Economy

WASHINGTON (Reuters) -Inflation for a broad array of services in the United States remains “stubbornly high,” Federal Reserve Governor Philip Jefferson said Monday, though slower-growing wages might help slow prices in those parts of the economy as well.Though the Fed has seen some progress in slowing price increases for goods and expects the same to happen in housing, inflation continues for services ranging from restaurants to medical care — and will likely need to slow for the central bank to make clear progress back towards its 2% inflation target. “Core goods inflation has started to come down. Several indicators suggest that housing services inflation is likely to come down in the coming months. There is more uncertainty surrounding inflation in core services excluding housing,” Jefferson said in remarks to a Harvard University economics class.”The inflation outlook for this nonhousing category of core services partly depends on whether growth in nominal labor costs comes back down, and recent data suggest that labor compensation has indeed started to decelerate somewhat over the past year.”In later comments in response to questions, Jefferson said he was under “no illusion” that inflation would return quickly to the Fed’s target, and noted that the Personal Consumption Expenditures price index remained “elevated,” jumping unexpectedly last month to a 5.4% annual rate versus a 5.3% rate as of December.The Fed uses the PCE index to sets its inflation target.”I’m under no illusion that it’s going to be easy to get the inflation rate back down to 2%,” Jefferson said. “There’s a lot of resolve on the part of the (Federal Open Market) Committee. I know that I am committed to doing what it takes.” Jefferson did not detail his views on the Fed’s upcoming policy decision, or how much higher he thinks the target federal funds rate might have to move beyond the 4.5% to 4.75% range set at the Fed’s last meeting. The central bank meets on March 21-22 and is expected to approve a quarter point rate increase, while also providing new projections about policy for the rest of the year. More

Good morning. We begin today with the news that Britain and the EU have clinched a deal to settle their toxic dispute over Northern Ireland trading rules in a turning point after years of post-Brexit tensions. Rishi Sunak, UK prime minister, and Ursula von der Leyen, European Commission president, sealed the agreement in the shadow of Windsor Castle, with both talking of a “new chapter” in relations. Sunak and von der Leyen hope the deal to smooth trade between Northern Ireland and the rest of the UK will end years of grim post-Brexit ties between London and Brussels. “We have made a decisive breakthrough,” Sunak said at a press conference with von der Leyen, as the two hailed an agreement to reform the so-called Northern Ireland protocol, dubbed “the Windsor framework”.The protocol was established to prevent a hard border on the island of Ireland. But Sunak’s next task will be selling the deal to its critics, Northern Ireland’s Democratic Unionist party and Eurosceptic Tory MPs. Go deeper: Rishi Sunak and Ursula von der Leyen are using the deal on Northern Ireland to herald renewed friendship between the UK and EU.A note to readers: FirstFT is getting a new look, starting tomorrow. We’re excited to see what you think. As always, you can share your feedback with us at [email protected] more stories in the news1. Congress to examine operations of US companies in China The US congressional panel created to focus on threats from Beijing plans to look at the role of private equity, venture capital and Wall Street firms in China as it prepares to launch its first hearing featuring witnesses such as Matt Pottinger, the deputy national security adviser during the Trump administration, and former national security adviser HR McMaster.2. Two Abu Dhabi state funds agree 1MDB settlement The International Petroleum Investment Company and Aabar, both mired in the 1MDB financial fraud, have agreed a $1.8bn settlement with the Malaysian sovereign fund and the ministry of finance to end a legal dispute in London.3. JPMorgan slashes China weighting in proposed Asia bond index The new version of the JPMorgan Asia Credit index would seek to compensate for a lack of new dollar bond sales by Chinese property groups by adding corporate debt from other Asia-Pacific countries, according to a person with direct knowledge of the matter. China’s weighting would decrease from about 43 per cent to roughly 30 per cent, the person said.4. EY China staff encouraged to wear Communist party badges Communist party members at EY China in Beijing have been asked to wear their party badges to show their political loyalty while they are at work. A Communist party branch committee at the company made the demand just ahead of China’s annual parliamentary meetings, a time of high political sensitivity in the country.5. Investcorp opens Tokyo office to target Japan deals The Bahrain-based alternative investment manager that once owned Tiffany and controlled Gucci is opening an office in Tokyo to raise funds and pursue acquisitions of high-end Japanese manufacturers and other hidden gems. The move represents the debut of major, private Middle Eastern funds in Japan.The day aheadPeace Memorial day Taiwan will observe the final day of the Peace Memorial day holiday weekend. The Taiwan Stock Exchange remains closed today. India GDP figures India’s gross domestic product data for the fourth quarter of 2022 will be released today. Economists expect growth to have slipped to an annual 4.6%, according to a Reuters poll. Earnings Companies reporting results today include abrdn, AMC Entertainment Holdings, Bayer, Duolingo, Man Group, Moncler, Ocado, Schrodinger, Serco, Target, and Universal Health Services. More in our Week Ahead newsletter. Join the FT and the FT’s Financial Literacy and Inclusion Campaign on March 8 at 9pm HKT for an hour of financial empowerment in the key areas affecting women in all relationships as well as those without any ties. Register free.What else we’re reading Battle of Asia hubs: how Singapore stacks up against Hong Kong Hong Kong has lost ground to regional rival Singapore, according to an FT analysis of real estate prices, air traffic and other indicators, underlining the challenge the Chinese territory faces as it reopens to the world after years of pandemic controls.

