Aurelia Butler

Import prices rose 0.3% last month after an unrevised 0.8% jump in January, the Labor Department’s Bureau of Labor Statistics said on Friday. The increase in import prices, which exclude tariffs, was in line with economists’ expectations.In the 12 months through February, import prices dropped 0.8% after declining 1.3% in January. Government data this week showed both consumer and producer prices increased strongly for the second consecutive month in February. Financial markets still expect the Federal Reserve to start cutting interest rates by June, though firmer inflation readings, if sustained, could delay the expected easing in borrowing costs until the second half of the year.Since March 2022, the Federal Reserve has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.Imported fuel prices shot up 1.8% in February after rebounding 1.2% in the prior month. The cost of imported food increased 1.1% after advancing 1.7% in January.Excluding fuels and food, import prices gained 0.1%. These so-called core import prices increased 0.7% in January. They fell 0.7% on a year-on-year basis in February.Prices for imported capital goods rose 0.2% last month after increasing 0.4% in January. The cost of motor vehicles, parts and engines edged up 0.1%. Imported consumer goods prices excluding automotives climbed 0.3% after surging 1.2% in January. More

This article is an on-site version of our Swamp Notes newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday and Friday. You can explore all our newsletters hereCapitol Hill on Wednesday finally reached consensus on something (anything!) when the House of Representatives voted overwhelmingly to force China to sell TikTok. Thank God for bipartisanship, cried the Washington flame keepers. The two parties might disagree on Vladimir Putin, US democracy, border security, taxing billionaires, Israel and everything else, but at least they know a national security threat when they see one. Please colour me sceptical. In addition to the fact that bipartisan unity is heavily overrated — Iraq war anyone? — there is at best sketchy evidence that TikTok poses a remote national security threat. What the addictive app does represent is an easy, symbolic way of pretending to be serious. Even if there were revelations of TikTok’s plans to subvert US democracy — and to underline, there aren’t — the digital app would come about 45th on the list of things Congress should do.As the parent of a teenager, any harm to TikTok is a cause for celebration. In the memorable phrase of the former vice-president, Mike Pence, TikTok is “digital fentanyl”. It is hard to overstate the degree to which the China-owned app has swallowed the time and mindshare of an entire generation. But this bill would do nothing to address that. Assuming the Senate agrees with the House, and with Joe Biden, who has urged its passage, and regardless of whether ByteDance would be permitted by Beijing to sell the app to a US owner, the fentanyl will keep coming. The same of course applies to social media apps owned by US companies like Alphabet, Meta and others, including their copycat versions of TikTok. Pence has no objections to fentanyl per se. He just doesn’t want it to come from China. So this bill is no cause for parental celebration.Here is what a serious bill would look like. It would impose privacy regulations on the sale to third-parties of any data collected by any social media app, regardless of who owns it. Right now, China and Russia, and any other adversary, can buy all the personal data they like from owners like X, Instagram and YouTube. They can also manipulate those sites for their own causes. To be clear, there is no serious evidence China has yet attempted the kind of fake news operation along the lines of what Russia’s Internet Research Agency (owned by the late Yevgeny Prigozhin — remember him?) carried out through Facebook in the 2016 US election. That does not mean China won’t try it at some point. If Beijing wishes to mess with voters’ heads, however, digital America is an open door. Being forced to divest TikTok would not change that.A serious bill would also protect America’s children from social media. The evidence of harm to America’s adolescents of spending an estimated seven to nine hours a day on the internet, most of which is swallowed by social media apps, is now beyond doubt. I would urge Swampians to read Jonathan Haidt’s summary of that evidence in The Atlantic. All the data shows a steep increase in the rates of teen depression, and suicides by girls in particular, since 2010, which is when a majority of Americans got a smartphone. Other research shows that teenagers use these apps because their peer groups do. They would happily give them up if their friends did. This is a classic collective action problem. Only government can reverse the negative externalities of teenage social media addiction.Alas, Congress is no closer to such action than before. Indeed, the appearance of having taken a tough step on TikTok may even reduce the chances of the kind of privacy and child protection that America desperately needs. Wednesday was a bad