Aurelia Butler

WASHINGTON (Reuters) – The minutes of the Federal Reserve’s policy meeting last month may indicate on Wednesday how many policymakers feel the U.S. central bank is done raising interest rates and whether possible risks to the economy from the aggressive monetary tightening have taken on more weight in their debate.The Fed raised its benchmark overnight interest rate to the 5.25%-5.50% range at the July 25-26 meeting, a step Fed Chair Jerome Powell said at his post-meeting press conference may not be the last in an aggressive round of rate increases that began in March 2022 to offset the fastest breakout of inflation since the 1980s. But Powell also said the “pieces of the puzzle” were beginning to fall into place to push inflation lower, including improved supply chains, a moderation in the demand for workers, and tighter lending conditions. The minutes, which are due to be released at 2 p.m. EDT (1800 GMT), may show how much faith different groups of Fed officials have in a continued decline in inflation, or whether the bulk of them still feel another rate increase is likely needed, as most of them did in their last round of economic projections in June. An additional quarter-percentage-point rate increase, whether at the Fed’s Sept. 19-20 meeting or later in the year, would be marginal in its macroeconomic impact, a small addition to the 5.25 percentage points the Fed has added to its policy rate over the 16 months ending in July.It would, however, send an important signal to bond and stock markets that are largely convinced the central bank is finished raising rates and will now begin looking for the right moment to start cutting.”There appears to be little consensus amongst policymakers regarding the path ahead,” wrote Citi analyst Andrew Hollenhorst, who said he will look to the minutes for “the leading edge of a debate about the appropriateness of keeping policy rates elevated even as job growth and inflation have recently cooled.”‘MIXED MESSAGING’The minutes include references to how officials assess the economy, the likely path of inflation, appropriate monetary policy, and the chief risks to policymakers’ outlook. The document, issued three weeks after a policy meeting, is always at risk of seeming outdated and is often reiterative of points the Fed chief makes in post-meeting press conferences, or overrun by data that has come out in the meantime. Powell, for example, confirmed at his press conference last month that Fed staff had changed their forecast and removed the expectation the economy would slip into recession, a point that would otherwise have only been revealed in the minutes.And whatever the debate among policymakers as of the July 25-26 meeting, data since then has confirmed a continued hiring slowdown along the lines Fed officials have hoped might help cool the job market, while the closely-watched personal consumption expenditures price index excluding food and energy posted its first significant drop since 2022. The core PCE index fell in June to 4.1% from 4.6% in May, a fact only released after the Fed meeting, though economists expected the decline.Since the July meeting, Philadelphia Fed President Patrick Harker has joined Atlanta Fed President Raphael Bostic in saying no more rate increases were needed.Other central bank officials, including New York Fed President John Williams, a vice chair and permanent voting member on the rate-setting Federal Open Market Committee, have begun discussing the timetable for possible rate cuts – even as they’ve pushed that possibility off into next year.”The mixed messaging indicates that the Fed, or at least a substantial portion of the Fed, is worried that policy could quickly become too tight” if inflation continues lower but credit markets continue to restrict lending, wrote Tim Duy, chief U.S. economist at SGH Macro Advisors.If market interest rates “break higher … the Fed is going to have a problem. It could quickly need to make a choice between taking the chance that inflation is not completely under control or trying to keep the hope … alive” of lowering inflation without a large rise in unemployment. More

The meeting held on Wednesday comes amid China’s mounting economic woes with a prolonged property crisis, deflationary pressure and slower growth in retail sales and industrial output.Tuesday’s grim data has raised calls from China watchers for authorities to roll out major fiscal stimulus to get the economy back on more solid footing.Without giving details, the cabinet meeting chaired by premier Li Qiang said China would continue to introduce policies for boosting consumption and promoting investment.Economists see a downside trend for the world’s second-biggest economy. Barclays (LON:BARC) was among a number of global banks to cut its forecasts for China’s 2023 growth after weak activity data.Beijing pledged to boost the household consumption share of GDP to prop up economic growth as debt-fuelled investment in infrastructure and property has peaked and exports slumped due to weakening global demand.However, despite a slew of policy announcements about how to boost growth, without direct stimulus such as consumer vouchers and tax cuts, Chinese households have continued to build up savings and reduce borrowing – meaning demand remains sluggish.”Prolonged weakness in property construction will add to destocking pressures in the industrial space and depress consumption demand as well,” said Tao Wang, economist at UBS Investment Bank. “In such a case, economic momentum may stay subdued in the rest of the year and China may miss this year’s growth target of around 5%.” More

