Economy

Borrowers covered under the forbearance program have not been required to make payments on their loans since March 2020, but the suspension of repayments is set to expire at the end of April.Over the period, an estimated $195 billion worth of payments have been waived, the New York Fed said.Borrowers in a separate smaller pool of about 10 million loans provided privately or through the Federal Family Education Loan (FFEL) system and not covered by the forbearance program struggled with their debt payments over the past two years. In particular, from March last year delinquency rates for FFEL borrowers have been on the rise and returned to pre-pandemic levels by the end of December.By contrast, delinquency rates fell among borrowers covered by the two-year forbearance program to a low of 3.6% at the end of last year.That bodes ill for those covered by the program who had higher debt balances, lower credit scores and were making less progress on repayments than FFEL borrowers before the pandemic began.”As such, we believe that … borrowers are likely to experience a meaningful rise in delinquencies, both for student loans and for other debt, once forbearance ends,” New York Fed economists wrote in a blog post. More

The US has agreed to ease steep tariffs on UK steel and aluminium products as the countries attempt to resolve a Trump-era trade dispute and bolster transatlantic relations.Washington will suspend its 25 per cent levy on UK steel imports of up to 500,000 tonnes a year and a 10 per cent levy on aluminium products of up to about 21,600 tonnes a year, according to the deal announced on Tuesday.The suspension, which will also see the UK lift its retaliatory tariffs on US bourbon, agricultural and other goods, will go into effect on June 1.The deal states that any UK steel company owned by a Chinese entity must undertake an audit of its financial records to “assess influence from the People’s Republic of China”. The results will be shared with the US.Chinese company Jingye Group acquired British Steel, the UK’s second-largest steelmaker, in late 2019.Donald Trump’s administration imposed tariffs on a range of countries in 2018 on the grounds that cheap foreign metal imports posed a threat to national security.Anne-Marie Trevelyan, the UK’s international trade secretary, said the move was “good news” for the British industries that had been “unfairly” hit with duties by the US. “It means our manufacturers can now enjoy a high level of tariff-free access to the US market once again.”Gina Raimondo, US Commerce Secretary, said President Joe Biden had made it a “top priority” to “counter China’s unfair trade practices and ensure that America is able to compete globally in the 21st century”.Biden administration officials have previously accused China of dumping steel produced by its state-subsidised industry into global markets.The Biden administration has already struck similar deals with the EU and Japan, although it only began talks with the UK on lifting the tariffs in January.

In December, the Financial Times reported that the US was delaying the talks because of concerns over the UK’s threats to change post-Brexit trading rules in Northern Ireland.Washington believed repeated threats by Brexit minister Lord David Frost to suspend the Northern Ireland protocol, which ensures there is no trade border on the island of Ireland, compromised the Good Friday Agreement of 1998, which brought peace to the region.Frost resigned just before Christmas and Liz Truss, the foreign secretary now in charge of talks, has taken a more conciliatory tone.The announcement follows a visit by Trevelyan to Baltimore and Washington this week, where she met with Katherine Tai, US trade representative, and Raimondo.In a press conference held earlier on Tuesday to mark the end of the two-day “trade dialogue”, Tai said the two sides had also discussed how best to respond to new shocks to the global economic system, such as Covid-19 and the war in Ukraine.When asked if the new dialogue set up by the UK and US would lead to the continuation of the stalled free trade agreement talks, Tai said she did “not want to prejudge, predetermine or prescript where these dialogues might take us”.But she added that a free trade agreement was “a very 20th-century tool” which “has its place . . . in the toolbox”. “What I would like to do is to ensure that the conversations and the approaches that we bring today . . . are maximally responsive and that we don’t spend years and spend a lot of blood, sweat and tears working on something that isn’t going to be relevant to the needs of our people in our economy,” Tai said.In response to the announcement, Gareth Stace, director-general of the trade body UK Steel, said: “This deal represents a hugely positive outcome . . . The tireless work of the [UK] trade secretary and her department has resulted in a strong deal for the UK which removes longstanding export barriers and opens up access to this important market once more.” More

