Economy

Investors expect the European Central Bank to accelerate the shrinking of its balance sheet this summer, testing their appetite for eurozone sovereign debt as cash-strapped governments also turn to markets to raise funds.The shift by the ECB to tighten its policy stance is likely to drive up government borrowing costs in more heavily indebted southern European countries once “investor fatigue” from more bonds flooding the market sets in, some analysts warned.This month the ECB started to reduce its bond holdings by not replacing €15bn of the securities that mature each month in its asset purchase programme, which makes up two-thirds of the almost €5tn of assets it has purchased under its longstanding policy of quantitative easing. Debt markets were unperturbed by the Frankfurt-based institution starting to reduce its bond holdings this month.But eurozone governments issued about €100bn of extra debt — above that needed to refinance maturing bonds — in January and again in February, according to Camille de Courcel, head of strategy for G10 Rates Europe at French bank BNP Paribas. “We have this very strong supply [of new debt] and we think there will be some kind of indigestion in the market and then we could see some underperformance,” she said.Overall borrowing costs for eurozone governments have risen sharply in the past year as the ECB has reduced its bond purchases and raised interest rates. But the difference, or spread, between the cost of borrowing for heavily indebted countries in Europe’s periphery, such as Italy, and those of safer “core” countries such as Germany has narrowed in the past six months.Since Giorgia Meloni’s election as head of Italy’s rightwing government, she has surprised investors by taking a relatively cautious approach to public spending, calming anxiety about the country’s high debt levels. “Meloni is more fiscally prudent than initially thought,” said Ludovic Subran, chief economist at German insurer Allianz. Italy’s 10-year bond yield was 4.42 per cent on Wednesday, close to its highest level for almost a decade. The spread with its German equivalent, however, was just below 1.8 percentage points — after falling from levels above 2.5 points last year.This seems an anomaly to some economists, who expected rising interest rates to cause the spread between riskier assets and less risky ones to rise. “The stability in peripheral spreads in the face of the fastest monetary tightening cycle ever, and re-pricing of the terminal rate higher, looks puzzling,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management.However, analysts said higher yields on longer-term Italian government bonds were attracting more investors, helping to compress spreads. Piet Haines Christiansen, director of fixed-income research at Danske Bank, said this had started to “attract a certain investor base that has been absent in the past many years during the low interest rate environment”. For example, Rabobank researchers calculated that asset managers, insurers, pension funds and households “stepped up” to absorb €30bn of Italian sovereign debt sold by banks and foreign investors around the time of last October’s election.“Italy is the one we’re watching fairly closely,” said Michael Metcalfe, head of macro strategy at State Street, adding that private sector investor demand for Italian government debt had held up well. “Is confidence beginning to wobble? We’re not really seeing anything,” Metcalfe said. “The [ECB policy] tightening we’ve had has been well flagged, so markets have had time to adjust. But it’s worth being cautious. Quantitative tightening will be a long process.”But others still think Italy’s borrowing costs are still likely to rise. Sophia Oertmann, an analyst at DZ Bank, calculated that to avoid a “vicious circle” of rising debt and borrowing costs Italy needs to return to a primary budget surplus — excluding interest costs — something it has not done since 2019. Without this “a psychological tipping point would then also be reached”, she said, pointing to rating agencies updating their scores for Italy in April and May as a possible “catalyst”.Encouraged by the smooth start to shrinking the ECB’s bond portfolio, some of its governing council members, such as Bundesbank president Joachim Nagel, have called for the central bank to speed up the quantitative tightening process when this is reviewed in July. Others, such as Austria’s central bank head Robert Holzmann, have even said it should bring forward from the end of next year the start of a reduction in its separate €1.7tn portfolio of bonds bought under an emergency scheme launched during the coronavirus pandemic. To go even faster, the ECB could sell bonds before they mature, but most analysts think this is unlikely as it would crystallise big losses.

