Economy

LONDON (Reuters) -New finance minister Jeremy Hunt promised to win back Britain’s economic credibility by fully accounting for the government’s tax and spending plans, while insisting his boss Liz Truss remained in charge of the country.Prime Minister Truss appointed Hunt on Friday in an attempt to rescue her leadership as confidence in her ability to run the country drained away within both her own Conservative Party and international financial markets.Sunday’s newspapers were rife with stories of plans to replace her.Investors have sold British government bonds heavily since Sept. 23 when Hunt’s predecessor, Kwasi Kwarteng, announced a string of unfunded tax cuts without publishing a set of independent economic forecasts. The knock-on effects forced the Bank of England into an emergency intervention to protect pension funds and drove up mortgage costs – adding to the squeeze on Britons’ finances.”What I’m going to do… is to show the markets, the world, indeed people watching at home, that we can properly account for every penny of our tax and spending plans,” Hunt told BBC television in an interview broadcast on Sunday.Britain’s economy is at risk of going into recession at the same time as the Bank of England is raising interest rates to control soaring inflation. Bank Governor Andrew Bailey said on Saturday he thought a big rate hike would be needed in early November.Truss – who became Conservative Party leader just 41 days ago after promising to slash taxes – fired Kwarteng on Friday and has ditched key parts of the programme they agreed together.The chaos has fuelled discontent in the governing party, already splintered before Friday and falling far behind the opposition Labour Party in opinion polls.Crispin Blunt on Sunday became the first Conservative lawmaker to publicly say Truss could not survive as leader, “I think the game is up and it’s now a question as to how the succession is managed,” he told Channel 4’s ‘The Andrew Neil Show’. Blunt did not say how such a change could happen, but that if enough of the party wanted it they would find a way.Even U.S. president Joe Biden criticized Truss’s original economic plan as a mistake.”I think that the idea of cutting taxes on the super wealthy at a time when – anyway, I just think – I disagreed with the policy, but that’s up to Great Britain to make that judgment, not me,” he said. DIFFICULT DECISIONSAfter effectively dismantling Truss’s gamble that tax cuts would spur economic growth and pay for public spending, Hunt has said he will go further, including imposing tighter spending controls and some tax rises. “I’m going to be asking every government department to find further efficiency savings,” he said, adding that while he wanted to keep other tax cuts the government has promised, he ruled nothing out in his drive to balance the books.He will set out details in a fiscal statement on Oct. 31.The Sunday Times said initial forecasts from the Office for Budget Responsibility showed a 72 billion pound ($80 billion) shortfall in the current plans. The paper also said Hunt would delay a planned cut to the basic rate of income tax. The Treasury declined to comment on the report.Asked if markets would have confidence in his plans, Hunt told the BBC: “Well, I think, you know, for people trading the markets, actions speak louder than words.”A first test will come on Monday morning when trading in Britain’s battered government bonds resumes without the support of the Bank of England’s emergency bond-buying programme, which expired on Friday.”Basically we’ve moved from looking not too dissimilar from the U.S. or Germany as a proposition to lend, to looking more like Italy and Greece,” former Bank of England Deputy Governor Charlie Bean told Sky. ‘THE PM IS IN CHARGE’While Hunt seeks to fend off financial market pressure, Truss has to deal with mutiny from within her party.Reports citing anonymous sources filled Sunday’s newspapers, with defence minister Ben Wallace touted as senior lawmakers’ preferred replacement by the Sunday Mirror, and Rishi Sunak – who Truss defeated last month in a leadership contest that balloted Conservative Party members – named as another possible successor by the Sun on Sunday.Writing in the Sun, Truss admitted her plans had gone “further and faster than the markets were expecting”.”I’ve listened, I get it,” she wrote. “We cannot pave the way to a low-tax, high-growth economy without maintaining the confidence of the markets in our commitment to sound money.”Conservative lawmaker Robert Halfon said her initial plans had made the government look like “libertarian jihadists” who had treated the whole country as laboratory mice on which to carry out ultra-free-market experiments.He told Sky that while he was not calling for her resignation now, things had to improve.Hunt was asked whether, given the drastic policy change he has overseen, he was now effectively running the government.”The prime minister is in charge,” he said. “She has changed the way we’re going to get there. She hasn’t changed the destination, which is to get the country growing.”($1 = 0.8953 pounds) More