Rishi Sunak is planning to set aside a large part of a windfall in UK public finances this year, risking a backlash from Tory MPs who want the chancellor to use all funds available to cushion the cost of living crisis hurting British families.The official forecasts in the Spring Statement will show the deficit is at least £20bn better than expected this year, but Sunak will use only some of the money to help households facing soaring gas, electricity, and fuel bills.Sunak will instead highlight the importance of “more resilient public finances” as he worries about a surge in the cost of servicing government debt instead of spending the entire windfall. He is set to say he will “stand by” families, with a cut in fuel tax expected to be part of new measures he will announce on Wednesday.His speech will focus on the theme of “security” as he offers Britain’s “unwavering” support to Ukraine amid a promise to continue supplying weapons and aid to the war-stricken country. Many Tory MPs are pushing for bolder fiscal action, including cutting taxes or reducing the impact of the planned 1.25 percentage point rise in national insurance contributions, which takes effect next month and is intended to raise £12bn for the NHS and social care. Some want Sunak to ditch the measure altogether, although a second choice would be to increase the threshold at which people pay NICs from £9,600 to the income tax threshold of £12,500.

Iain Duncan Smith, a former Conservative leader, said Sunak had “headroom” and should use the fiscal good news this year to pump money into the economy to avoid “stagflation” — when prices rise amid a recession.“He should act boldly and decisively,” Duncan Smith said, adding that the chancellor should either scrap the national insurance rise or raise the threshold. “By the autumn it could be too late.”Official figures on Tuesday showed a £13.2bn downward revision in borrowing, putting the government on course to release more than £20bn for new one-off measures to help households. Robert Halfon, a longstanding campaigner against increases in fuel duty, said: “Boris and the chancellor should make it their defining domestic mission to use this windfall to cut the cost of living for workers — not just for this emergency situation but for the long term.”The Treasury is nervous about these demands and worries that higher inflation in 2022-23 and higher interest rates will raise the forecast cost of servicing debt by more than the extra tax revenues it will receive. However, forecasts for the 2024-25 financial year are set to show an improvement in borrowing because additional tax revenues will outweigh the higher cost of servicing debt.Sir Charlie Bean, a former member of the Office for Budget Responsibility’s forecasting team, nevertheless said he expected the chancellor to have significant “wriggle room” in the public finance forecasts to help households. Sunak is also expected to announce a shake-up of training in an attempt to raise the country’s skills levels and growth potential, including a review of the operation of the apprenticeship levy. He will argue that providing incentives to the private sector to carry out more training is part of a plan to create “a new culture of enterprise”, including a new regime of tax breaks to boost investment and innovation.Last month the chancellor said he feared the apprenticeship levy was not doing enough to “incentivise business to invest in the right kinds of training”. Most new measures will be introduced in his autumn Budget. More

Reforming the current system, Pension Fund Administrators (AFP), was one of the biggest demands demonstrators had during the 2019 protests. One of the biggest complaints against the system is its low-paying pensions.Leftist President Gabriel Boric proposed eliminating the private system in favor of a public one in his government plan, but Marcel refrained from specifics during a presentation before deputies. The finance minister pointed out that one of the problems of the current system is the low level of contributions from workers and companies compared to other countries. When it came to the reform, he said that the government was going to start a “social dialogue” to find governing principles for a new system.”From there we are going to work on a reform project that can reach Congress during the next year,” Marcel said.”We don’t want this consultation process to go beyond a couple of months, because we are aware that there is a lot of anxiety to finally see a proposal on the table.”Congress has also approved three partial withdrawals of pension savings to help households during the pandemic, and a new withdrawal is currently under discussion.Boric’s government, which took power on March 11, has a complicated agenda filled with promises of social reforms while struggling with a sputtering economy after it registered historic growth last year. (Report by Fabián Andrés Cambero,; Edited by Natalia Ramos and Alistair Bell) More

