Aurelia Butler

When the histories of the war in Ukraine are written, it seems a fair bet that the African mediating mission announced by South Africa’s president Cyril Ramaphosa this week will struggle to make a footnote. Would-be mediators are two-a-penny these days, and anyway South Africa has marked its card as being rather too cosy with Moscow to be a credible interlocutor with Ukraine.But when the histories of the rise of the post-unipolar world are written, Africa’s quixotic mediators may well merit a mention. The idea of six African heads of state criss-crossing the front lines of a European war is not just a telling counterpoint to all those western interventions in Africa over the years, it also underlines the accelerating assertiveness of the countries of the “global south” — and their sense that their hour really may at last have come.This has been visible in a number of arenas since the old globalised order started to fragment following the financial crisis of 2008. But the war in Ukraine has turbocharged it. Many non-western nations have looked on at the west’s full-throttle support for Ukraine and seen hypocritical powers yet again prioritising their own interests and concerns over the big global issues such as health and climate change. They also sense two major opportunities: to play the US and China off against each other, and, as they see it, a long overdue rewriting of the post-1945 world order. As with all great would-be revolutionary coalitions, this revamped “non-aligned movement” is a group of vastly different and often competing interests; and some can hardly claim to be neutral. The Brics summit in Durban in August will be a cacophonous showcase for these contradictions. The group consists of two autocracies, Russia and China, two big democracies, Brazil and India (the latter hugely wary of the rise of China) and the host, and junior relation, South Africa. Now over a dozen more countries are interested in joining, including Iran.Not only does this threaten to unleash the world’s most mind-numbing acronym, but the risk, particularly for India and Brazil, is that the Brics would tilt ever more into becoming a China club rather than a non-aligned forum of developing economies.But even so there are clear common interests and goals: a restructuring of the UN Security Council so it represents the world as it is today; a rethink of the Bretton Woods institutions; a tilt at the dollar as the global reserve currency; a push back at the American-led system of economic sanctions; and more.These targets may not all be attainable but they are rather more precise than the woolly aims of the original non-aligned movement at its first meeting in Bandung, Indonesia in 1955. Back then the members represented a minuscule share of the global economy; not so today.“Then it was a talking shop,” says Michael Power, who for 30 years has studied the rise of the global south, most recently as the Cape Town-based strategist for asset manager Ninety One. “But now they are talking about whether they should start trading with each other with local currencies.”So what should the west do? Lead by example, finally commit to reforms of the global order and pick its words more carefully. One easy piece of advice to anyone drafting communiqués at the end of this weekend’s G7 summit: avoid coinages such as “fence-sitters” and “geopolitical swing states” that currently circulate in Washington. The swing state metaphor — implying “we will focus on you once every four years” — perpetuates the sense of a patronising, if not parochial, imperial power.“We should talk about a rules-based international system, not the rules-based system,” says a senior western diplomat. “And when we talk of the war it should not just be about European peace but about the type of world we want to live in.”More concretely, the Biden administration has been building bespoke regional alliances, from I2U2 (diverting as a Bono-inspired grouping would be, this is India, Israel, the UAE and the US), to the Asia-Pacific security Quad of India, Australia, Japan and the US.China is busily convening too, however. This week Xi Jinping hosted a summit of Central Asian countries — Russia’s backyard — reinforcing the thesis of historian Serhii Plokhy that, far from expanding Moscow’s global heft, the war in Ukraine has accelerated a potential subservience to Beijing.New world orders are of course easier to declare than realise. In 1991 George HW Bush talked of one. His words resounded hollowly a year later: Bosnia was in flames. And some will find it tricky to steer their new course. South Africa’s clumsy pas de deux with Russia is an object lesson in how not to play the non-aligned game. It is lucky that the Biden administration does not seem inclined to penalise it for its erraticism.But India, Indonesia and others are playing rather well. When the war in Ukraine ends, it will be against the backdrop of a subtler world order than that of February 2022. It will be more complex and probably more dangerous; but for some non-aligned countries it will have more opportunity. 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WASHINGTON (Reuters) – Wall Street, small businesses and potential homebuyers may all breathe a sigh of relief if the Federal Reserve chooses not to raise interest rates at its policy meeting next month, as many traders and analysts expect.But U.S. central bank officials are not only still on the fence about a pause in their 14-month tightening cycle, they are only starting to hash out whether to frame that decision as an extended halt to the aggressive run of rate hikes or a mere “skip” to give the economy some breathing room, with more borrowing cost increases coming soon if inflation does not decline.Between the possibility the Fed may deliver a rate hike at its June 13-14 meeting and the uncertainty around how policymakers might describe a decision not to, there’s no guarantee of clarity soon from a central bank whose officials are beginning to diverge over what should happen next.If there is any steer to come from the top, it could happen on Friday when Fed Chair Jerome Powell speaks on a monetary policy panel at a U.S. central bank staff research conference in Washington. The panel is scheduled to begin at 11 a.m. EDT (1500 GMT).Yet even Powell may be constrained in how far he can lean at this point: The Fed is unlikely to raise interest rates if a down-to-the-wire political standoff over the U.S. federal debt ceiling remains unresolved. If an actual U.S. debt default is the result, the central bank may even be pushed towards emergency steps to ease the burden on the economy.Even so, Powell on Friday could bring some definition to a discussion increasingly colored in shades of gray after more than a year of strong consensus around the need to raise the benchmark policy rate fast in order to slow a breakout bout of inflation. This week has seen some Fed policymakers call for a pause to the rate hikes, others push for more increases, and, in the case of Fed Governor and vice chair nominee Philip Jefferson, walk a middle path citing risks on either side with no clear recommendation. Atlanta Fed President Raphael Bostic captured the mood earlier this week when he said that while he was “inclined” to keep interest rates steady at the June meeting, even that decision would not say much about the future.”I would say it was a pause, but a pause could be a ‘skip,’ or it could be a hold,” Bostic said. “There’s a lot of uncertainty in the world. We will just have to see how things play out and get a sense of what’s true signal and what’s noise, and that is going to be a week-to-week thing.”‘FRUSTRATING INCONSISTENCY’The quarter-of-a-percentage-point rate increase approved by the Fed earlier this month was the tenth in a row since March of 2022, and raised the benchmark policy rate to the 5.00%-5.25% range, the level most policymakers had penciled in as the likely stopping point for rate hikes. The Fed’s policy statement at that meeting opened the door to a pause, though Powell in his post-meeting press conference said “it’s not possible to say that with confidence now … We’re going to have to see data accumulating” before deciding whether the door was closed on further rate hikes. Data on inflation, jobs, and the banking industry since then have done little to clarify the situation, with nothing seeming to change very fast. Job growth seems to be slowing but remains strong; inflation appears to be slowing but is still high; overall demand, bank credit and the economy look to be slowing but also are holding up better than anticipated.The result has been “a frustrating inconsistency” with some of the arguments developed by policymakers since the last meeting, said Tim Duy, chief U.S. economist at SGH Macro Advisors, with dovish officials keeping the possible need for more rate hikes open, hawkish ones noting the risks of tightening credit, and some trying to have it both ways.”It’s getting to be time to fish or cut bait,” Duy said, and either agree the economy needs time to fully adjust to the aggressive rate hikes enacted over the last year – a core argument for pausing – or “stick with the hawkish position of waiting for inflation data to roll over” and continue raising rates until then.(This story has been refiled to fix a typographical error in paragraph 1) More

