Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is director of economic policy studies at the American Enterprise InstituteNippon Steel and US Steel reached a deal in December for the Japanese steelmaker to acquire its iconic US competitor. The acquisition is a non-hostile, $14.1bn deal in which Nippon would pay $55 per share — a 40 per cent premium to the US company’s share price the trading day before the deal. Investors cheered, with shares in US Steel rising 26.1 per cent the day it was announced. But the merger is opposed by the United Steelworkers labour union. And on Thursday last week, President Joe Biden sided with the union, declaring that it was “vital” for US Steel to remain “domestically owned and operated”.An American president opposing investment by a staunch ally in a US manufacturing company is a sign that protectionism has run amok. What Biden should be focused on instead is the long-term prosperity of the American people. Nippon’s acquisition of US Steel would benefit the economy broadly and the working class specifically. The company intends to inject much-needed technology and capital into US Steel. This would raise the productivity of its workers, putting upward pressure on their wages and incomes, and potentially increasing employment opportunities and steel output. There may be downstream benefits, as well. As productivity increased and US Steel prices fell, the incentive facing domestic manufacturers to import steel from abroad would reduce. This could allow domestic manufacturers to cut their costs and become more competitive. In the US, for every job in steel production, there are around 14 jobs in industries that use steel intensively. The major obstacle to the deal going through is a national security review led by the Treasury department. Some elected officials have expressed security concerns. But that is ridiculous — Japan is a staunch ally of America. And under the terms of the deal, US Steel production will remain in the US.The president stopped just short of pledging to block the deal, and his statement did not reference national security. But if he does block it on national security grounds, he would echo the abuses of his predecessor, Donald Trump, who imposed “Section 232” national security tariffs on US allies, including Canada and European nations. Indeed, it should surprise no one that in January, Trump publicly pledged to block the deal “instantaneously” should he win the 2024 election. This is yet another example of the Biden-Trump consensus against sound economic policy. There are four broader issues at stake. First, this episode casts doubt on the degree to which talk about “resilience” and the need for “friendshoring” is based on legitimate concerns about national security. Japan is America’s friend, so Biden’s opposition to the deal suggests that “resilience” rhetoric is often little more than a fig leaf for rank protectionism.Second, this might have a chilling effect on the willingness of other foreign companies to invest in the US. But foreign investment is a sign of the strength of the American economy, and Biden should be doing all he can to welcome more of it. The more than $5tn in foreign direct investment in the US is increasing the productivity of American workers and building up the country’s industrial base and services economy.Third, Japan is an increasingly important Pacific ally as the US’s relationship with China becomes more adversarial. Biden should be using economic policy to strengthen this partnership, not to weaken it by treating a Japanese company as a security threat.Finally, the president’s unusual intervention in a single deal is itself a threat to economic liberty. In a free society, the government should not attempt to blow up voluntary transactions between private parties. America’s long-term prosperity rests on the responsible use of government power, including the president’s bully pulpit. Because this deal clearly does not threaten national security, blocking it on those grounds would also weaken the rule of law. Biden is further eroding foundational norms weakened by Trump.US Steel is an American icon. JPMorgan financed its creation; Andrew Carnegie helped to found it. It was once the largest corporation in the world, and its plants lined the banks of Pennsylvania’s Monongahela River. The closure of those plants was lamented in a song by Bruce Springsteen. But even more iconic than US Steel are the commitments that Biden would be undermining if he blocked the deal — to sound economic policy that supports long-term prosperity, the value of foreign investment, and support for America’s allies, the rule of law and economic freedom. Video: How Biden’s Inflation Reduction Act changed the world | FT Film More

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MOSCOW (Reuters) – Russia will hold interest rates at 16% on Friday, a Reuters poll showed on Monday, with many economists expecting the bank to start easing monetary policy in June as inflation is stubbornly high. Inflation has eroded Russians’ living standards over the last decade. President Vladimir Putin, fresh from securing a new six-year term in office, has recycled old promises with new deadlines and pledged more than 11.5 trillion roubles ($125 billion) of public spending. Widespread labour shortages, rouble weakness, hefty government spending to fund what Moscow calls its “special military operation” in Ukraine, have all driven prices higher. All 24 analysts and economists polled by Reuters on Monday predicted that the Bank of Russia would keep its key rate at 16% at Friday’s meeting. We expect no changes in terms of rate or rhetoric, said Expert RA Chief Economist Anton Tabakh, with the central bank waiting for its previous monetary tightening to have an effect in the second half of this year. Sovcombank chief analyst Mikhail Vasilyev, predicting a hold, said there was a 30% chance of a rate hike to 17%, as inflation continued to pose risks. Inflation, the bank’s main area of concern, stood at 7.4% in 2023, following on from an 11.9% reading in 2022. Economists expect it to remain well above the central bank’s 4% target this year. “We believe that the annual inflation will start to slow down significantly only from the summer,” said Natalya Milchakova, lead analyst at Freedom Finance Global. “A key rate cut is still a long way off.” In late February, 2022 Russia ramped up its benchmark rate to 20% in an emergency move after Moscow despatched tens of thousands of troops to Ukraine, which led the West to impose increasingly wide-ranging sanctions on Russia.The key rate was gradually cut to 7.5%, before the bank started hiking again in July 2023. It held rates at 16% in February. ($1 = 91.9050 roubles) More