The war in Ukraine forced the EU to rewrite defence policy Decades of engagement with Moscow, through trade, investment and diplomacy, in the belief that it would stop the Kremlin threatening the continent’s security, has been exposed as a monumental error since Russia’s invasion of Ukraine. A generation of individual government cuts to defence spending has been replaced by an unprecedented rush to re-arm. Opinion: The inherent flaws of corporate bond ETFs ETFs are supposed to be ultra-simple products — cheap, easy-to-use funds that invest in a broad range of shares, bonds or other assets, spreading risk for inexpert investors. But as with so much of modern finance, the reality is very different from the appearance, writes Patrick Jenkins.The art of getting over an office faux pas There are two sorts of people in the world, writes Pilita Clark. Those who know how to recover from a faux pas at work and those who do not. In her latest column, the FT’s business columnist offers examples of both. ‘I do not see us having a problem getting to Mars’ Tim Peake, the first British astronaut to undertake a spacewalk, is convinced that humans will live on the Red Planet. But freshly retired from European Space Agency m missions, Peake sits down for an interview with FT’s Henry Mance.Take a break from the newsFor the best Japanese food in London, use our guide, written by Nikkei’s Joshua Ogawa. Discover hidden gems between and behind red-brick buildings that serve excellent, and sometimes creative, Japanese cuisine.

Popular grilled skewers ‘Set A’ include minced chicken meatball, asparagus with pork, and king prawn More

WASHINGTON (Reuters) – The U.S. Commerce Department and other government agencies approved about 69.9% of export license applications involving China in the 2022 budget year, according to written testimony made public ahead of a U.S. House hearing Tuesday.Under Secretary of Commerce for Industry and Security Alan F. Estevez will tell the House Foreign Affairs Committee that the U.S. government denied or returned-without-action approximately 30.1% percent of such license applications. “Approvals of any licenses involving (China) are not loopholes in our controls,” Estevez said, adding “license applications for (China) had an average processing time of approximately 77 days, which was significantly longer than the average processing time of approximately 40 days for all cases.”At the hearing titled “Combating the Generational Challenge of CCP Aggression” Estevez will tell lawmakers China “remains a huge focus of our enforcement efforts, and we will continue to prioritize this work in the coming year.”The Commerce Department’s Bureau of Industry and Security (BIS) has over 639 China-based parties on its trade blacklist known as the “Entity List” and over 155 of those were added during the Biden Administration, Estevez said.Companies on the Entity List are restricted from receiving U.S.-origin goods and technology.Commerce also maintains the Unverified List (UVL) that requires checks for U.S. technology use. Estevez said BIS conducted about 1,151 end-use checks in around 54 countries, where approximately 75% of checks were considered favorable.He defended the restrictions especially on semiconductors.”These changes are designed to address concerns related to the production of advanced semiconductors,” Estevez said. “These controls are not intended to stop production of legacy semiconductors, and these controls are not tools of economic protectionism. They are national security and foreign policy tools.”BIS warned in October that unverified users could be moved to the more restrictive Entity List.Estevez said it removed 25 of 28 entities from the unverified list after checks in late 2022. “This cooperation continues in 2023, but we are continuing to monitor cooperation closely,” Estevez said. More