(Reuters) – The incongruous sight of tourists enjoying Maui’s tropical beaches while search-and-rescue teams trawl building ruins and waters for victims of the deadliest U.S. wildfire in more than a century has outraged some residents.They have vented on social media, posting video of tourists enjoying holiday activities like snorkeling while the death toll in the historic resort town of Lahaina passes 100 and is rising every day.”Our community needs time to heal, grieve, and restore,” Hawaiian actor Jason Momoa said on Instagram, urging tourists to cancel their trips.Authorities and businesses have welcomed the trickle of travelers, saying it will lessen the blow to the island’s economy, which relies heavily on tourism. The industry is Maui’s “economic engine,” generating 80% of its wealth, according to the island’s economic development board.As Maui embarks on a long, painful recovery from the fires, officials are wrestling with how to balance residents’ immediate needs for housing and resources against the island’s long-term financial health.Hawaii Governor Josh Green recalled at a weekend press conference how the COVID-19 pandemic similarly forced the state to weigh the risks of allowing tourists in during a public health crisis against the harm Hawaii’s economy would suffer from barring them.”All of our people will need to survive, and we can’t afford to have no jobs or no future for our children,” Green said. “When you restrict any travel to a region, you really devastate its own local residents in many ways more than anyone else.”Tourism has taken a hit in the week since the wildfire devastated Lahaina, a popular vacation destination that was also home to historic sites significant to Hawaiian residents.The number of airline passengers to Maui on Sunday was down nearly 81% compared to the same time last year, according to the Hawaii Department of Business, Economic Development and Tourism.In 2022, 2.9 million tourists visited Maui, which has a year-round population of 165,000, according to the latest numbers from the U.S. Census Bureau. The state tourism department reported in February that visitors spent $5.69 billion on Maui in 2022.The Hawaii Tourism Authority now is asking visitors to avoid all non-essential travel to West Maui, the part of the island affected by the fires, so resources can be used to help locals recover. “It is likely that a big chunk of the people who are affected, losing family members, losing family homes, it’s likely a lot of them were employed by the visitor industry,” tourism authority spokesperson Ilihia Gionson said.Hotels in West Maui have temporarily stopped accepting bookings. Many are housing their employees and preparing to house evacuees and first-responders working on disaster recovery, according to the tourism authority.The agency urged visitors to areas of Maui that did not burn – such as Kahului, Wailuku, Kihei, Wailea and Makena – to contact their accommodation and ensure they could still be hosted. “Maui is not closed,” Maui County Mayor Richard Bissen said at the weekend press conference alongside the governor. “Many of our residents make their living off of tourism.”Reached by phone on Tuesday, the Four Seasons Resort at Wailea Beach in South Maui said all hotel operations were running normally, but that it was encouraging tourists with August reservations to postpone their trips until the rest of the island had recovered more fully.Occupancy at the five-star hotel had plunged “dramatically” since the fire, a front desk operator said.Hotel operator Hilton Worldwide Holdings (NYSE:HLT), which has 23 hotels throughout Hawaii, said it was waiving cancellation penalties for those traveling to, from or through all islands of Hawaii through Aug. 31.Jack Richards, CEO of Los Angeles-based travel company Pleasant Holidays, scrambled to evacuate more than 400 customers who were on Maui during the fires. Dead phone lines and lost internet connections hampered the efforts, he said.Most of the tourists were eventually relocated to other Hawaiian islands. Another 1,400 customers with August travel plans to Maui need to be rebooked, he said.Tour operators who continued to offer services in or around West Maui after the fires faced a flood of criticism. A company that held a charity snorkeling tour on Friday 11 miles (18 km) from Lahaina later issued an apology and said it was suspending operations for the time being. More

BAGHDAD (Reuters) – Iraq has made strides implementing U.S. dollar supply restrictions targeting Iran but faces an uphill battle with a banking system unaccustomed to strict oversight and persistent currency smugglers, central bank governor Ali al-Allaq said.”It is really a battle, because the people benefiting from this situation and those harmed (by the new measures) will try in various ways to continue their illegal activities,” Allaq said in an interview with Reuters.Allaq did not mention Iran by name and said he did not have data on how much of Iraq’s dollars been smuggled to Iran or other neighbouring countries, including Turkey and Syria, before the United States tightened regulations in November.The U.S. measures that aim to enforce sanctions on Iran are a sensitive matter in a country that has often been a front line in the rivalry between Washington and Tehran.Iraq’s government is reliant on Washington’s continued goodwill to ensure oil revenues and finances do not face U.S. censure, but it came to power with the support of powerful, Tehran-backed groups and so cannot afford to alienate Iran.The latter groups have accused the U.S. of meddling in Iraq’s internal affairs and creating a currency crisis, as businesses either struggling or unwilling to abide by the new measures sourced dollars from exchange shops, driving down the value of the Iraqi dinar.Iraq has more than $100 billion dollars in reserves, Allaq said, but could not freely intervene in the market to bring the rate down due to the restrictions.Last month, the U.S. Treasury Department and the Fed barred 14 Iraqi banks from conducting dollar transactions as part of a wider crackdown on dollar smuggling to Iran via the Iraqi banking system, U.S. officials said.Allaq said that action related to transfers from 2022, before a new platform that aimed to improve transparency went live. He said the central bank was undertaking a review of the banking sector and introducing new regulations that he said would likely see some banks close.”It would be very normal in the coming period to see a reduction in the (number of private banks),” he said.”There are always side-effects, but at the same time we have a responsibility to protect the country’s interests by trying to find the necessary means for monitoring and oversight so as not to expose the country to any issues on this front,” he said.’TRANSFORMATION’The U.S. measures have targeted Iraq’s so-called dollar auction, where the central bank requests dollars from the U.S. Federal Reserve before selling them to commercial banks, which in turn sell the funds to businesses in the highly import-dependent economy.U.S. and Iraqi officials have said the auction allowed large sums of money to be illegitimately acquired by groups who would provide fake invoices and then either transfer or physically smuggle the funds to neighbouring countries, chiefly Iran.A feature of a highly informal economy, the system was also used by thousands of small businesses that are not registered with the state, Allaq said, a widespread phenomenon in Iraq that allows them to dodge taxes and customs fees.Since January the central bank has asked banks to provide detailed information on senders and recipients of transfers via an online platform.When companies began trying to use the platform in January, less than 20% of requests were approved by U.S authorities, Allaq said. That number had now risen to around 85 percent, signalling growing ease with the new regulations, he said.Allaq said that tighter regulations along with government plans to promote digital payment were forcing a wider shift in the Iraq economy in a country where cash remains king and the majority of adults do not have bank accounts.”It is not just an electronic platform, it will lead to a total reorganisation of trade and the movement of money, and control on a lot of avenues for suspicious activity.” More