Aurelia Butler

Yellen told a gathering of community bankers that the unprecedented economic and financial crisis would be exacerbated by possible disruptions to the federal government’s operations, including air traffic control, law enforcement, border security and national defense, and telecommunications systems.She said the accompanying financial crisis could multiply the severity of the downturn, adding, “It is very conceivable that we’d see a number of financial markets break – with worldwide panic triggering margin calls, runs and fire sales.” More

OTTAWA (Reuters) – Canada’s annual inflation rate rose in April for the first time in 10 months, data showed on Tuesday, adding pressure on the central bank to raise interest rates again after having paused its tightening campaign since January. Annual inflation unexpectedly rose to 4.4% in April, Statistics Canada said. Analysts polled by Reuters had expected the annual rate to edge down to 4.1% from 4.3% in March. Month-over-month, consumer prices gained 0.7% from March, higher than the forecast 0.4% increase.”The market is under-pricing the probability the Bank (of Canada) comes back and hikes again,” said Derek Holt, vice president of capital markets economics at Scotiabank. “I don’t see any slowing down in terms of the underlying price pressures.”The central bank has kept rates unchanged at its last two policy setting meetings as it assesses whether its eight-consecutive rate hikes have been sufficient to tame inflation.BoC Governor Tiff Macklem has said that Canadian inflation risks getting stuck significantly above the Bank of Canada’s 2% target, and if that happens the central bank is ready to hike interest rates further. Higher rent and mortgage interest costs contributed the most to the annual inflation rate in April, Statscan said. The higher interest rate environment may have contributed to rising rents by stimulating higher rental demand, the agency said.The prices for groceries, however, rose at a slower pace in April than in March, helped by smaller price increases for fresh vegetables and coffee and tea, Statscan said. Excluding food and energy, prices rose 4.4% compared with a rise of 4.5% in March.The average of two of the Bank of Canada’s (BoC) core measures of underlying inflation, CPI-median and CPI-trim, came in at 4.2% compared with 4.5% in March.The month-over-month inflation rate was driven by gasoline prices, which posted the largest monthly increase since October, following an announcement from OPEC+ to cut oil output, Statscan said.The Canadian dollar was trading 0.3% higher at 1.3430 to the greenback, or 74.46 U.S. cents. More

Retail sales rose 0.4% last month, the Commerce Department said on Tuesday. Data for March was revised slightly lower to show sales dropping 0.7% instead of 0.6% as previously reported. Economists polled by Reuters had forecast sales rebounding 0.8%.Retail sales are mostly goods, which are typically bought on credit, and are not adjusted for inflation. Food services and drinking places are the only services category in the retail sales report.The rise in retail sales added to strong job growth in April in suggesting that the economy was experiencing a spring revival after activity slowed in February and March. Spending is being underpinned by strong wage gains thanks to a tight labor market.Some households still have savings accumulated during the COVID-19 pandemic. Economists are forecasting a recession as the cumulative and delayed effects of the Federal Reserve’s fastest interest rate hiking campaign since the 1980s to tame inflation start to have a broader impact on the economy.Banks are also tightening lending standards, which could make credit inaccessible to some consumers.Excluding automobiles, gasoline, building materials and food services, retail sales rebounded 0.7% last month. Data for March was revised slightly down to show these so-called core retail sales slipping 0.4% instead of 0.3% as previously reported. Core retail sales correspond most closely with the consumer spending component of gross domestic product. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, accelerated in the first quarter, offsetting the drag on GDP growth from an inventory liquidation.The economy grew at a 1.1% annualized rate last quarter. The Atlanta Fed is currently estimating GDP rising at a 2.7% pace in the second quarter. More

Nigel Farage, the British politician who helped force a Brexit referendum in 2016 and successfully campaigned to leave the European Union, said on Monday “Brexit has failed”.Asked if Sunak agreed with Farage, that Brexit had failed because politicians had mismanaged the exit from the EU, Sunak’s spokesman said: “No. The prime minister has talked about the benefits of Brexit on a number of occasions.”William Cash, a well known eurosceptic in the governing Conservative Party, accused the government on Monday of making “trivial” and “obsolete” changes by announcing plans to remove around 600 of the almost 4,000 EU laws by the end of this year. Almost seven years after Britain voted to leave the EU, opinion polls show a majority of the public regret leaving the bloc. Britain’s economy is expected to grow more slowly than other major economies this year, although economists say Brexit is not the sole cause of the problems.The government, led by Brexit-supporting Sunak, says Britain is prospering with new-found freedoms, while the opposition Labour Party does not plan to apply to rejoin the bloc if it wins the next general election due next year. Farage has criticised how the Conservative government has handled its implementation.”Arguably, now we’re back in control, we’re regulating our own businesses even more than they were as EU members. Brexit has failed,” Farage told the BBC, adding that takeover regulation and corporation tax were driving businesses away. “We’ve mismanaged this totally.” Asked if the prime minister had sympathy with the concerns of businesses who said they were struggling to deal with government bureaucracy, Sunak’s spokesman said the prime minister wanted to “ensure that the UK remains a business-friendly country to invest in”. More

