Economy

The Fed’s decision to raise its key interest rate by three-quarters of a percentage point is good news for savers, but less so for borrowers: They can expect to pay more on credit card debt, car loans and certain student loans. [Here’s what the Fed’s decision means for mortgages.]Credit CardsCredit card rates are closely linked to the Fed’s actions, so consumers with revolving debt can expect to see those rates rise, usually within one or two billing cycles. The average credit card rate was recently 16.73 percent, according to Bankrate.com, up from 16.34 percent in March.“With the frequency of Federal Reserve rate hikes this year, it will be a drumbeat of higher rates for cardholders every couple of statement cycles,” said Greg McBride, chief financial analyst at Bankrate.com. “And the cumulative effect is growing. If the Fed raises rates by a total of three percentage points this year, your credit card rate will be three percentage points higher by the first of the year.”Car LoansCar loans are also expected to climb, but those increases continue to be overshadowed by the rising cost of buying a vehicle (and the pain of what you’ll pay at the gas pump). Car loans tend to track the five-year Treasury, which is influenced by the federal funds rate — but that’s not the only factor that determines how much you’ll pay.A borrower’s credit history, the type of vehicle, loan term and down payment are all baked into that rate calculation.The average interest rate on new-car loans was 5.08 percent in May, according to Dealertrack, which provides business software to dealerships. That’s almost a full percentage point higher than December 2021, when rates had reached their lowest point since 2015 and when the firm began tracking rates.The average rate for used vehicles was 8.46 percent in May, also nearly a full percentage point higher than December. But those rates vary widely; borrowers with the lowest credit scores received average rates of 20 percent in May, Dealertrack said, whereas individuals with the most pristine credit histories received rates of 3.92 percent.Student LoansWhether the rate increase will affect your student loan payments depends on the type of loan you have.Current federal student loan borrowers — whose payments are on pause through August — aren’t affected because those loans carry a fixed rate set by the government.But new batches of federal loans are priced each July, based on the 10-year Treasury bond auction in May. Rates on those loans have already jumped: Borrowers with federal undergraduate loans disbursed after July 1 (and before July 1, 2023) will pay 4.99 percent, up from 3.73 percent for loans disbursed the year-earlier period.Private student loan borrowers should also expect to pay more; both fixed and variable-rate loans are linked to benchmarks that track the federal funds rate. Those increases usually show up within a month.But the Fed is not finished and has penciled in rates hitting 3.4 percent by the end of 2022. Private lenders will probably bake those and other expectations into their interest rates as well — meaning borrowers could end up paying anywhere from 1.5 to 1.9 percentage points more, depending on the length of the loan term, explained Mark Kantrowitz, a student loan expert and author of “How to Appeal for More College Financial Aid.” More

Federal Reserve Chairman Jerome Powell speaks at a news conference following a Federal Open Market Committee meeting on May 4, 2022 in Washington, DC.
Win McNamee | Getty Images

The Fed’s main tool to battle inflation is interest rates

The Federal Reserve has a few main goals with respect to the economy: to promote maximum employment, keep prices stable and ensure moderate long-term interest rates.

Generally, the central bank aims to keep inflation around 2% annually, a number that lagged before the pandemic.

Its main tool to battle inflation is interest rates. It does that by setting the short-term borrowing rate for commercial banks, and then those banks pass rates along to consumers and businesses, said Yiming Ma, an assistant finance professor at Columbia University Business School.
That higher rate influences the interest you pay on everything from credit cards to mortgages to car loans, making borrowing more expensive. On the flip side, it also boosts rates on savings accounts.

How raising rates can slow inflation

But how do higher interest rates reel in inflation? They help by slowing down the economy, according to the experts.
“The Fed uses interest rates as either a gas pedal or a brake on the economy when needed,” said Greg McBride, chief financial analyst at Bankrate. “With inflation running high, they can raise interest rates and use that to pump the brakes on the economy in an effort to get inflation under control.”  
Basically, the Fed policymakers aim to make borrowing more expensive so that consumers and businesses hold off on making any investments, thereby cooling off demand and hopefully holding down prices.

