Economy

WASHINGTON (Reuters) -The United States on Wednesday took aim at Russia’s oil refining sector with new export curbs and targeted Belarus with sweeping new export restrictions, as the Biden administration amps up its crackdown on Moscow and Minsk over the invasion of Ukraine.The new round of sanctions announced by the White House ban the export of specific refining technologies, making it harder for Russia to modernize its oil refineries. The White House also applied a sweeping set of export restrictions levied against Russia last month to Belarus, arguing the controls would help prevent the diversion of items, including technology and software, in the defense, aerospace, and maritime sectors to Russia through Belarus.”The United States will take actions to hold Belarus accountable for enabling Putin’s invasion of Ukraine, weaken the Russian defense sector and its military power for years to come, target Russia’s most important sources of wealth, and ban Russian airlines from U.S. airspace,” the White House said.The European Union also approved new sanctions against Belarus for its supporting role in Russia’s invasion of Ukraine, effectively banning about 70% of all imports from that country, the EU said on Wednesday.The United States has steadily increased sanctions on Moscow after Putin began the invasion of Ukraine on Feb. 24. Belarus has allowed Russian troops to use its territory as a staging ground for the assault.The Commerce Department, which oversees U.S. export controls, also said it was adding to a trade blacklist entities with ties to the Russian and Belarusian military and defense sectors, making it much harder for them to receive U.S. technology imports. In a detailed filing https://public-inspection.federalregister.gov/2022-04819.pdf about the new restrictions on Belarus, the United States said it would allow mobile phone and software sales to consumers in Belarus, but not to President Alexander Lukashenko, his intelligence staff, the Belarusian military, as well as members of state media and other government officials.The U.S. State Department will also impose sanctions targeting 22 Russian defense-related entities, including firms that make combat aircraft and missiles for the country’s military, to “further restrict Putin’s war machine,” the White House said.Details of the measures and the targets of sanctions were not immediately available. BLOWS TO ENERGY SUPPLYWith the exception of some measures targeting Russian state gas company Gazprom (MCX:GAZP), the Biden administration has largely held back from sanctions against Russia’s energy sector, concerned that such measures could raise already high energy prices. Oil marched relentlessly higher beyond $110 a barrel on Wednesday, responding to a flood of divestment from Russian oil assets by major companies and expectations that the market will remain short of supply for months to come.”The United States and our allies and partners do not have a strategic interest in reducing the global supply of energy – which is why we have carved out energy payments from our financial sanctions,” The White House said. “But we and our allies and partners share a strong interest in degrading Russia’s status as a leading energy supplier over time.” Russia exports between 2 million and 3 million barrels of refined products daily, making it one of the world’s largest exporters of fuels. The country has about 5.5 million barrels of crude refining capacity, according to the U.S. Energy Department, citing Oil & Gas Journal figures.Russia’s invasion has yet to achieve its aim of overthrowing Ukraine’s government but has sent more than 870,000 people fleeing to neighboring countries and jolted the global economy as governments and companies line up to isolate Moscow. More

(Reuters) – The Federal Reserve’s nearly $9 trillion balance sheet has more room to decline than it did the last time the central bank shrank its holdings and policymakers will still watch money markets closely, a senior bank official said on Wednesday.The Fed’s standing repo facilities should also serve as a backstop to keep markets stable as the central bank shrinks its bond holdings, said Lorie Logan, an executive vice president with the New York Fed.”Staff will carefully monitor developments in money markets to understand changes in reserve conditions,” Logan said during a webinar organized by New York University.Logan reiterated that policymakers want to shrink holdings mainly by letting their securities mature.Some officials have said the Fed may need to consider selling some if its mortgage-backed securities later to speed up the transition to a portfolio made up mostly of Treasury securities, but Logan said those decisions would be made later.She also shared some estimates on what the balance sheet runoff could look like. For instance, principal payments from Treasury holdings could range from $40 billion to $150 billion per month, over the next few years, averaging around $80 billion.The runoff for mortgage-backed securities could average about $25 billion per month over the next few years, but the exact pace is uncertain and affected by mortgage rates, she said.The Fed’s balance sheet doubled after the central bank purchased assets to stabilize markets and support the economy during the pandemic. Logan, who heads the New York Fed’s market operations, said that asset purchases to support market functioning will be rare in the future.”I expect circumstances warranting sizable intervention to support market functioning to be extraordinarily rare,” she said. More

Applications to refinance a home loan increased 1% last week but were still 56% lower than the same week one year ago.
Mortgage applications to purchase a home fell 2% for the week and were 9% lower year over year.
While mortgage rates rose to the highest level in two years last week, they have since fallen quite sharply due to the war in Ukraine.