(Reuters) – Cleveland Federal Reserve Bank President Loretta Mester on Tuesday said she would like to raise interest rates to about 2.5% by year end, with bigger rate hikes in the first half, and further tightening next year to bring down high inflation and keep it from getting entrenched.”I find it appealing to front-load some of the needed increases earlier rather than later in the process because it puts policy in a better position to adjust if the economy evolves differently than expected,” Mester said in remarks prepared for delivery at John Carroll University. “If by the middle of the year, inflation is not beginning to moderate, we could speed up our rate increases. But if inflation is moving down faster than expected, we could slow the pace of rate increases in the second half of the year compared to the first half.” The Fed raised rates last week by a quarter of a percentage point, to a target range of 0.25% to 0.5%, a move Mester said she strongly supported. Her remarks added to a rising chorus supporting a faster pace at coming Fed meetings. Fed Chair Jerome Powell on Monday said the Fed should raise rates “expeditiously” toward neutral and, if needed, above it. Russia’s invasion of Ukraine adds to upward pressure on inflation, Mester said, which is already running at a 40-year high and three times the Fed’s 2% inflation target. “With inflation already at very high levels and demand outstripping supply, there are rising risks that too-high inflation will become embedded in the economy and persist,” she said. More

Wall Street stocks rose on Tuesday and US government bond prices fell, as investors looked ahead to tighter monetary policy from the Federal Reserve. The S&P 500 index rose 1.1 per cent as investors balanced remarks from Fed chair Jay Powell about the need for rapid interest rate rises with his reassurance that tightening would not spark a recession. The tech-heavy Nasdaq Composite added 2 per cent. Meanwhile, the yield on the benchmark 10-year US Treasury note rose 0.09 percentage points to 2.38 per cent — the highest level since May 2019 — as its price fell. Powell said on Monday that the Fed should move “expeditiously” towards tighter monetary policy. He also pushed back on concerns that this would cause a recession, citing episodes in 1965, 1984 and 1994 when the central bank slowed an overheated economy without prompting a sharp contraction.“The bond market is responding to expectations of tighter monetary policy, but equity markets are saying if Powell is confident about the growth outlook then risk assets will do well,” said Seema Shah, global investment strategist at Principal Global Investors. “Equity markets responding in this way is a bit surprising,” she added. “One of these views is going to give at some point.” Not all investors were persuaded that the Fed’s tough talk would translate into policy decisions, which potentially could explain the continued support for equities. “This is a Fed that is talking very hawkish and getting the market to do their dirty work for them,” said Andy Brenner, head of international fixed income at NatAlliance Securities. “I do not think that this is an aggressive Fed.” Tesla rose 7.9 per cent on Tuesday after the electric carmaker opened a plant in Germany, pushing its market capitalisation back above $1tn for the first time since January. Europe’s regional Stoxx 600 share index, which remains about 6 per cent lower for the year, ended the day 0.8 per cent higher, with strong gains for financial stocks. Bundesbank president Joachim Nagel said on Monday that the European Central Bank should raise interest rates this year if the inflation outlook warranted it. Germany’s Xetra Dax closed up 1 per cent and London’s FTSE 100 gained 0.5 per cent. The US Treasury market is experiencing its worst month since 2016 after the Fed raised interest rates last week for the first time since 2018. US consumer price inflation soared to a 40-year high of 7.9 per cent last month.Russia’s invasion of Ukraine has prompted sharp jumps in the prices of commodities from oil to wheat, exacerbating inflationary pressures caused by resurgent demand following coronavirus shutdowns and prompting markets to predict the Fed will raise its key interest rate to more than 2 per cent by December.“Inflation expectations for the next one to two years are now extremely high,” said Brian Nick, chief investment strategist at Nuveen. “But the scenario where the Fed goes ahead and does what it is signalling it will do is probably the best-case scenario,” he added. “Do too little and inflation becomes further entrenched.” The 10-year German Bund yield, a barometer for eurozone borrowing costs, rose 0.04 percentage points to 0.5 per cent, its highest level since October 2018. Brent crude settled 0.1 per cent lower on Tuesday at $115.48 a barrel, with the international oil benchmark still nearly 20 per cent higher since February 23, the day before Russia invaded Ukraine. Hong Kong’s Hang Seng index gained 3 per cent. It began to rally last week when Chinese vice-premier Liu He made a rare intervention to pledge state support for the economy and capital markets. More

