Aurelia Butler

Joe Biden will cut short a planned overseas trip and return to Washington on Sunday, after Speaker of the House Kevin McCarthy offered the first hint that lawmakers were moving towards a deal to raise the debt ceiling and avert an unprecedented government default.The US president is set to depart on Wednesday for G7 meetings in Japan. He had originally been scheduled to travel on to Papua New Guinea and Australia, but those plans have been scrapped, the White House said Tuesday.The change in plans came as Biden met the four top members of Congress — Republicans McCarthy and Mitch McConnell and Democrats Chuck Schumer and Hakeem Jeffries — in the Oval Office on Tuesday to try and make progress on a potential deal to raise the debt ceiling and avert default. All parties were cautiously upbeat after the hour-long meeting.The White House called the conversation “productive” and “direct”, adding Biden was “optimistic that there is a path to a responsible, bipartisan budget agreement if both sides negotiate in good faith and recognise that neither side will get everything it wants”.Staffers would continue to meet daily to hash out a deal, the White House said, and Biden would speak to the congressional leaders by phone while he is travelling, before reconvening in person when he is back in Washington.McCarthy, who has struck a more pessimistic tone in recent days, was more circumspect. He told reporters that while he was not more “optimistic”, the conversations had been “productive”.The Speaker added it was “possible to get a deal by the end of the week”, but cautioned: “We have got a lot of work to do in a short amount of time.”The White House began formal talks with congressional leaders last week in an effort to reach a deal before the Treasury runs out of money and is unable to meet its obligations. Janet Yellen, the Treasury secretary, has said the so-called X-date could come as soon as June 1.

Earlier on Tuesday, more than 140 leaders of the biggest US companies, including Goldman Sachs, Pfizer and KKR, warned that not raising the debt ceiling could lead to a “potentially devastating scenario”.In an open letter to Biden and congressional leaders, executives from a wide range of leading businesses and investment firms warned a failure to raise the debt ceiling could have “disastrous consequences” for the US economy.“We write to emphasise the potentially disastrous consequences of a failure by the federal government to meet its obligations,” the signatories wrote. “Absent a resolution, the government is likely to run out of money as soon as June 1. Action to end the pending debt crisis is necessary now.”The letter was organised by the Partnership for New York City, a group co-chaired by Albert Bourla, chair and chief executive of Pfizer, and Rob Speyer, president and chief executive of Tishman Speyer, the real estate group. It was signed by executives representing broad swaths of corporate America from companies including airline JetBlue, glasses retailer Warby Parker and media group Condé Nast. More

Over 3mn more people are struggling to keep up with bills and payments, according to official data that has shown the growing impact of the cost of living crisis on UK households. The Financial Conduct Authority said on Tuesday that 10.9mn people reported struggling to meet bills and credit payments this month, up from 7.8mn in May 2022. The figures have been published ahead of the FCA’s planned implementation of a new consumer duty at the end of July, aimed at strengthening consumer protection measures, including for loans.The regulator is already warning that lenders need to do more to support borrowers. “Research highlights the real impact the rising cost of living is having on people’s ability to keep up with their bills,” said Sheldon Mills, FCA executive director of consumer and competition. He said the new consumer duty imposed on companies would ensure firms acted to deliver good outcomes for consumers. The FCA’s findings have been drawn from its regular Financial Lives survey, which will be published in full later this year. The figures reflect a growing burden of debt in Britain, as more people fall into financial difficulty due to a challenging economic climate. The Bank of England last week warned that inflation would remain above the UK government’s 2 per cent target until 2025, as central bankers raised interest rates to 4.5 per cent. This will exacerbate living costs as homeowners come up to renegotiate mortgage rates. “For many people this will be missing payments on their mortgage or not meeting a credit card payment, that could drag them further into debt,” said Laura Suter, head of personal finance at platform AJ Bell. “More than a million people are due to remortgage on to higher rates before the end of the year, leaving many with a price shock they can’t afford.” Forecasts published by the FCA in March predicted that 356,000 mortgage borrowers could face payment difficulties by June 2024. It said that young borrowers aged between 18 and 34 were more likely to be “financially stretched” than the rest of the working age population.