The Fed uses interest rates as either a gas pedal or a brake on the economy when needed.

Greg McBride
chief financial analyst, Bankrate

There could also be a secondary effect of alleviating supply chain issues, one of the main reasons that prices are spiking right now, said McBride. Still, the central bank can’t directly influence or solve that particular problem, he said.
“As long as the supply chain is an issue, we’re likely to be contending with” outsize wage gains, which drive inflation, he said.

The Fed wants to avoid stalling the economy

The main worry for economists is that the Fed raises interest rates too quickly and dampens demand too much, stalling the economy.
This could lead to higher unemployment if businesses stop hiring or even lay off workers. If policymakers really overshoot on rate hikes, it could push the economy into a recession, halting and reversing the progress it has made so far.
Treating inflation in the economy is like treating cancer with chemotherapy, said Sinclair of the Indeed Hiring Lab.

“You have to kill parts of the economy to slow things down,” she said. “It’s not a pleasant treatment.”
Of course, it will take some time for any action to affect the economy and curb inflation. That’s why the Federal Open Market Committee carefully watches economic data to decide how much and how frequently to raise rates.
There is also some uncertainty due to the war in Ukraine, which has also increased prices on commodities such as gas. The Fed will have to watch how the war is hampering the U.S. economy and act accordingly.