WASHINGTON (Reuters) – The Biden administration announced measures to crack down on child labor on Monday amid a steep rise in violations and investigative reports by Reuters and other news outlets on illegal employment of migrant minors in dangerous U.S. industries.U.S. officials said the Labor Department had seen a nearly 70% increase in child labor violations since 2018, including in hazardous occupations. In the last fiscal year, 835 companies were found to have violated child labor laws.U.S. officials told reporters on a Monday conference call that the administration was probing the employment of children at companies including Hearthside Food Solutions and suppliers to Hyundai Motor Co. It has created an interagency task force on child labor, and plans to target industries where violations are most likely to occur for investigations. The Democratic administration of U.S. President Joe Biden is also pushing for heavier penalties for companies that violate these laws, and more funding for enforcement and oversight, they said. U.S. federal law prohibits people under age 16 from working in most factory settings, and those under 18 are barred from the most dangerous jobs in industrial plants. “This isn’t a 19th century problem, this isn’t a 20th century problem, this is happening today,” said one of the officials on the call. “We are seeing children across the country working in conditions that they should never ever be employed in the first place.” The maximum civil monetary penalty is currently just $15,138 per child, the administration noted in a press release, a figure that’s “not high enough to be a deterrent.” The U.S. Department of Labor (DOL) opened an investigation into Hearthside Food Solutions, a U.S. food contractor that makes and packages products for well-known snack and cereal brands, for reportedly employing underage workers and violating child labor laws, officials confirmed on the call. Reuters reported the DOL’s investigation into Hearthside earlier on Monday. The company came under scrutiny following a New York Times investigation that said Hearthside’s factories employed underage workers making Chewy (NYSE:CHWY) granola bars and bags of Lucky Charms and Cheetos, which the company would later ship around the country.It was not clear whether the probe will lead to criminal charges, fines or other penalties. Hearthside said in a statement the company would “work collaboratively with the Department of Labor in their investigation and do our part to continue to abide by all local, state and federal employment laws,” and that they were “appalled” by the report alleging child labor at their company. The Hearthside investigation is the latest in a rise in similar probes. Reuters last year published a series of stories on child labor including revelations about the use of child labor among suppliers to Hyundai, including a direct subsidiary of the Korean auto giant, in the U.S. state of Alabama.The first story in the Reuters series, published in February 2022, uncovered young teens working in dangerous chicken processing plants in Alabama. Earlier this month, a major food safety sanitation company paid $1.5 million in penalties for employing more than 100 teenagers in dangerous jobs at meatpacking plants in eight states, following another Labor Department investigation.As Reuters previously reported, a record number of unaccompanied migrant minors entered the country in recent years, with many entering federal shelters and then released to sponsors, usually relatives, while immigration authorities resolve their requests for refuge in the United States. But authorities are struggling with long-term follow-up to prevent minors from being sucked into a vast network of enablers, including labor contractors, who recruit workers for big plants and other employers. At times they have steered kids into jobs that are illegal, grueling and meant for adults. The majority of minors Reuters found working were from Central America.Separately, the Biden administration said earlier this year it will speed up the deportation relief process for immigrants in the United States illegally who witness or experience labor abuses.”We also absolutely need to protect workers who do come forward and participate in wage and hour and other worker protection investigations and activities,” one official said on the Monday call. More

