Finance

NatWest Group CEO Alison Rose admitted on Tuesday to having discussed the details of Nigel Farage’s bank account with a BBC reporter.
Farage was informed earlier this month that Coutts — a high-end private bank and wealth manager requiring clients to hold a minimum of £1 million in investments or borrowing, or £3 million in savings — planned to cut ties with him.
He subsequently filed a subject access request (SAR) to obtain a dossier the bank held on him which he then published, claiming it showed the bank account was being terminated due to his views.

Jonathan Bachman | Getty Images

LONDON — NatWest Group CEO Alison Rose resigned after a media storm over the termination of Brexit figurehead Nigel Farage’s bank account by sister lender Coutts.
Rose admitted Tuesday to having discussed the details of Farage’s account with a BBC reporter and having thus been the source of a controversial story for which the national broadcaster has since issued an apology.

Initially, the board reiterated its support for her to stay on as CEO, but at 2 a.m. Wednesday the bank announced her immediate departure by mutual consent.
In a statement, Rose said she remained “immensely proud of the progress the bank has made in supporting people, families and business across the U.K., and building the foundations for sustainable growth.”
The controversy
NatWest is 39% owned by the British taxpayer following the 2008 crisis, heightening the public interest in the bizarre saga.
“Despite a stellar performance as the first woman to take the helm of a U.K. bank, her mistake in discussing sensitive customer details with a journalist broke a sacred trust with the British public and her decision to step down was the only viable path,” said Danni Hewson, head of financial analysis at AJ Bell.
“She will be a loss, having worked her way up the ranks and championed diversity and inclusion in the sector with a huge focus on getting more women in financial services. But NatWest is no ordinary bank, it is still almost forty percent owned by the U.K. taxpayer, and the political and regulatory ramifications of this episode are likely to ripple out for months to come.”

Farage was informed last month that Coutts — a high-end private bank and wealth manager requiring clients to hold a minimum of £1 million ($1.29 million) in investments or borrowing, or £3 million in savings — planned to cut ties with him.

Alison Rose, NatWest chief executive, (right) departs 10 Downing Street in London, after meeting with Chancellor Jeremy Hunt.
James Manning | PA Images | Getty Images

He subsequently filed a subject access request (SAR) to obtain a dossier the bank held on him which he then published, claiming it showed the bank account was being terminated due to his political views.
Prime Minister Rishi Sunak and several members of his Conservative government issued statements condemning the bank and characterizing the termination of Farage’s account as an affront to free speech. Farage was offered an alternative account at regular main street bank NatWest, but declined.
His critics maintain that although frequent references are made to Farage’s political profile and controversial views, the reasons outlined for allowing the banking relationship to lapse were primarily commercial, and he was not “de-banked” as he claims.
The dossier
Minutes from the Wealth Reputational Risk Committee at Coutts on November 2022 state that Farage’s mortgage was due to expire in July 2023, at which point “on a commercial basis” it would not look to renew and therefore recommended winding down the banking relationship.
Without the mortgage, the bank indicated that Farage’s account value would fall below its commercial criteria. The committee recommended exiting the relationship in July, but was at the time seeking to retain Farage as a client barring any “flash points” that might pose further “reputational risk.”
Coutts said that upon expiry of Farage’s mortgage repayments, it “did not have the appetite to renew his mortgage or provide banking facilities” and had therefore implemented an “exit plan” that allowed for the bank to terminate Farage’s account earlier in the event of further controversy in the meantime.
“The Committee did not think continuing to bank NF [Nigel Farage] was compatible with Coutts given his publicly-stated views that were at odds with our position as an inclusive organisation,” the minutes added.
“This was not a political decision but one centred around inclusivity and Purpose.”
An update from March 10 this year noted that Farage’s account had “been below commercial criteria for some time and upon review of Nigel’s past public profile and connections, the perceived risks for the future weighed against the benefit of retention, the decision was taken to exit upon repayment of an existing mortgage.”
Farage’s politically exposed person (PEP) status — conferred by British banks to high-ranking public figures who may be susceptible to bribery — was downgraded to “lower risk” as he is “no longer associated with any political party” since stepping down as Brexit Party leader in 2021.
Part of the client analysis from Coutts contained within the 40 pages of personal data, highlighted an array of news articles alongside Farage’s own media appearances and tweets, determined that the “values” he promotes did not align with the bank’s.
“Particularly given the manner in which he states (and monetises) those views – deliberately using extreme, hatful[sp?] and emotive language (often with a dose of misinformation) – at best he is seen as xenophobic and pandering to racists, and at worst, he is seen as xenophobic and racist,” it said.
“He is considered by many to be a disingenuous grifter and is regularly (almost constantly) the subject of adverse media.”

LONDON – June 16, 2016: Then-UK Independence Party Leader (UKIP) Nigel Farage poses during the launch of a national poster campaign urging voters to vote to leave the EU ahead of the EU referendum.
DANIEL LEAL/AFP via Getty Images