It might get worse before it gets better

When the Fed does lift rates, it’s also likely that people will see the downsides of those increases before any improvement on inflation, said Sinclair.
Basically, that means consumers may have to pay more to borrow money and still see higher prices at the gas pump and grocery store. That scenario is particularly tough on low-income workers, who have seen wages rise but not keep pace with inflation.
Of course, ideally, the central bank would like to raise rates gradually so that the economy slows just enough to bring down prices without creating too much additional unemployment. The Fed wants to avoid a recession as well as the chance of stagflation — a situation in which inflation remains high while the economy slows.
“They have to carefully walk that tightrope,” said Sinclair.
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Jesse Powell, who leads the crypto exchange Kraken, has challenged the use of preferred pronouns, debated who can use racial slurs and called American women “brainwashed.”Jesse Powell, a founder and the chief executive of Kraken, one of the world’s largest cryptocurrency exchanges, recently asked his employees, “If you can identify as a sex, can you identify as a race or ethnicity?”He also questioned their use of preferred pronouns and led a discussion about “who can refer to another person as the N word.”And he told workers that questions about women’s intelligence and risk appetite compared with men’s were “not as settled as one might have initially thought.”In the process, Mr. Powell, a 41-year-old Bitcoin pioneer, ignited a culture war among his more than 3,000 workers, according to interviews with five Kraken employees, as well as internal documents, videos and chat logs reviewed by The New York Times. Some workers have openly challenged the chief executive for what they see as his “hurtful” comments. Others have accused him of fostering a hateful workplace and damaging their mental health. Dozens are considering quitting, said the employees, who did not want to speak publicly for fear of retaliation.Corporate culture wars have abounded during the coronavirus pandemic as remote work, inequity and diversity have become central issues at workplaces. At Meta, which owns Facebook, restive employees have agitated over racial justice. At Netflix, employees protested the company’s support for the comedian Dave Chappelle after he aired a special that was criticized as transphobic.But rarely has such angst been actively stoked by the top boss. And even in the male-dominated cryptocurrency industry, which is known for a libertarian philosophy that promotes freewheeling speech, Mr. Powell has taken that ethos to an extreme.His boundary pushing comes amid a deepening crypto downturn. On Tuesday, Coinbase, one of Kraken’s main competitors, said it was laying off 18 percent of its employees, following job cuts at Gemini and Crypto.com, two other crypto exchanges. Kraken — which is valued at $11 billion, according to PitchBook — is also grappling with the turbulence in the crypto market, as the price of Bitcoin has plunged to its lowest point since 2020.Mr. Powell’s culture crusade, which has largely played out on Kraken’s Slack channels, may be part of a wider effort to push out workers who don’t believe in the same values as the crypto industry is retrenching, the employees said.This month, Mr. Powell unveiled a 31-page culture document outlining Kraken’s “libertarian philosophical values” and commitment to “diversity of thought,” and told employees in a meeting that he did not believe they should choose their own pronouns. The document and a recording of the meeting were obtained by The Times.Those who disagreed could quit, Mr. Powell said, and opt into a program that would provide four months of pay if they affirmed that they would never work at Kraken again. Employees have until Monday to decide if they want to take part.On Monday, Christina Yee, a Kraken executive, gave those on the fence a nudge, writing in a Slack post that the “C.E.O., company, and culture are not going to change in a meaningful way.”“If someone strongly dislikes or hates working here or thinks those here are hateful or have poor character,” she said, “work somewhere that doesn’t disgust you.”After The Times contacted Kraken about its internal conversations, the company publicly posted an edited version of its culture document on Tuesday. In a statement, Alex Rapoport, a spokeswoman, said Kraken does not tolerate “inappropriate discussions.” She added that as the company more than doubled its work force in recent years, “we felt the time was right to reinforce our mission and our values.”Mr. Powell and Ms. Yee did not respond to requests for comment. In a Twitter thread on Wednesday in anticipation of this article, Mr. Powell said that “about 20 people” were not on board with Kraken’s culture and that even though teams should have more input, he was “way more studied on policy topics.”“People get triggered by everything and can’t conform to basic rules of honest debate,” he wrote. “Back to dictatorship.”The conflict at Kraken shows the difficulty of translating crypto’s political ideologies to a modern workplace, said Finn Brunton, a technology studies professor at the University of California, Davis, who wrote a book in 2019 about the history of digital currencies. Many early Bitcoin proponents championed freedom of ideas and disdained government intrusion; more recently, some have rejected identity politics and calls for political correctness.“A lot of the big whales and big representatives now — they’re trying to bury that history,” Mr. Brunton said. “The people who are left who really hold to that are feeling more embattled.”Mr. Powell, who attended California State University, Sacramento, started an online store in 2001 called Lewt, which sold virtual amulets and potions to gamers. A decade later, he embraced Bitcoin as an alternative to government-backed money.In 2011, Mr. Powell worked on Mt. Gox, one of the first crypto exchanges, helping the company navigate a security issue. (Mt. Gox collapsed in 2014.)Mr. Powell founded Kraken later in 2011 with Thanh Luu, who sits on the company’s board. The start-up operates a crypto exchange where investors can trade digital assets. Kraken had its headquarters in San Francisco but is now a largely remote operation. It has raised funds from investors like Hummingbird Ventures and Tribe Capital.As cryptocurrency prices skyrocketed in recent years, Kraken became the second-largest crypto exchange in the United States behind Coinbase, according to CoinMarketCap, an industry data tracker. Mr. Powell said last year that he was planning to take the company public.He also insisted that some workers subscribe to Bitcoin’s philosophical underpinnings. “We have this ideological purity test,” Mr. Powell said about the company’s hiring process on a 2018 crypto podcast. “A test of whether you’re kind of aligned with the vision of Bitcoin and crypto.”In 2019, former Kraken employees posted scathing comments about the company on Glassdoor, a website where workers write anonymous reviews of their employers.“Kraken is the perfect allegory for any utopian government ideal,” one reviewer wrote. “Great ideas in theory but in practice they end up very controlling, negative and mistrustful.”In response, Kraken’s parent company sued the anonymous reviewers and tried to force Glassdoor to reveal their identities. A court ordered Glassdoor to turn over some names.On Glassdoor, Mr. Powell has a 96 percent approval rating. The site adds, “This employer has taken legal action against reviewers.”Kraken is one of the world’s largest cryptocurrency exchanges.KrakenAt Kraken, Mr. Powell is part of a Slack group called trolling-999plus, according to messages viewed by The Times. The group is labeled “… and you thought 4chan was full of trolls,” referring to the anonymous online message board known for hate speech and radicalizing some of the gunmen behind mass shootings.In April, a Kraken employee posted a video internally on a different Slack group that set off the latest fracas. The video featured two women who said they preferred $100 in cash over a Bitcoin, which at the time cost more than $40,000. “But this is how female brain works,” the employee commented.Mr. Powell chimed in. He said the debate over women’s mental abilities was unsettled. “Most American ladies have been brainwashed in modern times,” he added on Slack, in an exchange viewed by The Times.His comments fueled a furor.“For the person we look to for leadership and advocacy to joke about us being brainwashed in this context or make light of this situation is hurtful,” wrote one female employee.“It isn’t heartening to see your gender’s minds, capabilities, and preferences discussed like this,” another wrote. “It’s incredibly othering and harmful to women.”“Being offended is not being harmed,” Mr. Powell responded. “A discussion about science, biology, attempting to determine facts of the world cannot be harmful.”At a companywide meeting on June 1, Mr. Powell was discussing Kraken’s global footprint, with workers in 70 countries, when he veered to the topic of preferred pronouns. It was time for Kraken to “control the language,” he said on the video call.“It’s just not practical to allow 3,000 people to customize their pronouns,” he said.That same day, he invited employees to join him in a Slack channel called “debate-pronouns” where he suggested that people use pronouns based not on their gender identity but their sex at birth, according to conversations seen by The Times. He shut down replies to the thread after it became contentious.Mr. Powell reopened discussion on Slack the next day to ask why people couldn’t choose their race or ethnicity. He later said the conversation was about who could use the N-word, which he noted wasn’t a slur when used affectionately.Mr. Powell also circulated the culture document, titled “Kraken Culture Explained.”“We Don’t Forbid Offensiveness,” read one section. Another said employees should show “tolerance for diverse thinking”; refrain from labeling comments as “toxic, hateful, racist, x-phobic, unhelpful, etc.”; and “avoid censoring others.”It also explained that the company had eschewed vaccine requirements in the name of “Krakenite bodily autonomy.” In a section titled “self-defense,” it said that “law-abiding citizens should be able to arm themselves.”“You may need to regularly consider these crypto and libertarian values when making work decisions,” it said.In the edited version of the document that Kraken publicly posted, mentions of Covid-19 vaccinations and the company’s belief in letting people arm themselves were omitted.Those who disagreed with the document were encouraged to depart. At the June 1 meeting, Mr. Powell unveiled the “Jet Ski Program,” which the company has labeled a “recommitment” to its core values. Anyone who felt uncomfortable had two weeks to leave, with four months’ pay.“If you want to leave Kraken,” read a memo about the program, “we want it to feel like you are hopping on a jet ski and heading happily to your next adventure!”Kitty Bennett More

