Economy

E-bikes, frozen berries and security cameras have been added to the list of goods and services tracked to calculate inflation in the UK, in changes that reflect the popularity of new technology and rising concern about the environment.In its annual update to the basket of goods and services used to track inflation, the Office for National Statistics added 26 new items and removed 16 from the more than 700 that it selects as representative of what consumers typically spend their money on.During the past three years items related to the pandemic, such as hand sanitisers, were added to the basket but this year the impact of Covid-19 “has faded”, according to the ONS. Non-film DVDs dropped out of the collection, reflecting the rise in streaming services. Also out were non-chart CDs and digital cameras. Mike Hardie, ONS deputy director of prices transformation, said that the removal reflected “how most of us listen to music and take pictures straight from our phones these days”. Instead, video doorbells and security cameras were added to the basket, together with soundbars and computer game accessories.Hardie added that with many people looking to reduce their impact on the environment, e-bikes were also added, reflecting their rise in popularity over the recent years.The changes also showed transformations in food preferences. Frozen berries were introduced for the first time, partly a reflection of the popularity of home-made smoothies. Dairy-free spreads were also added, expanding the range of “free from” products, capturing the growing number of people switching to a vegan diet. Cooking apples were taken out of the basket, however, as few shops are now stocking them. Alcopops, low alcohol and typically brightly coloured drinks, have also fizzled out, together with packets of 20 super king-size cigarettes.

Myron Jobson, senior personal finance analyst at online platform Interactive Investor, said that the latest inflation basket reflects a market “that is both increasingly technologically savvy and health conscious”.The ONS is also introducing a new data source for rail fares, switching away from the index of regulator the Office for Rail and Road. Instead it will use 30mn price points provided by rail industry body the Rail Delivery Group. According to the statistical agency, this will provide “much more granularity and a better understanding of how rail prices are changing”.The change is part of a wider transformation in the calculation of prices by the ONS. In the coming years it will rely less on collecting the prices of physical goods and instead use information and price intelligence from sources including supermarket scanners and retailer websites. More

The failure of Silicon Valley Bank has torn into global markets, with investors ripping up their forecasts for further rises in interest rates and dumping bank stocks around the world.Government bond prices soared on Monday, posting some of the biggest rallies since the crisis of 2008, as fund managers ramped up bets that the US Federal Reserve would now leave interest rates unchanged at its next scheduled monetary policy meeting this month to steady the global financial system. As recently as last week, markets were braced for another half-percentage point rise.Meanwhile, bank stocks dropped heavily. Europe’s Stoxx banking index fell 5.7 per cent, taking its decline since the middle of last week to just over 11 per cent, with all 22 stocks in the index in negative territory. Several lenders suffered double-digit declines on Monday alone, including Austria’s Bawag Group and Germany’s Commerzbank. Spain’s Banco Sabadell fell more than 9 per cent.Futures contracts tracking Wall Street’s S&P 500 and the tech-heavy Nasdaq 100 were up 0.2 per cent and 0.6 per cent ahead of the New York open, after US regulators said on Sunday that SVB depositors would be fully repaid and unveiled emergency funding measures in a bid to contain the fallout. In the UK, the Bank of England brokered a deal to sell the UK arm of SVB to HSBC for £1.But futures in big US banks fell about 2 per cent and investors were picking off weaker names. Shares in First Republic, another San Francisco-based bank, dropped as much as 68 per cent in pre-market trading after it said on Sunday it would receive $70bn in funding from JPMorgan and the Fed’s new backstop plan. The failure of SVB, and closure of Signature Bank have come just months after the shortlived crisis in UK government bonds, underlining the risks buried in the financial system that are coming to light as central banks remove the largesse that shielded markets following the outbreak of the Covid-19 pandemic. Investors and analysts said policymakers at the Fed and elsewhere would need to tread carefully as they sought to hose down inflation.