Evelyn Reynolds

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    Yellen Says Stable Financial System Is Key to U.S. Economic Strength

    The Treasury secretary will offer an upbeat assessment of the economy on Tuesday, a year after the nation’s banking system faced turmoil.Treasury Secretary Janet L. Yellen will tell lawmakers on Tuesday that the United States has had a “historic” economic recovery from the pandemic but that regulators must vigilantly safeguard the financial system from an array of looming risks to preserve the gains of the last three years.Ms. Yellen will deliver the comments in testimony to the House Financial Services Committee nearly a year after the Biden administration and federal regulators took aggressive steps to stabilize the nation’s banking system following the abrupt failures of Silicon Valley Bank and Signature Bank.While turmoil in the banking system has largely subsided, the Financial Stability Oversight Council, which is headed by Ms. Yellen, has been reviewing how it tracks and responds to risks to financial stability. Like other government bodies, the council did not anticipate or warn regulators about the problems that felled several regional banks.“Our continued economic strength depends on a solid and resilient U.S. financial system,” Ms. Yellen said in her prepared remarks.Last year’s bank collapses stemmed from a confluence of events, including a failure by banks to properly prepare for the rapid rise in interest rates. As interest rates rose, Silicon Valley Bank and others absorbed huge losses, creating a panic among depositors who scrambled to pull out their money. To prevent a more widespread run on the banking system, regulators took control of Silicon Valley Bank and Signature Bank and invoked emergency measures to assure depositors that they would not lose their funds.The bank failures — and the government’s rescue — prompted debate over whether more needed to be done to ensure that customer deposits were protected and whether bank regulators were able to properly police risk.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Turkey’s new central bank governor, formerly at Amazon and New York Fed, seen as a ‘credible choice’

    Previously the central bank’s deputy governor, Karahan’s resume features years spent in prominent American institutions and companies.
    With Turkey’s inflation at 65%, the 42-year-old economist has his work cut out for him.
    Investors and economists say continuity in monetary policy priorities will engender confidence in Turkey’s new central bank chief.

    Newly appointed Governor of Turkish Central Bank, Fatih Karahan is seen in Ankara, Turkey on February 04, 2024. 
    Emin Sansar | Anadolu | Getty Images

    Turkey’s newly appointed central bank governor, Fatih Karahan, has his work cut out for him, after being named to the job by presidential decree over the weekend following the sudden resignation of his predecessor, Hafize Gaye Erkan.
    Previously the central bank’s deputy governor, Karahan’s resume features years spent in prominent American institutions and companies. He received both a master’s degree and doctorate in economics at the University of Pennsylvania, spent nearly a decade as an economist at the Federal Reserve Bank of New York, worked as a part-time lecturer at Columbia University and New York University, and served as a senior economist at Amazon.

    It is hoped that the 42-year-old economist’s experience will serve him well as he heads the institution working to tackle the eye-watering inflation and cost-of-living crisis that has hit Turkey’s population of 85 million. The country’s currency, the lira, is down 38% against the dollar year to date and has lost more than 80% of its value against the greenback over the last five years. 
    Turkey’s consumer price index print came out Monday showing a roughly 65% increase year on year for the month of January. Its central bank has made eight consecutive interest rate hikes since May 2023 — for a cumulative 3,650 basis points — in an effort to rein in soaring inflation. The latest rate increase, on Jan. 25, raised Turkey’s key interest rate by 250 basis points to 45%, though its leaders signaled at the time that the hiking cycle was at its end.
    While painful for the country, investors and economists say that the rate hikes have been necessary and that continuity in monetary policy priorities will engender confidence in the new central bank chief.
    In his statement posted to the Turkish central bank’s website Sunday, Karahan stressed “price stability” as his team’s main priority, vowing to “ensure disinflation” and “maintain the necessary monetary tightness until inflation falls to levels consistent with our target.”

    “All eyes now focus on new central bank governor Fatih Karahan,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a note Monday. “As things stand, continuity in monetary policy looks set to continue.”