day for China. I shed no tears for Beijing. It has banned virtually pretty much every single US-owned social media and search app. But it was also a good day for Elon Musk, Mark Zuckerberg and others. In that respect, nothing has been achieved for US national security, citizens’ privacy, or the mental wellbeing of its children. Brooke, am I being too cynical? If you add in Biden’s opposition to Nippon Steel’s takeover of US Steel, it seems there is a lot of protectionism around in Washington nowadays masquerading as something else. Should the US pass a Europe-style digital privacy act?Join us on Saturday May 4 in Washington, DC and online to see the FT US Weekend Festival. Speakers include US national security adviser Jake Sullivan, political scientist Ruy Teixeira and FT journalists such as Roula Khalaf and Martin Wolf. As a newsletter subscriber, claim a discount on your pass using promo code NewslettersxFestival.Recommended readingBrooke Masters responds Ed, I agree that there is a lot of cynicism built into the attacks on TikTok. It is much easier to complain about Beijing than address the time-sucking qualities and pernicious influence of all the big social media apps. I’m not convinced that the European digital privacy law has done much either.Like you, I don’t think forcing ByteDance to sell TikTok would solve the societal problems, but as a financial reporter, I can’t help gaming out what would happen if the bill actually passed the Senate and was signed. The obvious buyer would be one of the existing Big Tech giants. But letting them snap TikTok up would only increase their power over the American psyche. Yet there is also something unseemly about former US Treasury secretary Steven Mnuchin’s manoeuvring to get control himself. He was a major player in the Trump administration when it was forcing TikTok to move its data to the US. But the government can’t just take TikTok without compensation — that will hurt not just China, but the 60 per cent of ByteDance shareholders who are international investors, including US pension funds. It’s hard to see how this whole mess is going to have a positive outcome for anyone.Your feedbackWe’d love to hear from you. You can email the team on [email protected], contact Ed on [email protected] and Brooke on [email protected], and follow them on X at @RanaForoohar and @EdwardGLuce. We may feature an excerpt of your response in the next newsletterRecommended newsletters for youUnhedged — Robert Armstrong dissects the most important market trends and discusses how Wall Street’s best minds respond to them. 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The bank has put out an abridged version of an upcoming series of volumes, at a time when the far right is on the rise in Germany, triggering nationwide protests in a country still scarred by its 20th century history.It detailed how the Reichsbank financed Adolf Hitler’s war efforts, helped the exploitation of occupied territories and was involved in the confiscation, expropriation and sale of Jewish assets.”The Reichsbank acted as a willing stooge and receiver of stolen goods in the context of the financial holocaust,” said Albrecht Ritschl, a professor of economic history at the London School of Economics and one of the authors of the research. Founded in Frankfurt in 1957, the Bundesbank had little in common with the Berlin-based Reichsbank, which was wound down after the end of World War II and initially replaced with the Bank deutscher Länder.The Reichsbank’s gold, for example, was confiscated by the Allies. However, some of its staff and above all middle-managers were hired by the new institutions after undergoing a process known as “denazification”.Imposed by the Allies at the end of the war, the criteria for such denazification became laxer after 1948 as Germany became more integrated in the West and the central bank scrambled to find qualified personnel, the researchers found. “The degree of continuity in terms of what we might call the functional elite is thus on a par with that seen in ministries and other public institutions,” said fellow author Magnus Brechtken, deputy director of the Institute for Contemporary History in Munich. Bundesbank President Joachim Nagel hoped the 100-page booklet would reach the general public and vowed to learn lessons from it.”Never again should there be antisemitism in Germany,” he said, repeating a slogan used in recent demonstrations against the far right.”Never again should minorities be excluded and subjected to state tyranny, never again should government bodies like the central bank be allowed to trample on democratic values,” Nagel added. More

