Aurelia Butler

The Fed has raised its benchmark interest rate five full percentage points over the past 14 months. Inflation by the Fed’s preferred measure has eased from 7% last summer to 4.2%, and unemployment has fallen to 3.4%, the lowest since 1969. “Is inflation still too high? Yes,” Jefferson said in remarks prepared for delivery to a monetary policy conference at the Hoover Institution. “Has the current disinflation been uneven and slower than any of us would like? Yes. But my reading of this evidence is that we are ‘doing what is necessary or expected’ of us.” And that, he said, is the dictionary definition of being “on track.” Earlier in the day Jefferson was nominated by U.S. President Joe Biden to be the next Fed vice chair, a key role in shaping U.S. monetary policy. Jefferson, who joined the Fed last May, has voted for every rate hike since then, including this month’s increase to a range of 5%-5.25%. After that decision Fed Chair Jerome Powell signaled the Fed may pause further rate hikes as it assesses incoming data and the effect of recent bank sector stress on credit conditions. Jefferson in his prepared remarks Friday did not signal any disagreement with that strategy. He said he expects consumer spending, which was very strong last quarter, to slow and credit conditions to tighten. Though he feels the added credit shock from the string of regional bank failures since March will likely be mild, it is “too soon to tell” and the downside impact could be bigger than he anticipates. Meanwhile, he said, “monetary policy affects the economy and inflation with long and varied lags, and the full effects of our rapid tightening are still likely ahead of us.” Jefferson’s remarks Friday constituted a defense of the central bank’s efforts to bring down inflation before an audience of some of the Fed’s tougher critics, including Stanford University professor John Taylor, author of a hugely influential and eponymous monetary policy rule who says the Fed’s policy rate should be even higher at 6%. The conference’s organizers, who include Taylor, titled last year’s iteration “How monetary policy got behind the curve” and this year’s version “How to get back on track.” “We are balancing the directives of the dual mandate given to us by the U.S. Congress,” Jefferson said, a difficult task in the uncertain post-pandemic world of economic surprises, including inflation that’s been more persistent than thought, and a labor market that has remained strong. “It is in this sense that I believe that we are well on track.’” More

WASHINGTON (Reuters) -Leaders of the Group of Seven (G7) countries are set to discuss concern about China’s use of “economic coercion” in its dealings abroad as part of their larger joint statement next week, according to a U.S. official familiar with the discussions.The statement, a likely component of the overall communique that will be released by leaders during the May 19-21 summit in Hiroshima, Japan, is expected to be paired with a broader written proposal on how the seven advanced economies will work together to counter “economic coercion” from any country.The main G7 statement is set to include “a section specific to China” with a list of concerns that include “economic coercion and other behavior that we have seen specifically from the [People’s Republic of China],” the official said on Friday.A separate “economic security statement will speak more to tools” used to counter coercive efforts from any countries responsible, including planning and coordination, the person said. In each case, the statements are to expected go further than prior statements by the G7.U.S. President Joe Biden has made China a focus of his foreign policy, working to keep the tense and competitive relationship from veering into one of open conflict, including over self-ruled Taiwan. The G7, which also includes Canada, France, Germany, Italy and the United Kingdom, is closely tied economically to China, the world’s biggest exporter and a key market for many of the seven countries’ companies. Last month, China called a statement by the G7 foreign ministers that touched on similar topics “full of arrogance, prejudice against China,” and lodged complaints with this year’s G7 host, Japan.Under Biden’s predecessor, President Donald Trump, G7 statements often offered only a cursory mention of issues involving China. The Biden administration has pushed for more direct statements.The joint statement issued by all the G7 leaders every year is intended to signal that the powerful countries are aligned on a range of political and economic issues. G7 members will also hold out the prospect of further cooperation with China on areas like climate.”We’re not for decoupling the U.S. and Chinese economy, we are for de-risking, we are for diversifying,” said the U.S. official. “That principle is very unifying.”Negotiations over the precise language of the leaders’ joint declarations are still subject to diplomacy and adjustment before they are released during summit.CHINA TESTS G7 ALLIANCEThe G7 meeting will be a test of how much the members, all rich democracies, can agree on a common approach to China, the world’s second largest economy.The China terms have been a major subject of the talks currently underway by G7 finance leaders in Niigata, Japan, where they have focused on reducing “over-reliance” of their countries’ supply chains on Chinese manufacturing, including by partnering with low- and middle-income countries.”The U.S. wants to get something hard on paper down in terms of agreement and the other countries are interested, but they’re not as interested in putting specifics down on paper on these various instruments and economic statecraft tools,” said Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center.In particular, some G7 members are skeptical about signing on to controls on outbound investment in China.The policies are being drafted partly to help deny China’s military access to tools it could use to gain technological superiority, and many in the Biden administration see them as complementary to export controls restricting access to some semiconductors that have the same goal.”Of course, each member of the G7 is to some extent going to carve their own path on China and yet there are also a set of kind of principles that unite the G7 in a common approach to China,” said the U.S. official.Traveling for the G7 finance meeting in Japan, U.S. Treasury Secretary Janet Yellen said on Thursday that China had clearly used economic coercion with Australia and Lithuania.Hanging over the meeting was a lack of progress in resolving the U.S. debt ceiling stalemate. A scheduled meeting on Friday between Biden and top lawmakers was postponed until early next week as Biden’s Democrats and Republicans seek a compromise to avoid a catastrophic default.U.S. officials, nonetheless, expect the president to attend the two-day summit as planned, followed by trips to Papua New Guinea and Australia also aimed at shoring up Washington’s approach to the China-dominated Asia-Pacific region. More