    Wolfango Piccoli, co-president at advisory firm Teneo, agreed.
    “Like Erkan, Karahan is not a monetary economist, but is nevertheless regarded as a credible choice,” Piccoli wrote in an analysis for the firm.
    “Unlike recent gubernatorial changes, Erkan’s departure will not result in a dramatic shift in policy stance,” he said, adding that the central bank could still “adopt a more hawkish tone in terms of forward guidance to support Karahan in his new role.”

    Unorthodox policy

    Piccoli noted that Turkey’s monetary policy still ultimately remains at the mercy of Turkish President Recep Tayyip Erdogan, who spooked investors for years by stifling the central bank’s independence and preventing it from raising interest rates despite runaway inflation that at one point topped 85%.
    The more conventional policy approach that began under Erkan and Turkish Finance Minister Mehmet Simsek, also appointed last year, followed several years of unorthodox policy. Erdogan has previously decried interest rates as “the mother of all evil” even as consumer prices soared and the lira plunged.

    Turkish Central Bank Governor Hafize Gaye Erkan answers questions during a news conference for the Inflation Report 2023-III in Ankara, Turkey on July 27, 2023.
    Anadolu Agency | Anadolu Agency | Getty Images

    “Regardless of Karahan’s stature and the backing provided by Treasury and Finance Minister Mehmet Simsek, Erdogan remains the ultimate decision-maker,” Piccoli said.
    “As long as the president stays supportive of the (gradual) turn to orthodoxy that he endorsed after the 2023 elections, the identity of the governor is almost irrelevant as the TCMB has weak (if any) institutional independence.”
    Karahan “will still have to operate within the boundaries of a central bank that is neither independent nor staffed by adequate professionals,” Piccoli added. CNBC has reached out to the Turkish central bank for comment.
    Investor confidence in Turkey improved over the roughly eight-month tenure of Erkan, who became Turkey’s first-ever female central bank governor in June 2023. She tendered her resignation on Friday in a surprise announcement, saying the decision was due to a “reputation assassination” campaign and the need to protect her family.
    Erkan, like Karahan, also has a resume featuring elite American institutions; she has a Ph.D. in financial engineering from Princeton and degrees from both Harvard and Stanford’s business schools, and later worked at Goldman Sachs and First Republic Bank, the latter for which she served as co-CEO. She also was on the board of directors for Tiffany & Co., and was appointed director of Marsh McLennan, a professional services company and Fortune 500 firm. More

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    Red Sea tensions risk significantly higher inflation, OECD warns

    Higher shipping costs due to the Red Sea crisis could add 5 percentage points to OECD member import costs, the Paris-based group said Monday.
    Clare Lombardelli, chief economist at the OECD, told CNBC that recent data on inflation has nonetheless been encouraging, and shipping-driven inflation pressures remain a risk rather than its base case.
    Tiemen Meester, chief operating officer at Dubai-based logistics firm DP World, said the current situation was in a “steady state” and that cargo flows were catching up, but networks had already adjusted.

    Elevated shipping costs as a result of ongoing tensions in the Red Sea could impede the global fight against inflation, the Organisation for Economic Co-operation and Development said Monday.
    The Paris-based group estimates that the recent 100% rise in seaborne freight rates could increase import price inflation across its 38 member countries by nearly 5 percentage points if they persist.

    That could add 0.4 percentage points to overall price rises after a year, the OECD said in its latest economic outlook.
    In late 2023, major shipping firms began diverting their vessels away from Egypt’s Suez Canal, the quickest trade route between Europe and Asia, due to a spate of attacks by Iran-backed Houthi militants based in Yemen. Tensions remain high, with the navies of countries including the United States involved in the conflict.