His comments come amid concerns of the new leftist administration of President Luiz Inacio Lula da Silva regarding the impact of high borrowing costs on economic growth, as the country’s benchmark interest rate remains at a six-year high of 13.75% to combat inflation.”The government is carefully monitoring the credit market to ensure liquidity and access,” Ceron told a news conference. “Possible needs for specific sectors are being discussed, such as small and medium-sized companies, but this is still in the initial stage of discussion,” he added.Outstanding loans in Brazil decreased by 0.3% in January, marking the first decline in a year. However, the central bank highlighted the seasonal aspect of the result and said it was still too early to evaluate whether Brazilian retailer Americanas SA bankruptcy protection is impacting the credit market. During the press conference, Ceron stated that a broad consumer debt renegotiation program is in its final stage and will be announced soon. The government’s idea is to use public funds that already exist to guarantee the renegotiation without any fiscal impact, although Ceron did not rule out the need for new contributions from the Treasury this year or next to make the program viable.The secretary also stated that the increase in the minimum wage promised by Lula will cost about 5 billion reais, and the rise in income tax exemption will cost another 3.2 billion reais, but added other compensatory measures would accompany them. More

After months of secret negotiations the UK and the EU on Monday published the text of their new deal to refine post-Brexit arrangements for Northern Ireland.Totalling more than 100 pages, the deal — called the Windsor Framework — sets out ways to smooth the working of the so-called Northern Ireland Protocol, which has soured EU-UK relations and destabilised the politics of the region.Although Northern Ireland continues to follow EU rules for goods trade, the new implementation agreement sets out processes on trade, state subsidy and value added tax policy to reduce the impact of the trade border in the Irish Sea created by the original deal.While Northern Ireland remains subject to EU law in areas where it applies in the region, the deal takes steps to address concerns in the mainly Protestant unionist community that the protocol has undermined the constitutional integrity of the United Kingdom.The new framework aims to improve the functioning of the protocol in five key areas:The business of trade: red-green lanesGoods coming from Great Britain to Northern Ireland will now be divided into two classes: those that are destined for Northern Ireland (green lane) and those heading on to Ireland and the EU single market (red lane). Companies that register for a trusted trader scheme and use the green lane will have “an unprecedented reduction” of customs paperwork, the EU said. Goods in the red lane will have to go through full customs, food and animal health checks. For agri-food, the most tightly controlled goods, the EU will accept UK public health standards, meaning fresh meat and other goods will be allowed to enter Northern Ireland. They must carry “not for EU” labels. As the labels are introduced between now and 2025 the proportion of consignments subject to identity checks will fall to 5 per cent. The UK has agreed to share near-real time customs data with the EU so it can spot evidence of fraud and take remedial action if necessary.UK prime minister Rishi Sunak said the changes “removed any sense of a border in the Irish Sea”, while an EU official talked of a “dramatic reduction in the number of checks”.Parcels to friends or family and from online deliveries from Great Britain will not require customs paperwork, ending another significant source of aggravation for Northern Ireland residents. Businesses using approved parcel carriers will have simplified customs procedures.Importers of some types of British-made steel in Northern Ireland have had to pay tariffs since last year when the EU changed its quota rules. The deal also fixes