“The SVB situation is a reminder that Fed hikes are having an effect, even if the economy has held up so far,” said Mark Haefele, chief investment officer at UBS Global Wealth Management in a note to clients. “Concerns over bank earnings and balance sheets also add to the negative sentiment for . . . equity markets.”Futures markets show investors believe the US central bank will temper the path of interest rate rises from here, despite Fed chair Jay Powell’s reminder a week ago of his determination to pull down inflation, and despite data on Friday showing that the US economy added 311,000 jobs, higher than the 225,000 forecast by economists.Refinitiv data shows that traders see a 15 per cent probability that the US central bank will leave rates unchanged later this month. Expectations for a half-point rise have evaporated, leaving a roughly 85 per cent chance that the Fed will opt to raise interest rates by a quarter-percentage point to a target range between 4.75 and 5 per cent.Goldman Sachs said on Monday that it no longer expected any increase at the Fed’s meeting ending on March 22 “in light of recent stress in the banking system”.Investors also scaled back their bets on how high the European Central Bank would raise its deposit rate later this year to slightly above 3.5 per cent, down from a peak of 4.2 per cent only last week. The shake-up in bond markets was substantial. Germany’s interest rate-sensitive two-year bond yield plummeted 0.48 percentage points to 2.62 per cent on Monday, as bond markets rallied sharply in response to fading expectations of further increases in borrowing costs. The rate has fallen from the 14-year high of 3.3 per cent it hit last week, showing how sharply investors have repriced their rate expectations since SVB’s collapse.In the US, the benchmark 10-year government bond yield slipped 0.16 percentage points to 3.54 per cent. The two-year Treasury yield fell 0.25 percentage points to 4.33 per cent.

George Saravelos, a strategist at Deutsche Bank, said the SVB rescue package from the Fed, which includes an offer to absorb government debt and mortgage-backed bonds at above-market prices, represented a new form of quantitative easing — the bond-buying programme that US policymakers fired up after the pandemic hit to stabilise the financial system.“Both the speed and end point of the Fed hiking cycle should come down,” Saravelos said. “We’ve learnt two things over the last few days. First, that this monetary policy tightening cycle is operating with a lag, like every other. Second, that this tightening cycle will now be amplified due to stress in the US banking system.” Michael Every, an analyst at Rabobank, said the implications of the Fed’s “bailout of Silicon Valley venture capitalists funding Instagram filters that make cats look like dogs” were potentially “enormous”. “The Fed is de facto allowing a massive easing of financial conditions as well as soaring moral hazard,” he said in a note to clients.Currencies that perform well in times of stress also rallied. The Japanese yen and the Swiss franc both climbed around 1 per cent against the dollar.The rapid collapse of SVB had made market participants “more aware again that the Fed will eventually break something if it keeps raising rates”, said Lee Hardman, currency analyst at MUFG. The bank’s collapse had also “taken the wind out the US dollar’s sails” by highlighting risks associated with rising rates, Hardman added. A measure of the dollar’s strength against a basket of six international peers fell 0.6 per cent on Monday.Additional reporting by Martin Arnold in Frankfurt

Video: Fractured markets: the big threats to the financial system More

Interest rate futures put the chance of no change in Bank Rate on March 23 at about 40%, up from 25% earlier on Monday and around 10% last week. Bets on a quarter-percentage point rate hike fell to about 60%.The move followed a similar drop in expectations about a rate hike by the Federal Reserve this month after U.S. authorities announced plans to limit the fallout from the collapse of SVB. More

For decades, institutions of higher education provided steady, well-paid jobs in small towns where the industrial base was waning. But the tide of young people finishing high school is now also starting to recede, creating a stark new reality for colleges and universities — and the communities that grew up around them.As Americans have fewer children and a diminishing share of young adults pursue a degree, the once-burgeoning market for college slots has kicked into reverse. Although undergraduate enrollment stabilized somewhat in 2022, it’s still down about 7.6 percent since 2019.“It looks like the future is declining numbers of young people likely to attend college, even in growing areas like the Mountain West,” said Nathan Grawe, an economics professor at Carleton College in Minnesota who studies the demand for postsecondary education. “We’ll start to have some tough stories.”Evidence of a shrinking student body is everywhere in the western Pennsylvania borough of Clarion, population 3,880, which has taken immense pride in the graceful campus of Clarion University since the institution was founded as a seminary 156 years ago.Since 2009, when it had 7,346 students, the university has shrunk by nearly half. With the drop in enrollment has come the loss of nearly 200 staff members, mostly through attrition. Last year, the school even lost its name, as it was merged with two of the 13 other universities in the Pennsylvania State System of Higher Education, creating a multicampus university called PennWest.Tracy Becker, who looks out on Main Street from her broad desk at the city’s chamber of commerce, says there aren’t as many young volunteers for community events like the annual Autumn Leaf Festival, which has been held during homecoming weekend since 1953.