Aurelia Butler

Britain’s government is poised to miss its target to seal deals covering 80 per cent of its trade with the rest of the world by the end of 2022. The promise — set out in the Conservative manifesto ahead of the 2019 general election — reflected ambitions that post-Brexit Britain would be free to strike trade agreements all over the world. But instead the UK has so far only made deals covering just over 60 per cent of its global trade, according to government officials.For the previous four decades the UK did not have any bilateral trade deals because as an EU member state its trade was conducted through Brussels.Since it has left the EU, London has managed to roll over 71 deals that it had through its membership of the bloc. It has signed only four new trade agreements: with Australia, New Zealand, Japan and Singapore.George Eustice, the former environment secretary, said last month that the deal with Canberra “gave away far too much for far too little in return”, reflecting criticism that the agreement was particularly advantageous for Australia’s farming industry. According to the government’s own estimate the deal would increase UK GDP by just 0.08 per cent by 2035.Meanwhile, attempts to strike ambitious new trade deals with the US and India have stalled.Negotiations with Washington began in May 2020 but are deadlocked over a number of issues, including the UK-EU dispute over the Northern Ireland Protocol, which governs post-Brexit trade arrangements in the region. The US fears Britain’s attempt to revisit the protocol could undermine the Good Friday peace agreement and some Democratic members of Congress have threatened to block any trade agreement with London unless it resolves the impasse with Brussels.

Discussions with the Indian government formally began in January but the government failed to complete the negotiations by October as originally intended. Suella Braverman, the home secretary, has expressed “reservations” that the UK could concede too much on immigration from India.The UK is also engaged in negotiations to upgrade existing trade deals with Canada, Mexico, Switzerland, South Korea and Israel, and is trying to strike an agreement with the six states of the Gulf Co-Operation Council as well as joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).Nick Thomas-Symonds, Labour’s shadow trade secretary, said 2022 had been a “year of broken promises and failure on trade” from the government.“Promise to deliver a USA trade deal, broken. Promise of a trade deal with India by Diwali, broken. Promise to have 80 per cent of UK trade covered by free trade agreement by the end of 2022, broken,” he said. “The Conservative record on trade has either been delivering no deals or bad deals.”When asked earlier this month by Thomas-Symonds whether the UK would hit its 80 per cent target, Kemi Badenoch, the trade secretary, said: “I have been very clear that what is important is the substance of trade deals, not the timing.” Privately, ministers concede that the 80 per cent goal cannot be met until US president Joe Biden takes a more active interest in striking a trade deal with the UK.On Friday the Department of International Trade said the government would only sign new agreements that were fair, reciprocal and in Britain’s best interests.“We have already signed trade deals with 71 countries plus the EU that account for £814bn of bilateral trade, and we are now seeking new deals with India, the Gulf, Canada, Mexico, Israel and the £9tn combined GDP free trade bloc in the Indo-Pacific, which will spur growth, create jobs and boost wages for UK workers,” a DIT spokesperson said. More

Like many observers, the FT got its biggest call for 2022 wrong. Though we acknowledged it might be wishful thinking, our Europe editor Ben Hall suggested last year there was no rational case for Vladimir Putin to invade Ukraine. Logic, sadly, proved no bar to the Russian leader’s calamitous gamble. If we were hopeful last year that war would be avoided, Tony Barber is pessimistic about the chances of a lasting ceasefire in 2023. And David Sheppard forecasts, on balance, that Europe will experience blackouts as Moscow squeezes natural gas exports. Given mounting concerns, we ask again this year if China will invade Taiwan, adding the possibility of a blockade.In all, five FT predictions for 2022 missed the mark. We were wrong in calling an end to the “great resignation”; Tesla’s shares fell, thanks in part to Elon Musk’s Twitter escapades; and the Democrats retained the US Senate. We judged incorrect Clive Cookson’s forecast that a more infectious Covid variant than Omicron would emerge, though sub-variants did, and China’s reopening has sparked new concerns.A number of readers beat the FT, with the three highest scorers tying on 18 correct answers. Congratulations to the winner, after the tiebreaker, Michael Greason of Toronto. Readers are again invited to submit answers to the 20 questions and tiebreaker below, giving their real name and email. At a difficult time for many, we wish everyone a Happy New Year. Neil BuckleyFT readers: submit your predictions for 2023Will there be a ceasefire in Russia’s war in Ukraine?No. Conditions for a lasting ceasefire, let