It is never ideal for a central bank to hold an emergency meeting; the very fact is prone to cause nervousness in financial markets. As it was, the European Central Bank seems to have been able to use its “ad hoc” meeting Wednesday morning to get somewhat back on the front foot after being caught out by market reactions to its monetary policy meeting the week before.That meeting came as investors had started to worry about how the ECB’s move towards tightening financial conditions would affect the borrowing costs of the fiscally weaker eurozone governments. Their disappointed hopes of a stronger commitment to contain widening sovereign spreads caused steep sell-offs: in less than a week, Italy’s borrowing costs rose by almost one percentage point.It was the speed of this change that forced the ECB’s hand. The past week has brought back chilling echoes of the eurozone sovereign debt crisis. Apart from the sudden widening of yield spreads, the analyst community is full of chatter about “fragmentation risk”. Conditions have quickly become ripe for speculative attacks on pressured sovereigns’ debt and a repeat of the ugly politics of creditor-debtor country antagonism.This is what the ECB had to arrest, having failed to foresee the rapid deterioration that its own earlier circumspection had caused. The terse statement from the emergency meeting is short, but should not leave any doubt that the bank has moved into a new phase. The meeting did three important things. First, the ECB now explicitly states that its monetary policy is in fact being unevenly transmitted to different member countries — its code for intervention in bond markets being justified. Second, it has moved from communicating the possibility of using its balance sheet reinvestments to combat excessive spreads to an express intention of doing so. And third, a new “anti-fragmentation” tool, mooted as an if-necessary resort for months, has now been ordered up from the technical staff.Early signs are that the more robust approach is working; yields and spreads have come down from the most recent heights. Whether it is enough is anyone’s guess, but the track has now been laid for several forms of intervention to come within weeks or months.Above all, this highlights the differences from the previous crisis. The ECB is now clearly in the game of containing spreads and, as important, its governing council is reasonably united behind this understanding. We are no longer in the world where former president Mario Draghi had to bounce his colleagues into action through dramatic unilateral “whatever it takes” statements. There is no doubt that the ECB has the means to prevent a fragmentation crisis; and the bank is finally working hard to dispel any doubts that it has the [email protected] More