Konstantin Veit, a portfolio manager at bond investor Pimco, said he expected the ECB to stop replacing all maturing bonds in the APP from July, which would increase the monthly reduction in its holdings to €25bn. “The main consequence is increased government bond supply to the market,” said Veit. Normally, he said, such a shift “probably doesn’t matter that much, and higher yields typically makes fixed income more attractive”. However, this could change in a political or economic crisis, in which case “the market might take a closer look at supply dynamics.”Most investors think the private sector has enough capacity to mop up the extra supply of bonds this year, but only if inflation declines roughly in line with expectations.“Last year the ECB helped reduce net bond supply, this year the ECB will add to it, likely taking the net bond supply to over €700bn, from something around €150bn last year,” said Derek Halpenny, head of research for global markets at MUFG. “If inflation were to prove notably higher than expected that could create problems.” More

The swap exchanges old debt for new bonds maturing in 2024 and 2025, according to an economy ministry statement Thursday.”In this way, the uncertainty about the debt maturities of the coming months is cleared up, helping to preserve the sustainability of the Treasury debt,” the ministry said.Argentina had initially hoped to swap around half of its total debt due, an official source told Reuters on the condition of anonymity earlier this week.”Between banks, insurers and companies, the (swap) volume would be between 3 and 3.5 trillion pesos (around $17 billion),” they said, adding that swapping “anything above 50% will already be a great achievement.”The swap, first announced Monday, prompted global rating agency S&P to slash Argentina’s local currency rating to ‘SD/SD’ (selective default) from ‘CCC-/C’ Thursday. It also downgraded Argentina’s national rating to ‘SD’ from ‘raCCC+’.Argentine stocks and bonds also fell Thursday as investment funds flocked for the exit following news of the debt swap, which aims to ease market uncertainty in an election year and amid a stalling economy.Though the debt swap is technically voluntary rather than a forced restructuring, the agency – and indeed the markets – still appear to view it as a distressed event.This is Argentina’s third bond swap since August 2022.Argentina also still has an eye-watering estimated $170 billion of local debt due, given the swap only pushes back the payment deadline.Meanwhile, a historic drought in Argentina has squeezed the economy, which is already battling an expected annual inflation rate of some 100%.Economy Minister Sergio Massa recently described the swap as “giving predictability” to the market to improve access to credit.The opposition led by the “Juntos por el Cambio” coalition have criticized the latest measure since the new maturities will need to be handled by the incoming government following the October elections. More

(Reuters) – SVB Financial Group scrambled on Thursday to reassure its venture capital clients their money was safe after a capital raise led to its stock collapsing 60% and contributed to wiping out over $80 billion in value from bank shares.The lender on Wednesday launched a $1.75 billion share sale to shore up its balance sheet and navigate declining deposits from startups struggling for funds amid increased spending.The shares posted their biggest loss since the bank’s 1988 IPO as it warned that venture capital funding could remain constrained in the near term, while Chief Executive Greg Becker said cash burn by clients increased in February. The stock collapsed to its lowest level since 2016, and after the market closed shares slid another 26% in extended trade.Becker has been calling clients to assure them their money with the bank is safe, according to two people familiar with the matter. Some startups have been advising their founders to pull out their money from SVB as a precautionary measure, the sources added. One San Francisco-based startup told Reuters they successfully wired all their funds out of SVB on Thursday afternoon, and the funds had appeared in their other bank account as a “pending” incoming wire by 4 pm Pacific Time on Thursday.However, the Information publication reported the bank told four clients that transfers could be delayed. SVB did not immediately respond to a request for comment. GRAPHIC: SVB Financial’s stock slumps as investors fear bank run (https://fingfx.thomsonreuters.com/gfx/mkt/zgpobnxeavd/Pasted%20image%201678405360777.png) A crucial lender for early-stage businesses, SVB is the banking partner for nearly half of U.S. venture-backed technology and healthcare companies that listed on stock markets in 2022.”While VC (venture capital) deployment