Aurelia Butler

The Marshall Islands is one of three sparsely populated Pacific island nations covered by so-called Compacts of Free Association (COFAs) with the United States. Under the agreements, the U.S. has responsibility for their defense and provides economic assistance, while gaining exclusive access to huge strategic swaths of the Pacific.The U.S. agreed renewed COFA deals with Micronesia and Palau this year, but is still negotiating with the Marshall Islands at a time when China is making significant inroads into the Pacific, a region the U.S. has long considered its back yard.The foreign minister of the Marshall Islands called in July for more U.S. money to deal with the nuclear legacy to enable the renewal of its COFA, the economic terms of which expire on Sept. 30.Marshall Islands President David Kabua told the annual United Nations General Assembly in New York his country wanted to continue its free association with the United States but Washington “must realize that the Marshallese people require that the nuclear issue will be addressed.””We … have satisfactorily addressed most issues and remain cautiously optimistic that our agreements will be finalized soon,” he said. “However, there remain difficult issues that the Marshallese people have insisted need to be resolved … we cannot ignore the wishes of our people.” Under MOUs agreed this year, the U.S. will commit a total of $7.1 billion over 20 years to the three nations, subject to congressional approval.Chief U.S. negotiator Joseph Yun has proposed Congress approve the total amount by Sept. 30, even without a final agreement with the Marshall Islands.The top U.S. diplomat for East Asia Daniel Kritenbrink told a July congressional hearing the U.S. was “absolutely committed” to reaching a deal with the Marshall Islands, calling such agreements “central to our entire position in the Pacific.”Marshall Islanders are still plagued by health and environmental effects of 67 U.S. nuclear bomb tests from 1946 to 1958, which included “Castle Bravo” at Bikini Atoll in 1954 – the largest U.S. bomb ever detonated.U.S. President Joe Biden will host a second summit with leaders of the Pacific Islands Forum at the White House on Monday, part of his efforts to step up engagement with a region where the U.S. is in a battle for influence with China. More

Frydenberg’s role will include “deepening and strengthening client coverage across the Australia and New Zealand region,” as per Goldman Sachs’ statement. In addition, Frydenberg is expected to continue offering advice on economic and geopolitical issues in his capacity as the firm’s senior regional advisor for Asia Pacific.Prior to joining Goldman Sachs, Frydenberg served in several senior positions within the Australian government. He was elected to parliament in 2010 and held roles including minister for environment and energy before his appointment as treasurer in 2018. His tenure as treasurer was marked by his leadership throughout the pandemic under the Morrison government.However, his political career took a turn when he lost his Liberal seat of Kooyong in Melbourne to teal independent Monique Ryan last year, which led him to transition into the finance industry with Goldman Sachs. His appointment as chair signifies a notable step in his career within the investment banking sector.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

ORLANDO, Florida (Reuters) -With oil prices at their highest this year and eyeing $100 a barrel again, the last thing U.S. consumers, businesses and policymakers need is another inflationary headache. The fledgling auto workers strike, if it lasts and broadens out, could be just that. Most economists reasonably focus on the temporary blow to U.S. economic output or payrolls from a lengthy strike across the sector. And the economy could contract almost one full percentage point in the fourth quarter, according to Morgan Stanley economists, which would cut their full-year 2023 GDP growth call to 1.4% from 1.7%. But the potential effect on new and used car prices, at a time when inventories remain historically low, combined with a significant wage settlement, could also move the inflation dial. This is a worst-case scenario for the Fed. Policymakers and market participants won’t need reminding of the role supply shocks and shortages of chips, parts and other inputs had in driving inflation to the highest in over 40 years after the pandemic. Soaring used car prices had an outsized impact on U.S. inflation, in particular. That dynamic has reversed over the last year, but disinflationary base effects are fading and could quickly flip to being inflationary in the event of a damaging strike. Michael Feroli, chief U.S. economist at JP Morgan, is wary. A prolonged nationwide strike could put