“Ideally, I would love to see the university stay and thrive,” said Kaitlyn Nevel, a cafe owner, “but you just have to try and have however many backup plans.”Ross Mantle for The New York TimesKaitlyn Nevel’s cafe used to be staffed mostly with university students; now she has one such employee. As foot traffic lightened, she branched into catering. “Ideally, I would love to see the university stay and thrive, but you just have to try and have however many backup plans,” Ms. Nevel said.As Ms. Nevel’s resigned optimism suggests, declining enrollment doesn’t necessarily spell doom for college towns. Despite the lower student head count, few empty storefronts mar Clarion’s downtown. It has even attracted new businesses like Mechanistic Brewing, which Chelsea Alexander started with her husband in 2019 after moving back from Washington, D.C.Ms. Alexander is one of 28 people in her family to attend the local university. Since 1905, her family has run a clothing shop in town, which sells a line of T-shirts that trade on alumni nostalgia for favorite eateries that have long since closed and for towering dorms that have been demolished. But as graduating classes shrink, even alumni visits will taper off.The State of Jobs in the United StatesThe labor market continues to display strength, as the Federal Reserve tries to engineer a slowdown and tame inflation.Mislabeling Managers: New evidence shows that many employers are mislabeling rank-and-file workers as managers to avoid paying them overtime.Energy Sector: Solar, wind, geothermal, battery and other alternative-energy businesses are snapping up workers from fossil fuel companies, where employment has fallen.Elite Hedge Funds: As workers around the country negotiate severance packages, employees in a tiny and influential corner of Wall Street are being promised some of their biggest paydays ever.Immigration: The flow of immigrants and refugees into the United States has ramped up, helping to replenish the American labor force. But visa backlogs are still posing challenges.Ms. Alexander’s father, Jim Crooks, operates the store, and he has organized local merchants to spruce up the compact main street and market their businesses to potential visitors who may have no such connection to the town.“For many years, the university was carrying a lot of the businesses,” said Mr. Crooks, who has also converted four apartments above the shop from student housing into Airbnb lodgings. “Everybody’s just saying, ‘We can’t depend on the university.’”F.L. Crooks & Company, a family-owned clothing store, has served Clarion since 1905. Two apartments above it have been converted from student housing to Airbnb lodgings.Ross Mantle for The New York TimesAlthough Pennsylvania’s university system had been shrinking for a decade, along with the rest of higher education, it experienced a sudden shock when students disappeared during the pandemic. Among those who noticed: the leaders at the Federal Reserve Bank of Philadelphia, whose territory across Pennsylvania, New Jersey and Delaware has a higher density of colleges and universities than most.Along with large hospital systems, which are often affiliated with universities, educational institutions make up a substantial share of local economies that used to be dominated by manufacturing, logging and mining. Patrick T. Harker, the president of the Philadelphia Fed, wanted to find out how big that share was — since the education and medical sectors were starting to show cracks as well.“Traditionally, ‘eds and meds’ have been thought of as recession-proof,” Dr. Harker said. “This pandemic showed that is not true.”Not all of those institutions are equally vulnerable, however. Rural hospitals have been drying up even as large health care chains build new facilities in fast-growing suburbs, while the dwindling pool of students flocks to state flagships. “They’re stronger than ever, while the regional systems are really struggling,” said Deborah Diamond, a staff economist at the Philadelphia Fed.Dr. Diamond put together a tool that showed how much different regions depended on health care and higher education. The places at the top of the dependence list were predictable, like the Durham-Chapel Hill area of North Carolina, with two powerhouse universities. But they also included smaller areas, like the one surrounding Bloomsburg, Pa., two and a half hours east of Clarion on Interstate 80. There, institutions including Geisinger Health and Bloomsburg University — another state-owned school — make up 21.9 percent of local employment and 18.3 percent of regional income.