has tracked our expectations, client cash burn has remained elevated and increased further in February, resulting in lower deposits than forecasted,” Becker said in a letter to investors.The funding winter is a fallout of a relentless increase in borrowing costs by the Federal Reserve over the last year as well as elevated inflation. The SVB turmoil raised investors’ concerns about broader risks in the sector.Shares of First Republic, a San Francisco-based bank, sank more than 16.5% after hitting the lowest level since October 2020, becoming the second-biggest decliner in the S&P 500 index. Zion Bancorp dropped more than 12% and the SPDR S&P regional banking ETF slid 8% after hitting its lowest point since January 2021.Major U.S. banks were also hit, with Wells Fargo (NYSE:WFC) & Co down 6%, JPMorgan Chase & Co (NYSE:JPM) down 5.4%, Bank of America Corp (NYSE:BAC) 6% lower and Citigroup Inc (NYSE:C) 4% lower. Thursday’s slump evaporated over $80 billion in stock market value from the 18 banks making up the S&P 500 banks index, including a $22 billion drop in the value of JPMorgan.In a separate deal, SVB said private equity firm General Atlantic will buy $500 million worth of its shares.Meanwhile, ratings agency Moody’s (NYSE:MCO) downgraded the bank’s long-term local currency bank deposit.Natalie Trevithick, head of investment grade credit strategy at investment adviser Payden & Rygel, said the bank’s bonds were not doing as poorly as the equity.”Future performance is going to be news dependent but I don’t expect them to properly recover in the near term. It’s not quite cheap enough for a lot of buy-the-dip people to come back in,” Trevithick said.Despite the latest concerns, analysts at brokerage firm Wedbush Securities said the bank had received significant proceeds from selling securities and raising capital.”We do not believe that SIVB is in a liquidity crisis,” Wedbush analyst David Chiaverini said in a report, referring to the company’s trading symbol.California-based SVB has sold $21 billion of its securities portfolio, which would result in an after-tax loss of $1.8 billion in the first quarter. Funds raised from the sale will be re-invested in shorter-term debt and the bank will double its term borrowing to $30 billion.”We are taking these actions because we expect continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients,” Becker said.”When we see a return to balance between venture investment and cash burn – we will be well positioned to accelerate growth and profitability,” he said, noting SVB is “well capitalized.”The bank also forecast a “mid-thirties” percentage decline in net interest income this year, larger than the “high teens” drop it forecast seven weeks earlier.Bank stocks remained under pressure from “risk-off sentiment” and questions about systemic risks to the industry, said John Luke Tyner, a fixed income analyst at Aptus Capital Advisors. More

WASHINGTON (Reuters) – U.S. President Joe Biden on Thursday delivered a budget proposal that includes a robust spending agenda, higher taxes on the wealthy and plans to reduce the deficit, a document that forms the blueprint for his expected 2024 re-election bid.Here is reaction to Biden’s budget proposal to Congress for the 2024 fiscal year:U.S. House Budget Committee Chair Jodey Arrington, Republican from Texas: “His policies have led to 40-year record inflation, soaring interest rates and the prospect of a sustained economic recession. Unfortunately, Biden’s latest budget is more of the same bloated bureaucracy at the expense of working families, while sticking our grandchildren with the bill.” U.S. House Democratic Leader Hakeem Jeffries: “The Biden budget plan protects Social Security, strengthens Medicare and invests in our children. House Republicans continue to hide their extreme plans from the American people.” U.S. House Speaker Kevin McCarthy, House Majority Leader Steve Scalise, House Majority Whip Tom Emmer and Republican Conference Chair Elise Stefanik in a joint statement: “President Joe Biden’s budget is a reckless proposal doubling down on the same Far Left spending policies that have led to record inflation and our current debt crisis.” Republican U.S. House Member Ben Cline of Virginia on Fox Business: “I think his budget in the Republican House of Representatives is going to be about as popular as Pete Buttigieg in East Palestine, Ohio. I don’t think it’s going to get a, well, very good reception. His tax increases are dead on arrival. We’re working on a budget that is going to get rid of the woke and weaponized government that Joe Biden has been pushing for years now.” U.S. Senate Majority Leader Chuck Schumer: “The president’s budget is set to be a bold, optimistic, and serious proposal for strengthening our economy and