already-low inventory under heavy strain, posing “significant” upside risk to auto prices. “Such an outcome will present another wrinkle for the ongoing disinflation as it would halt the recent streak of soft readings in the CPI component for motor vehicles,” he and his team wrote on Friday.STEP ON THE GAS…The transportation group accounts for around 16% of the U.S. Consumer Price Index, and around half of that is the new and used motor vehicles index.The annual rate of used cars and trucks price inflation reached a record high 45% in June 2021, according to one measure from the Bureau of Labor Statistics, while Cox Automotive’s Manheim index of used vehicle prices rose at a peak annual rate of 54% in April that year.Both have been showing annual deflation since late last year, contributing to the slowdown in broader consumer price inflation across the country, but the rate of price declines has been slowing.The United Auto Workers strike against the ‘Detroit Three’ automakers General Motors (NYSE:GM), Ford (NYSE:F) and Stellantis (NYSE:STLA) entered its fifth day on Tuesday. It is the first time ever the union strike has been across all three automakers simultaneously.Fewer than 13,000 of the UAW’s 150,000-strong workforce are involved in the strike over pay and benefits, which is currently centered on one U.S. assembly plant at each company. If no agreement is reached, that could quickly spread in numbers and locations. Detroit’s Big Three accounted for 43% of new cars sold in the U.S. last year, according to Cox Automotive, so the disruption is potentially huge.JP Morgan analysts also warn that a significant wage settlement – the UAW is looking for a 40% increase over four years – will present an upside risk for inflation across the sector as some of that will be passed onto consumers….AND WIPE THAT TEAR AWAYOthers are more sanguine. Using the 2019 auto workers strike as a proxy, Morgan Stanley’s Ellen Zentner and team estimate that higher prices for new vehicles could add 0.02 percentage points to monthly CPI. UBS economists reckon new and used car prices will rise “marginally” and that the overall impact on inflation will be “limited.”Fed officials will hope so. This comes just when the grind higher in oil is starting to bite – crude futures are up 30% in the last three months and for the first time since December the year-on-year price change is positive. That is, oil is once again inflationary, not deflationary.The timing could not be worse. Annual inflation has plummeted this year and by some measures now has, or is close to having, a “2” handle – the central bank’s 2% goal is within sight.The American public is getting more confident that the inflation scare is over too. The University of Michigan’s preliminary five-year consumer inflation expectations index for September fell to 2.7%, the lowest since April 2021 and the one-year outlook fell to 3.1%, the lowest since March 2021.(The opinions expressed here are those of the author, a columnist for Reuters.)(By Jamie McGeever; Editing by Andrea Ricci) More

LONDON (Reuters) – The Bank of England will announce on Thursday whether it is halting a run of interest rate hikes that stretches back to December 2021, a day after signs that it had turned a corner in tackling Britain’s high inflation problem.Investors piled into bets on the BoE keeping Bank Rate at 5.25% on Wednesday as soon as official data showed a surprise fall in the pace of price growth.Goldman Sachs and other banks ditched their previous calls for one more rate increase and investors put a roughly 50% chance on a pause by the BoE, up from just 20% on Tuesday.Other analysts said they still thought a final BoE rate hike was the most likely outcome after a recent jump in global oil prices, but they stressed it could go either way.”We stick with our call for a hike, but now see this as a coin toss,” JP Morgan economist Allan Monks said.BoE Governor Andrew Bailey and his colleagues on the Monetary Policy Committee have faced intense criticism after consumer price inflation surpassed 11% in October last year.At 6.7% in August, inflation is falling towards the 5% level that the BoE predicts for the coming months – and which British Prime Minister Rishi Sunak has promised to voters ahead of an election expected next year.But it remains more than three times the BoE’s 2% target and the highest in the Group of Seven economies.HIGHER FOR LONGERBailey and other officials have stressed in recent weeks that, while they might be close to reaching the peak of their run of rate hikes, they would probably have to keep borrowing costs at high levels for a period, dashing hopes of quick cuts.Whether it raises rates one more time or not, the challenge for the BoE is likely to be to convince investors that it will stick to