Good eveningIt’s a big day for policymakers in Europe and the US as they lay out monetary responses to the deteriorating economic outlook and address the recent turmoil in financial markets.After a rare emergency meeting this morning, the European Central Bank pledged a new bond-buying plan to tackle surging borrowing costs in weaker eurozone countries. Prices of bonds in heavily-indebted Italy rallied after the announcement, following fears that the country had been heading towards the “danger zone”.The central bank’s move comes just a week after it had disappointed investors with a lack of detail over how it might tackle the “financial fragmentation” which meant borrowing costs rising more for southern eurozone countries than for those in the north.The ECB meeting is followed later today (2pm ET/7pm London time) by the US Federal Reserve’s announcement on interest rates. Investors in recent days have come to believe that the Fed might accelerate its policy tightening with a rise of 0.75 percentage points as it ramps up its fight against inflation. However, they remain uncertain about the impact of its “quantitative tightening”.Recent data highlight the need for action. US producer prices rose 0.8 per cent in May — an acceleration of 0.3 percentage points from the previous month — or 10.3 per cent on an annual basis. Diesel and petrol prices are soaring, while wider retail sales fell unexpectedly in May for the first time in five months as Americans put car purchases on hold.New surveys have also highlighted a darkening mood in the country. A survey of chief executive officers showed confidence dimming, reflecting “uncertainty driven by the unprecedented times we face as a nation and global community,” in the words of General Motors boss Mary Barra. It follows last week’s FT’s poll of top economists which showed 70 per cent believe a recession is coming next year.Chief economics commentator Martin Wolf takes a wider view of the challenges facing policymakers, drawing on his experiences as an economist at the World Bank in the 1970s. He argues that they need to avoid repeating the mistakes of that era, a similar time of surging inflation, wars in key commodity-producing regions, declining real wages, slowing growth, fears of tightening monetary policy and turbulence in stock markets.“What I remember most about that period was the pervasive uncertainty,” he concludes. “We did not have any idea what would happen next. Many mistakes were made, some out of over-optimism and others out of panic. The past does not repeat itself. But it is rhyming. Do not ignore time’s poetry.” Latest newsGlobal banking regulator urges closer links between pay and climate risksUS homebuilder confidence declines for sixth consecutive monthBiden tells US oil refiners rising profits ‘not acceptable’ as war ragesFor up-to-the-minute news updates, visit our live blogNeed to know: the economyGazprom, the Russian state-owned energy company, cut gas supplies to Germany, its biggest customer, for the second time this week, blaming turbine repairs. It also cut supplies to Italy, its second biggest buyer. Despite the slowdown in economic growth, the UK labour market is still running hot, with official data yesterday showing the number of full-time employees at a record high, redundancies at record lows and the number of unfilled vacancies at a new peak of 1.3mn. However, save for those lucky enough to earn a bonus, pay in real terms fell sharply.Latest for the UK and EuropeA new study showed that UK exports to the EU fell by 15.6 per cent, or £12.4bn, in the first six months of last year because of post-Brexit trade frictions over standards and technical specifications. Brexit is also being blamed for delays in introducing superfast broadband across the UK. Science columnist Anjana Ahuja says leaving the EU’s Horizon research programme “makes a mockery of the government’s self-proclaimed ambition to turn the UK into a global science superpower”. However, the government did this week grant a £500mn upgrade to the country’s largest scientific facility, the Diamond Light Source microscope in Oxfordshire.The FT revealed that Poland was poised to drop its opposition to a global minimum corporate tax, which could lead to EU adoption of the OECD proposals at a meeting of finance ministers on Friday.Global latestRetail sales in China fell for a third consecutive month in May as lockdowns and mass testing hit growth in the world’s biggest consumer market. Industrial production fared slightly better, gaining 0.7 per cent compared with last year, boosted by growth in new energy vehicles and solar cells.

