Aurelia Butler

In testimony before the Senate, Consumer Financial Protection Bureau Director Rohit Chopra rejected arguments by banks that capping late fees would force them recover the lost revenue by charging higher interest rates or cutting access to credit for some.”They are fully allowed to capture their costs,” Chopra said under questioning from Senator Tim Scott, the top Republican on the Senate Banking Committee, who recently announced his 2024 presidential bid.”One of the things that our issuers tell us is that they don’t want to profit off of late fees. That’s exactly the goal here because the law says those penalty fees are supposed to be reasonable and proportional.”The CFPB in February rolled out a regulatory proposal that would cap late fees at $8, far lower than the current $30-$41, unless credit card issuers could justify charging more, part of the Biden administration’s attack on what it calls consumer “junk fees.”Lobbyists and industry advocates have assailed the term, claiming it mischaracterizes legitimate charges, and warned of unintended consequences in the banking sector.”When you don’t consider the overall cost of collecting something, that becomes embedded in the overall structure of he organization,” Scott said Tuesday. More

The UK jobs market is defying gravity. For months, Bank of England officials have warned that households should expect to feel poorer, as higher energy costs and rising interest rates made employers less willing either to hire or to raise wages in line with inflation.But the latest official data, released on Tuesday, showed workers in a position of strength. Unemployment remains close to record lows. Employment has finally climbed above its pre-pandemic level, with a record 33.1mn people in work, even if the employment rate is still lower than in 2019.And although inflation has been eroding the value of workers’ pay since late 2021, that may be about to change. In April — the last month covered by the data — average wages, excluding bonuses, were up 7.5 per cent year on year, growing only slightly slower than inflation on the Office for National Statistics CPIH measure, which includes housing costs.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

“Record pay growth across Britain means our 18-month run of falling real wages may have ended,” said Hannah Slaughter, senior economist at the Resolution Foundation think-tank. But, she added, the acceleration in wage growth, while welcome for workers, would “worry the Bank [of England], and by extension anyone looking to remortgage”.The big question for monetary policymakers is whether the near-record pace of wage growth can be expected to slow as inflation moderates, or also reflects more lasting labour shortages that have increased workers’ bargaining power.James Smith, economist at ING, said there was “no doubt that inflation is a key factor”, as it was the main determinant of this year’s 9.7 per cent increase in the minimum wage, reflected for the first time in the data. Consumer price inflation, which eased only to 8.7 per cent in April, has been cited in business surveys as the main source of upward pressure on pay, raising hopes that wage pressures would subside as energy prices fell.But the ONS figures show wage growth has been stronger in sectors such as finance and manufacturing — where pay relies on workers’ ability to demand higher wages — than in areas such as retail, which have a high share of employees earning close to the minimum wage.Public-sector pay growth has picked up, even as doctors, nurses and teachers have threatened further industrial action. Unions have also won some striking pay deals in parts of the private sector where staff are scarce. Earlier this week, Unite paused planned strikes at Heathrow airport while its members voted on a new offer that would match pay with retail price inflation this year and link it to inflation in 2024.Unite has also called off planned industrial action at a Coca-Cola bottling plant in Wakefield after securing a deal that will raise pay by more than 10 per cent for high-paid technicians, and by as much as 18 per cent for some of the lowest-paid clerical staff.Neil Carberry, chief executive of the Recruitment & Employment Confederation, said labour shortages “amplify the impact of inflation”, as employers were raising wages both to fill roles and in response to cost-of-living pressures on their staff. But the latest data contained some signs of shortages easing. Vacancies are still high in many professional areas but have dropped below pre-pandemic levels in some lower-paid sectors such as retail. The workforce, which shrank after the onset of Covid-19 as young people opted to study longer and older people dropped out, is expanding again as fewer people choose early retirement or opt to stay at home to care for family.Although long-term sickness is keeping growing numbers out of work, the overall rate of economic inactivity has fallen sharply in the past few months, with the biggest drop seen among older people. Growing numbers of migrants from outside the EU have also bolstered employment.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Simon French, economist at Panmure Gordon, said this suggested there was still scope for the UK workforce to grow in response to employers’ wish to hire. Rapid nominal wage growth was “inevitable” given the even higher rate of inflation, he said, but “whether it is a wage price spiral where the negotiating power of labour can continue to keep up with prices, I’m more sceptical”. More