alone a formal peace settlement, are unlikely to be met in 2023. Freezing present positions would satisfy neither Russia nor Ukraine. Vladimir Putin’s Kremlin would not have broken Ukraine’s independence, or even fully control the four regions it “annexed” in September. President Volodymyr Zelenskyy cannot accept a ceasefire leaving Ukraine without the territory lost since Russia’s invasion in February, on top of occupied Donbas and Crimea, seized in 2014. Regaining that territory would require weaponry the west seems unwilling to supply. Russia is trying to regroup and is preparing its people for a long war. A continued, grinding conflict is most likely. Tony BarberWill there be blackouts in Europe?Yes. It could happen before April if the weather is cold enough, but next winter is the bigger challenge. Though gas storage sites are now close to full, refilling them in the spring will be tough. In 2022, Russian gas flows were largely intact until June; in 2023 they will be close to zero. Liquefied natural gas will struggle to cover the shortfall. Offsetting the risk is Europe’s backwards shift from gas to coal. France’s nuclear plants should have fewer maintenance issues. But the energy system has been straining for 18 months. The risk of something breaking is increasing. David SheppardWill the global temperature temporarily reach the 1.5C warming threshold?No, but it might as soon as 2024. The planet has already warmed by about 1.1C, comparing average temperatures in 2011-20 with the late 1800s, and by at least 1.2C in recent individual years. With emissions at record levels, scientists put 50:50 odds on temporarily hitting 1.5C in at least one year in 2022-26. With cooling La Nina weather patterns expected to last into early 2023, forecasters think the whole-year temperature will average 1.2C, but this could change in coming years. One year of 1.5C would not mean the Paris Agreement goal had been breached but would take the world much closer. Pilita ClarkWill the Fed start to cut interest rates? No. The market expects the Federal Funds rate to peak at 4.9 per cent in the first half of 2023 and then fall to 4.7 per cent in September and 4.4 per cent in December. But the great majority of members of the Open Market Committee believe the rate will end 2023 at 5 per cent, or more. This latter forecast will prove correct. As Fed chair Jay Powell warned in November, “History cautions strongly against prematurely loosening policy. We will stay the course until the job is done.” The Fed does not wish to repeat its mistake of complacency. Martin WolfWill Rishi Sunak still be UK prime minister by the year-end?Yes, though looking ever more beleaguered. The prime minister will want to keep going well into 2024 before calling an election but will be threatened by ideologues on the right and by wayward backbenchers. His ruthless Conservative party has ditched four prime ministers since the 2016 Brexit vote — two in the past year. Sunak is a steadier character than Boris Johnson or Liz Truss but his troops, staring likely election defeat in the face, may become even more erratic and politically self-harming. They could hole his leadership below the waterline even if they don’t mean to. Miranda GreenWill the ECB use its new backstop to contain the bond spreads of Italy or others?No. After president Christine Lagarde’s recent hawkishness, markets now expect the ECB’s end point for rate rises to be higher than expected. Higher rates, a recession and quantitative tightening will add pressure to peripheral bond yields. Yet the criteria for triggering the specially created Transmission Protection Instrument remain tricky and subjective, and the ECB may use existing bond programmes or curb QT first to arrest any blowout in spreads. The Italian government led by the hard-right Giorgia Meloni has also, so far, been more fiscally sound than anticipated. That can change quickly, of course. Tej ParikhWill Joe Biden stand for president again?Yes. There is no getting around the president’s age; Biden will be 81 by the 2024 election, and 82 when the 2025 inauguration happens. But don’t rule out a run just yet. After a bumper year of legislation and a better than expected Democratic performance in the midterms, Biden is probably still the Democrats’ best shot at holding on to the White House; vice-president Kamala Harris has struggled to build a profile. That doesn’t mean other Democrats aren’t exploring the possibility of a 2024 run all the same. Courtney WeaverWill Donald Trump be indicted?Yes. There are at least four areas of potential investigative jeopardy for the former president: Trump’s attempt to reverse the 2020 election, his retention of classified documents at Mar-a-Lago, his pressure on Georgia officials to find “missing votes” and the fraudulent management of the Trump Organisation. The first two are in the hands of Jack Smith, the special counsel appointed in November, who has subpoenaed officials in seven states. Based on what is already in the public domain, prosecutors in at least one of these investigations are likely to consider there is sufficient evidence for an indictment — which Trump will no doubt deny and contest to trial. Edward LuceCan China restore economic