OTTAWA (Reuters) -The Bank of Canada (BoC) said on Friday it has picked longtime central bank executive Rhys Mendes as its new deputy governor, making him the first person of color to that role.Mendes, who will start in the role on July 17, will fill a vacancy created by the departure of Paul Beaudry, and will join the six-member interest-rate-setting governing council.As deputy governor, Mendes will oversee the BoC’s economic and financial research as well as its analysis of international economic developments, according to a statement from the central bank.Mendes, who joined the bank in 2004, has been on secondment to Canada’s Finance Ministry since 2021, serving as assistant deputy minister.”We will benefit greatly from his experience and expertise in economic modelling, monetary policy framework design, and international policy issues,” BoC Governor Tiff Macklem said in a statement.The Bank of Canada is seeking to diversify its workforce and told staff in a memo in 2020 that it planned to double the number of senior officers who are visible minorities by 2030, and increase the number of women in those roles by 45% in the same period.Mendes’ addition to the Bank of Canada’s governing council, which takes policy decisions by consensus, comes as the bank is assessing whether its record pace of rate hikes has been sufficient to tame inflation.Mendes holds a doctorate in economics from the University of Toronto. At the bank, he has held positions including managing director of economic and financial research and managing director of international economic analysis.The BoC kept interest rates unchanged in its last two meetings after hiking at eight consecutive policy meetings, and has said rates may need to stay high for a while to ensure inflation does not get stuck above a bank target.Canada’s annual inflation rate eased to 4.3% in March, its slowest pace in 19 months, but still more than double the bank’s 2% target.Last month, the bank said Beaudry would leave at the end of July to return to academia, after a stint of more than four years. More

“Monetary policy is now at the low end of what is arguably sufficiently restrictive given current macroeconomic conditions,” Bullard said in remarks prepared for delivery to a monetary policy conference at the Hoover Institution. The pandemic government aid that helped fuel high inflation is mostly spent, and the Fed policy rate, which was near zero 14 months ago, is now at 5%-5.25% and beginning to drag on the economy. Inflation expectations, which had risen last year, are now back down to levels Bullard said is consistent with the Fed’s 2% inflation target. Still, Bullard said, households have about $400 billion more in savings than was usual in the pre-pandemic era, representing what could be kindling for more inflation; and the “zone” that constitutes sufficiently restrictive rates can fluctuate depending on incoming data. Accordingly, he said, “the prospects for continued disinflation are good but not guaranteed.” Fed Chair Jerome Powell signaled a pause could be the right call as the Fed assesses progress on inflation and the impact of the recent banking sector stress on credit conditions. Bullard said earlier this month he has an open mind about June, though rates may need to rise further. He did not specifically address the June meeting in his prepared remarks on Friday. More