WASHINGTON (Reuters) – Federal Reserve officials for months have been counting on slower-rising U.S. housing prices to help in their efforts to control inflation, and there are good reasons to think that may happen soon. An oft-cited index of real-time leases prepared by real estate firm Zillow, for example, shows rental inflation peaked just over a year ago – and, mathematically, should start lowering inflation statistics that include rents as an annual average. Data showing the rental vacancy rate was the highest in two years in the first quarter of 2023 also supports the idea that rental inflation should start to come down. But that relief remains, for now, just over the horizon, with shelter costs in May continuing to drive headline inflation and rising at a monthly rate that equates to about 6% annually – a lot for a service that accounts for about 35% of the consumer “basket” used to analyze prices. Though the monthly pace of shelter inflation is slowing, it is doing so just as some analysts – and some Fed officials – ponder if housing has reached a bottom and whether home prices might start to rise again.Housing is treated as a service in the Consumer Price Index, broken into rents and a rental equivalent calculated for those who own their homes. Both were increasing at around 0.8 percent per month last fall and have since declined to around a 0.5% growth pace as of May.But that has still been enough to prop up overall inflation. Shelter costs in May accounted for roughly two-thirds of the headline 4% increase in consumer prices.Though further slowing is expected, “shelter inflation remains a wildcard … in the near term,” analysts from TD Securities wrote following the release on Tuesday of the latest CPI data, with month-to-month readings that may not move down much further for the time being.Ahead of this week’s Fed policy meeting, some U.S. central bank officials had already begun raising doubts about whether the full measure of help expected from a slowdown in housing costs will be realized.”While we expect lower rents will eventually be reflected in inflation data as new leases make their way into the calculations, the residential real estate market appears to be rebounding, with home prices leveling out recently, which has implications for our fight to lower inflation,” Fed Governor Michelle Bowman said in a speech late last month. More

The failure is having an outsized impact on commuters and the movement of goods and services, Buttigieg said Tuesday at a press conference at the site. The 1,924-mile (3,096-kilometer) interstate runs from Miami to the Maine-Canada border. It’s part of a critical long-distance trucking and commuting route. The portion of the highway, which collapsed after a tanker-truck fire on Sunday, carried an average of 160,000 vehicles a day, he said, 8% of which were trucks. “Obviously, that is a lot of America’s GDP moving along that road every single day,” Buttigieg said.The incident is being investigated by the US National Transportation Safety Board, which expects to produce a preliminary report in two to three weeks.©2023 Bloomberg L.P. More

It is natural for people to focus on problems at home. But it is also essential to take a wider view. The succession of shocks — the pandemic, supply constraints, Russia’s invasion of Ukraine, soaring inflation and tightening monetary and financial conditions — have adversely affected large parts of the world economy, but the weakest of countries and the most vulnerable people within them, above all. All this has had (and will have) dire consequences for economic development, the alleviation of poverty and even political stability in poor countries. These challenges, which emerge clearly in the World Bank’s latest Global Economic Prospects report must not be ignored. They certainly give its new president, Ajay Banga, a formidable in-tray.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

The World Bank’s summation of the consequences of these shocks, made worse by the longer-term slowdown in the growth of world trade, rising protectionism, the build up of debt and the worsening climate crisis, is grim. What can justly be called a “polycrisis” has “dealt an enduring setback to development in emerging and developing countries, one that will persist for the foreseeable future. By the end of 2024, economic activity in these economies is expected to be about 5 per cent below levels projected on the eve of the pandemic.” Worse, in more than one-third of the poorest countries, incomes per head will be below 2019 levels in 2024. This will have far-reaching effects: the impoverished and insecure will find it hard to improve their own human capital or that of their children. Today’s disasters will radiate far into the future.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