    A cargo ship travels on the Suez Canal in Ismailia Province, Egypt, Jan. 13, 2024. 
    Ahmed Gomaa | Xinhua News Agency | Getty Images

    Ships are taking the longer Cape of Good Hope route around the southern coast of Africa, which increases journey times by between 30% and 50%, taking capacity out of the global market.
    However, the OECD also notes that the shipping industry had excess capacity last year, a result of new container ships being ordered, which should moderate cost pressures.
    Clare Lombardelli, chief economist at the OECD, told CNBC on Monday that a sustained increase in inflation as a result of the latest crisis is a risk, but not the group’s base case.

    “It’s something we’re watching closely … we have seen an increase in shipping prices, if that were to continue for for an extended period, then that would feed through into consumer price inflation. But at the moment, we don’t anticipate that to be the case,” Lombardelli said.
    According to Tiemen Meester, chief operating officer at Dubai-based logistics firm DP World, European imports are presenting the biggest challenge and have seen significant delays to cargo that was already en route.
    “Unfortunately, there’s higher cost in the inefficiencies in the network, so ultimately, the rates are going up. But it’s actually nowhere near to where they were at their peaks during Covid … How that costs will find its way to the consumer, we’ll have to see,” Meester told CNBC, describing it as a “short-term problem.”
    “I think kind of where we are now is a steady state, because the networks have adjusted and cargo is flowing, bookings are taking, it just takes more time,” he added.

    The OECD’s Lombardelli said that overall there has been positive data among its members in recent months showing inflation coming down consistently. This will help rebuild real incomes and support consumption, she said.
    The OECD’s 38 members include the United States, United Kingdom, Australia, Canada, Mexico, France, Germany, Israel, Turkey, Japan and South Korea.
    Its latest outlook hiked its economic growth forecast for the U.S. by 0.6 percentage points from its previous November estimate, to 2.1% for this year. Its euro zone outlook was lowered by 0.3 percentage points, to 0.6%, while its U.K. outlook was flat at 0.7%.
    “We’ve seen positive news in the U.S., we’re seeing inflation coming down now, but we’re not seeing a big cost in terms of the labor market there,” Lombardelli told CNBC.
    “Growth is looking stronger, and inflation is coming down. So you’ll see a rebuilding of real incomes there in the U.S., and that will support consumption growth.”
    Europe has been hit harder by an energy price shock, the impact of inflation on real incomes and consumption, and its greater dependence on bank-based financing amid tighter montary policy, she said.
    In the medium-term, the OECD expects a greater drag on growth from its aging workforce.
    The OECD nonetheless sees the European Central Bank as being in a position to cut interest rates in the second half of the year if current trends continue, Lombardelli said. More

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    Turkey’s inflation sees biggest monthly jump since August, nears 65% year on year

    In January, Turkish inflation logged its biggest monthly jump since August with a 6.7% rise from December, while year-on-year inflation hit nearly 65%.
    Food, beverages and tobacco, as well as transportation, all increased between roughly 5% and 7% month on month, while housing was up 7.4% since December.
    The figures come two days after Turkey’s appointment of a new central bank governor, Fatih Karahan.

    A tram passes shoppers as it travels along Istiklal Street in the Beyoglu district of Istanbul, Turkey, on Tuesday, Dec. 19, 2023.
    Bloomberg | Bloomberg | Getty Images

    In January, Turkish inflation logged its biggest monthly jump since August with a 6.7% rise from December, while year-on-year inflation hit nearly 65%, according to the Turkish central bank’s figures released Monday.
    The consumer price index for the country of 85 million people increased by 64.86% annually, up slightly from 64.77% in December. Sectors with the largest monthly price rises were health at 17.7%, hotels, cafes and restaurants at 12%, and miscellaneous goods and services at just more than 10%. Clothing and footwear was the only sector showing a monthly price decrease, with -1.61%.

