Economy

DENVER (Reuters) – A U.S. gasoline tax cut is among the options being considered to provide relief to consumers, U.S. Treasury Secretary Janet Yellen said on Friday, adding she was confident that the country’s economy would perform well this year. “We’re looking at a range of things that we might do to relieve consumers. The gas tax is one of the things on the list”, Yellen told reporters on Friday at a social services agency in Denver, Colorado. However, she added that she had concerns that cutting the gasoline tax could cause benefits to flow to oil companies and not to consumers. She also said that a tighter monetary policy to fight inflation could cause recession, but added that the Federal Reserve should be able to balance its dual mandate for maximum employment and price stability.”I have confidence in the Fed to get inflation under control without causing a recession. And I see a good strong economy that, even with inflation and the problems that the Russia Ukraine situation is causing, I believe the economy will do well this year.”Commenting on the U.S. dollar’s reserve currency status, which has enabled powerful sanctions against Russia, she said there was no serious competitor the dollar.”There really is no other currency that I think can rival it as its the reserve currency, and creates the ability to impose very strong sanctions”, Yellen said, when asked if the dollar could lose some of its global clout due to efforts by Russia and China to find alternatives ways to do business.”China has engaged in searches, Russia has as well, but it’s really not come close to inventing any kind of substitute for the dollar,” Yellen said. More

WASHINGTON — President Biden and other Western leaders moved on Friday to further isolate Russia from the global trading system, saying they would strip the country of normal trade relations and take other steps to sever its links to the world economy in response to President Vladimir V. Putin’s invasion of Ukraine.The measures, which were announced jointly with the European Union and other Group of 7 countries, would allow countries to impose higher tariffs on Russian goods and would prevent Russia from borrowing funds from multilateral institutions like the International Monetary Fund and the World Bank.Mr. Biden also moved to cut off additional avenues of trade between the United States and Russia, barring lucrative imports like seafood, vodka and certain diamonds, which the White House estimated would cost Russia more than $1 billion in export revenues per year.The United States will also restrict exports to Russia and Belarus of luxury items like high-end watches, vehicles, alcohol, jewelry and apparel. The European Union announced its own set of bans, including barring imports of Russian iron and steel.The restrictions add to a growing list of economic barriers that much of the developed world has put in place on Russia, whose economy is already suffering as a result. The ruble has lost nearly half its value over the past month, food prices are soaring and Russia is in danger of defaulting on its sovereign debt. Its stock market has remained closed since the war began.Mr. Biden said on Friday that the moves “will be another crushing blow to the Russian economy.” He said Russia was “already suffering very badly” from the sanctions, adding that the West’s economic pressure was a reason the Russian stock market had not reopened.“It’ll blow up” once it opens, Mr. Biden predicted.The White House has been under pressure in recent days to respond to Russian attacks in Ukraine, including the shelling of hospitals, other buildings and civilian evacuation routes. The White House has warned that Russia may also use chemical weapons against Ukrainians, but it has repeatedly said that Mr. Biden will not send American troops into the fray.Instead, the administration has focused on ratcheting up economic pressure. Earlier in the week, Mr. Biden banned imports of Russian oil, gas and coal and imposed restrictions on U.S. energy investments in Russia.The move to strip Russia of its preferential trade status would allow some of its biggest trading partners to impose higher tariffs on Russian goods. The Group of 7 countries, which also include Canada, Britain, France, Germany, Italy and Japan, purchased about half of Russia’s exports in 2019.Russia’s preferential trade status is conveyed by its membership in the World Trade Organization, whose rules require that all members grant each other “most favored nation” trading status in which goods can flow between countries at lower tariff rates.Taking away that status — which the United States calls “permanent normal trade relations” — would most likely have a much larger impact for the European Union, which is Russia’s largest trading partner and a major importer of Russian fuel, minerals, wood, steel and fertilizer.In the United States, the move would carry heavy symbolism, but it could have a limited economic impact compared with other sanctions that have already been imposed, according to trade experts.Chad P. Bown, a senior fellow at the Peterson Institute for International Economics, said the measure would raise U.S. tariffs on Russian products to an average of about 32 percent from 3 percent.“However, the trade impact on Russia of such a tariff hike would be small, as the United States is not a particularly sizable export destination for Russian products,” he said. Russia was the 20th-largest supplier of goods to the United States in 2019, sending mainly energy products and minerals.And many of those goods would be subject to far lower tariffs — in some cases none at all — as a result of a decades-old trade law that would kick into place if the preferential trade status were revoked.Each country will follow its own domestic process to make this change, the Biden administration said. The European Union has begun to pave the way for higher tariffs on Russian goods, but the bloc’s 27 member countries must agree on how to carry that out. Canada announced last week that it would withdraw most favored nation tariffs for both Russia and Belarus, a close Russian ally.In the United States, the task falls to Congress, which had been pressuring the administration to consider such a move.House Democrats proposed two weeks ago to strip Russia of its trading status and begin a process to expel the country from the World Trade Organization. This week, top Democratic and Republican lawmakers said they would include the measures in a bill to penalize Russia, but at the White House’s request, Democrats ultimately stripped out the provision to remove Russia’s special trading status. The bill passed the House on Wednesday but has yet to pass the Senate.“It was taken out because the president wants to talk to our allies about that action, which I think is appropriate,” Representative Steny H. Hoyer, Democrat of Maryland and the majority leader, told reporters this week.Speaker Nancy Pelosi said on Friday that the House would take up legislation next week to formalize the revocation of Russia’s trading status.“It is our hope that it will receive a strong, bipartisan vote,” she said.If approved, the measure would add to an array of harsh sanctions already announced by the United States and its allies. Western governments have reduced their energy trade with Russia, frozen the assets of Russian officials and oligarchs, and cut off the country from the dollar-denominated global financial system.An icebreaker cut a path for a cargo ship near the Franz Josef Land archipelago in Russia last year. The move to strip Russia of its preferential trade status would allow some of its biggest trading partners to impose higher tariffs on Russian goods. Emile Ducke for The New York TimesGovernments have also banned exports of advanced technology and transactions with Russia’s central bank. On Friday, the Bank for International Settlements, which provides banking services to the world’s central banks, said it was no longer conducting transactions with Russia. And the Treasury Department placed new economic sanctions on three immediate family members of Mr. Putin’s spokesman, along with 12 members of the Russian Duma and the management board of VTB Bank, which has already been sanctioned.The Treasury Department said it was specifically targeting a plane and a yacht of the Russian billionaire Viktor F. Vekselberg, which together are worth an estimated $180 million. Mr. Vekselberg is an ally of Mr. Putin, the department said.The Russian government has fired back by announcing it would place its own restrictions on its exports, including of raw materials.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