creating opportunities to climb into the middle class, as well as helping people stay there once they get in the middle class.” Congressional Progressive Caucus Chair Pramila Jayapal: “This budget would advance priorities progressives have been pushing for years, and continue the unfinished work from the president’s 2022 agenda. ….. There are also a few places where we need to do better, and ensure record levels of funding come alongside real accountability, particularly for immigration and defense.” Republican U.S. Senator Chuck Grassley of Iowa: “Even with near-record revenues, President Biden wants to raise taxes on every segment of America. Under his plan, the government’s bite out of the economy would be the largest since World War II. And despite all that, he’s somehow managed to continue adding to our national debt at a breakneck speed. It’s an unserious proposal, and will be treated as such by both parties in Congress.” Josh Bivens, Economic Policy Institute, director of research: “If there’s a quibble on the tax side, it’s that it doesn’t ask enough of plenty of American households who could afford to pay more.” U.S. Chamber Of Commerce Executive Vice President Neil Bradley: “The administration’s proposed budget is a recipe for economic and fiscal disaster. Nearly $2 trillion in spending increases would result in an economy where one out of every four dollars is government spending. An unprecedented $5 trillion in tax increases would hit businesses of all sizes and lead to lower wages for working Americans.”U.S. Senate Armed Services Committee Chair Jack Reed, Democrat from Rhode Island, on Biden’s $886 billion in proposed national defense spending: “This topline request serves as a useful starting point.” U.S. House Armed Services Committee Chair Mike Rogers (NYSE:ROG), Republican from Alabama: “A budget that proposes to increase non-defense spending at more than twice the rate of defense is absurd. The president’s incredibly misplaced priorities send all the wrong messages to our adversaries.” More

TOKYO (Reuters) -The Bank of Japan (BOJ) is set to maintain ultra-low interest rates on Friday and hold off on making major changes to its controversial bond yield control policy, leaving options open ahead of a leadership transition in April.The meeting will be the last one to be chaired by Governor Haruhiko Kuroda, who leaves behind a mixed legacy with his massive stimulus praised for pulling the economy out of deflation – but straining bank profits and distorting market function with prolonged low interest rates.With inflation exceeding its 2% target, the BOJ has been forced to ramp up bond buying to defend a 0.5% cap set for the 10-year bond yield – at the cost of distorting the shape of the yield curve and causing dysfunction in the bond market.U.S. Federal Reserve Chair Jerome Powell’s comments on Tuesday signaling the need for bigger-than-expected rate hikes also point to the likelihood Japanese yields will remain under upward pressure.Many analysts thus see the days of yield curve control (YCC) numbered, though recent BOJ policymakers’ speeches underscore their preference to hold off on big policy changes at least until Kuroda’s successor, Kazuo Ueda, takes the helm in April.”Under Ueda’s new leadership team, the BOJ will keep monetary conditions accommodative but tweak (YCC) to mitigate its side-effects,” said Mari Iwashita, chief market economist at Daiwa Securities.”After conducting an examination of its policy framework, the BOJ will either abandon the 10-year yield target or shift to one targeting a shorter duration,” she said.At the two-day meeting ending on Friday, the BOJ is set to maintain its short-term interest rate target at -0.1% and that for the 10-year bond yield around 0%.Some market players bet the BOJ could widen the band set around the 10-year yield target, allowing the yield to rise up to 0.75%, from the current 0.5%, as early as Friday.But many analysts polled by Reuters expect any tweak in YCC to happen after Ueda takes over as new governor.Kuroda has repeatedly said consumer inflation, now running at double the pace of the BOJ’s 2% target, will begin to slow as the effect of past spikes in fuel and raw material prices fades.Data released on Friday showed Japan’s wholesale prices rose 8.2% in February from a year earlier to mark the second straight month of year-on-year slowdown, heightening the chance the rise in consumer inflation will start to moderate in coming months.The upper house of parliament on Friday approved the government’s appointment of Ueda and his two new deputies, Shinichi Uchida and Ryozo Himino, finalising the confirmation of the new BOJ leadership.Ueda will chair his first policy meeting on April 27-28, when the board will produce closely watched, fresh quarterly growth and price forecasts extending through fiscal 2025. More