“We should consider whether there are necessary – and targeted – adjustments we should make to banking regulation,” Bowman said in remarks prepared for delivery to a Texas Bankers Association event, listing topics such as deposit insurance reform that are outside the purview of the Fed and which would require legislation to change.”Radical reform of the bank regulatory framework – as opposed to targeted changes to address identified root causes of banking system stress – is incompatible with the fundamental strength of the banking system,” she said. Bowman has emerged as strong critic inside the Fed of the stricter bank rules that Vice Chair of Supervision Michael Barr has signaled he plans to roll out, even before the failures of two U.S. regional banks in March triggered widespread financial market stress. During testimony to Congress this week, Barr was repeatedly asked about Bowman’s views, which were first laid out in detail last week. He said he welcomed any third-party independent reviews to follow his own review of the failure of Santa Clara, California-based SVB. Barr’s review, which was published in late April, found problems in the Fed’s own approach to supervision that he said needed fixing. Barr, who started his job last summer, has also said he plans to consider new rules for banks, including lowering the threshold for intense supervision to banks with $100 billion or more in assets, from the $250 billion cutoff established under his predecessor.Bowman did not touch on monetary policy or the economic outlook in her prepared remarks. More

China’s president Xi Jinping on Friday laid out an ambitious plan for co-operation with Central Asian countries on defence and security, pushing into a region traditionally seen as Russia’s backyard at a moment when Moscow is distracted by the war in Ukraine.Hosting his first in-person summit with leaders of the group of Central Asian countries known as the “C5”, Xi also offered to increase transport and energy ties with the region. The group consists of Kazakhstan, Tajikistan, Kyrgyzstan, Turkmenistan and Uzbekistan.“Xi stressed that China is ready to help Central Asian countries improve their law enforcement, security and defence capacity building in an effort to safeguard regional peace,” state news agency Xinhua reported.For Beijing, Central Asia is critical to the security of its politically sensitive western Xinjiang region, where it is has been accused of suppressing the Muslim Uyghur population. The region is an important source of land-based energy imports and a gateway to overland trade with Europe.Russia is the dominant power in Central Asia, but its attack on Ukraine has caused disquiet in the region. Moscow has also traditionally served as a peacekeeper, but its ability to maintain stability is in doubt after it failed to quell border skirmishes between Kyrgyzstan and Tajikistan last year.Xi, who hosted the two-day summit in the Chinese city of Xi’an, said Beijing would provide Rmb26bn ($3.7bn) in “financing support” and “free assistance” to Central Asian countries. He did not give further details. Beijing would also boost cross-border freight volume, including supporting a “cross-Caspian Sea” transport corridor by upgrading ports, developing China-Europe freight train hubs and encouraging the construction of warehouses in Central Asian countries. China sees Central Asia as a crucial overland alternative for the sea trade to Europe. But since the start of the Ukraine war, the northern part of this route through Russia has been disrupted. This has led to efforts to strengthen alternative corridors through the region that do not pass through Russia. Xi said China would accelerate construction of oil pipelines and increase oil and gas imports. While Xi did not provide further details of the defence co-operation, analysts said China would be keen to introduce a formal security co-operation arrangement. This could take the form of further efforts to stem terrorism — China is concerned the region could act as a conduit for separatists entering Xinjiang — as well efforts to export its model of state control to help countries with internal security.Temur Umarov, a fellow at the Carnegie Russia Eurasia Center, said China was likely to focus on reviving joint drills in Central Asia involving its People’s Armed Police. Such drills were held across the region in 2019, but suspended during the pandemic.Tajikistan would be of particular interest to Beijing as the only country bordering both China and Afghanistan, Umarov said.“Tajikistan’s military is not the strongest in Central Asia. So that is why, from China’s point of view, it’s an extension of Chinese national security” to deepen co-operation there, he said.Analysts said Beijing could also help the region build 5G networks equipped with its social monitoring and control systems, such as advanced facial recognition software.Moscow and Beijing both fear insecurity in the region from so-called “colour revolutions” — pro-democracy movements they claim are backed by western governments.“They are helping the Central Asian local authorities not to be overthrown by colour revolutions,” said Chienyu Shih of Taiwan’s Institute for National Defense and Security Research. Additional reporting by Max Seddon in Riga More