DENVER (Reuters) -U.S. Treasury Secretary Janet Yellen said on Friday the U.S. economy is better prepared to weather economic turbulence from Russia’s invasion of Ukraine because of the $1.9 trillion COVID-19 aid package passed a year ago.Yellen, speaking at a Denver social services agency on the first anniversary of the American Rescue Plan, (ARP) said the United States is now much better able to withstand unforeseen crises — such as the war in Ukraine — than it was a year ago.”Our world is interconnected, and our ambition to ensure that Russia pays a high price for its unprovoked invasion has already impacted us at home,” Yellen said, referring to a steep surge in energy prices.”America is better able to handle these turbulent times because our economy is historically strong, and the American economy is historically strong because of the ARP and the resiliency of the American people,” Yellen said.The ARP provided direct payments to Americans, funding for schools and increased COVID-19 responses and rental assistance, as well as a $350 million fund to assist state and local governments. With congressional negotiations on the Biden administration’s ambitious social and climate spending package stalled, state and local funding has emerged as the Biden administration’s main social policy tool channeling funding to local programs aimed at achieving similar goals, such as child care, education and affordable housing. She said the program has provided overtime and premium pay for over 740,000 essential workers, supplementing their regular wages.Yellen said that the ARP spending “acted like a vaccine for the American economy, ensuring that we were inoculated from the possibility of new variants or unforeseen circumstances.” More