WASHINGTON (Reuters) -U.S. President Joe Biden on Friday nominated Federal Reserve Governor Philip Jefferson to be the central bank’s vice chair, a key policy advisory role recently vacated when Lael Brainard took a top position in Biden’s White House economics team.Biden also nominated the World Bank’s U.S. executive director, Adriana Kugler, to be a Fed governor, adding a labor economist to the central bank’s leadership ranks as policymakers judge how much further to raise interest rates and cool a strong job market that a number of them, including Chair Jerome Powell, see as aggravating inflation.The president also renominated Governor Lisa Cook, who joined the Fed at the same time as Jefferson roughly a year ago, to a full 14-year term on the Board of Governors. Her current term expires in January 2024.”These nominees understand that this job is not a partisan one, but one that plays a critical role in pursuing maximum employment, maintaining price stability, and supervising many of our nation’s financial institutions,” Biden said in a statement. “I am confident these nominees will help build upon the historically strong economic recovery we have had under my administration.” A Colombian-American, Kugler would be the first-ever Latina on the Fed Board of Governors, addressing the long-standing complaints of Senator Bob Menendez, an influential Democrat who has decried the historic absence of Hispanics in U.S. central bank leadership. “We are finally giving Latinos, all 62 million of us who call this country home, a seat at the table where the most consequential decisions on monetary policy are made,” Menendez in a statement, pledging to fight for swift confirmations for all three in the closely divided Senate. Kugler, 53, is a PhD economist who has researched extensively on U.S. and international labor markets and served as the Labor Department’s chief economist under President Barack Obama. Biden appointed her last year to her World Bank role, where she is one of 25 national executive directors at the global development lender.Jefferson, 61, would become the second-ever Black vice chair, the prior being Roger Ferguson who held the post roughly two decades ago. Jefferson’s elevation to the No. 2 spot comes a year into a relatively subdued tenure on the Fed board during which he has offered limited views on monetary policy in the public sphere. He has also voted in favor of each of the eight interest rate increases the Fed has delivered since he joined the seven-member board after an easy Senate confirmation in May 2022.Cook, 58, the first Black woman to serve on the Fed board, was approved by the Senate a year ago on a narrow 51-50 party line vote. Previously she was a Michigan State University economics professor and was a senior economist at the Council of Economic Advisers during the Obama administration. She, too, has voted in favor of the Fed’s ongoing rate increases.HISTORIC TIGHTENING NEARS ENDGAMEThe nominations to the world’s top central bank come as the Fed opens a new chapter in its battle against high inflation. After just over a year of the steepest round of interest-rate hikes in 40 years, the Fed on May 3 nudged its policy rate to just over 5% and signaled it may be time to take a pause and assess whether any more hikes are needed. Central bankers want policy tight enough to bring down inflation, now running at more than twice their 2% goal, but not so tight it craters a labor market that so far has weathered the steeper borrowing costs with surprising strength. Finding that balance will be a tricky task.Meanwhile Biden is in a standoff with Republicans over the debt limit that Treasury Secretary Janet Yellen says could leave the government short of the cash it needs to pay its bills as early as June 1. A default would send the economy into the recession it has so far avoided, analysts say, and do long-term damage to the nation to boot.Powell is at a “critical juncture,” said Andrew Levin, a Dartmouth professor and a special advisor to Janet Yellen when she was Fed vice chair, where some policymakers may want higher rates while others resist. In Jefferson, Levin said, Powell will have a sharp deputy who can both act as a conduit for those disparate voices and help him sort through all of it.”Having diverse perspectives is really important to making decisions like this that affect every American,” Levin said, and both Kugler and Jefferson add exactly that.  CONFIDENCE IN POWELLStill, the appointment of Jefferson, a PhD economist who has spent most of his career as a college economics professor, marks a departure from a recent run of vice chairs with extensive monetary policy expertise. Brainard, for instance, served as a Fed Board member for eight years before getting the No. 2 role. The move suggests Biden continues to have confidence in Powell’s agenda-setting, even as it risks putting some of the historic employment gains under the president’s watch at risk with potentially more policy tightening to come, Capital III’s Karim Basta said.The Fed vice chair typically works closely with the Fed chair and the New York Fed president – currently John Williams – as a “troika” who formulate policy options that feed into rate-setting decisions made twice a quarter by the Fed’s 19 policymakers. Jefferson has a given a handful of speeches as Fed governor, arguing among other things a key point Powell has made repeatedly – that it is possible, though tricky, to win the inflation fight without sending the economy into recession. On Friday, after his nomination, he took to the stage in front of a roomful of sometimes ardent critics of Fed policy to defend the U.S. central bank’s inflation fight, declaring policy to be “on track” and promising to pursue both of the Fed’s goals, including full employment, with seriousness and humility. More