“As we’ve seen some declines in manufacturing employment, their economic relevance is higher than it’s ever been,” said Fred Gaffney, the president of the area’s chamber of commerce.A local merchant is encouraging others to market to customers without a connection to the town’s university.Ross Mantle for The New York TimesClarion Hospital is the second-largest employer in the county.Ross Mantle for The New York TimesA similar set of factors is evident in Clarion County, where the university is still the largest employer, followed by Clarion Hospital. Walmart comes next, and then a few plants making building materials and prefabricated housing, several social service organizations and the county government. The county used to have more manufacturing, including a large glass plant that closed in 2010. As that receded, so did the county’s population; its labor force dropped to 16,000 in 2022, from about 21,000 in 2008.In the same period, Clarion University’s enrollment began to fall, as did state funding, raising the price of attendance. In 2021, Daniel Greenstein, the chancellor of the State System of Higher Education, proposed forming two clusters of three schools each, to consolidate operations and offer more classes across campuses.“We had to align our costs with our new enrollment numbers,” Dr. Greenstein said in an interview. “We were built out as if we were still having 120,000 students when we had 85,000. You just can’t do that. Like every American family, you have to live within your means.”At the same time, Mr. Greenstein requested more money from the State Legislature to enable the system to freeze tuition and offer more scholarships, which he said was critical to arresting the slide in enrollment. The state increased the system’s base funding by 15 percent in 2022 and threw in $125 million from a federal stimulus measure. The freshman class grew slightly last fall, but not enough to offset another overall drop in enrollment.For the merged schools, swooning enrollment underestimates the degree to which student presence has faded on campus. To bolster their course catalogs, the schools are offering more of their classes online. That allows some students to show up in person only a few days a week — a trend that may accelerate as the system pursues more adult students, some of whom just need to finish degrees or complete shorter certificate programs.Jennifer Fulmer Vinson, Clarion’s mayor, operates an antiques shop in a century-old house reclaimed from a long-gone fraternity.Ross Mantle for The New York TimesClarion’s mayor, Jennifer Fulmer Vinson — another Clarion graduate — sees that as a loss for the borough. History classes come less often to her antiques shop, which sits in a century-old house reclaimed from a long-gone fraternity, stuffed with curios including an old Coke machine and a cabinet full of war medals.“Why are students going to come pay to live on campus when they never leave their room?” Ms. Vinson said. “It’s become more of a ghost town.” (The university says that the first-year student experience is meant to be campus-centered and that most courses will remain in person.)About an hour’s drive west on Interstate 80 from Bloomsburg, the town of Lock Haven also has a university that last year merged with two others in the state-owned system. As the school has shrunk and well-paid staff members have moved away, the state’s substantial tax-free land holdings have started to grate on local residents.Gregory Wilson, the city manager, has created a handout showing what the median property owner pays in taxes to subsidize Lock Haven University: $186 annually.“I think the hope has always been that the investment they’re making to have the university here is somehow returned to them,” Mr. Wilson said. “But that becomes a harder sell as the university becomes smaller.”The contraction has come alongside another recent and unwelcome development: The local hospital, which the sprawling University of Pittsburgh Medical Center bought in 2017, announced in January that it would shutter its inpatient operations, forcing residents to travel at least a half an hour for serious care.All of it has been profoundly frustrating for Angela Harding, a Clinton County commissioner, who says that while she values the hospital and the university, drawing new residents to Lock Haven becomes harder as those economic anchors lose their grip.“I’m sick and tired of having to fight for every single crumb that we get,” Ms. Harding said.Colleges and the towns they occupy can do little about demographic currents. But they should, experts say, reinforce each other — the university can offer space for community functions and support for small businesses, for example, while the town can throw events for prospective students and their parents. Vacant student housing could be converted into homes for new residents who might be able to work remotely or want a quiet place to retire.Tracy Becker, of Clarion’s chamber of commerce, says there are fewer young volunteers for community events than in the past.Ross Mantle for The New York TimesMatthew Wagner, the director of programs for Main Street America, a group dedicated to the development of small downtowns, says he sees less town-gown tension now that municipalities and schools understand their shared fates.“Much like if you had a manufacturer that was facing headwinds, we need to think of the university as an economic development retention program, and direct our assets and resources that way,” Dr. Wagner said.Lock Haven has taken that idea to heart. Its main street is vibrant, with several new boutiques interspersed with longstanding local restaurants. Fabre Sanders, whose father runs a window-treatment store, moved back from Boston a few years ago to start a candy and gift shop. During the pandemic, she said, residents did everything they could to keep the shops alive.“They looked around and said, ‘If we don’t support the local we have, we’re going to have nothing,’” Ms. Sanders said. More