NEW YORK (Reuters) – Federal Reserve Bank of Cleveland President Loretta Mester said Tuesday the U.S. central bank remains committed to getting inflation down but did not offer any comment on the near term monetary policy actions. “The Fed is committed to returning inflation to its 2 percent goal,” Mester said in the text of a speech to be given in Dublin. “We all know that high inflation makes it very hard for people to make ends meet,” she said, adding “it is a particularly onerous burden for people and businesses with fewer resources.”Mester said high inflation also has long-run costs and longer-run economic performance, to be strong, needs price stability. Mester does not have a vote on this year’s rate-setting Federal Open Market Committee. Mester’s speech was focused on long-term issues in the economy and she noted that it remains possible the low interest rate world that prevailed before the coronavirus pandemic struck in 2020 could return. “Higher productivity growth would increase the potential return on new investment, and raise firms’ demand for capital, thereby raising the equilibrium interest rate,” Mester noted, while adding, “demographic forces could offset that.” More

WASHINGTON (Reuters) -Democratic President Joe Biden and top congressional Republican Kevin McCarthy will sit down on Tuesday to try to make progress on a deal to raise the U.S. government’s $31.4 trillion debt ceiling and avert an economically catastrophic default.They have little time to reach a deal. The U.S. Treasury Department on Monday reiterated its warning that it could run short of money to pay all its bills as soon as June 1, which would trigger a default that economists say would be likely to spark a sharp economic downturn.”Time is running out. Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the U.S. economy,” Treasury Secretary Janet Yellen was set to tell a group of bankers. “There is no time to waste.”Republicans, who control the House of Representatives by a 222-213 majority, have for months demanded that any increase in the government’s self-imposed borrowing cap be linked to spending cuts. In the past week, staffs for both sides have discussed a range of issues, including spending caps and changes to energy permitting in exchange for votes to lift the limit, according to people briefed on the talks.White House officials have described the talks, due to start at 3 p.m. EDT (1900 GMT) as constructive, but McCarthy on Monday said that he believed little progress had been made.”If you look at the timeline to pass something in the House and pass something in the Senate, you’ve got to have something done by this weekend,” McCarthy told reporters. “And we are nowhere near any of that.”Biden is due to leave town on Wednesday to attend a meeting of the Group of Seven rich nations in Japan, while the House is currently scheduled to leave Washington for a week-long recess after Thursday’s session.Democrats including Senate Majority Leader Chuck Schumer, who is also expected to attend Tuesday’s White House meeting, said that talks were proceeding in a “serious way.”He criticized Republicans for blocking a debt ceiling hike after helping to raise it three times under Biden’s Republican predecessor, Donald Trump.”Default must be taken off the table,” Schumer said in a Monday speech on the Senate floor. “No one should play with it. No one should flirt with it. No one should hold it hostage and say unless you do this, we’re going to default, because the consequences of default are just awful.”A similar 2011 standoff led to a historic downgrade of the United States’ credit rating, which sparked a selloff in stocks and pushed its borrowing costs higher.The current standoff has rattled investors, sending the cost of insuring exposure to U.S. government debt to record highs, and a Reuters/Ipsos poll completed on Monday found that three-quarters of Americans fear that a default would take a heavy toll on families like theirs.Concern about the talks weighed on U.S. stocks on Tuesday, which showed modest declines in premarket trading. ‘TOO MANY COOKS’Some observers have raised concerns that the five-party talks — featuring Biden, McCarthy, Schumer, top Senate Republican Mitch McConnell and top House Democrat Hakeem Jeffries — are too unwieldy to make progress.No. 2 Senate Republican John Thune told reporters that the talks appear to have “too many cooks.””As we’ve said all along, it is Biden and McCarthy,” Thune said. “So, whoever can actually speak on behalf of the president needs to get in the room, and get McCarthy’s best people in there, and get it done.”Adding to the challenge of striking a deal, McCarthy agreed to a change in House rules that allows for just one member to call for his ouster as speaker, which gives greater power to hardliners, including the roughly three dozen members of the House Freedom Caucus. More