The health regulator said these companies cannot market or distribute the products in the U.S. and retailers who sell them risk FDA enforcement action.Any company that wants to legally market a new tobacco product in the United States must receive a written marketing order from FDA. But if the health regulator deems it unfit for public health, it issues a marketing denial order. The FDA named eight of these companies that received the denial orders, which include Imperial Vapors LLC, Savage Enterprises and Big Time Vapes, among others. However, the FDA said it was not disclosing the names of the other two companies to protect potential confidential commercial information.The FDA added the premarket tobacco product applications (PMTAs) submitted for a variety of flavored e-cigarette products did not provide sufficient evidence to show that permitting the marketing of these products would be appropriate for public health.Some of the flavors denied by the health regulator include Citrus, Strawberry Cheesecake, Cool Mint and Menthol. However, Altria Group (NYSE:MO) Inc’s NJOY has six e-cigarette products which have received full approval from the FDA. Juul, another e-cigarette maker in which Altria was a former investor, is still seeking approval for its products. The FDA last year briefly banned Juul’s products but put it on hold and agreed to reconsider after the company appealed. More

Two-thirds of the £12bn eventual rise in UK mortgage costs from higher interest rates has yet to be passed on to borrowers, leaving them facing painful refinancing over the coming months, a think-tank has warned.The Bank of England this week lifted its main interest rate by a quarter of a percentage point to 4.5 per cent, the 12th consecutive rise since December 2021. The increase will lead to higher bills for people on floating mortgage rates and heighten remortgage fears among those nearing the end of a fixed-rate deal.In a report published on Saturday, the Resolution Foundation said about half of the 7.5mn mortgaged households facing revised interest rates between the fourth quarter of 2021 and the end of 2026 had yet to see a change in their mortgage rate. The think-tank estimated the £12bn increase in mortgage costs over the same period by taking market expectations of interest rate changes over the next four years, as well as repayment rises since 2021, and calculating the impact on variable rate and fixed-rate mortgages.It found £9bn of the increase would be borne by the richest 40 per cent of households, who are more likely to live in expensive homes and hold mortgages. But it also warned that lower-income households and first-time buyers would feel greater pressure on their living standards, since mortgage costs are much higher as a proportion of their income. Simon Pittaway, senior economist at the Resolution Foundation, said: “People moving on to new fixed-rate deals over the next year can expect to see their annual mortgage costs rise by an eye-watering £2,300 — with young families and low- and middle-income households with mortgages facing the biggest living standards hits.”The BoE has estimated that roughly 1.3mn households will need to refix between April and December 2023. “For the average mortgagor within that group, monthly interest payments will increase by around £200 a month if their mortgage rate rises by 300 basis points — the increase implied by quoted mortgage rates,” the central bank said in its latest monetary policy report. Borrowers who value the certainty of knowing their future monthly payments may select a two-year fix or a cheaper five-year deal, brokers said. But consumers who believe interest rates will fall within the next two years may spurn a fix in favour of a tracker mortgage, linked to the BoE base rate, that allows them to fix later should better deals emerge. Simon Gammon, managing partner at broker Knight Frank Finance, said that was “a highly personal decision” because it came “with the risk that your monthly payments will rise if the BoE opts to raise interest rates further”. For the 8 per cent of borrowers on tracker mortgages, Thursday’s interest rate rise means an average £24 increase in monthly payments, but a £417 monthly jump when the rises from 2021 are included, according to data from industry body UK Finance, based on average mortgage sizes. Meanwhile, the 9 per cent of borrowers on a standard variable rate — the most expensive offered by lenders — will see an average £15 rise in their monthly payments, but a £267 monthly increase with previous rate increases included. Mortgage brokers played down the prospect of borrowers being forced on to SVRs, pointing to the rise in product transfer mortgages, where a lender offers a new deal as the customer’s fix expires without having to reassess affordability. Ray Boulger, analyst at broker John Charcol, said that even if people’s circumstances had changed “they can still get a product transfer in nearly every case . . . So if people are on SVR, it’s normally through choice or probably through inertia.” More