The FCA moved last week to warn firms it would take robust action where they failed to offer consumers “fair value”. It followed an assessment by the regulator that found many companies were still falling short on implementing the new consumer duty, which will bind groups to treat customers properly. Regulators hope that measures will force firms to communicate more effectively with consumers, though industry figures have complained about the potential administrative burden on firms and the risk of a growing number of compensation claims.UK Finance, the trade association for the banking and financial services sector, said: “Lenders are proactively contacting customers and will always work with them to find the right solution for their particular needs and circumstances.” More

“Gradual policy adjustments can be helpful,” Logan said at an Atlanta Fed economic conference.While not commenting on an upcoming Fed decision on whether to raise rates an 11th straight time, Logan said that “financial conditions can sometimes deteriorate nonlinearly, doing damage to the broader economy, but the risk of a nonlinear reaction can be mitigated by raising interest rates in smaller, less frequent steps.”Logan’s remarks, introducing a discussion among economists about how to tighten monetary policy without undue financial stress, point to the ongoing influence of recent bank failures on the Fed’s policy discussion.Policymakers have expressed relief that deposit outflows from the banking system stabilized quickly after the March 10 failure of Silicon Valley Bank raised the risks of further bank runs. But the collapse of SVB and a handful of other regional banks also made policymakers more cautious after they raised the benchmark policy rate by 5 percentage points in a little over a year, the fastest pace since the 1980s.Logan said it may be possible to pull the levers of monetary policy in ways designed to protect financial stability.”The restrictiveness of monetary policy comes from the entire policy strategy – how fast rates rise, the level they reach, the time spent at that level and the factors that determine further increases or decreases,” Logan said.While the Fed has scaled back to quarter point rate increases after moving rates over the past year by as much as three quarters of a point at a time, officials continue to debate if rates have gone as high as needed to cool inflation, and will have ongoing discussions about how long rates need to remain high.”These levers can conceivably be arranged to maintain the restrictiveness of policy while reducing financial stability side effects,” Logan said. More

The remarks on Tuesday by Cleveland Fed President Loretta Mester, New York Fed chief John Williams and Richmond’s Thomas Barkin reveal ongoing internal debate over a pause on rate hikes next month.Investors bet the Fed will hold fire at its June 13-14 meeting as policymakers assess the impact of the five percentage points of rate increases they’ve delivered in little over a year and strains in the banking sector.Williams, who is vice chair of the policy-setting Federal Open Market Committee, didn’t spell out what he favored doing next month — but left the impression that he was comfortable with a wait-and-see approach.“We know it takes a while for our decisions to fully affect the economy,” he told an audience at the University of the Virgin Islands in St. Thomas. “We’ve got to make our decisions and then watch what happens, get that feedback, see how the economy’s behaving.”While officials have been strongly united on the tightening done up until this point, divisions are beginning to emerge over whether rates are now high enough for the Fed to pause its increases.Mester, in remarks that were among the most hawkish shared by US central bankers since they met earlier in May, explicitly left the option of doing more on the table.“At this point, based on the data I have so far, given how stubborn inflation has been, I can’t say that I’m at a level of the fed funds rate where it’s equally probable that the next move could be an increase or a decrease,” she said earlier in Dublin.Barkin stressed he was open minded about what to do in June, while noting that he was still looking to be convinced that inflation has been defeated and he’d support further rate hikes if needed.“I do want to learn more about what’s happening with all these lagged effects. But I also want to reduce inflation,” he said in an interview on Bloomberg Television with Michael McKee. “And if more increases are what’s necessary to do that I’m comfortable doing that.”Policymakers raised rates by a quarter percentage point at a meeting earlier this month, bringing their benchmark to a target range of 5% to 5.25%, and signaled they may be ready to pause their tightening cycle.Barkin, though, said officials haven’t decided what they will do at next month’s FOMC meeting.“The message sent in the last statement was one of optionality,” he said, noting that uncertainty is high and there was a lot of data due before the next meeting, in addition to other potential headwinds for the economy.Economic Headwinds“You’ve got questions about the debt ceiling and what impact that might have. You’ve got questions about credit tightening and how significant that might be,” the Richmond Fed chief said.“So I think it gives you time and optionality to say either there’s still more we need to do so let’s do more, or it’s still OK to wait and we’ll wait a bit.”Consumer prices climbed 4.9% from a year earlier in April, the first sub-5% reading in two years. Excluding food and energy, the so-called core inflation rate also moderated.While the Fed targets a different yardstick of annual price movements — the personal consumption expenditures gauge — all measures are running at more than double the central bank’s 2% target pace.“There’s a plausible story that we get inflation down, due to a lot of the actions that have been taken in the past – both ours and by others,” Barkin said. “But I’m still looking to be convinced on that story and it may take more.”©2023 Bloomberg L.P. More