this issue for steel specifically. State aid & VATUnder Article 10 of the protocol, any UK subsidy decision that might affect Northern Ireland goods trade must be referred to Brussels for approval. The UK viewed this as an unnecessary impingement on its sovereignty.Although Article 10 remains in place, the UK government said “stringent tests” would now apply, effectively removing 98 per cent of Northern Ireland subsidies from being at risk of referral to Brussels. “This rules out all but the largest subsidies and those where firms have no material presence in Northern Ireland,” the UK said.Another area of difference that riled British ministers was that Northern Ireland could not adopt domestic VAT rate changes, something Sunak said was unacceptable when chancellor. These will now be extended to Northern Ireland, including politically talismanic items: some cuts to alcohol duties will now apply UK-wide, including relief for beer in pubs. However, except for immovable objects such as household solar panels, the UK cannot undercut EU minimum VAT rates for now. The two sides have agreed to draw up a list of goods where the UK could impose lower rates over the next five years.Governance and consent: role of Northern Ireland institutionsFor Northern Ireland’s unionist community, the prospect that the region would have to automatically implement large amounts of new or updated EU law in the future, as specified in the protocol, has long been a source of tension.The deal seeks to address this by handing an “emergency brake” to the Northern Ireland legislative assembly at Stormont that can be pulled in “exceptional circumstances” if 30 of the 90 members from at least two parties vote to block the adoption of updated EU single market rules.Under this ‘Stormont brake’, rules that are subject to objection will not be applied until they have been discussed by Brussels and London. If Britain decides not to implement measures that the EU still deems necessary at the behest of the Northern Ireland assembly, the bloc could take targeted “remedial measures”. London has said it will legislate to ensure that the Westminster government takes account of Stormont’s demands if and when it pulls the emergency brake. Experts said the circumstances when it could be used were very tightly drawn. “This is progress, but the new system only applies when the brake is pulled,” said Catherine Barnard, EU law professor at Cambridge university. “For the rest of the time it is business as usual.”Feeling part of the UnionEU rules had created a number of bureaucratic hurdles that unionists believed cut them off from the rest of their country. Pets had to be microchipped and get a passport to travel from Great Britain to Northern Ireland — the same rules needed to travel to the EU. Under the deal, pets will only need a simple travel document. Medicines approved for use in the UK could also be sold in the region even if not yet approved in the EU. Finally, seed potatoes and plants banned from being imported because they might carry disease can now move freely to Northern Ireland on the basis of a special plant health label.The constitutional dimension: the role of the ECJLeading Brexiters and unionists have demanded an end to the jurisdiction of the European Court of Justice over Northern Ireland, and to the ECJ’s role as the enforcer of the protocol. The deal does not achieve this; nor does it create a new dispute resolution mechanism involving international arbitration, as some leading Brexiters had wanted.The UK government argued the new “green lane” trading system significantly narrowed the amount of EU law applying in Northern Ireland, meaning 1,700 pages of EU law that were enforced in the original deal will no longer apply in the region. The government added only 3 per cent of EU laws were now applicable in Northern Ireland. According to the command paper: “The rules that do apply are there solely, and only as strictly necessary, in order to maintain the unique ability for Northern Ireland firms to sell their goods into the EU market.” More