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Global oil supply will “struggle” to meet still rising demand next year, the International Energy Agency said today, despite signs that record prices at the pump are starting to hit consumption. Our Big Read examines US president Joe Biden’s attempts to mend fences with Saudi Arabia and limit the damage to energy markets roiled by Russia’s invasion of Ukraine.The latest in our Economists Exchange series features the FT’s Delphine Strauss talking to Nobel laureate Christopher Pissarides, who argues that policymakers can no longer bring about social change through monetary and fiscal stimulus that will fuel inflation but not bring any fundamental shift in workers’ bargaining power.The slowing of New Zealand’s house price boom as interest rate rises bite is being watched closely by markets across the world. “New Zealand is a canary in the coal mine,” said one economist. “It’s a test case for a central bank to push up rates as house prices are soaring to deal with inflation.”Laos, the latest Asian country to come under serious financial strain from surging energy and commodity prices, had its sovereign debt status reduced to “junk” by Moody’s Investor Service.Need to know: businessGerman energy company HH2E’s €1bn investment in a green hydrogen plant is one of the biggest moves so far in the country’s efforts to go carbon neutral as well as weaning itself off Russian gas.A Bank of America survey showed three-quarters of global fund managers expected company profits to deteriorate, the weakest reading since the 2008 financial crisis. Especially gloomy are those fund managers in Hong Kong, who pleaded with the government to reopen the city borders or risk a “permanent” loss of talent, even as coronavirus cases begin to rise again. The UK ordered airlines to make sure all summer flights went ahead after disruption meant between 2 and 4 per cent of flights were cancelled during the first week of May, compared with a normal rate of 1 per cent. Unions blamed staff cuts, while operators cited long waiting times for new workers to pass security checks. Next week rail journeys will also be disrupted by the most significant industrial action in 30 years.Almost half of UK Covid loans went to businesses not facing financial distress, according to a new report. It also found that the loan guarantee schemes could have saved between 150,000 and 500,000 businesses with between 500,000 and 2.9mn jobs.One particular market has bounced back strongly from Covid disruptions: Europe’s illegal drug business. Cocaine supply has passed pre-pandemic levels while more potent and dangerous drugs are beginning to appear, with increased activity from Mexican gangs, according to a European monitoring agency.The World of WorkAre you ready to ditch those elasticated waistbands and “Zoom mullets” for more formal attire for the return to the office? The new edition of our Working It podcast discusses how the pandemic has changed what we wear to work.On-demand services such as ultrafast delivery apps have grown rapidly in recent years, but, says columnist Sarah O’Connor, the growing awareness of how gig workers are exploited, combined with cutbacks in consumer discretionary spending, could spell the end of the “servant economy” model. The latest flashpoint involves ride-hailing app Bolt, which is being taken to court by the UK’s GMB union over employment rights. Get the latest worldwide picture with our vaccine trackerAnd finally…What’s your favourite book of 2022 so far? We’re collecting reader recommendations for our popular Summer Book series next week and would love to hear from you. Follow this link and share those titles you think fellow FT readers might enjoy.© Getty Images/iStockphoto More