LONDON (Reuters) -Next week’s Federal Reserve meeting has lost the heat it once had as a likely moment for the central bank’s first interest rate cut – but it could shine a big light on where the Fed thinks the economy is at over the long run.Conditioned by verbal pushback from Fed officials all year and still-sticky inflation and punchy growth readings, futures markets currently price a near zero chance of a first cut at the March 20 gathering and now favour June or July instead.And yet the readout from the meeting will be packed with information about what happens next, not least an updated quarterly “dot plot” on policymaker projections and the likely start of discussions on slowing the Fed’s balance sheet runoff.With many investors reassessing the long-term trajectory of the U.S. economy and whether it’s on a sustainably faster growth path, considerable focus will be on what those Fed dots say about the assumed “neutral” policy rate that neither stimulates nor reins in the economy long term.Based on their median forecasts, Fed policymakers have left their long-run policy rate assumption basically unchanged since before the pandemic at 2.5%, barring a brief shaving to 2.4% in early 2022 that was quickly reversed.And as Fed officials assume they will get inflation back to the 2% target one way or another over time, it implies they see a “real” neutral rate of just 0.5% – compared to the current real policy rate of about 2.5%.A hike in that assumption may not make a difference to whether or even when the Fed starts to cut, as it could cut 200 basis points (bps) off rates over the coming two years and still claim to be in a “restrictive” mode bearing down on economic activity and inflation. But it has potential significance of how much scope the Fed reckons it has over any easing cycle – where it sees a likely “terminal rate” in central bank parlance. And this is why it may be keenly watched by many investors.The discussion is clearly well underway.Unobservable in real time, the theoretical neutral rate is an ephemeral beast almost impossible to pinpoint until you’ve hit it and – even then – shifting sands of the economy may still shroud it in mystery.Most Fed officials, including Chair Jerome Powell, claim not to know where it lies exactly.And yet their best guesses on it should reveal some of what they think is happening under the bonnet of the economy, how restrictive they think the current 5.25-5.50% policy rate is right now and where rates may settle once they start an easing campaign.FED MURMURSAlthough not a voting member on the Fed’s Open Market Committee (FOMC) council this year, Minneapolis Federal Reserve President Neel Kashkari restarted the debate early last month.”It is possible, at least during the post-pandemic recovery period, that the policy stance that represents neutral has increased,” he said.San Francisco Fed boss Mary Daly, who is an FOMC voter this year, then said the neutral rate estimate was between 0.5% and 1.0% – implying a long-run policy rate of 2.5-3.0%.Another 2024 voter, Richmond Fed chief Thomas Barkin, said it was certainly possible the neutral rate had risen. Cleveland Fed President Loretta Mester also said this month that it was an open question.Speaking in London last week, the New York Fed’s John Williams seemed keener to dampen thoughts of a major change in thinking and said the neutral rate hadn’t risen much since the pandemic.Such public uncertainty perhaps raises the bar for shift in the median “dot” on the long-run rate.Yet any rise at all could affect markets’ thinking on anything from the dollar to Treasury debt – and on the stock market by extension.Already, futures markets see Fed policy rates settling somewhere in the region of 3.0-3.5% over the next two years – almost 200 bps lower from here but still well above Fed’s standing 2.5% long run policy rate dot.A rise in that “dot” of up to 50 bps back to 3% – where it was as recently as 2018 – could potentially pull markets’ assumed “terminal rate” of easing higher too.What it does show is the Fed is at least mulling the implications of such impressive U.S. disinflation over the past year even as steep rate rises have left labour markets virtually unscathed and so far failed to seed any recession. And to that effect, many economists are going back to the drawing board too. One significant smoking gun this year has been revisions to U.S. immigration statistics for last year that change assumptions about the long-run trajectory of the labour force – possibly upping the level of job creation that can happen going forward without lifting wage growth and inflation further.Other analysis homes in on how rising public debt levels may be playing a role in higher neutral rates.A working paper published last week by the Bank for International Settlements tries to quantify the effect on the “natural rate” from big fiscal expansions. The study, by economists Rodolfo Campos, Jesus Fernandez-Villaverde, Galo Nuno and Peter Paz, estimates the natural interest rate increases by 20-50 bps in response to a 10 percentage point increase in the ratio of public debt to GDP.Given that U.S. debt/GDP has risen by about 20 points since before the pandemic to near 100% now – and is projected by the Congressional Budget Office to rise further to 116% over the next decade – those assumptions are certainly food for Fed thought.The opinions expressed here are those of the author, a columnist for Reuters. More