Lidl became the fifth supermarket to introduce rationing as the government summoned senior executives from some of the leading UK grocers to discuss the supply chain problems.The discount supermarket announced on Monday that it would “temporarily limit” the purchase of peppers, tomatoes and cucumbers to three items per person, following supply chain disruption blamed mainly on extreme weather in Spain and Morocco.Lidl’s announcement means that five out of the six biggest supermarkets accounting for more than two-thirds of the UK grocery market, according to data from Kantar, are rationing supplies of salad vegetables. Sainsbury’s, the UK’s second largest grocer, has said that it will not impose limits on purchases of vegetables for the moment, although it confirmed it is also experiencing shortages.Supermarket executives spoke to Mark Spencer, food, farming and fisheries minister, on Monday afternoon in a call that focused on avoiding future repeats of the shortages, rather than resolving the current rationing, according to one source close to the talks. They added that there were no discussions about the government intervening to support producers as farmers had called for last week. One industry insider dismissed the talks as “a way for the government to sound busy”.

In a statement after the meeting, Spencer sought to reassure the public that the food supply chain was “extremely resilient,” adding: “I spoke to retailers today to hear from them direct about the important work they’re doing to respond to and alleviate the current short term issues. I have also asked them to look again at how they work with our farmers and how they buy fruit and vegetables”.Andrew Opie, director of food and sustainability at the British Retail Consortium said the government had been reminded by executives at the meeting “how hard” they were working to address the problem, adding that they had “confirmed that customers should start to see an improvement in the coming weeks.” He said that although “the majority” of food sold in supermarkets comes from the UK there was a “key role for imported food, particularly outside of the UK growing season, to maintain the supply of affordable food for households.”He called on the government to develop a “wider strategy” to deal with the issue of food security involving farmers, food manufacturers, retailers and hospitality.The government has faced a growing backlash over its handling of the shortages. Environment secretary Thérèse Coffey was mocked last week for suggesting that consumers should embrace more seasonable foods, such as turnips, in light of the supply chain issues.“It’s important to make sure that we cherish the specialisms that we have in this country,” she said. “A lot of people would be eating turnips right now rather than thinking necessarily about aspects of lettuce and tomatoes and similar, but I’m conscious that consumers want a year-round choice and that is what our supermarkets, food producers and growers around the world try to satisfy.”Last week, English growers said that imports of salad vegetables had fallen to about a half of expected levels. More

Since Britain’s exit from the EU in 2020, special trading rules for Northern Ireland have been the source of rancour and division. The so-called Northern Ireland protocol was poorly negotiated, then partially disowned, then nearly overridden by the UK, threatening a trade war with the EU. Reforms to the protocol agreed by Prime Minister Rishi Sunak should not only ease trade but also set the UK on a more constructive relationship with the EU. The “Windsor framework” negotiated with European Commission president Ursula von der Leyen is a significant moment for post-Brexit Britain. A pragmatic prime minister has pushed for something he believes can bring beneficial results, defying hardline opponents in his party. With luck, the deal may yet begin a normalisation of UK-EU relations, and of UK politics.Boris Johnson’s EU exit deal left Northern Ireland inside the EU’s single markets for goods, so checks were imposed on goods entering from Great Britain to avoid creating a destabilising land border with the south of the island. Resulting trade frictions made unionists, who want the region to stay in the UK, feel ties with Britain had been weakened.Attempting to negotiate reforms was a hefty gamble for Sunak. Though he appears to have won over some prominent Brexiters, a hardcore of Eurosceptic Tory MPs may prove immovable. Labour has rightly signalled its backing for the prime minister’s agreement in a parliamentary vote, but will clearly make political capital out of Conservative divisions.It is unclear if the Windsor framework goes far enough to be embraced by the Democratic Unionist party, which has boycotted power-sharing in Northern Ireland unless the protocol was renegotiated. So the agreement may yet fail to achieve the other big objective of returning devolved government to Belfast. But Sunak is correct to judge that the UK’s wider interests are better served by pressing ahead with his deal.The prime minister appears to have achieved more than many in his own party had expected — a sign, perhaps, that he has built trust in Brussels. If it works as intended, Sunak can claim his deal ensures “smooth flowing trade” within the UK by creating a “green lane” at Irish Sea ports with minimal checks for goods destined for Northern Ireland, even if those heading for Ireland and the EU market must take a “red lane”. EU negotiators have moved less far on key legal points. But while the European Court of Justice retains the last word on single market issues in Northern Ireland, its role is limited, and London, not Brussels, will have control of value added tax and state aid in the region.Crucially, the deal gives the Northern Ireland assembly an “emergency brake” on changes to EU goods rules with a “significant and lasting effect” on everyday lives — with a UK government veto if that brake is pulled. This provides a potential incentive for the DUP to engage with the Northern Ireland assembly, and could open it up to criticism if it does not.The agreement moves the UK off a collision course with the EU, and towards a reset. Von der Leyen suggested work could quickly begin on the UK joining the €95bn Horizon programme, a huge prize for the scientific community. The deal may help Sunak to make progress on small boat crossings in the Channel when he meets France’s Emmanuel Macron next month.Above all, in a Europe transformed by Russia’s invasion of Ukraine, the Windsor framework holds out the prospect of smoother engagement between London and EU partners. Assuming it can be navigated safely through Westminster, it may at last begin to drain some of the venom of the Brexit years. More