The president has met Republican demands for debt reduction with a plan to trim deficits by taxing companies and the rich. Months after losing control of the House in 2010, President Barack Obama and his vice president, Joseph R. Biden Jr., released a budget proposal that bowed to Republican warnings about the need to rein in spending by promising a freeze in popular programs like education.Now president, Mr. Biden is confronting the same equation, with an emboldened new Republican majority in the House demanding deep spending cuts. But this time, Mr. Biden has made a sharp break from the past.His proposed budget does contain new steps to reduce deficits, but instead of talking about hard choices and freezing spending, Mr. Biden has pledged to defend popular federal programs from Republican attacks and instead rely almost exclusively on taxing corporations and high earners as the way to reduce the growth in the deficit by nearly $3 trillion over the next decade.The shifting strategy by Mr. Biden is rooted in his determination not to repeat political and economic mistakes from the Obama era, administration officials say privately. Economists now say economic mistakes from the Obama era slowed the recovery from the 2008 financial crisis. And publicly, officials point to polls to contend that voters side with the president on how to reduce deficits.“The American people are absolutely right that having the super-wealthy and special interests pay their fair share is the right way to reduce the deficit,” said Jesse Lee, a senior communications adviser to Mr. Biden’s National Economic Council.The budget fight is expected to drag out for months as both sides attempt to pin the blame on the other. Mr. Biden is attempting a different sort of budget triangulation from Mr. Obama’s plan, as he nods to concerns over the $31.4 trillion national debt but seeks to redefine the issue and turn conservatives’ longstanding antipathy toward tax increases into a negotiating and electoral weapon.“The Republicans have taken off the table making the wealthy and the well connected pay a little more to help reduce the national debt — that means they’re not really serious about the national debt,” Senator Elizabeth Warren, Democrat of Massachusetts, said in an interview.Understand Biden’s Budget ProposalPresident Biden proposed a $6.8 trillion budget that sought to increase spending on the military and social programs while also reducing future budget deficits.Recapturing a Centrist Identity: As he unveiled his proposal, Mr. Biden made curbing the budget gap one of his centerpiece promises. The move is part of a wider shift that sees the president speaking more to the concerns of the political middle.A Missing Plan for Social Security: Like the president’s previous budgets, his new proposal makes no mention of the program, which he promised to shore up during his 2020 campaign.N.Y. Transit Projects: President Biden’s budget plan routes about $1.2 billion to two of the biggest transit projects in New York City: the Second Avenue Subway extension and new train tunnels under the Hudson River.“Higher taxes aimed at billionaires and giant corporations that are hiding their money overseas would have very little effect on our economy, other than the ability to reduce the national debt or to invest more,” she said.House Republicans are refusing to raise a cap on the amount of debt the United States can have outstanding unless Mr. Biden agrees to large federal spending cuts, which could include slashing antipoverty programs and new measures meant to fight climate change. They say the current national debt load and new spending programs approved by the president are weighing on economic growth, partly by driving up borrowing costs for private businesses.They are trying to assemble their own budget proposal that can pass the House, likely centered on cuts to housing assistance, health care programs and other aid to the poor. In a caucus that fractures on key issues like how much to spend on the military and whether to raise retirement ages for Social Security and Medicare, members have found common purpose in skewering Mr. Biden’s fiscal plans.“After two years of economic failures, the American people desperately want results,” Representative Jason Smith of Missouri, the chairman of the Ways and Means Committee, said at the start of a hearing on Mr. Biden’s budget on Friday. “The budget before us today calls for $4.7 trillion in new taxes and sinks $6.9 trillion in new spending during a staggering debt crisis.”Mr. Biden has refused to negotiate directly over raising the debt limit but says he welcomes a conversation on the nation’s finances — on his own, populist terms.