WASHINGTON/BRUSSELS (Reuters) – The United States, European Union and other allies on Friday escalated their economic pressure on Russia, moving to strip Moscow of privileged trade and economic treatment among other steps to punish it for its invasion of Ukraine.U.S. President Joe Biden said the new actions collectively will further hobble a Russian economy already weighed down by previously announced international sanctions that have cratered the rouble and forced the stock market to close.Referring to ending normal trade relations, Biden said: “Doing it in unison with other nations that make up half of the global economy will be another crushing blow to the Russian economy that’s already suffering very badly from our sanctions.”The measures announced by the EU, the United States and other G7 allies amount to a fourth set of sanctions against Russia over the Feb. 24 invasion.They include efforts seeking to end Moscow’s “most-favored nation” trade status, opening the door to banning or imposing punitive tariffs on Russian goods and putting Russia on a par with North Korea or Iran.They will also ban luxury goods from being exported from their countries to Russia, designed as a blow to Russian elites.As a first step, the EU will prohibit imports of iron and steel sector goods from Russia. European Commission President Ursula von der Leyen said the EU was also working to suspend Russia’s membership rights of leading multilateral institutions, including the International Monetary Fund and the World Bank, and crack down on its use of crypto-assets.A U.S. ban on luxury exports to Russia and its ally Belarus – including high-end watches, vehicles, clothes, alcohol and jewelry – takes effect immediately, the Commerce Department said.The U.S. Congress would need to pass legislation to revoke Russia’s trade status, and lawmakers have been moving in that direction. The United States also moved to shut down development funds while announcing a ban on imports of Russian seafood, vodka and diamonds, too. The White House said Biden would ban U.S. investment in Russia beyond the energy sector.Top U.S. imports from Russia included mineral fuels, precious metal and stone, iron and steel, fertilizers and inorganic chemicals, all goods that could face higher tariffs once Congress acts to revoke Russia’s favored nation trade status.The United States also imposed sanctions on more Russian oligarchs, leaders and elites, targeting members of the lower house of parliament and billionaire Viktor Vekselberg, among others. Those hit with the new sanctions include 10 people comprising VTB Bank’s board, 12 members of the Duma and family members of Kremlin spokesman Dmitry Peskov, the U.S. Treasury Department said.Russian forces invaded Ukraine last month in the biggest assault on a European state since World War Two. Russia calls the action a “special operation.””Russia cannot grossly violate international law and expect to benefit from being part of the international economic order,” the White House said in a statement. The United States also imposed fresh North Korea-related sanctions, targeting Russian individuals and companies after U.S. and South Korean officials said Pyongyang had used its largest intercontinental ballistic missile system in two recent launches.Meanwhile, Britain imposed sanctions on 386 members of the Duma and also said it would seek to ban the export of luxury goods to Russia. The EU has already sanctioned the same group of lawmakers.Britain’s announcement said the sanctions targeted those who had voted to recognize the independence of Ukraine’s largely Russian-speaking breakaway regions of Luhansk and Donetsk in the run-up to the invasion. More

SANTIAGO (Reuters) – Chile’s tax reform, a key plank of new President Gabriel Boric’s economic plan, will focus on individuals, natural resources and environmental levies more than corporations, Finance Minister Mario Marcel told Reuters in his first interview in office.Marcel, speaking hours after being sworn on Friday in along with the rest of Boric’s first Cabinet, said the plan was to send a tax reform bill to Congress in the first half of the year, adding it was at the heart of the government’s agenda.”The focus is on the taxation of individuals, natural resources and also green taxes,” he told Reuters. “The truth is that there isn’t much room left to increase the tax burden of firms without hitting the country’s competitiveness.”Investors are closely watching Boric’s economic moves after the 36-year-old leftist leader won election last year pledging to “bury” Chile’s market-orientated economic model, credited for driving decades of growth but also stoking wide inequality.Boric, a former protest leader and lawmaker, has moderated his rhetoric since then, with the choice of respected former central bank chief Marcel to lead the economic portfolio being widely seen as a market-friendly pick.Marcelo said the aim was to agree a longer-term “tax pact,” adding modifications could be separated into different packages “to advance faster in Congress”. The government wants to increase tax collection by five points of GDP over four years.Regarding closely watched plans for new mining royalties in the world’s top copper producer and no. 2 lithium producer, Marcel said that he would look to build on bills already being discussed in Congress versus starting from scratch.Marcel held off from offering updated economic growth targets, but said projections from the central bank in December of 1.5%-2.5% growth this year were a reasonable range.”It seems reasonable for an economy that has to make a certain adjustment to reduce the inflationary pressures that we’ve seen in recent months,” he said, adding that this will imply that domestic demand must “slow down significantly”.The minister said that although the conflict in Ukraine has little direct effect on Chile’s economy, the impact it has brought on fuel and grain prices was a factor to keep an eye on.”Without a doubt, it is a worrying situation, but fortunately the Chilean economy is a little further away from the conflict and also has mechanisms to absorb this type of shock,” he said. More