WASHINGTON — President Biden on Thursday proposed a $6.8 trillion budget that sought to increase spending on the military and a wide range of new social programs while also reducing future budget deficits, defying Republican calls to scale back government and reasserting his economic vision before an expected re-election campaign.The budget contains some $5 trillion in proposed tax increases on high earners and corporations over a decade, much of which would offset new spending programs aimed at the middle class and the poor. It seeks to reduce budget deficits by nearly $3 trillion over that time, compared with the country’s current path.It reaffirms Mr. Biden’s case that he can prevent the growing debt burden from weighing on the economy while expanding spending and protecting popular safety-net programs — almost entirely by asking companies and the wealthy to pay more in taxes.But after claiming credit for a $1.7 trillion decline in the annual deficit over the past year, Mr. Biden now sees the deficit increasing again in the 2024 fiscal year, to $1.8 trillion. The jump is larger than other forecasters, like the Congressional Budget Office, have projected. It is driven by rising costs of servicing the national debt as the Federal Reserve raises interest rates to curb inflation and by new programs the president is proposing that are not fully offset by tax increases in their first year.The plan drew swift criticism from Republicans, who are locked in an economically perilous debate with Mr. Biden over the borrowing limit, which House conservatives refuse to raise unless he agrees to sharp spending cuts.Senator Charles E. Grassley of Iowa, the top Republican on the Budget Committee, said Mr. Biden’s spending blueprint was “an unserious proposal and will be treated as such by both parties in Congress.”The budget plan, he said, “is a road map for fiscal ruin.”The proposals stand little chance of becoming law because Republicans won control of the House in November. Instead, Mr. Biden’s budget request was a political statement of values aimed at winning public opinion amid the debt-limit fight and a nascent 2024 campaign.He unveiled the plan formally on Thursday in Philadelphia. His budget would “lift the burden off families in America,” the president said during a swing-state speech meant to contrast his economic vision with that of Republicans who have called for spending cuts.“My budget is about investing in America and all of America,” Mr. Biden said during a roughly 50-minute speech to scores of union workers, Biden supporters and local Pennsylvania politicians. “Too many people have been left behind and treated like they’re invisible. Not anymore. I promise I see you.”The president emphasized a message of bolstering manufacturing, an effort many of his allies believe can sway blue-collar workers who in recent years have lost faith in the Democratic Party.The proposals in the budget showcased Mr. Biden’s early success in expanding the federal government’s role in the economy, and they reaffirmed his push for more. On Mr. Biden’s watch, its numbers show, domestic spending in areas like research and support for manufacturing has grown significantly larger as a share of the economy than was considered in the budget plans of the last Democratic administration, under President Barack Obama, when Mr. Biden was vice president.An Intel semiconductor manufacturing facility in New Albany, Ohio, is part of Mr. Biden’s plan to rebuild American manufacturing.Pete Marovich for The New York TimesIn his first two years as president, Mr. Biden signed laws to expand and rebuild critical infrastructure like water pipes and highways, bolster U.S. manufacturing of semiconductors and other high-tech goods, and accelerate a transition from fossil fuels toward low-emission sources of energy to fight climate change. He delivered military aid to Ukraine in its fight against Russia and signed a bipartisan law to increase federal medical care for military veterans exposed to toxic burn pits.He also left much of his economic agenda unfinished, a fact reflected in his budget, which renewed calls for programs that failed to pass muster when his party controlled Congress..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.