Philip Haffey rustles a feed sack and the cows come trotting to him. The fourth-generation dairy farmer in Northern Ireland’s County Armagh produces 1.4mn litres of milk a year. The grain his cattle eat, when they are not chomping grass or silage, is imported from Great Britain.But those cereal imports could prove a nightmare for him under Boris Johnson’s new bill to unilaterally rewrite the Brexit trading rules for the region. Farmers say the prime minister’s initiative threatens the dairy sector, which is worth £1.5bn a year to Northern Ireland and is part of the largest integrated industry across the island.The bill envisages a dual regulatory regime, where goods entering the region could be produced either to UK or EU standards. But if rules diverge and the grain that Haffey feeds his cattle is grown with pesticides not permitted in the EU, he would no longer be able to send his milk for processing in the Republic of Ireland.That would do more than just inconvenience a farmer who happily voted for Brexit. The region does not have enough plants to process all the milk it produces, meaning the 800mn litres a year produced by Northern Irish farmers that is processed south of the border — a third of the region’s output — would have nowhere to go except Great Britain.Milk from north and south is also mixed together so butter, cheese, Baileys Irish Cream liqueur, baby formula and other products are made with supplies from both jurisdictions indistinguishably.Haffey objects to Irish Sea customs checks for British goods entering the region under the post-Brexit trading arrangements, known as the Northern Ireland protocol. “We are part of the UK, so things should flow as freely to Northern Ireland as they do to Wales,” he said. “I think pressure needs to be exerted on the EU.”But even he stops short of calling for the protocol — which London says is causing “peril” to societal and political conditions in the region — to be scrapped altogether, for one simple reason. As Alan Cleland, a farmer in County Down put it: “Loads of bits and pieces of the protocol are problematic. But from the point of view of our milk, it seems to be working.”

Alan Cleland, a dairy farmer from County Down: ‘From the point of view of our milk, [the Protocol] seems to be working’ © Paul McErlane/FT

London’s bill to give ministers power to tear up parts of the protocol is already undermining the industry’s image, said Gerry O’Reilly, a dairy farmer south of the border in County Cavan and a shareholder in Lakeland Dairies, a large processor.Northern Irish milk, including from Haffey, keeps Lakeland supplied, particularly at the end of the year when herds like his are not producing, he said. “Already, even, damage has been done,” O’Reilly said. “If you’re an international buyer you’d say, ‘I want steady supply for five to 10 years but you have all this political nonsense’. It weakens us straightaway.”In order to preserve the 1998 Good Friday Agreement that ended three decades of conflict, the protocol left the region inside the EU’s single market for goods and subject to EU rules and oversight, rather than put customs checks on a land border that is now largely invisible.But unionists say the customs checks in the Irish Sea that were imposed instead undermine the region’s status as part of the UK. The Democratic Unionist party has paralysed local political institutions to press its demands for the Irish Sea border to be scrapped.

Dairy, which trades on its image of rolling pasture lands, has become one of the most emblematic all-island industries in the quarter century since the Good Friday Agreement.“Dairy is Ireland’s flagship,” said Conor Mulvihill, director of Dairy Industry Ireland, a trade body. The industry is worth €13bn to the Republic of Ireland and 85,000 people are employed in it on both sides of the border. “It’s mental what is being proposed.”Whiskey is another industry with north-south supply chains that, since the Good Friday Agreement, has boomed, rising from just four distilleries two decades ago to 42. Malt and grains cross the border every day, as does newly distilled spirit to be matured.“It’s very important we have a single set of rules,” said William Lavelle, director of the Irish Whiskey Association. “If the protocol is in any way undermined or disapplied . . . it would just bring a whole range of new headaches.”But other industries complain that the protocol has brought costly red tape that could make it difficult for some products, such as sausages, to be sold in Northern Ireland.