As has long been the case, east Asia and south Asia are expected to perform relatively well. But performance elsewhere, notably in Latin America and sub-Saharan Africa, is forecast to be poor. Yet this has to be set in a longer-term perspective. The report indicates that, without China, incomes per head of emerging and developing countries have stagnated relative to those in high-income countries since the middle of the last decade. The relative incomes per head of the low-income countries have stagnated for even longer. In brief, the reduction in global inequality seems to have stalled.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

The causes of this long-term stagnation in relative incomes are many and complex. They lie in domestic policy and politics, as well as in the global environment. But one factor must be rising protectionism and the slowdown in the growth of world trade. Notably, the volume of world trade grew at an average rate of 5.8 per cent a year between 1970 to 2008, while gross domestic product growth averaged 3.3 per cent: trade was an engine of growth. Between 2011 and 2023, the average growth of world trade was a mere 3.4 per cent, while that of global GDP fell to 2.7 per cent. This is not deglobalisation. But it is definitely what some now call “slowbalisation”.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Today, however, many of the most daunting challenges are financial. The long-term accumulation of debt, especially by low-income countries, is interacting with higher interest rates and turbulent credit markets to create serious debt difficulties. As usual, these include not just higher cost but reduced supply: credit, once again, is rationed. Thus, the report notes that one out of every four emerging and developing economies has now in effect lost access to international bond markets.The evidence supplied on the impact of tightening credit conditions is both striking and disturbing. Since February 2022, the cost of borrowing for C-rated borrowers has jumped by an extraordinary 14.4 percentage points. As a result, the growth forecast for 2023 for these countries has collapsed from 3.2 per cent a year ago to just 0.9 per cent now.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Yet debt pressures on the poorest countries are not a new phenomenon. Net payments of interest on public debt as a share of government revenue in low-income countries have not only risen significantly since the pandemic but have long been above that of the average of all emerging market and developing countries. Substantial debt relief is needed. Much of that will have to come, in one way or the other, from China. Today, remarkably, bilateral debt owed by low-income countries to the high-income members of the Paris Club has become less than half that owed to non-Paris Club countries, mainly China.The dire situation on financing and debt has become pressing. There is no chance that extreme poverty will be eliminated without urgent and radical change. The same is true if needed investments are to be made in climate mitigation and adaptation. Nor is it conceivable that the problems of poor countries with weak credit ratings will be addressed by the private sector on its own. There is an overwhelming case for urgent, effective and generous action.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

Next week’s “summit for a new global financing pact” in Paris offers a valuable opportunity to make rapid progress. But it is important that such progress be made cooperatively with China. The needed changes must build on the recognition that what is going on now is as unsustainable as it is undesirable. They must be addressed at the urgent needs of both people and planet. They must bring down the cost of existing debt and provide the resources and risk-sharing instruments needed to generate affordable financing in future.Yes, the shocks of recent years have made generous and effective action more politically difficult in high-income countries. Frightened people become inward-looking. But these shocks have also, beyond any doubt, made action more vital. Banga has inherited what is, if wisely used, an institution more valuable as a pulpit than as a bank. In these hard times, he must use it well, to bring the world together to tackle these highly urgent [email protected] Martin Wolf with myFT and on Twitter More