“Polycrisis”: this was the description Jean-Claude Juncker gave the nexus of challenges facing the EU in 2016, when he was European Commission president. Last week the International Monetary Fund underscored how multiple clouds — including the European energy crisis, rapid interest rate rises and China’s slowdown — have been gathering over the global economy. What has seemed like separate crises emerging from many different regions and markets are now coalescing: we may be facing a polycrisis on a global scale.It is rare for so many engines of the global economy to be stalling all at once: countries accounting for one-third of it are poised to contract this year or next, according to the IMF. Indeed, its outlook for the largest economies — the US, the eurozone and China — is bleak. As global inflation rates have touched their highest in 40 years, central banks have been raising interest rates this year with a synchronicity not seen in the past five decades, and the US dollar has hit its strongest level since the early 2000s. These forces are driving the gloomy forecasts and creating new strains.Emerging economies have been saddled with higher dollar-denominated debt burdens and disruptive capital outflows. Meanwhile, mortgage rates and corporate borrowing costs have surged across the world. Many gauges of financial market stress are also flashing red, as the rapid snapback in rates from lows during the pandemic has exposed vulnerabilities. Fire-sale dynamics are an ongoing risk, as UK pension funds recently demonstrated.The proximate causes of the global maelstrom are two historic shocks in quick succession: Covid-19 and Russia’s invasion of Ukraine. The Federal Reserve has raised interest rates at its sharpest pace since the early 1980s, when Paul Volcker was its chair, to quash inflation spurred in part by pandemic support and supply bottlenecks. Meanwhile, Putin’s weaponisation of natural gas flows means Europe is undergoing a huge terms-of-trade shock, and China’s economy is suffering under its zero-Covid policy, alongside a property market crash. Indeed, new ailments have emerged before the scars of the pandemic have even healed.The multiple and mutually reinforcing shocks have left policymakers with a difficult balancing act. For governments, efforts to boost growth and support households and businesses need to avoid pouring further fuel on the inflationary fire and raising debt burdens — which have already been pushed up by the pandemic — particularly as borrowing costs are now rising. The more interest rates rise, the greater the risks of a housing market crash and further financial market strains. Yet for central bankers, not tightening monetary policy enough may embed high inflation.While there are no simple solutions, there are some lessons. Today’s fragile economy needs policy to be well calibrated and attuned to risks. The UK is an example of how not to do it. Its bull-in-a-china-shop approach of recent weeks shows what happens when realities are ignored. Policy errors are partly why the IMF sees a one-in-four chance of global growth next year falling below the historically low level of 2 per cent.The contagious effect of global crises intensifies the need to build resilience. While the banking system was strengthened after the financial crisis, policymakers did too little to bolster the non-bank financial system. Many will also lament the lack of productivity-enhancing and inflation-busting investments in skills, technology and fossil fuel alternatives over the past decade, when interest rates were low. Without level-headedness and long-term thinking the global economy will only continue to lurch from one crisis to the next. More

* Xi opened the week-long, twice-a-decade session with a speech touting China’s fight against COVID-19, the party’s safeguarding of national security, maintaining social stability, protecting people’s lives and taking control of the situation in Hong Kong, which was rocked by anti-government protests in 2019. He also called for accelerating the building of a world-class military.* Xi’s speech of less than two hours – far shorter than his nearly three-and-a-half-hour address at the last party congress in 2017 – mentioned “safety” or “security” 73 times, up from 55 times in the previous speech, while mentioning “reforms” 16 times, down from 70 times five years ago.* To prolonged applause, Xi said it was up to the Chinese people to resolve the Taiwan issue and China would never renounce the right to use force but will strive for a peaceful resolution. Taiwan, which China views as its own territory, responded that it will not back down on its sovereignty or compromise on freedom and democracy.