“This president clearly believes the way to grow this economy is investing in the middle class and working families,” Shalanda D. Young, the director of the White House budget office, told reporters on Thursday.The president’s budget proposed $400 billion to deliver affordable child care for parents, $150 billion for home care for older Americans and disabled people, and nearly $400 billion to make permanent expanded health coverage assistance through the Affordable Care Act. He would spend $325 billion to guarantee paid leave for workers and nearly $300 billion combined for free community college and prekindergarten for students. He is seeking $100 billion in additional assistance to lower housing costs for homeowners and renters.Mr. Biden would reinstate for three years an expanded child tax credit, which was included in the economic aid bill he signed in 2021 but expired last year, as a means of reducing child poverty. He would make permanent a change in the credit that allows people to benefit from it in full even if they do not make enough money to owe federal income taxes. Together, the changes would cost more than $400 billion.To help offset costs, Mr. Biden proposed a series of tax increases on corporations and the wealthiest Americans. They include a 25 percent tax aimed at billionaires (he requested a similar tax last year but at a lower rate: 20 percent). He also called for quadrupling a tax on stock buybacks and renewed his push to roll back President Donald J. Trump’s tax cuts for high earners and to raise the corporate income tax rate to 28 percent from 21 percent.Mr. Biden proposed increasing and expanding a tax on Americans earning more than $400,000 as part of efforts to extend the solvency of Medicare by a quarter-century. He is also seeking new savings for the government based on more aggressive negotiation over prescription drug prices.But for the third consecutive budget, Mr. Biden did not put forth any new initiatives to extend the solvency of Social Security — unlike during the 2020 campaign, when he sought to expand benefits and bolster the program’s trust fund by effectively raising payroll taxes on people earning more than $400,000 a year.The budget offered few paths to compromise between Mr. Biden and Republicans on fiscal issues. One potential area of common ground was responding to what both parties call a growing military and economic threat from China. The budget proposed $9.1 billion in investments next year through the Pentagon’s “Pacific Deterrence Initiative,” which includes expenditures on new weapons systems that can be used to protect allies and defend U.S. interests in the region. It also asks for $400 million to a fund dedicated to countering the influence of the Chinese Communist Party abroad, such as exposing Chinese disinformation campaigns.The budget also refers to various domestic investments, which the administration argues are needed to make the U.S. economy more competitive with China. That includes money for domestic research into agriculture, an area where it says China has become the largest funder of research, as well as major investments in the manufacturing of semiconductors, clean energy products and other technologies in the United States.Still, Speaker Kevin McCarthy of California and his lieutenants reiterated on Thursday that they intended to insist on significant reductions in spending before they would consider allowing the federal debt limit to be raised — even though a stalemate over the debt limit could shake the world economy and endanger the retirement savings of millions of Americans.“We must cut wasteful government spending,” Mr. McCarthy and the other members of his leadership team said in a joint statement issued after Mr. Biden’s budget was released. “Our debt is one of the greatest threats to America, and the time to address this crisis is now.”The budget sees the gross national debt increasing by about $18 trillion through 2033, rising to just above $50 trillion. But the administration suggests that growth will not threaten the economy. “The economic burden of debt would remain low and in line with recent historical experience over the next decade,” administration officials wrote in the proposal.Last year’s budget painted a rosy and ultimately over-optimistic picture of the U.S. economy. The administration expected gross domestic product to grow 4.2 percent after adjusting for inflation, for instance, but it ultimately climbed by a more modest 2.1 percent.The new budget’s projections were more muted, with a caveat. The White House sees the economy growing by only 0.6 percent after adjusting for inflation this year, a weak pace that is in line with outside expectations. It also predicted a substantial increase in the unemployment rate — to 4.3 percent, a notable rise from 3.4 percent in January. Alongside that slowdown, inflation is expected to moderate.But officials noted that the administration completed its projections in November and that economic data had been stronger than expected since. Administration economists said in a blog post that unemployment “would likely be lower” than the official forecast in light of that.Much of the budget’s contents were holdovers from Mr. Biden’s previous proposals. But there were also a few new plans. One of them was a tax on the energy used in creating new digital currency assets, known as cryptocurrency mining. That practice relies on large amounts of electricity and generates emissions that contribute to climate change.Administration officials want to discourage the practice, which they say impedes the country’s energy transition. So they proposed a 30 percent tax on the electricity used in it, phased in over three years, whether that comes from an electric utility or a localized source like a home solar panel, on the theory that the energy involved would be put to better purpose in another use.Reporting was contributed by More