NEW YORK (Reuters) – Federal Reserve Bank of New York President John Williams said Friday the U.S. and other major economies are still in a fundamentally low-interest-rate world despite the impact of the coronavirus pandemic and the inflation surge arising from it. Speaking to a conference at the Federal Reserve in Washington, Williams’ remarks took on the technical concept of the natural rate of interest, which is the interest rate that neither slows nor stimulates the economy. Before the pandemic struck, this measure, referred to as R-Star, had been historically low, allowing the central bank to keep its interest rate target at fairly low levels. But the pandemic and its shocks to the global economy, as well as the resulting high level of inflation, obscured efforts to estimate R-Star and the New York Fed stopped publishing its closely watched estimate in late 2020. Williams, a leading intellectual architect of the R-Star concept, said his bank would be relaunching its public estimate Friday, updating it on a quarterly basis. Williams’ contended that even with the pandemic and the aftermath of its most acute phase, the fundamental story of a low natural interest rate remains in place. “According to the model estimates, the main longer-term consequence from the pandemic period is a reduction in potential output, but the imprint on R-star appears to be relatively modest,” Williams said, adding “importantly, there is no evidence that the era of very low natural rates of interest has ended.” Compared with pre-pandemic R-Star estimates that hovered around the 0.5% range, Williams said “the resulting estimate of R-star is about 1/2 percent in the first quarter of 2023, and subsequently falls to slightly below zero.” Williams, who also serves as vice-chairman of the rate-setting Federal Open Market Committee, did not comment on the economic or monetary policy outlook in his remarks. But his comments suggest that once the Fed’s battle to contain high inflation is over it may again at some later time be able to return short-term rates to low levels. More

A paper ECB supervisors prepared for this week’s meeting of euro zone finance ministers said recent banking turmoil showed “increased attention needs to be paid to the liquidity and funding risk outlook of the sector as monetary policy shifts to a new regime.”The ECB said it was actively working with other global supervisors to understand which lessons could be learnt.Deposit flights have caused the failure of some U.S. regional banks and forced Switzerland to orchestrate Credit Suisse’s rescue by rival UBS. “It may be beneficial to explore how factors such as high deposit base concentration and a predominant reliance on uninsured deposits could be dealt with in the Pillar 2 framework,” the ECB said.Most European Union countries have some form of national insurance that guarantees deposits up to 100,000 euros ($110,080).The Pillar 2 framework is a supervisory process aimed at ensuring each lender has adequate capital and liquid asset holdings based on its specific risk profile.The ECB can impose additional capital and liquidity requirements if it sees fit. It would use liquidity requirements to address liquidity risks.The Pillar 2 liquidity framework focuses on liquidity risks that are not fully addressed by Pillar 1 requirements: the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR).The LCR forces banks to hold high-quality assets (HQLA) they can convert into cash, either through a sale or by pledging them as collateral, to cover cash outflows over a 30-day period.Banks mostly hold government bonds as HQLA, but rising interest rates have curtailed the value of these holdings, so for example Silicon Valley Bank suffered a major capital hit when it sold U.S. Treasuries to offset deposit flights.”Areas of focus include some elements of the calibration of the LCR and the extent to which assets held at amortised cost, which may be difficult to sell without suffering losses when liquidity needs arise, can qualify as HQLA,” the paper said.($1 = 0.9084 euros) More