* China will enact policies to boost its birth rate, Xi said, as policymakers worry that an imminent decline in China’s population could hurt the world’s second-biggest economy.* Former Vice Premier Zhang Gaoli made his first public appearance since Chinese tennis star Peng Shuai accused him of sexual assault last year, attending the party Congress. He has made no public comment on the accusation, which Peng posted on social media in November but later denied having made. * China will make its COVID-19 prevention measures more scientific, accurate and effective, a party spokesman said on Saturday, while reiterating Beijing’s stance that its pandemic approach is the right one. * Little is known about who will be promoted into which key roles on the Politburo and its seven-member Standing Committee. Here are some of the leading contenders and some scenarios to look out for.* Leaders face a difficult time. The world’s second-largest economy is slowing and facing a potentially painful rebalancing of its investment- and property-led model.* China’s real estate developers are delaying debt restructuring moves until after the congress, hoping the gathering offers clues on how Beijing plans to stabilise the embattled sector. More

“Very productive bilateral discussions were held with IMF staff on the sidelines of the IMF and World Bank’s annual meetings in Washington, and significant progress was made across all policies,” Mohamed Maait said in a statement.Egypt began talks with the IMF for a financial support package in March, soon after the Ukrainian crisis threw its already unsettled finances into further disarray and led foreign investors to pull nearly $20 billion out of Egyptian treasury markets in a matter of weeks.It is hoping to stem a currency crisis that has restricted imports and sparked market unease over foreign debt repayments.In its own parallel statement on Saturday, the IMF said it had agreed with Egyptian authorities to finalise work to reach a staff-level agreement “very soon.”The policies discussed, according to the IMF statement, included monetary and exchange rate policies that “would enable Egypt to gradually and sustainably rebuild foreign reserves,” public debt reduction, social safety net expansion, and increasing competitiveness in the economy.”We are proceeding with raising the efficiency of public spending, ensuring optimal utilization of state resources, improving the budget structure, and enhancing financial transparency,” Maait said. More

“The prime minister is in charge,” Hunt told the BBC in an interview broadcast on Sunday, when asked who was running the government.Asked about calls to replace Truss, he said his constituents wanted stability: “The worst thing for that would be more political instability at the top – another protracted leadership campaign.” More

LONDON (Reuters) – British Prime Minister Liz Truss has the confidence of the government, City Minister Andrew Griffith told Sky on Sunday.”Liz Truss has got the support of the government,” he said when asked if Truss’s position was safe after the recent turmoil in financial markets triggered by her economic plans. “It’s really important at this time that we have stability.” More

Did UK inflation pick up again in September?The UK government bond market has been turbulent in recent weeks, after Westminster’s “mini” Budget on September 23 sparked a sharp sell-off that eased only when the Bank of England intervened days later. Now that the BoE’s emergency bond-purchasing programme has ended, and chancellor Kwasi Kwarteng has been dismissed — with prime minister Liz Truss walking back a key part of her planned tax cuts at the same time — investors are likely to turn at least some of their attention to a more traditional driver of market moves: inflation data.Ahead of the release of fresh figures on Wednesday, economists polled by Reuters expect the UK consumer price index to rise to 10 per cent for the year to September, from 9.9 per cent in August when it was just shy of a 40-year high.Core inflation, which excludes food and energy, will also be closely watched by policymakers as a measure of the extent to which high energy prices are becoming entrenched in the economy.Economists expect core inflation to have climbed to 6.4 per cent in September from 6.3 per cent in the previous month when it was the highest since 1992.Economists expect inflation to remain high in the months ahead.