    Food, beverages and tobacco, as well as transportation, all increased between roughly 5% and 7% month on month, while housing was up 7.4% since December.
    The monthly rises, economists say, stem from a significant increase to the minimum wage that Turkey’s government mandated for 2024. The minimum wage for the year has risen to 17,002 Turkish lira ($556.50) per month, a 100% hike from January 2023.
    Turkey’s central bank has been on a prolonged mission to bring down inflation, implementing eight consecutive interest rate hikes since May 2023, for a cumulative 3,650 basis points. The bank’s latest increase, on Jan. 25, raised the key interest rate by 250 basis points to 45%.
    The more conventional approach follows several years of unorthodox policy during which Ankara refused to tighten rates despite ballooning inflation. The lira is down 38% against the dollar year to date and has lost more than 80% of its value against the greenback over the last five years. 
    The latest inflation print comes just days after Turkey’s central bank governor, Hafize Gaye Erkan, announced her resignation, saying Friday that the decision was due to a “reputation assassination” campaign and the need to protect her family.

    Erkan became the bank’s central governor by presidential decree in June 2023, and led — along with Turkish Finance Minister Mehmet Simek — the turnaround in Turkey’s monetary policy and subsequent series of interest rate rises.

    Turkish Central Bank Governor Hafize Gaye Erkan answers questions during a news conference for the Inflation Report 2023-III in Ankara, Turkey on July 27, 2023.
    Anadolu Agency | Anadolu Agency | Getty Images

    She was replaced on Saturday by the central bank’s deputy governor, Fatih Karahan, who spent nearly a decade as an economist at the Federal Reserve Bank of New York.
    January’s inflation figures “highlight the continued strength of services inflation and may put pressure on new central bank governor Karaham to restart the central bank’s tightening cycle,” Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a research note.
    “The fact that inflation didn’t rise significantly more than expected in January is positive given the uncertainty about the impact of the minimum wage hike,” Peach wrote. “But the figures present a small setback to the disinflation process and highlight the continued strength of services inflation. For now, the central bank’s end-year inflation forecast of 36% remains intact.”   More

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    How Nevada Is Pushing to Generate Jobs Beyond the Casinos

    Before the pandemic brought everyday life to a halt, Joe Kiele supported himself through the industry that dominates Nevada’s economy. He waited tables at a steakhouse inside a casino in Reno.Four years later, Mr. Kiele, 49, remains in Reno, yet he now spends his workday inside a factory. In place of worrying about the doneness of a customer’s rib-eye, he trains people on the proper handling of industrial chemicals.His employer, Redwood Materials, is constructing an enormous complex across a lonely stretch of desert. There, the company has begun recycling batteries harvested from discarded smartphones and other electronics. It extracts critical minerals like nickel, lithium, copper and cobalt, and uses them to manufacture components for electric vehicle batteries.Not coincidentally, the plant sits only eight miles from a major customer — a Tesla auto factory.Mr. Kiele’s shift from restaurant server to chemical operator parallels a transformation long championed by Nevada’s leaders seeking to make their economy more diverse, reducing its reliance on the hospitality industry for jobs. In recent years, they have tried to secure investment from companies engaged in the transition toward green energy.The Redwood Materials plant, which occupies roughly 300 acres and is expected to require some $2 billion in investment over the next decade, looms like a monument to Nevada’s aspirations. For the employees, the factory is evidence that there are ways to pay bills besides dealing cards and delivering food.“We’re not based on consumerism,” Mr. Kiele said. “We’re dealing with industry.”This is not the first time that Nevada has sought to broaden its economy. The state has a history of betting its fate on the bounty flowing from a single industry.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Why Are Americans Wary While the Economy Is Healthy? Look at Nevada.