its guns and not rush to cut rates even as Britain’s already fragile economy shows signs of weakening.”While the BoE will no doubt try to project a ‘higher for longer’ message, as the ECB has since its rate hike last week, history tells us that once the peak is in, forward rates move notably lower,” Dominic Bunning, head of European FX Research at HSBC, said in a note to clients.The BoE is alarmed that wages have so far defied the slowdown in the broader economy and are rising at a record pace, threatening to thwart its attempts to bring inflation down.British inflation is almost double the rate in the United States, where the Federal Reserve on Wednesday kept borrowing costs on hold. Last week, the European Central Bank raised rates to a record high but signalled that it was likely to pause.The BoE is scheduled to make its announcement at 12 p.m. (1100 GMT) on Thursday. It is not due to hold a press conference.As well as its decision on rates, the central bank is expected to give details of the next phase of programme to reduce the stockpile of government bonds which it amassed over a decade and a half to help the economy during the global financial crisis and the COVID-19 pandemic. More

WASHINGTON (Reuters) -Federal Reserve Chair Jerome Powell declined on Wednesday to say he expects a “soft landing” for the U.S. economy, but that sure was the picture painted by policymakers in their newest economic forecasts. Fed officials, indeed, appear to be growing more confident than ever in being able to cool inflation without a recession or a sharp rise in unemployment. They expect economic growth to slow next year to about 1.5%, from 2.1% this year, and for the unemployment rate to go no higher than 4.1%, the latest quarterly summary of their projections shows. That’s just a smidge higher than the 4% level they see as sustainable in the long-run, and only a few tenths more than its current 3.8% level.Just three months ago they anticipated U.S. GDP to grow only 1.1% next year, after just 1% this year, and for the unemployment rate to peak at 4.5% next year and still be there at the end of 2025.But asked during a press conference if he would now call the soft landing a baseline expectation, Powell demurred. “No, I would not do that,” he said. “I’ve always thought that the soft landing was a plausible outcome…ultimately, this may be decided by factors that are outside our control at the end of the day, but I do think it’s possible.”The autoworker strike, a possible government shutdown, the resumption of student loan repayments, higher energy prices, and higher long-term borrowing costs are among risks that Powell noted could affect the trajectory of the economy, inflation and, ultimately, where Fed policymakers decide they need to take rates. ONE MORE TIMEThe summary of forecasts shows most policymakers continue to expect one more interest-rate hike this year, bringing the policy rate to 5.6%, after the Fed held rates steady in a range of 5.25-5.50% on Wednesday, as widely expected. The rosier economic picture also came with projections for fewer rate cuts next year than envisioned three months ago. Policymakers now expect to end next year with short-term borrowing costs at 5.1%, a half percentage point higher than they anticipated in June.The dialed-back pace of anticipated policy easing next year goes hand in hand with what policymakers expect to be uneven progress toward the Fed’s 2% inflation goal, with inflation seen ending this year a little higher than projected in June. Fed officials now see the personal consumption expenditures price index at 3.3% at year end, versus June’s forecast of 3.2%, and at 2.5% by the end of next year. For 2025, they upped expected inflation slightly to 2.2% from the 2.1% projected in June, and their first look at 2026 showed them reaching their 2.0% inflation goal that year. Fed officials expect further reductions in the policy rate as well, to 3.9% by the end of 2025 – above the 3.4% they projected in June – and to 2.9% by the end of 2026.That would still be above the 2.5% they continue to see as the long-run neutral policy rate – the level of borrowing costs that neither slows nor stimulates a healthy economy. The path of rates laid out in the projections is neither a plan nor a guarantee, Powell said – it’s merely a best guess of what it will take to bring inflation back down to 2%.”A soft landing is a primary objective and I did not say otherwise,” Powell said. “I mean, that’s what we’ve been trying to achieve for all this time. The real point though, is the worst thing we can do is to fail to restore price stability.” More