“What are they going to cut?” Mr. Biden mused to an audience in Philadelphia on Thursday, as he formally unveiled his budget and called on Republicans to follow suit..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“What about Medicaid? What about the Affordable Care Act? What about veterans’ benefits? What about law enforcement? What about aid to rural communities? What about support for our military?” he asked. “What will they make — how will they make these numbers add up?”This debate is happening in an economic moment that is very different from 2011, when Mr. Obama issued his budget for the 2012 fiscal year.At that time, the gross national debt was about $15.5 trillion, or just under three-quarters of what was the annual output of the American economy. But the economy was nowhere close to recovering from the 2009 recession. The unemployment rate was 9 percent. The economy was running well below what economists call its potential — the amount of goods and services it would be producing at what you might call optimal performance.Then-President Barack Obama speaking about his budget proposal in 2009, with Mr. Biden, his vice president. Mr. Obama bowed to Republican demands to reduce deficits.Doug Mills/The New York TimesProgressive economists pushed Mr. Obama to take advantage of low interest rates to continue running large deficits and pump more money into the economy. After losing the House, though, he bowed to Republican demands to reduce deficits and pivoted the other way. His budget proposed caps on government spending and urged Congress “to act now to secure and strengthen Social Security for future generations” by taking steps to shore up its finances.A bout of brinkmanship later in 2011 between House Republicans and Mr. Obama nearly ended with the United States defaulting on its debt, before Mr. Obama agreed to a set of caps on future spending increases in exchange for lifting the limit. That deal helped cut the deficit by nearly two-thirds before Mr. Obama left office.Many economists have concluded that those measures dragged out the time it took for the economy to finally run hot enough to generate sustained wage gains for workers.Today’s economy has run so hot that the Federal Reserve is trying to cool it down to tame high inflation. Unemployment is 3.6 percent, and companies are having trouble finding workers. Republicans blame Mr. Biden’s spending policies for stoking inflation and say his tax proposals would further burden people and business owners already struggling with high prices.Progressive economists disagree — increasingly saying there is little threat to growth from large tax increases on companies and high earners.Even with his proposed savings, Mr. Biden’s budget still foresees the gross national debt increasing by about $18 trillion through 2033, to just above $50 trillion, or 128 percent of gross domestic product. It projects deficits to average about 1.5 percent more, as a share of the economy, than Mr. Obama projected in his 2012 budget. Yet administration economists say that under their plans, “the economic burden of debt would remain low.”Some progressive groups criticized Mr. Biden last week for focusing at all on deficit reduction in the budget. Others welcomed his emphasis on raising taxes for businesses and people earning more than $400,000.Budget hawks urged Mr. Biden last week to propose more — and more immediate — deficit reduction. Such reductions would pull consumer spending power out of the economy faster by raising taxes or reducing federal expenditures, or both. Advocates of deficit reduction said that could help ease price growth in the economy.Jerome H. Powell, the Fed chairman, told lawmakers in the House and Senate last week that federal tax and spending policy was “not contributing to inflation” today. He was pressed on that view by Senator John Kennedy of Louisiana, a Republican on the Budget Committee.“It’s undeniable that the only way we’re going to get this sticky inflation down is to attack it on the monetary side, which you’re doing, and on the fiscal side, which means Congress has got to reduce the rate of growth of spending and reduce — reduce the rate of growth of debt accumulation,” Mr. Kennedy said.“Now I get that you don’t want to get in the middle of that fight,” he added. “But the more we help on the fiscal side, the fewer people you’re going to have to put out of work. Isn’t that a fact?”“It could work out that way,” Mr. Powell replied. More