growth to more than 5 per cent?Yes. China is facing a bleak ending to 2022; the opening from its “zero-Covid” policy will sadly claim many more lives yet and is overwhelming hospitals, as the pandemic did elsewhere in 2020-21. But a lot can and will change over the course of the year. Once China learns to “live with Covid”, economic activity should bounce back strongly. Consumer spending will be energised by a pandemic-fuelled glut in savings and Beijing will launch a stimulus package focused on infrastructure. James KyngeWill Beijing invade or blockade Taiwan?No. Xi Jinping may one day decide to attack or blockade Taiwan — but probably not in 2023. An invasion would be a colossal gamble. If it went wrong, Xi could start a war with the US, lose power and permanently damage China’s prospects. A blockade is much more likely: it would put huge pressure on Taiwan to fold, and would dare the US to fire the first shot. But even that would entail huge risks. Xi is unlikely to roll the dice unless convinced Taiwan is permanently slipping from his grasp. Taiwan’s 2024 presidential election may be the next crisis point. Gideon RachmanWill the Erdoğan era come to an end in Turkey’s June elections?No. Recep Tayyip Erdoğan will unleash a barrage of methods, fair and foul, to hang on to power despite his dwindling popularity. Extending his rule into a third decade will have dire consequences for Turkey’s already troubled economy, worsen a fall in living standards and place further limits on personal freedoms. The wild card is whether a jail sentence and political ban handed down this month to Erdoğan’s most plausible rival, Istanbul mayor Ekrem İmamoğlu, could create an unstoppable backlash and boost the opposition. Laura PitelCan Japan’s yield curve control survive?Yes. The negative interest rate may go, however, along with more changes like the recent widening of the trading band for ten-year bond yields. From April, there will be a new governor at the Bank of Japan. All the likely candidates, such as Hiroshi Nakaso and Masayoshi Amamiya, are less dovish than Haruhiko Kuroda, the incumbent. The new governor will seek to “normalise” monetary policy, but with the global economy set to struggle, 2023 will be too early to set yields free. Robin HardingWill the protests in Iran end?No. The months-long demonstrations by Iranian protesters, many of them women, were triggered by the death of a young woman, Mahsa Amini, in police custody. They have broadened into calls to replace the theocracy with a democratic system. Their scale has ebbed and flowed; if they escalate again the Islamic regime may crack down even harder. But with the economy struggling under western sanctions, the protests have displayed a resilience that underscores the anger and disillusionment of many Iranians. That will ensure that, whatever the authorities do, protests in some form are likely to continue. Andrew EnglandWill there be a string of defaults in Africa?Yes. At a minimum, there will be debt restructurings with haircuts for investors. After big write-offs in Africa 20 years ago, debt has crept up as sovereigns have tapped eurobond markets and borrowed bilaterally. Now, as interest rates rise and economies falter in the aftermath of Covid, debt service payments are becoming unsustainable in some countries. Chad, Ethiopia and Zambia have signed up for the G20 Common Framework for debt-distressed states. Last year, Ghana clinched an IMF bailout as commercial markets closed. It won’t be the last. David PillingWill the S&P 500 fall by at least 10 per cent?Yes. We asked this question last year, but it bears repeating. After a dreadful 2022 when US stocks sank around a fifth and bonds took a historic hammering, fund managers are asking if the pain is over. Unlikely. A rapid rise in interest rates has already dealt a blow, but central banks are in no hurry to loosen up, and impending recessions have yet to fully bite into corporate earnings expectations or stock valuations. Katie MartinWill Twitter survive?Yes. Elon Musk’s $44bn purchase has been predictably chaotic but the platform will stagger on. Users will not leave. Alternatives like Mastodon lack scale. Losses will increase, however. A Musk-friendly CEO will be appointed but advertisers will remain wary and it would take 100mn new $8 subscriptions just to cover debt interest payments. Musk will buy Twitter’s debt to ease financial pressure. His fixation on “free speech” will, though, put him on a collision course with the EU’s new Digital Services Act. A ban is unlikely but hefty fines could be on the horizon. Elaine Moore Will another major cryptocurrency business fail?Yes, although it depends a little on the definition of major. The ferocity of the 2022 “crypto winter” means that a lot of the obvious weak links have already collapsed and several frauds have been exposed. But there will be even more casualties next year — and probably some big ones — as chastened venture capital firms and retail traders continue to retreat and deprive the crypto industry of the raw fuel it depends on to grow: punters at the table. Robin WigglesworthWill Jamie Dimon announce a successor as CEO of JPMorgan?No. The JPMorgan Chase chief executive has said Daniel