(Reuters) – San Francisco Federal Reserve Bank President Mary Daly said Tuesday she believes the “main risk” to the U.S. economy is from too-high inflation that could get worse as Russia’s invasion of Ukraine boosts oil prices and China’s crackdown on COVID-19 further disrupts supply chains.”Even though we have these uncertainties around Ukraine, and we have the uncertainties around the pandemic, it’s still time to tighten policy in the United States,” Daly said at a virtual Brookings Institution event, “marching” rates up to the neutral level and perhaps even higher to a level that would restrict the economy to ensure inflation comes back down. “Inflation has persisted for long enough that people are starting to wonder how long it will persist,” she said. “I’m already focused on let’s make sure this doesn’t get embedded and we see those longer-term inflation expectations drift up.”The Fed last week raised rates for the first time in three years, and signaled ongoing rate hikes ahead. Fed Chair Jerome Powell on Monday said the central bank needs to move rates “expeditiously” higher in remarks widely understood to signal more aggressive tightening at coming meetings. Daly on Tuesday said the labor market is tight enough to be unsustainable, pointing to worker churn including new hires who “ghost” their new employers by not showing up because they have other options. “In addition to pushing up wage inflation, which could ultimately push up price inflation, putting us in sort of a vicious cycle,” she said, “it’s just not a very sustainable way to manage the economy.” She said she sought a “smooth landing” for the labor market as rate hikes help bring down inflation More

