Aurelia Butler

Jay Powell has said the Federal Reserve will not become a “climate policymaker”, as he mounted a full-throated defence of the US central bank’s independence from political influence.In a speech delivered on Tuesday, the Fed chair said the central bank must steer clear of issues outside its congressionally mandated purview and instead maintain a narrow focus on keeping consumer prices stable, fostering a healthy labour market and ensuring the safety of the country’s banking system.“It is essential that we stick to our statutory goals and authorities, and that we resist the temptation to broaden our scope to address other important social issues of the day,” he said at a conference hosted by Sweden’s central bank.“Without explicit congressional legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a greener economy or to achieve other climate-based goals.”He added: “We are not, and will not be, a ‘climate policymaker’.”Republican lawmakers have accused the Fed of overreaching its mandate by pledging to consider climate-related financial risks, an area in which Powell on Tuesday said the central bank had “narrow, but important, responsibilities” tied to bank supervision.“The public reasonably expects supervisors to require that banks understand, and appropriately manage, their material risks, including the financial risks of climate change,” he added.In a panel that followed the remarks, Mervyn King, a former governor of the Bank of England, said central bank independence was a “great responsibility and it cannot be misused by trying to creep into areas, which have not been explicitly delegated by the appropriate political process”.“I worry that people, in the great enthusiasm for doing good, are actually putting at risk central bank independence,” he said of climate-related issues.Republican senators last year blocked the appointment of Sarah Bloom Raskin, president Joe Biden’s pick to lead bank oversight at the Fed, after taking issue with her calls for regulators to more proactively address financial risks related to climate change.Several other major central banks have advocated for expanding their remit to include policing of climate risks. Mark Carney, another former governor of the BoE, has been the leading supporter of such a shift.Powell on Tuesday said central bank independence was particularly important if the Fed was to succeed in its battle to tame inflation, which is still running at multi-decade highs.“Restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy,” he said. “The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors.”Since March, the Fed has raised its benchmark rate from near-zero to just under 4.5 per cent and plans to further squeeze the economy this year. In separate remarks on Tuesday, Fed governor Michelle Bowman said the central bank still has “a lot more work to do” in terms of tightening. She added that the size of the forthcoming rate increases and the eventual stopping point will depend on the data.“I will be looking for compelling signs that inflation has peaked and for more consistent indications that inflation is on a downward path,” she said at the event hosted by the Florida Bankers Association.Democratic lawmakers have called on the central bank to back off of its tightening plans, warning of unnecessary economic pain and excessive job losses.“The tools that we have work and I think there’s nothing wrong with our mandates,” Powell told the panel.Speaking at the same event in Stockholm, European Central Bank executive board member Isabel Schnabel said monetary policymakers should press ahead with interest rate rises to fight inflation despite the risk that higher borrowing costs could derail global environmental efforts. “The green transition would not thrive in a high-inflation environment. Price stability is a precondition for the sustainable transformation of our economy,” Schnabel said at the event in Stockholm on Tuesday.Schnabel’s view aligns with the consensus among central bankers that it is up to governments to drive the transition to cleaner energy, while monetary policymakers should focus on their core task of fighting inflation. She pointed to a “persistent build-up of underlying price pressures” despite the unexpectedly sharp fall in headline eurozone inflation as energy prices subsided. But Schnabel said the ECB needed to act faster to bring its own investments and lending operations in line with the objectives of the Paris agreement and achieve carbon neutrality by 2050.The ECB had aimed to make its holdings of corporate bonds more climate-friendly by putting more weight on climate-related criteria when it made new purchases. However because it has stopped increasing its net bond holdings, this policy has “lost much of its punch”, Schnabel added. More

The global economy is “on a razor’s edge” and risks falling into recession this year, World Bank officials have warned as the institution unveiled its latest projections for global growth. The Washington-based organisation expects the world economy to grow by just 1.7 per cent this year, a sharp fall from an estimated 2.9 per cent in 2022, according to the latest edition of its twice-yearly Global Economic Prospects report, published on Tuesday. “The risks that we warned of six months ago have materialised and our worst-case scenario is now our baseline scenario,” said Ayhan Kose, the World Bank economist responsible for the report. “The world’s economy is on a razor’s edge and could easily fall into recession if financial conditions tighten.”If the World Bank’s gloomy prognosis was realised, the current decade would become the first since the 1930s to experience two global recessions. The report follows similarly stark forecasts from the IMF. Kristalina Georgieva, the fund’s managing director, said last week that a third of the global economy would be marred by recession this year. The World Bank has lowered its growth forecasts for 95 per cent of advanced economies and more than 70 per cent of emerging market and developing economies, compared with six months ago. “There is a lot of debate about whether the US and the eurozone will go into recession,” Kose said. “But whether they do or not in technical terms, they are going to feel like they are experiencing a recession.” Advanced economies will grow by just 0.5 per cent this year, down from an estimated 2.5 per cent last year, the bank warned. In the rest of the world, growth is expected to be unchanged at 3.4 per cent. However, excluding China, developing countries will grow by 2.7 per cent this year, down from 3.8 per cent in 2022.The report blamed high inflation, high interest rates, reduced investment and disruptions caused by Russia’s invasion of Ukraine in late February for the downward revisions in its outlook.The recent fall in energy prices will provide some relief, Kose said. Thanks partly to a warm European winter, natural gas is trading below its level before the war caused prices to surge. While headline inflation would fall back as a result of lower energy costs, core inflation — which excludes changes in volatile items such as energy and food — remained a concern.“There is a large menu of risks confronting our new baseline,” Kose said. The biggest threat to growth was that central banks would raise interest rates further to tackle inflation, and keep them high until inflation was “persistently” under control. Global interest rates average 5 per cent, he said. A 1 percentage point increase would reduce global growth this year from 1.7 per cent to 0.6 per cent, with per capita output contracting by 0.3 per cent — once changes in population are taken into account. That, he said, met “the technical definition of a global recession”.