Pinto, JPM’s president, would take over if he got hit by a bus or left unexpectedly. That doesn’t make Pinto or anyone else his heir. Last year, the board gave Dimon $50mn in options that vest after five more years of service. The dean of Wall Street CEOs has already seen off several potential rivals and the bank plans to open new headquarters in 2025. Barring another serious health scare, there’s no way he wants a target on his back so soon. Brooke MastersWill any of the big streaming platforms sell or merge?No, not this year. Consolidation is inevitable in the entertainment industry as streaming becomes dominant. Speculation abounds about combinations: NBCUniversal and Warner Bros Discovery, Disney with Apple, Netflix with a tech giant willing to overpay. Warner will probably be the first domino to fall given its financial troubles. But when AT&T sold Warner in 2022 it was through a structure that restricts dealmaking for a couple of years. It means the big shakeout is more likely in 2024, the year many streamers claim they’ll finally be breaking even. Alex BarkerWill the US women retain the football World Cup?No. The four-time World Cup-winning US women’s team is the most successful international squad, but the rest are starting to catch up. Since Megan Rapinoe’s US won the 2019 World title, America’s women only eked out a bronze at the Tokyo Olympics. Other nations are gaining, chiefly England. The Lionesses beat long-dominant Germany in the 2022 European championship, boosted by manager Sarina Wiegman who coached her native Netherlands to the 2017 European title and 2019 World Cup runners-up. With star striker Beth Mead, England’s women have a shot at succeeding in 2023 where the men have failed since 1966. Sara GermanoTiebreaker: How many heads of state will attend King Charles III’s coronation? More

NEW YORK (Reuters) – A key facility the Federal Reserve uses to help control short-term interest rates saw record inflows on Friday, the final trading day of the year. The New York Fed said that its reverse repo facility took in $2.554 trillion in cash from money market funds and other eligible financial firms, besting the prior high water mark seen on Sept. 30, when inflows totaled $2.426 trillion. The cash surge was almost certainly tipped into record territory on a typical quarter end pattern which can be further exacerbated on the year end. On those dates, for a variety of reasons, many financial firms prefer to park cash at the central bank rather than in private markets. The Fed’s reverse repo facility has been very active for some time. After seeing almost no uptake for an extended period, cash began to gravitate toward the central bank in the spring of 2021 and then grew consistently. Daily reverse repo usage has been holding over the $2 trillion mark since June. The reverse repo facility takes in cash from eligible financial firms in what is a de facto loan from the Fed. The current rate stands at 4.3%, which is a return that often bests private sector short-term lending rates. The reverse repo facility is designed to provide a soft floor for short-term rates and the federal funds target rate, the Fed’s main tool to achieve its job and inflation mandates. To set the high end of the range, the Fed also pays deposit taking banks to park cash at the central bank, with its interest rate on reserve balances now standing at 4.4.%. The federal funds rate is currently set at between 4.25% and 4.5% and traded at 4.33% as of Friday, bound between the reverse repo and interest on reserve balances rates. NO SIGNS OF SHRINKAGE Even with the massive usage of the reverse repos, Fed officials have been consistently unworried about the large inflows, even as some in financial markets have worried about the prospect the Fed could drain the life out of private money market borrowing and lending. Fed officials have also expected that as the central bank presses forward with its interest rate increases aimed at lowering very high levels of inflation, usage of the reverse repo facility should fall. But that has yet to happen, and some in markets now believe consistently high usage of the Fed facility will be around for some time to come. Research from the New York Fed has suggested bank regulation issues are keeping demand for the Fed reverse repo tool high. Meanwhile the Kanas City Fed added its view that large inflows are tied to limited private market investment opportunities and policy uncertainty. Strong inflows of cash to the central bank may not alarm central bankers, but it has pushed their operations into a de facto loss. The Fed funds itself through interest on the bonds it owns as well as services it provides to the financial community. Normally it earns a notable profit and by law hands that back to the Treasury. Right now, the cost of paying interest on reverse repos and on reserve balances is outstripping income. The Fed reported on Thursday that as of Dec. 28, an accounting measure it uses to track the loss stood at $18 billion. Many observers expect the Fed’s plans to raise rates further and maintain them at high levels means fairly substantial losses for the central bank over time, even as those losses will not impact the Fed’s monetary policy work. More