At the Siemens Gamesa factory in Aalborg, Denmark, where the next generation of offshore wind turbines is being built, workers are on their hands and knees inside a shallow, canoe-shaped pod that stretches the length of a football field. It is a mold used to produce one half of a single propeller blade. Guided by laser markings, the crew is lining the sides with panels of balsa wood.The gargantuan blades offer a glimpse of the energy future that Europe is racing toward with sudden urgency. The invasion of Ukraine by Russia — the European Union’s largest supplier of natural gas and oil — has spurred governments to accelerate plans to reduce their dependence on climate-changing fossil fuels. Armed conflict has prompted policymaking pledges that the more distant threat of an uninhabitable planet has not.Smoothly managing Europe’s energy switch was always going to be difficult. Now, as economies stagger back from the second year of the pandemic, Russia’s attack on Ukraine grinds on and energy prices soar, the painful trade-offs have crystallized like never before.Moving investments away from oil, gas and coal to sustainable sources like wind and solar, limiting and taxing carbon emissions, and building a new energy infrastructure to transmit electricity are crucial to weaning Europe off fossil fuels. But they are all likely to raise costs during the transition, an extremely difficult pill for the public and politicians to swallow.The crisis that has inspired Europe to more quickly reach toward clean energy sources like wind and solar also risks pitching it backward by unwinding efforts to shut coal mines and stop drilling new oil and gas wells to replace Russian fuel and bring prices down.Workers at Siemens Gamesa preparing a mold used to produce one half of a single propeller blade.Carsten Snejbjerg for The New York TimesIn Germany, Europe’s largest economy, leaders are planning to have several coal-fired power plants that were recently taken off the grid placed in reserve, so that they could be quickly fired up if needed. After years of dithering about investing so much in the natural gas infrastructure, Germany is also accelerating plans to build its own terminals for receiving liquefied natural gas, another fossil fuel.“Security of our energy supply stands above everything else at the moment,” said Robert Habeck, the country’s economy minister and a Green party leader in the coalition government.Local officials are taking similar steps. Last week, the Munich government decided to extend the life of one of the city’s coal-fired power plants, scrapping plans to convert it to burn natural gas in spring 2023.And that’s in a country that has helped spearhead Europe’s efforts to shift to renewable energy.In Poland, which gets 70 percent of its energy from coal and has been at loggerheads with the European Union over the climate agenda, the sudden energy shortage is being used by critics as evidence that the push to shut mines was a mistake.A power plant in Poland run by CEZ Group, a Czech conglomerate of companies in the energy sector.Maciek Nabrdalik for The New York TimesDominik Kolorz, head of the Silesian region of Solidarity Trade Union, said through a translator that “the so-called E.U. climate policy” was leading to a “huge economic crisis” and “total energy dependence on the Russian Federation.”In many ways, Europe has been a leading laboratory for the decades-long transition. It started establishing taxes on carbon emissions more than 20 years ago. The European Union pioneered an emissions trading system, which capped the amount of greenhouse gases companies produced and created a marketplace where licenses for those emissions could be bought and sold. Polluting industries like steel were gradually pushed to clean up. Last year, members proposed a carbon tax on imports from carbon-producing sectors like steel and cement.And it has led the way in generating wind power, especially from ocean-based turbines. Siemens Gamesa Renewable Energy, for example, has been instrumental in planting rows of colossal whirligigs at sea that can generate enough green energy to light up cities.Europe, too, is on the verge of investing billions in hydrogen, potentially the multipurpose clean fuel of the future, which might be generated by wind turbines.At Siemens Gamesa in Brande, a prototype for an even larger wind turbine.Carsten Snejbjerg for The New York TimesWind turbines can potentially generate enough green energy to light up cities.Carsten Snejbjerg for The New York TimesSuch exhilarating innovation, though, sits next to despair-inducing obstacles.Even before the invasion of Ukraine, a tight natural gas market, exacerbated by Russia’s restraining of supplies, had pushed gas and electricity prices to record levels, leading to shutdowns of fertilizer plants and other factories because of high costs. Household energy bills are set to rise by about 50 percent in Britain and drivers across Europe faced shock at the pump.European countries, most notably Germany, had mapped out strategies that relied on increasing dependence on Russian gas and oil in the medium term. That is no longer an option.After the invasion, Olaf Scholz, the chancellor of Germany, halted approval of Nord Stream 2, an $11 billion gas pipeline under the Baltic Sea that directly links Russia to northeastern Germany.As Ursula von der Leyen, the European Commission president, said when she announced a plan on March 8 to make Europe independent of Russian fossil fuels: “We simply cannot rely on a supplier who explicitly threatens us.” The proposal calls for member nations to reduce Russian natural gas imports by two-thirds by next winter and to end them altogether by 2027 — a very tall order.This week, European Union leaders are again meeting to discuss the next phase of proposals, but deep divisions remain over how to manage the current price increases amid anxieties that Europe could face a double whammy of inflation and recession.On Monday, United Nations Secretary General António Guterres warned that intense focus on quickly replacing Russian oil could mean that major economies “neglect or kneecap policies to cut fossil fuel use.”A hydrogen test station near the Siemens Gamesa design center. Hydrogen produced with wind power could be a multipurpose clean fuel of the future.Carsten Snejbjerg for The New York TimesThere are other technological, financial, regulatory and political hurdles. The ability to cheaply generate, transport and store a clean replacement fuel like hydrogen to power trucks, cars and airplanes remains years away.And there is the need to find a better business model.Siemens Gamesa is the world’s leading maker of offshore wind turbines, a key vehicle for achieving climate targets. The company is also working on a giant turbine that would be dedicated solely to producing green hydrogen.Yet, at the company’s offshore design center in Brande, a two-hour drive from Aalborg, the conversations focus on worries as much as bright prospects. The company just replaced its chief executive because of poor financial performance.Industry executives say that despite the huge climate ambitions of many countries, Siemens Gamesa and its competitors are struggling to make a profit and keep the orders coming in fast enough to finance their factories. It doesn’t help that building plants is often a condition for breaking into new markets like the United States, where Siemens Gamesa agreed to erect a facility in Virginia.Morten Pilgaard Rasmussen of Siemens Gamesa says companies like his struggle to get projects approved swiftly.Carsten Snejbjerg for The New York TimesMorten Pilgaard Rasmussen, chief technology officer of the offshore wind unit at Siemens Gamesa, said that companies like his “are now forced to do investments based on the prosperous future that we are all waiting for.”The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More