BRASILIA (Reuters) – Brazil’s Finance Ministry is preparing a new set of initiatives to increase tax revenue, including a review of deductions and exemptions for income tax on individuals, according to three sources familiar with the matter. The potential measures aim to shore up Brazil’s fiscal stability as leftist President Luiz Inacio Lula da Silva seeks to direct more money to the poor and state-backed projects. They include the taxation of company profits and dividends as well as changes in the taxation of certain investment funds, said the sources, who spoke on condition of anonymity as the discussions are not public.The Finance Ministry did not immediately respond to a request for comment.Previous administrations have tried – and failed – to restrict income tax deductions, which allow taxpayers to use proof of certain expenses, such as medical and educational costs, to reduce their tax bills. Such measures overwhelmingly benefit higher-income individuals.The government estimates it is set to lose 51.1 billion reais ($10.2 billion) from exemptions, along with 31.3 billion reais from deductions in its 2024 budget bill.Lula has criticized deductions for healthcare expenses. In December, a month before taking office, he highlighted the challenges faced by the poorest in accessing specialized treatments, comparing that with his own ability to undergo annual exams and deduct the associated expenses from his income tax, deeming it a “contradiction.”The finance ministry’s revenue chief Robinson Barreirinhas said last month that the government was working on additional revenue measures to be announced in the second half of this year. He mentioned “very solid and consistent” studies regarding the potential to boost annual revenue by 155 billion reais as a result of combined efforts.The revenue increase is a crucial pillar of the new fiscal framework presented by the government to provide a sustainable path for public debt. Finance Minister Fernando Haddad has already announced that the government would crack down on Asian e-commerce giants and online sports betting and curb some company tax benefits to raise more than 100 billion reais.($1 = 5.0033 reais) More

In 2015 Greece was on the brink of an economic disaster. In the aftermath of the financial crisis its debt ballooned and was downgraded to “junk” status. The so-called troika of institutions — the IMF, European Commission and European Central Bank — were desperately trying to keep it afloat, and speculation mounted over its withdrawal from the eurozone. Now, it is one of the fastest growing economies in the bloc, and its central bank governor expects it to regain its investment-grade credit rating this year. The turnround should be lauded, but with Greece heading to the polls on Sunday, it is vital that the next government builds on the hard-won progress. The foundations for the economic revival were forged by successive governments enacting austerity measures, including tax rises, public sector wage controls and changes to pensions, to meet the conditions of rescue packages. In 2018, Greece left its third and final bailout programme, and last summer it exited post-bailout monitoring. Although the pandemic led to a surge in debt, last year Greece’s debt-to-GDP ratio fell by more than 20 percentage points and the government achieved a small primary budget surplus. Enhanced fiscal prudence means the spread of Greek debt over German Bunds has dropped sharply since the height of the eurozone debt crisis, to trade close to Italy’s now.Since 2019, Prime Minister Kyriakos Mitsotakis, leader of the ruling New Democracy party, has overseen a pro-business and relatively orthodox management of the economy. Foreign direct investment and exports have grown strongly. The economy is now 6.4 per cent above its pre-pandemic level. But success achieved to date should not blind the country to the reforms needed ahead. Greece still has the highest debt load in the eurozone, and the economy is still about a fifth smaller than in 2008. Much of the recent improvement in its debt metrics has been driven by high inflation. Today’s high cost of living has also compounded the suffering of Greeks following years of austerity: the share of people at risk of poverty or social exclusion is one of the highest in the EU.A wiretapping scandal in which the security services, overseen by Mitsotakis’s nephew, spied on politicians and journalists, has tarnished the prime minister’s reputation and underscored Greece’s problems with the rule of law. The government has also been accused of illegal pushbacks of refugees at its borders and of presiding over a worrying decline in media pluralism. A fatal train crash has highlighted the parlous state of some public services and infrastructure.The election on Sunday will also bring some political uncertainty. The conservative New Democracy party is not expected to get the majority of votes needed to form a government. Greece will probably go back to the polls in the summer, when ND may be forced into a coalition with the mainstream centre-left party, Pasok. Syriza, the radical left opposition party, is pushing for a more expansionary fiscal policy to address social issues; how far it would go is unclear.Whoever comes to power will need to build on the gains of the past decade. Its relatively long average debt maturity and the €30.5bn it is set to receive from the EU’s Recovery and Resilience Facility by 2026 gives Greece a unique window to bolster its economy and cut debt further. Diversifying the economy beyond its reliance on tourism, driving long-term capital investment growth, and broader public service and justice reforms should be priorities.Greece has suffered over the past decade. But its sacrifices mean it now has the opportunity to turn suffering into prosperity. It should not lose sight of that prize. More