Brussels has kicked off a major ideological battle over big state interventions in Europe’s economy, as it finalises proposals to drive down carbon emissions and match US ambition on the green economy. The European Commission will this week unveil long-awaited proposals aimed at boosting green industry and domestic supplies of key raw materials, the main planks of the EU’s response to industrial competition from US and China. Last week Brussels put forward reforms that would enable capitals to match subsidies available in the US and elsewhere. But the draft proposals have sparked a fierce debate within Brussels, with more liberal EU member states objecting to distortions of free trade and open markets. Among the key points of friction are the inclusion of green production targets, potential barriers to imports of raw materials, and the extent to which constraints on public subsidies should be eased. “The balance has gone in this discussion — we are only talking about sovereignty,” said an EU diplomat. “By doing these things we are going to completely restructure the European economy in a way we are not confident will actually bring us to where we need to be in 10 or 20 years time.” Some of the most fraught debates have been over the net zero industry proposal, a direct response to the US Inflation Reduction Act announced last August. The US bill provides $369bn for clean energy technologies, a massive incentive package that has left EU officials fearing an exodus of companies across the Atlantic.Under leaked drafts of the EU response, domestic production in five key sectors — solar, wind, heat pumps, batteries and electrolysers — would need to meet at least 40 per cent of the bloc’s total requirements. The highest targets set are for the wind and heat pump sectors, at 85 per cent. But specific industry targets have been repeatedly removed and restored in drafts of the legislation as negotiations over the final proposal continue into this week. According to one EU official, a pro-competition camp has pressed for a more open list of technologies that would be considered as “strategic net zero” industries, while Thierry Breton, commissioner for the internal market, wanted a more fixed set of sectors. “Breton is more about boosting what we have,” they said.Officials are also debating rules requiring companies exporting minerals to the EU to meet criteria, such as environmental standards and labour rights, that would potentially create formidable barriers to imports from some developing countries. One diplomat from a developing nation said that the EU was advancing “at a rapid pace a whole set of requirements” that were making it “very expensive” to trade with the bloc.The EU is already immersed in a tough discussion over how far to relax restrictions on state aid, as the bloc seeks to compete with US and Chinese subsidies. Valdis Dombrovskis, the trade commissioner, warned journalists on Thursday of “the risks of going into a costly and inefficient subsidy race”.Member states including the Netherlands, Sweden, Denmark and Ireland are among those stressing the importance of maintaining a level playing field within the single market, rather than enabling bigger economies to pour large quantities of public subsidies into industry. Simon Coveney, Ireland’s enterprise minister, said the EU must be “careful that we don’t go too far” in loosening subsidy rules. He also warned against “protectionist policies”. “A small open economy like ours will lose out,” Mariin Ratnik, Estonia’s chief trade diplomat, told the FT.One EU diplomat said that France in particular is pushing the opportunity to shape Europe’s industrial policy, which Paris has long seen as too liberal. “We are building European competitiveness on subsidies. Free markets and open trade are no longer at the table,” the diplomat said.Raphaël Glucksmann, a French socialist MEP who chairs the European parliament’s foreign interference committee, said that Europe’s push for cheap solar energy was a good example of how the EU’s free trade policy had led to heavy dependencies on other states. “Thirty years of ideology have led to dependency, which is the big paradox of our time. Thirty years of deregulation and free trade policy have led to the triumph of the Chinese Communist party,” he said. “That is the Faustian pact between pro market ideologues and communism. This is very ironic but this is the result we are in now.” More

(Reuters) – A wave of relief swept over Silicon Valley Sunday following a tense weekend of board meetings, emergency funding plans and pleas for help after regulators stepped in to backstop the region’s embattled namesake bank.Banking regulators said Sunday evening that depositors at Silicon Valley Bank, which was shuttered Friday, would have access to their funds Monday, putting to rest fears that startups would struggle to pay their employees this week. The bank’s closure had followed interest rate hikes that hurt its startup customers and a failed capital raise attempt, spurring deposit withdrawals.Despite the palpable relief, questions still remained about the funding environment for startups, which had come to rely on Silicon Valley Bank for support to back unproven businesses that larger banks eschew. And the bank still had not found a buyer as of Sunday, which was a hope of many venture capital firms and tech founders hungry for positive news.