“We expect evidence of continued inflationary momentum, especially given the weakness of sterling over September,” said Ellie Henderson, economist at Investec. This is because a weak pound pushes up imported costs, particularly food, which tends to react quickly to changes in the exchange rate.The government’s cap on household energy bills for the next two years is expected to keep a lid on inflation over the coming months. However, price pressures are expected to remain high for longer because of the loose fiscal policy.Last week the International Monetary Fund said high levels of inflation would persist longer in Britain than in almost all other advanced economies. The fund forecast UK inflation would remain high at 6.3 per cent by the end of 2023, the most elevated of any other G7 country. Valentina RomeiWill Turkey really cut interest rates again?Many central banks across the world have been aggressively raising interest rates this year in an effort to tackle inflation. Turkey, never afraid to be an outlier, has been doing the opposite. To the astonishment of economists, the Turkish central bank is expected to cut borrowing costs for the third month running on Thursday despite official inflation that topped 83 per cent in September.President Recep Tayyip Erdoğan, infamous for rejecting the established economic principle that raising interest rates curbs inflation, has said repeatedly that he wants the bank’s benchmark funding rate to come down to single digits by the end of the year. Speaking last week, he said: “As long as this brother of yours is in this position, interest rates will continue to come down with every passing day, week and month.”Analysts believe the president, who in effect controls the central bank, should be taken at his word. “We expect another 100 basis point rate cut,” said Enver Erkan, chief economist at Tera Securities in Istanbul — a move that would bring the policy rate down from 12 per cent to 11 per cent. He expects the bank to reach Erdoğan’s single-digit target by the end of the year.Like other analysts, Erkan warned the policy is not sustainable. It risks putting renewed pressure on the lira, which is down almost 30 per cent against the dollar this year, and stoking inflation. But Erdoğan is focused on growth as he gears up for elections scheduled for June 2023. Erkan said: “Despite the risks and the lack of sustainability, we expect these kinds of policies to continue.” Laura PitelDid China’s GDP rebound in the third quarter?China’s gross domestic product grew just 0.4 per cent in the second quarter of the year, surprising analysts to the downside, as the full effects of the country’s economically-throttling zero-Covid policy exceeded expectations.Since then, a number of global banks, including UBS, ANZ, HSBC, Barclays and Nomura, have all downgraded their full-year forecasts for the world’s second-largest economy. The World Bank, meanwhile, now predicts growth in the rest of Asia will outpace that of China for the first time since 1990.The medium-term pressures weighing on China’s economy — weak consumer demand and uncertain business prospects in the face of repeated lockdowns — have not eased significantly over the past few months. A closely watched gauge of manufacturing sector activity, meanwhile, suggested a further contraction in activity in September.While consensus forecasts predict a rebound in GDP, with growth at 3.4 per cent for the third quarter, analysts highlight risks posed by resurgent lockdowns over the past few weeks.“We expect September activity data to either moderate or remain broadly flat,” analysts at Barclays said in a research note, adding that their forecast was for growth of 2.5 per cent. “Specifically, we expect retail sales growth to slow to 2.5 per cent y/y in September as intensified Covid lockdowns damped distance-sensitive consumption (eg, catering) and auto sales volume moderated.” William Langley More

Polls show voters liked direct payments from President Biden’s 2021 economic rescue bill. But they have become fodder for Republican inflation attacks.In the midst of a critical runoff campaign that would determine control of the Senate, the Rev. Raphael Warnock promised Georgia voters that, if elected, he would help President-elect Biden send checks to people digging out of the pandemic recession.Mr. Warnock won. Democrats delivered payments of up to $1,400 per person.But this year, as Mr. Warnock is locked in a tight re-election campaign, he barely talks about those checks.Democratic candidates in competitive Senate races this fall have spent little time on the trail or the airwaves touting the centerpiece provisions of their party’s $1.9 trillion economic rescue package, which party leaders had hoped would help stave off losses in the House and Senate in midterm elections. In part, that is because the rescue plan has become fodder for Republicans to attack Democrats over rapidly rising prices, accusing them of overstimulating the economy with too much cash.The economic aid, which was intended to help keep families afloat amid the pandemic, included two centerpiece components for households: the direct checks of up to $1,400 for lower- to middle-class individuals and an expanded child tax credit, worth up to $300 per child per month. It was initially seen as Mr. Biden’s signature economic policy achievement, in part because the tax credit dramatically reduced child poverty last year. Polls suggested Americans knew they had received money and why — giving Democrats hope they would be rewarded politically.Liberal activists are particularly troubled that Democratic candidates are not focusing more on the payments to families.