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Video: Fires Continue to Burn One Week Later in California

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Video: Fires Continue to Burn One Week Later in California

new video loaded: Fires Continue to Burn One Week Later in California

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Fires Continue to Burn One Week Later in California

The Palisades and Eaton fires, ravaging Los Angeles for more than a week, remain mostly uncontained by firefighters.

“We just had — just had Christmas morning right over here, right in front of that chimney. And this is what’s left.” “I urge, and everybody here urges, you to remain alert as danger has not yet passed. Please follow all evacuation warnings and orders without delay and prioritize your safety.”

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Recent episodes in Wildfires

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South Korea’s President Yoon Suk Yeol arrested after stand-off with police

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South Korea’s President Yoon Suk Yeol arrested after stand-off with police

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South Korea’s suspended President Yoon Suk Yeol was arrested on Wednesday morning following a predawn raid by police and investigators on his fortified hilltop compound.

Yoon’s detention followed a six-hour stand-off between law enforcement officials and members of the president’s security detail. It is the first time in South Korea’s history that a sitting president has been arrested.

The development marks the latest twist in a political crisis that was triggered by his failed attempt to impose martial law last month, and which has shaken confidence in the democratic integrity of Asia’s fourth-largest economy.

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Yoon was suspended from his duties after he was impeached by parliament in December following his attempt to impose martial law. The country is currently being led by finance minister Choi Sang-mok as acting president.

The operation on Wednesday, which began shortly after 4am, was the second attempt this month by the CIO to detain Yoon for questioning on insurrection and abuse of office charges.

An initial effort earlier this month was foiled by Yoon’s protection officers following a tense hours-long stand-off at the presidential residence. Yoon had previously refused to comply with investigators and had challenged their authority to bring him in for questioning.

“The rule of law has completely collapsed in this country,” Yoon said in a video statement recorded before his transfer to the headquarters of the country’s Corruption Investigation Office for questioning. “I’ve decided to appear for CIO questioning in order to prevent any bloodshed.”

According to South Korea’s state-owned news agency Yonhap, police and officials from the CIO arrived at the compound early on Wednesday and presented a warrant for Yoon’s arrest but were again initially prevented from entering by the Presidential Security Service.

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Yonhap also reported that about 30 lawmakers from Yoon’s conservative People Power party were at the compound and attempting to prevent officials from entering it.

But with hundreds of police gathered outside, some of them equipped with ladders and wire cutters to overcome barricades erected by Yoon’s protection officers, CIO officials were eventually allowed to enter the residence.

Yoon’s lawyers initially attempted to broker a deal whereby he would surrender voluntarily for questioning. But this was not accepted by CIO officials, and he was eventually arrested just after 10.30am and transferred to the investigative agency’s headquarters.

“Yoon’s arrest is the first step towards restoring our constitutional order,” said Park Chan-dae, floor leader of the leftwing opposition Democratic Party of Korea. “It underlines that justice is still alive.”

While Yoon’s powers have been transferred to Choi as acting president, he remains South Korea’s head of state while the country’s Constitutional Court deliberates on whether to approve his impeachment or reinstate him in office.

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The court held its first formal hearing into Yoon’s impeachment on Tuesday, but the session was adjourned after four minutes because the suspended president declined to attend, citing concerns for his personal safety.

The efforts by the CIO and police to detain Yoon for questioning relates to a separate, criminal process connected to his failed imposition of martial law. Yoon’s lawyers insist the CIO has no standing to pursue criminal insurrection charges against him.

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