Toronto-based Delphia Inc and San Francisco-based Global Predictions Inc will pay a $400,000 fine to settle the civil charges, but did not admit or deny the agency’s findings, the SEC said.”Today’s enforcement actions make clear to the investment industry – if you claim to use AI in your investment processes, you need to ensure that your representations are not false or misleading,” SEC Division of Enforcement Director Gurbir Grewal said in a statement.”Public issuers making claims about their AI adoption must also remain vigilant about similar misstatements that may be material to individuals’ investing decisions,” Grewal added. Representatives for the two companies could not be immediately reached for comment. Delphia will pay a $225,000 penalty while and Global Predictions will pay $175,000, the SEC said.SEC Chair Gary Gensler in recent months has repeatedly warned companies against “AI washing,” or making false statements about their use of artificial intelligence. More

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KARACHI (Reuters) -Pakistan’s central bank on Monday held its key interest rate at 22% as expected for a sixth straight policy meeting as inflation risks continued to loom. The decision was in line with the expectations of a majority of analysts, although most are also expecting rate cuts from the second quarter of this year. The bank said that although the inflation rate had eased in February, it remained high and subject to risks.”This warrants a cautious approach and requires continuity of the current monetary stance to bring inflation down to the target range of 5–7 percent by September 2025,” the State Bank of Pakistan’s (SBP) monetary policy committee said in a statement. Monday’s policy decision is the last ahead of the April expiry of a $3 billion standby arrangement with the International Monetary Fund.Pakistan’s key rate was last raised in June to fight persistent inflationary pressures and to meet one of the conditions set by the IMF for securing the critical bailout.The bank noted the improved inflation figures in February, when the country’s consumer price index rose 23.1% year on year, its slowest since June 2022, partly due to the “base effect”.But it noted that “going forward, any further adjustments in administered prices or fiscal measures that may push prices up pose risk to the near and medium-term inflation outlook.””Cognizant (NASDAQ:CTSH) of these risks, the Committee assessed that it is prudent to continue with the current monetary policy stance at this stage,” the statement added. “The decision to hold rates is guided by the inflation outlook, as opposed to the argument of debt burden and economic slowdown impact of a high policy rate,” said Sajid Javed Amin, deputy executive director at Sustainable Development Policy Institute. He added that the central bank must continue its “non-adventurous monetary policy stance” basing rate decisions on the inflation outlook, its primary mandate.In its last decision in January, the central bank had raised the average inflation forecast for the fiscal year ending in June to 23%-25%, from a previous projection of 20%-22%, due to rising gas and electricity prices.Inflation hit an all-time high of 38% in May last year, driven partly by new taxation measures imposed to comply with IMF’s demands for a rescue programme that helped the nation avert a sovereign debt default.During a call with analysts, the central bank chief said that talks with the lender over the third tranche of the ongoing bailout programme were progressing, but didn’t comment on what outcome he expected from the talk.He said the central bank expected a rollover of $2 billion in debt payments this week, and another $4 billion rollover by June. More

Already more than half a million jobs have been lost since Oct. 7 2023, when Israel began a retaliatory military campaign in Gaza after Hamas militants launched deadly cross-border attacks, the new report showed. If the conflict continues until end-March then the unemployment rate will soar to 57%, it said.ILO Regional Director for Arab States Ruba Jaradat said that the destruction of infrastructure and schools, hospitals and business in Gaza had “decimated entire economic sectors and paralyzed labour market activity, with untold repercussions on the lives and livelihoods of Palestinians for generations to come.”In Gaza, some 200,000 jobs have been lost, accounting for about two-thirds of total employment in the enclave. In the West Bank, the report described “near lockdown” conditions with more than 650 permanent and temporary checkpoints across the territory having significant negative effects on the economy. More than 300,000 jobs, or about a third of total employment, have already been lost there, it said. More