Investor sentiment on Germany’s current economic climate has worsened at the fastest pace since the pandemic hit over three years ago, according to a closely watched survey.Sluggish manufacturing output, slowing consumer spending and weak export growth have combined with high inflation and rising borrowing costs to cause the German economy to shrink in the past two quarters.The Leibniz Centre for European Economic Research, or ZEW, said the downturn triggered a sharp fall in its gauge of investor sentiment on the eurozone’s largest economy. The gauge dropped 21.7 points to minus 56.5 when it was published on Tuesday, marking the biggest monthly fall since April 2020. Economists polled by Reuters had predicted only a much smaller decline to minus 40.ZEW president Achim Wambach said investors had become less gloomy about the outlook for the German economy over the next six months. Its index of economic sentiment remained in negative territory, despite rising 2.2 points to minus 8.5 points. “The experts do not expect the economic situation to improve in the second half of the year,” said Wambach. “The export-oriented sectors in particular are likely to develop rather poorly due to a weak global economy. Overall, however, the current recession is not assessed as particularly threatening.”While Germany’s economy has struggled recently, many of its largest companies are faring better. The country’s Dax index of the 40 biggest listed groups is up 20 per cent over the past year to a new all-time high. Manufacturers have struggled, however. Investors told ZEW they expected this divergence between the dominant services sector and manufacturers to continue, with firms in the machinery, carmaking and chemical sectors all forecast to be hit by falling profits.Christian Schnittker, an economist at Goldman Sachs, said the survey’s findings were “consistent” with their expectations that Germany’s economy would contract over the course of 2023. Most analysts expect Germany to achieve only tepid growth this year and the country is expected to be the weakest performer among the world’s big economies, according to the OECD, which forecast gross domestic product in the country would stagnate in 2023.The European Central Bank is expected to cut its forecast for growth in the eurozone this year when its governing council meets this week. The downgrade is unlikely to be enough to dissuade the ECB from raising interest rates by another quarter percentage point on Thursday as it tries to bring down inflation that remains three times higher than its 2 per cent target.A drop in government and household spending caused German GDP to shrink 0.3 per cent quarter on quarter in the first three months of the year. That followed a 0.5 per cent contraction in the fourth quarter of last year. More

He also said one more interest rate hike was expected from the Federal Reserve in the summer.The Fed has been pushing up rates since last year to douse red-hot inflation, which has been stickier than what some had expected. The relentless monetary policy tightening has raised the odds of a recession as consumers cut down on discretionary spending, which is hurting loan demand. U.S. Bancorp is seeing a drop in loan demand in the second quarter compared to a year earlier, Cecere said. More

BRUSSELS (Reuters) – Not much progress is expected on the reform of European Union debt rules at EU finance ministers’ talks on Friday, officials said, as Germany and France remain at odds over whether there should be a minimum annual debt reduction obligatory for all.EU finance ministers will meet in Luxembourg to discuss changes to the 27-nation bloc’s fiscal rules, set to underpin the value of the euro, because a surge in public debt caused by the pandemic and the war in Ukraine has rendered them obsolete.The changes are meant to prevent excessive borrowing by governments at a time when the European Central Bank is quickly raising interest rates to bring down inflation while the economy is in technical recession.The European Commission proposed in April that governments should ensure public debt falls by an individually negotiated amount over four years and keeps falling for a decade afterwards. This is in sharp contrast to existing rules, under which each country is supposed to cut debt every year by 1/20 of the excess over the EU ceiling of 60% of GDP. For highly indebted countries like Italy, Greece, France or Spain, this existing requirement is simply unrealistic.The Commission therefore proposed that there should be no numerical target for annual debt cuts, stating only that at the end of the four years, debt must be lower than at the start.This immediately drew criticism from the EU’s biggest country, Germany, worried that such loose formulation of the objective would suck all ambition out of the debt-cutting plans. Berlin wants a 1% of GDP minimum annual debt reduction target explicitly written into the new rules which, Paris argues, defeats the whole purpose of the reform. “I don’t expect anything in Luxembourg, because we have just submitted the first round of written comments to the Commission proposal last week,” said one senior national official who takes part in the preparation of the meeting.”Now the Swedish presidency needs to go through the comments, which will take some time. Probably so much time that they will not make any compromise proposals, but leave that to the next presidency,” the official said, pointing to Spain which takes over the chairing of EU meetings on July 1.A second senior national official said the ministerial talks would boil down to a high-level political exchange, but without any specific outcome. Officials were also wary that because part of the debate on the reform would be public, some ministers might be tempted to “play to the gallery” and make statements aimed mainly at winning points with voters at home.”In preparatory discussions, some countries asked for ministers not to draw ‘red lines’ in the public session, so that there is a possibility of reaching a compromise afterwards,” a third senior national official said. Officials said they did not expect a deal before December. More