This week’s bill aims to introduce a “green lane” with no customs checks for goods from Britain that are staying in Northern Ireland and to end oversight of the rules by the European Court of Justice.Mike Johnston, head of the Dairy Council for Northern Ireland, welcomed London’s recognition that there is no “one size fits all” approach. But he said the worst-case scenario bill could mean “we would just have to stop buying grain” from Great Britain. The industry buys 400,000 tonnes a year, so “UK cereal farmers could lose out . . . there’s a lot hanging on this”.UK officials were divided over the extent of the potential crisis. One said there were “misconceptions out there” and that industries selling into the bloc would continue with EU regulations.

But another said: “There’s obviously no fix. They’re stuffed. The dual regulatory regime can never work for agri.”Dairy farmers said the risks were very real. The UK in 2021 authorised the use of an EU-banned insecticide, although London says it was not used in the end, and UK standards on gene editing are diverging from EU rules.Charlie Weir, another farmer in County Armagh, regretted voting to leave the EU “because it’s just been one lie after another” from London. “Why, if the protocol is so bad, is Northern Ireland the only region in the UK that in the first quarter has grown?” he said.“We could be left with higher costs and lower prices,” said another Armagh farmer who voted to stay in the EU and asked not to be named because of deep, enduring divisions in the region. “The protocol is unbelievably good for Northern Ireland — it’s just the best of both worlds,” he said. Additional reporting by Peter Foster in London More

The Federal Reserve on Wednesday is expected to raise benchmark borrowing rates by three-quarters of a percentage point.
In addition, the central bank will update its outlook on rates ahead as well as its estimates for GDP, unemployment and inflation.

The Federal Reserve on Wednesday is expected to do something it hasn’t done in 28 years — increase interest rates by three-quarters of a percentage point.
In response to soaring inflation and volatile financial markets, the central bank will hike the rate that banks charge each other for overnight borrowing to a range of 1.5%-1.75%, where it hasn’t been since before the Covid pandemic crisis began.

That rate feeds through to consumer borrowing, impacting virtually all adjustable-rate products such as credit cards and home equity loans.
Along with the rate increase, here’s a quick look at what the Fed also likely will do:

Adjust its future outlook for interest rates via its “dot plot” of individual members’ expectations.
Update its outlook for gross domestic product, inflation and unemployment. Economists figure the Fed will decrease its expectations for GDP this year while raising forecasts for inflation and the unemployment rate.
Change the language in its post-meeting statement to reflect current conditions, namely that inflation is running at a faster pace than anticipated, requiring more aggressive actions to contain price increases running at their fastest level since December 1981.

Goldman Sachs said new language in the statement could indicate that the rate-setting Federal Open Market Committee “anticipates that raising the target range expeditiously will be appropriate until it sees clear and convincing evidence that inflation is moderating,” which the firm said implies “a high bar for reverting to 25bp hikes.”

US Federal Reserve Chairman Jerome Powell speaks during a news conference in Washington, DC, on May 4, 2022.
Jim Watson | AFP | Getty Images

Following the FOMC meeting, Fed Chairman Jerome Powell will address the media. The decision is due at 2:00 p.m. ET and Powell will speak 30 minutes after that.
Powell will be called on to explain the Fed’s recent shift in rate expectations. He and other officials had been pushing the narrative that consecutive rate increases of 50 basis points would be the most likely course.

In fact, at his last news conference in May, Powell dismissed 75 basis points as an option, saying it was “not something the committee is actively considering.” A basis point is one one-hundredth of a percentage point.
Now, Powell could provide indications that multiple 75 basis point hikes are possible if inflation readings don’t start to come down.

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