Of even greater concern in the long term is a significant fall in the rate of growth in investment in emerging markets and developing economies. This fell from 11 per cent in 2010 to 3.4 per cent in 2019, with an outright contraction in 70 per cent of these economies during the coronavirus pandemic — a far steeper decline than the one in 2009 following the global financial crisis. The bank expects the rate to remain at 3.5 per cent until at least 2024, limiting future growth prospects. “With that rate of investment growth, you are not going to have any upgrade in the rate of economic output,” Kose said. “It will be simply impossible to meet the challenges of climate change, poverty and inadequate health and education systems.” More

The reform of the energy market proposed by Spain seeks to prevent these sources of energy with lower production costs from benefiting from the high prices of other resources that currently set the market price.The European Commission plans to propose a broader reform of the EU electricity market in March, a move aimed at reducing the impact of gas prices on power bills for industry and households. More

MEXICO CITY (Reuters) – The United States, Mexico and Canada will take steps to promote the North American semiconductor industry, enhance cooperation to root out lethal drugs, and improve legal pathways for migrants, the White House said on Tuesday.In a statement issued to coincide with a North American leaders summit in Mexico City, the White House said the three countries would in early 2023 organize a semiconductor forum to increase investment in the strategic hi-tech industry.This would mean coordinating semiconductor supply chain mapping to identify needs and investment opportunities in making chips that are used in everything from phones to defense, the statement said.The industry has long been dominated by Asia, and disruptions during the COVID-19 pandemic caused havoc among North American supply chains.U.S. President Joe Biden, his Mexican counterpart Andres Manuel Lopez Obrador and Canada’s Prime Minister Justin Trudeau have vowed to deepen regional economic integration as they gear up for a trilateral meeting on Tuesday.The three leaders will meet on Tuesday for a trilateral summit at the National Palace in Mexico City before issuing public statements. Biden and Trudeau will hold a bilateral meeting earlier the day. Biden and Lopez Obrador held a bilateral meeting on Monday where the two leaders discussed stronger economic ties, fighting the illegal drug trade, and approaches to curbing illegal migration at a meeting in Mexico City, the White House said.The White House said the three were committed to reducing methane emissions from solid waste and wastewater by at least 15% by 2030 from 2020 levels. They would also create a virtual platform to give migrants streamlined access to legal pathways.”This will give potential migrants the information they need to come to Mexico, the United States, and Canada lawfully – making them less likely to rely on smugglers,” it said.Turning to efforts to crack down on drug smuggling, the White House said that under the North American Drug Dialogue (NADD) the three allies would adopt an “updated strategic framework” to address threats posed by banned narcotics.This would include greater information-sharing on chemicals used to make drugs including fentanyl, a synthetic opioid that has been blamed for thousands of U.S. overdose deaths. More

Demand for kitchen appliances, furniture, big-screen TVs, apparel and other retail goods softened late last year as record inflation bit into disposable income and consumers shifted spending back to travel and other previously restricted activities. December 2022 U.S. container import volume topped 1.9 million 20-foot equivalent units (TEUs), according to Descartes (NASDAQ:DSGX) Systems Group. That was down 19% from the year earlier, but 1% above December 2019, the logistics software provider said. Then, the pandemic spawned an unexpected container cargo surge that overwhelmed seaports and upended global supply chains.”The December U.S. container import data points to less pressure on supply chains and logistics operations, but there are still a number of issues that may cause further disruptions in 2023,” said Chris Jones, an executive vice president at Descartes. Those include outbreak risks from new variants of the virus that causes COVID, Russia’s war in Ukraine, ongoing labor negotiations at busy U.S. West Coast ports and the threat of global recession, experts said. Despite the sharp volume downturn in December, 2022 is shaping to be the second-busiest year after 2021 for U.S. container imports. More