    Toni Irizarry recognizes that the economy has improved. Compared with the first wave of the pandemic, when Las Vegas went dark, and joblessness soared to levels not seen since the Great Depression, these are days of relative normalcy.Ms. Irizarry, 64, oversees a cafe at the Orleans Hotel and Casino, a property just off the Las Vegas Strip that caters mostly to locals. Guests have returned, filling the blackjack and roulette tables amid the cacophony of jingling slot machines — the sound of money.She started in the hospitality industry busing tables when she was only 16. Her paychecks have allowed her to purchase a home, raise three children and buy each of them their first car. But as she contemplates the future, she cannot shake a sense of foreboding.The outlook of people like Ms. Irizarry could be crucial in determining who occupies the White House. Nevada is one of six battleground states that are likely to decide the outcome of November’s presidential election. Its economic centerpiece, Las Vegas, was constructed on dreams of easy money. That proved a winning proposition for generations of working people, yielding middle class paychecks for bartenders, restaurant servers, casino dealers and maids. Yet over the last two decades, a series of shocks have eroded confidence.Nevada remains heavily reliant on the willingness of people around the world to spend their money at casinos, restaurants and entertainment venues.First, a speculative bonanza in real estate went spectacularly wrong, turning the city into the epicenter of a national foreclosure crisis. The Great Recession inflicted steep layoffs on the hospitality industry, demolishing the notion that gambling was immune to downturns. Then in 2020, the pandemic turned Las Vegas into a ghost town.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Fed Chair Powell Says Officials Need More ‘Good’ Data Before Cutting Rates

    Federal Reserve officials are debating when to lower rates. An interview with Jerome H. Powell confirms a move is coming, but not immediately.Jerome H. Powell, the chair of the Federal Reserve, made clear during a “60 Minutes” interview aired on Sunday night that the central bank is moving toward cutting interest rates as inflation recedes, but that policymakers need to see continued progress toward cooler price increases to make the first move.Mr. Powell was interviewed on Thursday, after the Fed’s meeting last week but before Friday’s blockbuster jobs report. He reiterated his message that lower borrowing costs are coming. But he also said that the Fed’s next meeting in March is probably too early for policymakers to feel sure enough that inflation is coming under control to reduce rates.“We think we can be careful in approaching this decision just because of the strength that we’re seeing in the economy,” Mr. Powell said during the interview, based on a transcript released ahead of its airing. He added that officials would want to see a continued moderation in price increases, even after several months of milder readings.The progress on inflation “doesn’t need to be better than what we’ve seen, or even as good. It just needs to be good,” Mr. Powell said.His remarks reaffirm that lower borrowing costs are likely coming this year — a change that could make mortgages, car loans and credit card debt cheaper for Americans. They also underscore how much better today’s economic situation is proving to be than what economists and Fed officials expected just a year ago.Many forecasters had predicted that the Fed’s rapid campaign of interest rate increases, which pushed borrowing costs from near zero to a range of 5.25 to 5.5 percent from March 2022 to July 2023, would slow the economy so much that it might even spur a recession. Central bankers themselves — including Mr. Powell — believed that some economic pain would probably be needed to cool consumer and business demand enough to prod businesses to stop raising prices so quickly.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    A City Built on Steel Tries to Reverse Its Decline

    Gary, Ind., was once a symbol of American innovation. The home of U.S. Steel’s largest mill, Gary churned out the product that built America’s bridges, tunnels and skyscrapers. The city reaped the rewards, with a prosperous downtown and vibrant neighborhoods.Gary’s smokestacks are still prominent along Lake Michigan’s sandy shore, starkly juxtaposed between the eroding dunes and Chicago’s towering silhouette to the northwest. But now they represent a city looking for a fresh start.More than 10,000 buildings sit abandoned, and the population of 180,000 in the 1960s has dropped by more than half. Poverty, crime and an ignoble moniker — “Scary Gary” — deter private investors and prospective homeowners.As U.S. Steel stands at a crossroads — a planned acquisition would put it under foreign control — so does the city that was named for the company’s founder and helped build its empire. A new mayor and planned revitalization projects have rekindled hope that Gary can forge an economic future beyond steel, the kind of renaissance that many industrial cities in the Midwest have managed.In theory, the potential is there. Gary sits in the country’s third-largest metropolitan area, astride major railroad crossings and next to a shipping port. A national park, Indiana Dunes, is a popular destination for park-loving tourists and curious drivers.“We have the recipe for success,” said Eddie Melton, the newly elected mayor. “We have to change the narrative and make it clear to the world that Gary is open to business.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More