“This is a huge step in restoring confidence in the startup community. Before this move many startups were planning emergency measures which would have likely led to more layoffs and furloughed employees. The actions have provided much needed certainty that everyone can make payroll on Monday,” said Jon Sakoda, founder of early stage venture firm Decibel Partners.The bank’s sudden shutdown sent a chill through Silicon Valley amid an otherwise gloomy period marked by tech layoffs and a pullback in spending as consumers tightened their wallets. Company executives, many of whom stashed all of their funds in Silicon Valley Bank, took to Twitter and other social media networks to beg for relief.Sam Altman, who heads OpenAI, known for its ChatGPT artificial intelligence software, was among those who answered the call, offering emergency funding to startups to help weather the uncertainty and pay their employees, Reuters reported Sunday.Tech investor Asheesh Birla had spent the last three days working nonstop, between advising companies about how to make payroll, or urging people to call their local politician. He is very happy with the federal government’s decision to backstop deposits but not make the bank’s equity holders whole, he said.“Companies should never have to worry about whether or not their deposits are safe,” he said.A joint statement Sunday by U.S. government bodies including the Treasury Department and Federal Reserve indicated taxpayers would not bear any cost associated with the new plans around Silicon Valley Bank. However, shareholders and some unsecured creditors won’t receive the same protections.Birla predicts that in the next few days, startups will rush en masse to open accounts at large banks. And for companies that hold considerable cash positions, he thinks that there will be a surge of interest in hiring treasurers who will work to minimize the amount of cash companies are holding at any moment.Silicon Valley Bank until now had been a reliable source of funding for startups relative to other banks.Doktor Gurson, CEO of Rad AI, said the news represented a “collective sigh of relief” after days worrying about how to make payroll for his startup with some 65 employees. “I lost a couple years of my life over the weekend to be honest. It’s been a bit of a roller coaster.”Still, the saga is far from over. Even as Rad AI plans to move money to new accounts in bigger banks, exactly when it can access all its SVB funds remains unclear, he said. “I don’t know that there’s any safe place to go,” he said. “I’m still a little bit nervous of what could happen.”He added, “We’ll still need to assess what we’re doing moving forward.” More

SINGAPORE (Reuters) – The U.S. dollar slid on Monday as authorities stepped in to cap the fallout from the sudden collapse of Silicon Valley Bank, with investors hoping the Federal Reserve will take a less aggressive monetary path. The U.S. government announced several measures early on Monday Asian hours, and said all SVB customers will have access to their deposits starting on Monday. Officials also said depositors of New York’s Signature Bank (NASDAQ:SBNY), which was closed Sunday by the New York state financial regulator, would also be made whole at no loss to the taxpayer.The dollar index, which measures the U.S. currency against six rivals, fell 0.153% at 104.080. The Japanese yen strengthened 0.34% to 134.52 per dollar, the highest in a month as investors made a move to safe-haven Asian currencies. “The currency market is still digesting all the news related to the collapse of SVB,” said Carol Kong, currency strategist at Commonwealth Bank Of Australia.”Given all the measures taken by the authorities the market should be calmer at least for the time being, but if there are concerns about regional banks, we could easily see the dollar and Japanese yen rally again.”The euro was up 0.44% to $1.069, while sterling was last trading at $1.2085, up 0.47% on the day. The Australian dollar rose 0.79% to $0.663, while the kiwi rose 0.36% to $0.616.In cryptocurrencies, bitcoin last rose 11.12% to $22,330.00. Ethereum last rose 12.12% to $1,598.90.The SVB collapse led investors to speculate that the Fed would now be reluctant to rock the boat by hiking interest rates by a super-sized 50 basis points this month, with the spotlight firmly on Tuesday’s inflation data.”From the perspective of the FOMC, their concern is still inflation and inflation has not really decelerated,” Kong said, adding that tomorrow’s CPI will continue to show that inflation remains persistently high.”Given what’s happened in the U.S. financial system, a 25 basis point hike is more likely than a 50 basis point hike.” Fed fund futures surged in early trading to imply only a 17% chance of a half-point hike, compared to around 70% before the SVB news broke last week.========================================================Currency bid prices at 0046 GMTDescription RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar $1.0690 $1.0639 +0.49% -0.22% +1.0704 +1.0648 Dollar/Yen 134.4550 134.9200 -0.47% +2.33% +135.0050 +134.2000 Euro/Yen 143.76 143.70 +0.04% +2.47% +144.2100 +143.1100 Dollar/Swiss 0.9183 0.9216 -0.36% -0.69% +0.9201 +0.9152 Sterling/Dollar 1.2086 1.2036 +0.45% -0.03% +1.2099 +1.2040 Dollar/Canadian 1.3758 1.3827 -0.49% +1.55% +1.3823 +1.3759 Aussie/Dollar 0.6623 0.6582 +0.65% -2.82% +0.6646 +0.6587 NZ 0.6154 0.6135 +0.31% -3.08% +0.6172 +0.6140 Dollar/Dollar All spotsTokyo spotsEurope spots Volatilities Tokyo Forex market info from BOJ More