The country’s current account balance logged a deficit of $4.52 billion in January, after a $2.68 billion surplus in December, according to the Bank of Korea (BOK). It was the biggest monthly deficit since the data series started in 1980.The balances of goods and services each posted a deficit of $7.46 billion and $3.27 billion, with a drop in exports and jump in travel outflows, although the surplus in primary income widened to $6.48 billion. Data out earlier this month showed the country’s trade deficit more than halved to $5.30 billion in February from a record $12.65 billion in January, suggesting an improvement in the current account.Vice Finance Minister Bang Ki-sun said after the data release that the government would continue efforts to improve exports and seek ways to boost domestic travel, while citing dividend payouts as a factor to cause volatility in the account in the first half of 2023.The BOK expects the current account to log a $26 billion surplus in 2023, narrower than $29.83 billion in 2022. (This story has been corrected to say 2023, instead of 2022, in paragraph 5) More

Londoners and people living in south-east England are 55 per cent more likely to struggle to pay their mortgages than those living elsewhere in the UK, new data shows, highlighting the uneven effect of the cost of living crisis. The Financial Conduct Authority said on Friday that 5.9 per cent of the 1.8mn mortgage holders in London and the South East were at risk of being “financially stretched” by mid-2024. According to the regulator, people who are financially stretched have a mortgage costing them more than 30 per cent of their gross income. The findings highlight the vulnerability of Londoners’ living standards to high housing costs. In the latest data, median incomes in the capital are no higher than the rest of the country when measured after housing costs. The share of mortgages at risk of default across the UK, excluding London and the South East, is 3.8 per cent, with the lowest rates in the poorest regions where house prices have traditionally been lower, including north-east England (2.3 per cent), Northern Ireland (2.4 per cent) and Scotland (2.8 per cent). The FCA released the figures as it finalised guidance for banks to support at-risk borrowers, including proactively contacting them about options to help them avoid default. The watchdog said banks reached out to 16.5mn customers to offer support last year and expects this number to rise to 20.5mn in the next 12 months. “Our research shows most people are keeping up with mortgage repayments, but some may face difficulties,” said Sheldon Mills, FCA executive director of consumers and competition, adding that those worried by default should contact their banks sooner rather than later. The picture on at-risk mortgages nationwide has improved to 356,000 from the 570,000 predicted last autumn. The FCA said the 570,000 figure was based on interest rate expectations in September 2022, when the bank rate was forecast to peak at 5.5 per cent. Its latest data was calculated on expectations that rates would now peak at 4.5 per cent. The FCA findings that London-based households with mortgages are more likely to be financially stretched match a range of recent surveys showing that living standards in the capital are no longer higher than average.

Official figures show that although households in London have higher average incomes after tax than any other region or nation in the UK, once rent or mortgage interest costs are deducted, their level of disposable income is no higher than average. Income growth in the capital has also ceased to rapidly outpace other parts of the country, and productivity growth rates have been below average in the UK since the 2008-09 financial crisis. In a report last week, the Centre for Cities blamed the slowdown in London’s productivity growth for a disproportionate amount of the overall weakness of the UK economy since the crash 15 years ago. The think-tank said a lack of housing affordability in the capital was preventing skilled people from moving there, hitting the value of output per hour worked. More