March futures on the S&P/TSX index were up 0.3% at 6:45 a.m. ET (10:45 GMT) after the benchmark S&P/TSX index retreated from a two-year high in the previous session as traders revised their rate-cut bets.The focus of the day will be the materials sector that houses precious and base metals miners, as Shanghai copper prices hit a record high while prices in London touched an 11-month peak, buoyed by a potential output cut in top producer China. [MET/L]Gold managed to eke out gains but was set for its first weekly drop in four weeks after surprisingly hot U.S. inflation readings prompted traders to re-think imminent Fed rate cuts. [GOL/]Energy shares may see a decline with Brent futures falling 0.7% to $84.85 a barrel after crossing $85 a barrel for the first time since November on Thursday.Investors will also keep an eye on the housing data, due at 8:15 a.m. ET, which is expected to show that the seasonally adjusted annualized rate of housing starts rose to 230,000 units in February, according to a Reuters poll of economists, from 223,600 units a month ago.In the U.S., futures moved slightly higher as investors braced for a Fed meeting next week that could provide clues on the timing of the central bank’s interest rate cuts. [.N]In domestic company news, TC Energy (NYSE:TRP) agreed to sell its Prince Rupert natural gas pipeline project to two partners in Ksi Lisims LNG, a proposed Canadian export terminal, the North American pipeline operator said on Thursday.COMMODITIES AT 6:45 a.m. ETGold futures: $2,174.3; +0.3% [GOL/]US crude: $80.69; -0.7% [O/R]Brent crude: $84.85; -0.7% [O/R]($1= C$1.3535) More

BEIJING (Reuters) -New bank lending in China fell more than expected in February from a record high the previous month, even as the central bank seeks to spur sluggish economic growth and fight deflationary pressures.Chinese banks extended 1.45 trillion yuan ($201.5 billion) in new yuan loans in February, according to Reuters calculations based on data released by the People’s Bank of China, down sharply from January and falling short of analysts’ expectations.Outstanding yuan loans grew 10.1% from a year earlier – the lowest on record – compared with 10.4% growth in January. Analysts had expected 10.2%. A pull-back in February from January was widely expected, because Chinese banks tend to front-load loans at the beginning of the year to get high-quality customers and win market share.The timing of the week-long Lunar New Year holiday, which fell in February this year versus late January in 2023, may also have weighed on lending activity last month.Analysts polled by Reuters had predicted new yuan loans would fall to 1.50 trillion yuan in February from 4.92 trillion yuan the previous month and against 1.81 trillion yuan a year earlier.”Aggregate financing and new loans came in weaker than expected amid limited high-quality borrowing demand, showing the limited immediate impact of February’s cut in the required reserve ratio,” analysts at ING said in a note.”Although the PBOC has signalled further RRR cuts to come, a lack of high-quality borrowing demand could limit the effectiveness of RRR cuts in stimulating the economy.”Chinese banks made 6.37 trillion yuan in new yuan loans in the first two months of 2024, data released by the central bank showed on Friday.It did not give loan figures for February alone.Household loans, mostly mortgages, contracted by 590.7 billion yuan in February, according to Reuters calculations based on central bank data, after rising 980.1 billion yuan in January, while corporate loans fell to 1.57 trillion yuan from 3.86 trillion yuan.China has set an economic growth target for 2024 of around 5%, which many analysts say will be a challenge to achieve without much more stimulus. Consumer and corporate confidence has been persistently weak since a post-pandemic bounce quickly fizzled out early in 2023.PBOC Governor Pan Gongsheng told a news conference last week that there is still room for cutting RRR, following a 50-basis point cut that was effective from Feb. 5, which was the biggest in two years. Last month, the PBOC announced its biggest ever reduction in a key mortgage reference rate, in a bid to prop up the struggling property market and overall economy. Broad M2 money supply grew 8.7% from a year earlier, below estimates of 8.8% forecast in the Reuters poll but in line with January’s pace.BROAD CREDIT GROWTH SLOWSGrowth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 9.0% in February from a year earlier and from 9.5% in January.Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity. Outstanding TSF was 9.5% higher at the end-January than a year earlier, the same as that at end-December.China has set the 2024 quota for local government special bond issuance at 3.9 trillion yuan, up from 3.8 trillion yuan last year. China also plans to issue 1 trillion yuan in special ultra-long term treasury bonds to support some key sectors”Increased fiscal support should lead to a reacceleration in government borrowing before long. But the headwinds from weak private sector credit demand clearly remain severe,” Capital Economics said in a note.TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.In February, TSF fell to 1.56 trillion yuan from 6.5 trillion yuan in January. Analysts polled by Reuters had expected February TSF of 2.22 trillion yuan. More