A house’s real estate for sale sign shows an upcoming open house in Washington, DC.
Saul Loeb | AFP | Getty Images

Mortgage demand stalled last week, as interest rates hit a multiyear high, but that will likely change quickly. Rates are now falling fast due to the Russian invasion of Ukraine.
Mortgage application volume was essentially flat compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Borrowers had no incentive to refinance, and homebuyers continue to face high prices and a severe lack of listings.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 4.15% from 4.06%, with points decreasing to 0.44 from 0.48 (including the origination fee) for loans with a 20% down payment.
Applications to refinance a home loan increased 1% for the week but were still 56% lower than the same week one year ago. Rates were 92 basis points lower a year ago, so there were far fewer borrowers who could benefit from a refinance. The refinance share of mortgage activity decreased to 49.9% of total applications from 50.1% the previous week.

Mortgage applications to purchase a home fell 2% for the week and were 9% lower year over year. Buyers are now seeing prices appreciate at the fastest pace in more than 45 years, up just over 19% from a year ago in January, according to a new report Tuesday from CoreLogic. As a result the average loan size increased to yet another record high of $454,400.
These dynamics will likely now shift, due to a sharp drop in mortgage rates this week. The war in Ukraine has caused investors to rush into the bond market, which resulted in lower yields. Mortgage rates loosely follow the yield on the U.S. 10-year Treasury. The average rate on the 30-year fixed fell 28 basis points in just the past two days, according to Mortgage News Daily.
The expectation going into this year was that rates would move higher steadily, as the Federal Reserve eases its purchases and holdings of mortgage-backed bonds. The Fed has not made any changes to its plan for that so far, so it is possible that the drop in mortgage rates will be brief. Lower mortgage rates will continue to put upward pressure on home prices, especially given the drastic imbalance of record low supply and strong demand.

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WASHINGTON (Reuters) -The World Bank said on Wednesday it had stopped all programs in Russia and Belarus with immediate effect, following the Russian invasion of Ukraine and “hostilities against the people of Ukraine.”In a statement, the multilateral development bank said it had not approved any new loans to or investments in Russia since 2014, the year Russia annexed the Crimea region of Ukraine.The bank said it had not approved any new lending to Belarus since mid-2020, when the United States imposed sanctions on the country over a disputed presidential election.The World Bank’s lending commitments to Belarus totaled $308 million in 2020, according to the bank’s website, with active projects including a biomass heating project, forestry development work and education modernizations.The World Bank has loaned more than $16 billion to Russia since the early 1990s. The most recent projects approved including a youth program in the North Caucasus in 2013 and a cultural heritage program dating back to 2010, the bank’s website showed.The decision to halt all programs in Russia and Belarus came a day after the leaders of the World Bank and the International Monetary Fund said they were racing to provide billions of dollars of additional funding to Ukraine in coming weeks and months, warning the war could result in “significant spillovers” to other countries.The European Union, the United States, Britain and others have hit Russia with a wide range of sanctions after its invasion of Ukraine.They have also imposed asset freezes, travel bans and other restrictions on numerous Russian individuals including President Vladimir Putin himself.Russia calls its actions in Ukraine a “special operation.” More

(Reuters) – In the U.S. Midwest one retailer planned to raise prices but did not have enough floor staff to physically change the tags.In the South, a high-end restaurant chain let employees “shift surf” among the eateries it owned, tailoring their schedules and maximizing their moneymaking. But the new system left some establishments short-staffed. In Alaska and Utah, job candidates skipped scheduled interviews and new hires failed to show up for their first day of work.Those stories and others were showcased in the Federal Reserve’s latest Beige Book, a periodic snapshot of the U.S. economy as relayed by the central bank’s business contacts from coast to coast. They highlighted how high inflation and labor shortages are colliding, sometimes producing outcomes that seem scripted for late-night talk show monologues.The Beige Book anecdotes also show why Fed Chair Jerome Powell will go ahead with raising interest rates this month despite rising economic uncertainty from Russia’s invasion of Ukraine. The main reason for the Fed’s imminent move, as Powell made clear on Wednesday, is to tamp down inflation, running at three times the Fed’s 2% target.But in his monetary policy update to Congress Wednesday, Powell also flagged the “widespread” improvements in labor market conditions. He noted that low-wage workers alone were getting wage hikes that outpaced high inflation. He added that: “employers are having difficulties filling job openings, an unprecedented number of workers are quitting to take new jobs, and wages are rising at their fastest pace in many years.” The Beige Book noted that many firms told the Cleveland Fed employee turnover was high “for various reasons, including a greater desire to work remotely, receive higher wages, change careers, or find better working conditions.””Government employees may have benefits but working for lower pay than the pizza delivery guy is very demoralizing,” a contact told the Minneapolis Fed, explaining why public sector workers are seeking other jobs.Some firms told the Richmond Fed that even after raising pay and adding benefits, they still lost workers “to companies who were willing to pay higher wages or were fully remote.”By raising interest rates, Powell hopes to slow the demand for not just for goods, services and houses, but also for workers, bringing it into better alignment with the limited supply.Businesses meanwhile were figuring out their own solutions. A transportation company in South Dakota reported turning away a “staggering” amount of work due to lack of staffing. And while one retailer enlisted corporate staff to change the in-store tags, the St. Louis Fed said, others “reported plans to utilize electronic price tags to reduce the labor needed to change prices.” More