“It’s a missed opportunity and a strategic mistake,” said Chris Hughes, a founder of Facebook and a senior fellow at the Institute on Race, Power, and Political Economy at The New School, who is a co-founder of the liberal policy group Economic Security Project Action. “Our public polling and our experience suggest the child tax credit is a sleeper issue that could influence the election, a lot more than a lot of candidates realized.”Celinda Lake, a Democratic pollster who has surveyed voters in detail on the child credit, said data suggest the party’s candidates should be selling Americans on the pieces of Mr. Biden’s policies that helped families cope with rising costs.“We have a narrative on inflation,” Ms. Lake said in an interview. “We just aren’t using it.”Many campaign strategists disagree. They say voters are not responding to messages about pandemic aid. Some Democrats worry that voters have been swayed by the persistent Republican argument that the aid was the driving factor behind rapidly rising prices of food, rent and other daily staples.Economists generally agree that the stimulus spending contributed to accelerating inflation, though they disagree on how much. Biden administration officials and Democratic candidates reject that characterization. When pressed, they defend their emergency spending, saying it has put the United States on stronger footing than other wealthy nations at a time of rapid global inflation.Republicans have spent nearly $150 million on inflation-themed television ads across the country this election cycle, according to data from AdImpact. The State of the 2022 Midterm ElectionsWith the primaries over, both parties are shifting their focus to the general election on Nov. 8.The Final Stretch: With less than one month until Election Day, Republicans remain favored to take over the House, but momentum in the pitched battle for the Senate has seesawed back and forth.A Surprising Battleground: New York has emerged from a haywire redistricting cycle as perhaps the most consequential congressional battleground in the country. For Democrats, the uncertainty is particularly jarring.Arizona’s Governor’s Race: Democrats are openly expressing their alarm that Katie Hobbs, the party’s nominee for governor in the state, is fumbling a chance to defeat Kari Lake in one of the most closely watched races.Herschel Walker: The Republican Senate nominee in Georgia reportedly paid for an ex-girlfriend’s abortion, but members of his party have learned to tolerate his behavior.In Georgia alone, outside groups have hammered Mr. Warnock with more than $7 million in attack ads mentioning inflation. “Senator Warnock helped fuel the inflation squeeze, voting for nearly $2 trillion in reckless spending,” the group One Nation, which is aligned with Senator Mitch McConnell of Kentucky, the Republican leader, says in an ad that aired in the state in August.Democrats have tried to deflect blame, portraying inflation as the product of global forces like crimped supply chains while touting their efforts to lower the cost of electricity and prescription drugs. They have aired nearly $50 million of their own ads mentioning inflation, often pinning it on corporate profit gouging. “What if I told you shipping container companies have been making record profits while prices have been skyrocketing on you?” Mr. Warnock said in an ad aired earlier this year.Candidates and independent groups that support the stimulus payments have spent just $7 million nationwide on advertisements mentioning the direct checks, the child tax credit or the rescue plan overall, according to data from AdImpact.Far more money has been spent by Democrats on other issues, including $27 million on ads mentioning infrastructure, which was another early economic win for Mr. Biden, and $95 million on ads that mention abortion rights..