LONDON (Reuters) – The cost of Russia’s invasion of Ukraine will become a lot clearer next week, with a previously unthinkable sovereign default looming, more emergency central bank measures likely and a stock market crash guaranteed if it reopens.Moscow’s “special operation” in its former Soviet neighbour has cut Russia off from key parts of the global financial markets by the West, triggering its worst economic crisis since the 1991 fall of the Soviet Union. Wednesday could mark another low. The government is due to pay $117 million on two of its dollar-denominated bonds. But it has been signalling it will not, or if its does it will be in roubles, tantamount to a default.Technically it has a 30-day grace period, but that is a minor point. If it happens it would represent its first international default since the Bolshevik revolution over a century ago.”Default is quite imminent,” said Roberto Sifon a top analyst at S&P Global (NYSE:SPGI) which has just hit Russia with the world’s biggest ever sovereign credit rating downgrade.That state-run energy giants Gazprom (MCX:GAZP) and Rosneft have made international bond payments in recent days and around $200 billion of still-unsanctioned government reserves does leave a sliver of hope that might not happen, though those odds look grim.(Graphic: Russia international debt default looming, https://fingfx.thomsonreuters.com/gfx/mkt/zgvomznxovd/Pasted%20image%201646220845544.png) Wednesday could be busy for other reasons as well. Russia’s Vedomosti financial newspaper reported central bank and Moscow Exchange sources as saying this week that suspended local equity and bond trading could resume by then.It would be chaotic at least in the short-term. Russia’s big firms which also listed on the London and New York markets, have saw those international shares slump virtually to zero when the crisis broke out and have now been stopped.”There are many financial institutions that are sitting on Russian assets that they want to get rid of but they can’t,” said Rabobank currency strategist Jane Foley. “They have no real option but to sit on them. But that means that when they are allowed to trade, the selling could be quite persistent.”(Graphic: Rouble plunges as conflict triggers unprecedented sanctions, https://fingfx.thomsonreuters.com/gfx/mkt/klpykbrqgpg/Pasted%20image%201647000011209.png) RECESSIONIt will not finish there. Russia’s central bank is scheduled to meet on Friday having already more than doubled interest rates to 20% and brought in widespread capital controls to try and prevent a full-blown financial crisis.Western investment banks like JPMorgan (NYSE:JPM) now expect the economy to plunge 7% this year due to the combination of bank run worries, sanctions damage and the instant inflation surge caused by a 40% slump in the rouble.That compares to predictions of 3% growth at the beginning on the year. It also means a peak-to-trough dive of around 12%, which would be larger than the 10% tumble in the 1998 rouble crisis, the 11% lost during the global financial meltdown and the 9% slump of the COVID-19 pandemic.”The CBR might hike rates a bit further, that would be safest assumption right now,” said Arthur Budaghyan, chief emerging market strategist at BCA Research. The more crucial moves as this stage however could be further capital control measures to try and keep the financial system cocooned.”Ensuring the banks can function, can still process payments and keep credit flowing to the economy so it can at least function in some capacity is much more important,” Budaghyan said. (Graphic: Russian stock market plunging far more than during other crises, https://fingfx.thomsonreuters.com/gfx/mkt/xmvjoekmepr/Pasted%20image%201645779548050.png) More

Agriculture firms have been slower than oil companies and retailers to announce they are curtailing Russian operations following Moscow’s Feb. 24 invasion of Ukraine, which has been near universally condemned around the world.”Food is a basic human right and should never be used as a weapon,” Cargill, a U.S.-based privately held company, said in a statement.Cargill this week removed details on its businesses in Russia and Ukraine from its website. The site previously said Cargill employs about 2,500 people in Russia, with investments of more than $1.1 billion in agro-processing. A Cargill spokesperson said the information was removed because the investment figure was not correct. The company declined to provide an updated figure on Russian investments. Rival ADM said in a statement its footprint in Russia was very limited and it would “scale down operations in Russia not related to the production and transport of essential food commodities and ingredients.” ADM has an arm of its WILD flavorings business in Russia and a 50% stake in Aston Foods and Food Ingredients, a sweeteners and starches business.Rival Bunge (NYSE:BG) Ltd said on Thursday it had suspended any new export business from Russia, but its oilseed crush plant is still operating there and serving the domestic market. Bunge has $121 million in total assets in the country, according to an SEC filing.Louis Dreyfus Company (LDC), the fourth in the quartet of the so-called ABCD companies that dominate global grain trading, said it suspended Russian operations on March 4. More

So far this year, the sol is South America’s second best performing currency behind Brazil’s real, according to Refinitiv Eikon data. It has also outperformed Chile’s peso, whose economy is similarly dependent on mining as the world’s top copper producer. High metal prices should allow Peru to collect over 6 billion soles ($1.62 billion) in tax revenue this year, said Adrian Armas, the Central Bank manager of economic studies. “With the record prices of commodities, collection is improved, therefore (also) the supply of dollars from mining,” Armas said during a conference call. Peru’s sol currency rose 0.22% on Friday to 3,704/3,705 units per dollar, rising 7.17% since the beginning of the year.On Thursday, the central bank raised its interest rate to 4% from 3.5% amid the inflationary pressures that have been affecting economies around the world. Armas added that global uncertainty due to the conflict between Russia and Ukraine, and a likely interest rate increase in the United States could weaken the Peruvian currency in the future.The Central Bank officer added that the Peruvian economy should have grown in January at a year-on-year rate equal to that of December, when it rose 1.72%. A recovery is expected for February, he added.($1 = 3.7040 soles) More