NEW YORK (Reuters) – Overseas investors in Russia have tens of billions invested in the country’s stocks and bonds, according to Morningstar data.U.S. asset managers like Capital Group, Blackrock (NYSE:BLK) and Vanguard disclosed large exposures, according to the most recent portfolio information available to the research firm.Disclosures cover a period starting September 2021 through to Feb. 25 this year. They total over $60 billion when considering the top 100 open-end funds and exchange-traded funds worldwide in terms of estimated U.S. dollar exposure to Russian securities, according to Morningstar data.It is not known if the funds have changed their positions since they released their data.A spokesperson for Harving Loevner confirmed the Morningstar figures and a spokesperson for MFS Investment Management said exposure amounted to approximately $1 billion as of the end of January, adding the firm was monitoring the situation closely to assess impact on its investments.Most of the other asset managers declined to comment on the specific figures, others did not respond to comment requests.TOP 10 FUNDS* Invesco Developing Markets Fund: $3.6 bln (equity)* PIMCO Income Fund: $3.57 bln (fixed income)* Vanguard Total International Stock Index Fund Investor Shares: $3.56 bln (equity)* Vanguard Emerging Markets Stock Index Fund Investor Shares: $3.13 bln (equity)* Capital Group’s American Funds Capital World Growth and Income Fund Class A: $1.95 bln (equity)* PIMCO GIS Income Fund Institutional USD Accumulation: $1.82 bln (fixed income)* Goldman Sachs (NYSE:GS) GQG Partners International Opportunities Fund Institutional Shares: $1.72 bln (equity)* Capital Group’s American Funds EuroPacific Growth Fund: $1.69 bln (equity)* Fidelity® Series Emerging Markets Opportunities Fund: $1.67 bln (equity)* iShares Core MSCI Emerging Markets ETF: $1.49 bln (equity)TOP ASSET MANAGERSTop asset managers with Russian exposure, according to Morningstar data and Reuters calculations:* Capital Group: over $8 bln (equity and fixed income)* Vanguard: around $7.8 billion (equity and fixed income)* PIMCO: over $6 bln (fixed income)* BlackRock: $264 mln but around $5 bln when including iShares ETFs (equity and fixed income) * Fidelity: $4.49 bln (equity and fixed income)OTHER MANAGERSOther investment firms managing Russian exposures of over $1 bln, according to Morningstar data and Reuters calculations, include: JPMorgan (NYSE:JPM) Asset Management, GQG Partners, MFS Investment Management, Harding Loevner. More

NEW DELHI (Reuters) -At least five superyachts owned by Russian billionaires were anchored or cruising on Wednesday in Maldives, an Indian Ocean island nation that does not have an extradition treaty with the United States, ship tracking data showed.The vessels’ arrival in the archipelago off the coast of Sri Lanka follows the imposition of severe Western sanctions on Russia in reprisal for its Feb. 24 invasion of Ukraine. Late on Wednesday Forbes reported that Germany had seized Russian billionaire Alisher Usmanov’s mega yacht in a Hamburg shipyard.Usmanov was on a list of billionaires to face sanctions from the European Union on Monday. A Forbes report based on three sources in the yacht industry said his 512-foot yacht Dilbar, valued at $600 million, was seized by German authorities. German authorities did not immediately respond to Reuters inquiries. Forbes said representatives for Usmanov did not immediately respond to a request for comment.Earlier, the Clio superyacht, owned by Oleg Deripaska, the founder of aluminium giant Rusal, who was sanctioned by the United States in 2018, was anchored off the capital Male on Wednesday, according to shipping database MarineTraffic. The Titan, owned by Alexander Abramov, a co-founder of steel producer Evraz, arrived on Feb. 28. Three further yachts owned by Russian billionaires were seen cruising in Maldives waters on Wednesday, the data showed. They include the 88-metre (288 ft) Nirvana owned by Russia’s richest man, Vladimir Potanin. Most vessels were last seen anchored in Middle Eastern ports earlier in the year. A spokesperson for Maldives’ government did not respond to a request for comment. The United States has said it will take strict action to seize property of sanctioned Russians.”This coming week, we will launch a multilateral Transatlantic task force to identify, hunt down, and freeze the assets of sanctioned Russian companies and oligarchs – their yachts, their mansions, and any other ill-gotten gains that we can find and freeze under the law,” the White House said in a tweet on Sunday. Washington imposed sanctions on Deripaska and other influential Russians in 2018 because of their ties to President Vladimir Putin after alleged Russian interference in the 2016 U.S. election, which Moscow denies. More