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-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs 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.Mr. Warnock has not cited any of the rescue plan’s provisions in his advertisements, focusing instead on issues like personal character, health care and bipartisanship, according to AdImpact data.Senator Raphael Warnock, who is locked in a tight re-election campaign this year, barely mentions the relief checks.Nicole Craine for The New York TimesFor months after the rescue plan’s passage, Democratic leaders were confident that they had solved an economic policy dilemma that has vexed Democrats and Republicans stretching back to the George W. Bush administration: They were giving Americans money, but voters weren’t giving them any credit.Tax cuts and direct spending aid approved by Mr. Bush, President Barack Obama and President Donald J. Trump failed to win over large swaths of voters and spare incumbent parties from large midterm losses. Economists and strategists concluded that was often because Americans had not noticed they had benefited from the policies each president was sure would sway elections.That was not the case with the direct checks and the child tax credit. People noticed them. But they still have not turned into political selling points at a time of rapid inflation.As the November elections approach, most voters appear to be motivated by a long list of other issues, including abortion, crime and a range of economic concerns.Mr. Warnock’s speech last week to a group of Democrats in an unfinished floor of an office space in Dunwoody, a northern Atlanta suburb, underscored that shift in emphasis.He began the policy section of the rally with a quick nod to the child credit, then ticked through a series of provisions from bills that Mr. Biden has signed in the last two years: highways and broadband internet tied to a bipartisan infrastructure law, semiconductor plants spurred by a China competitiveness law, a gun safety law and aid for veterans exposed to toxic burn pits. He lingered on one piece of Mr. Biden’s Inflation Reduction Act: a cap on the cost of insulin for Medicare patients, which Mr. Warnock cast as critical for diabetics in Georgia, particularly in Black communities.The direct payments never came up.When asked by a reporter why he was not campaigning on an issue that had been so central to his election and whether he thought the payments had contributed to inflation, Mr. Warnock deflected.“We in Georgia found ourselves trying to claw back from a historic pandemic, the likes of which we haven’t seen in our lifetime, which created an economic shutdown,” he said. “And now, seeing the economy open up, we’ve experienced major supply chain issues, which have contributed to rising costs.”Direct pandemic payments were begun under Mr. Trump and continued under Mr. Biden, with no serious talk of another round after the ones delivered in the rescue plan. Most Democrats had hoped the one-year, $100 billion child credit in the rescue plan would be made permanent in a new piece of legislation.But the credit expired, largely because Senator Joe Manchin III, Democrat of West Virginia and a key swing vote, opposed its inclusion in what would become the Inflation Reduction Act, citing concerns the additional money would exacerbate inflation.Senator Michael Bennet, Democrat of Colorado, was one of the Senate’s most vocal cheerleaders for that credit and an architect of the version included in the rescue plan. His campaign has aired Spanish-language radio ads on the credit in his re-election campaign, targeting a group his team says is particularly favorable toward it, but no television ads. In an interview last week outside a Denver coffee shop, Mr. Bennet conceded the expiration of the credit has sapped some of its political punch.“It certainly came up when it was here, and it certainly came up when it went away,” he said. “But it’s been some months since that was true. I think, obviously, we’d love to have that right now. Families were getting an average of 450 bucks a month. That would have defrayed a lot of inflation that they’re having to deal with.”Mr. Biden’s advisers say the rescue plan and its components aren’t being deployed on the trail because other issues have overwhelmed them — from Mr. Biden’s long list of economic bills signed into law as well as the Supreme Court decision overturning Roe v. Wade that has galvanized the Democratic base. They acknowledge the political and economic challenge posed by rapid inflation, but say Democratic candidates are doing well to focus on direct responses to it, like the efforts to reduce costs of insulin and other prescription drugs.Ms. Lake, the Democratic pollster, said talking more about the child credit could help re-energize Democratic voters for the midterms. Mr. Warnock’s speech in Dunwoody — an admittedly small sample — suggested otherwise.Mr. Warnock drew cheers from the audience after he called the child tax credit “the single largest tax cut for middle- and working-class families in American history.”But his biggest ovation, by far, came when the economics section of his speech had ended, and Mr. Warnock had moved on to defending abortion rights. More