WASHINGTON (Reuters) -The U.S. Federal Reserve held interest rates steady on Wednesday but stiffened a hawkish monetary policy stance that its officials increasingly believe can succeed in lowering inflation without wrecking the economy or leading to large job losses.The Fed’s benchmark overnight interest rate may still be lifted one more time this year to a peak 5.50%-5.75% range, according to updated quarterly projections released by the U.S. central bank, and rates kept significantly tighter through 2024 than previously expected.”People hate inflation. Hate it,” Fed Chair Jerome Powell said in a press conference after the end of a two-day policy meeting at which central bank officials held the benchmark overnight interest rate in the current 5.25%-5.50% range, but sketched a stricter policy path moving forward in an inflation fight they now see lasting into 2026.But a “solid” economy with still “strong” job growth, Powell said, will allow the central bank to keep that additional pressure on financial conditions through 2025 with much less of a cost to the economy and labor market than in previous U.S. inflation battles.Indeed, monetary policy is expected to remain slightly restrictive into 2026 while the economy continues to largely grow at its estimated trend level of around 1.8%.Even as inflation declines for the rest of 2023 and in coming years, the Fed anticipates only modest initial reductions to its policy rate. That means the expected half percentage point of rate cuts in 2024 would have the net effect of raising the inflation-adjusted “real” rate.As of June, Fed officials had expected to cut rates by a full percentage point next year.While Powell said the Fed was “in a position to proceed carefully” with future policy moves, he also made clear the jury was, to some degree, still out on the central bank’s fight to contain the worst outbreak of inflation in 40 years.”We want to see convincing evidence really, that we have reached the appropriate level” of interest rates to return inflation to the Fed’s 2% target, a judgment its policymakers have not yet made, Powell told reporters.Inflation by some measures remains more than double the Fed’s desired level, though Powell said the pace appeared to be in decline across several key parts of the economy.Bond yields jumped after the release of the latest Fed projections and policy statement, with the 2-year Treasury note at a roughly 17-year high near 5.2%. Major U.S. stock indices fell. A WIDER RUNWAY? While Powell’s inflation language remained strict, the tone did shift to accommodate what appears to be a growing sense among U.S. central bankers that the sought-after “soft landing” may be developing.Powell would not call it the Fed’s “baseline” – yet.But the path had likely “widened … I do think it’s possible,” he said, a comment underlined by projections showing Fed policymakers at the median see inflation continuing to fall even with gross domestic product continuing to grow and the unemployment rate never rising above 4.1%, an outcome that would fly in the face of U.S. history and the predictions of several top economists.Even Fed staff had until recently penciled in an expected recession this year, the usual outcome of successful inflation battles that drive out spending and investment and push up joblessness. The median GDP forecast among policymakers for 2023 is now 2.1% – five times where it began the year. With the federal funds rate falling to 5.1% by the end of 2024 and 3.9% by the end of 2025, the central bank’s main measure of inflation is projected to drop to 3.3% by the end of this year, to 2.5% next year and to 2.2% by the end of 2025. The Fed expects to get inflation back to its 2% target in 2026, which is later than some officials had thought possible.Ahead of this week’s Fed meeting, investors had been banking on significant rate cuts next year, an expectation clouded by the projections that show 10 of 19 officials see the policy rate remaining above 5% through next year.That means companies and households will face even tighter credit conditions and higher borrowing costs than they have already absorbed during the Fed’s aggressive two-year battle to contain inflation. Rising government bond yields, for example, will pass through into how banks set interest rates on credit cards, auto loans, and home mortgages.If it was a hawkish outcome, however, it was because the economy had outperformed, with inflation falling so far at little cost to jobs or economic output.”The message conveyed in their upward revision to growth and their downward revision to the unemployment rate in 2024 clearly indicates a Fed that has dialed up their expectation for a soft landing, despite higher-for-longer rates,” said Olu Sonola, head of U.S. regional economics at Fitch Ratings. The Fed’s statement was approved unanimously after a meeting that marked new Fed Governor Adriana Kugler’s debut on the central bank policymaking stage. More