Jerome H. Powell, the Federal Reserve chair, told lawmakers on Wednesday that the central bank is poised to lift interest rates at its meeting this month as it tries to cool down high inflation — saying that while Russia’s invasion of Ukraine is ramping up economic uncertainty, it isn’t yet shaking the Fed off its course.Mr. Powell, testifying before the House Financial Services Committee, said the economic path ahead remained unsettled as Russia invaded Ukraine and the world reacted. He outlined with more clarity than usual how the Fed is thinking about policy in the coming months, saying, “We are going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment.”With inflation running hot, the labor market showing strength and the economy growing rapidly, the Fed’s leader said he thought a quarter-point interest rate increase would be appropriate at the central bank’s meeting, which will conclude on March 16. He expects the Fed to make a “series” of increases this year. And he thinks officials will agree to a plan for shrinking their balance sheet bond holdings in coming months, as they had been planning to do.“The question now really is how the invasion of Ukraine, the ongoing war, the response from nations around the world — including sanctions — may have changed that expectation,” Mr. Powell said. “It’s too soon to say for sure, but for now I would say that we will proceed carefully along the lines of that plan.”Mr. Powell emphasized that flexibility was critical, because it was too soon to know what today’s geopolitical tumult would mean for the American economy.Economists have said the conflict is likely to push up gas and other commodity prices, further elevating inflation — already, oil prices have shot higher. But at the same time, a combination of higher fuel costs and wavering consumer sentiment could be a drag on economic growth. Given the unclear effects on the American economy, Mr. Powell said, the Fed will need to remain “nimble.”The Fed chair and his colleagues must balance the risks that Ukraine poses to both inflation and growth against another pressing reality: Price gains in America had already been coming in high for about a year. Fed policymakers, who are tasked with maintaining stable prices, want to make sure that those quick increases do not become a permanent feature of the economic backdrop.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.“The game plan is to prevent recent high inflation outcomes from persisting,” Michael Gapen and his colleagues at Barclays wrote in a research report, summing up the crux of Mr. Powell’s testimony.Prices are increasing at the fastest pace in four decades, picking up by 7.5 percent over the year through January in the closely watched Consumer Price Index and by 6.1 percent in the Fed’s preferred inflation gauge, the Personal Consumption Expenditures index. The central bank aims for 2 percent inflation on average over time. Mr. Powell attributed the stubbornly rapid increases to strong consumer demand, especially for goods, that has “collided” with limited supply.“Admitting that inflation — proclaiming that inflation — is far too high, and that we are committed to using our tools to get it back down, it’s really about very, very high demand,” Mr. Powell said. “It’s a very different kind of inflation story than we’ve had in the past, but it’s one we have to deal with, and we will deal with it.”Mr. Powell said the Fed expected inflation to cool off this year as it raised interest rates, government pandemic relief spending faded and supply constraints cleared up. But officials are also closely monitoring factors that could keep it high.If price gains do not begin to come down in 2022, he said the central bank would be prepared to “move more aggressively” and make a larger-than-usual rate increase. Markets have expected that the Fed could increase rates, which are near zero, by half a percentage points at some meetings.“We will use our policy tools as appropriate to prevent higher inflation from becoming entrenched while promoting a sustainable expansion and a strong labor market,” Mr. Powell said.Drivers fueled up last month in Brooklyn. Economists have said the war in Ukraine is likely to push gas and other commodity prices higher.Amir Hamja for The New York TimesHis testimony underscored the tense political and economic moment that confronts the Fed — and policymakers across Washington — as a war rages overseas and inflation dominates headlines and spooks consumers at home.Today’s economy does have many bright spots, which Mr. Powell emphasized: Growth has been stronger than in many other advanced economies, and jobs are plentiful, creating opportunities for workers.“The labor market is extremely tight,” Mr. Powell said. He added that “employers are having difficulties filling job openings, an unprecedented number of workers are quitting to take new jobs and wages are rising at their fastest pace in many years.”Inflation F.A.Q.Card 1 of 6What is inflation? More