Farage is a long-time ally of former U.S. President Donald Trump, vocal supporter of Russian President Vladimir Putin, and prominent figure in the British hard right, having previously led the U.K. Independence Party (UKIP) and the Brexit Party.
The documents note long lists of controversial statements and activities, including his filming of migrants arriving in dinghies via the English channel and reference to migrant boat arrivals as an “invasion,” and his blaming of violence in the city of Leicester last year on lawmakers who “promoted multiculturalism.”
Coutts acknowledged that Farage’s commentary “remains within the law regarding hate speech and arguably on the right side of ‘glorifying or promoting harmful behaviour’ (although we should be mindful of the role the ‘illegal immigrant / invasion’ rhetoric plays in contributing to discrimination and in some instances, violence, against migrants).”
The fallout
Farage told Sky News Wednesday that he was “shocked with the vitriol” contained within it, and is calling for the resignation of the entire NatWest Group executive board along with a regulatory overhaul of Britain’s banking sector.
British economist and financial author Frances Coppola, in a blog post Tuesday, agreed that the language in the bank’s risk assessment was “mostly negative and at times possibly defamatory,” and said now-ousted CEO Rose was right to apologize directly to Farage prior to her departure.
However, Coppola argued that the bank was “absolutely right to conduct such an assessment and fully entitled to reach the conclusions that it did,” with the Coutts risk assessment noting that there is an “extra cost attached to managing the accounts of high profile individuals such as NF.”
“Assessing the risk and cost of a customer is a commercial judgement. And reputational risk is hugely important to a bank like Coutts. It is wholly unreasonable to argue that they should not have taken account of – or even evaluated – the risk to them of doing business with a person as controversial as Nigel Farage,” Coppola argued.
“Why should a bank accept the extra cost that you create for them if you don’t borrow from them and don’t keep enough liquid savings with them to support their lending to other people? And why should it keep your account open when you don’t meet its published criteria, given the reputational risk and general aggravation you cause?”

LONDON – June 26, 2020: Private bank and wealth manager Coutts and Company, founded in 1692, and the eighth oldest bank in the world, displays support for Pride month at its offices in London.
Dave Rushen/SOPA Images/LightRocket via Getty Images

Britain’s Financial Conduct Authority said Wednesday that it had raised concerns with NatWest Group and Coutts about the “allegations relating to account closures and breach of customer confidentiality since these came to light,” and NatWest has launched an independent review of the series of events.
“It is vital that the review is well resourced and those conducting it have access to all the necessary information and people in order to investigate what happened swiftly and fully,” the FCA said in a statement.
“On the basis of the review and any steps taken by other authorities, such as the Financial Ombudsman Service or Information Commissioner, on relevant complaints, we will decide if any further action is necessary.”
Following a Wednesday meeting between Britain’s Economic Secretary to the Treasury Andrew Griffith and U.K. banking chiefs, the U.K. Treasury reiterated in a statement “the government’s clear position on the importance of legal freedom of expression,” adding it is “wholly unacceptable” to terminate the account of a person for expressing their political views.
“Banks will also be required to spell out why they are terminating a bank account – boosting transparency for customers and aiding their efforts to overturn decisions,” the statement said. “There will be limited exceptions to these requirements, for example to ensure that bank communications aren’t interfering with investigations into criminal activity.”
Whatever the outcome of Farage’s demands for further resignations and regulatory scrutiny, British banking has been thrust into the spotlight and could become yet another political hot potato ahead of a general election due next year. More

Google headquarters in Mountain View, California, US, on Monday, Jan. 30, 2023. Alphabet Inc. is expected to release earnings figures on February 2.
Marlena Sloss | Bloomberg | Getty Images

Check out the companies making headlines before the bell.
Alphabet — The Google parent popped more than 6% after topping Wall Street’s second-quarter earnings expectations, fueled by growth in its cloud-computing segment. The company also announced that its chief financial officer, Ruth Porat, would step into a new role as president and chief investment officer.

Microsoft — The software giant lost about 4% after reporting slowing revenue growth within its cloud business during its fiscal fourth quarter and called for lower-than-expected guidance. Microsoft, however, did beat Wall Street’s estimates, reporting earnings of $2.69 per share on $56.19 billion in revenue. Analysts polled by Refinitiv anticipated earnings per share of $2.55 on revenue of $55.47 billion.
PacWest — Shares of the regional bank stock jumped more than 28% on news that it will be acquired by Banc of California to create a new firm called Pacific Western. Banc of California shares added about 6%.
Snap — The Snapchat parent shed more than 18% after issuing weak guidance for the current quarter. Snap topped second-quarter expectations, reporting a narrower-than-expected loss of 2 cent a share on $1.07 billion in revenue. That beat expectations for a 4-cent loss and revenues of $1.05 billion, per Refinitiv.
Coca-Cola – The beverage giant saw shares climb more than 2% in premarket trading after the company reported quarterly earnings and revenue that topped estimates. Its organic revenue increased 11% in the quarter, fueled by higher prices. Coca-Cola also raised its full-year outlook following the strong report.
Boeing — The aircraft manufacturer rose more than 3% after it posted a revenue beat for the second quarter. Boeing’s losses per share also came in lower than expected. The company’s results were driven by an uptick in airplane deliveries.

Wells Fargo — The bank stock added 2.5% after announcing a $30 million share buyback program late Tuesday. Wells Fargo also said that its board approved a previously announced dividend hike to 35 cents from 30 cents per share.
Texas Instruments — Texas Instruments fell 4% even after reporting results that surpassed Wall Street’s expectations. The semiconductor stock shared lighter-than-expected guidance for the current period, citing sluggish demand.
AT&T — AT&T rose 2% after posting its latest quarterly results. The company topped earnings but fell short on revenue expectations, reporting adjusted earnings per share of 63 cents on $29.92 billion in revenue. Free cash flows topped expectation, which the company said it would use to pay down debt.
Teladoc Health — Shares jumped 6% after Teladoc Health beat on the top and bottom lines in its most recent quarter. The telehealth company reported a narrower-than-expected loss of 40 cents per share compared to a loss of 41 cents per share, according to the consensus estimate from StreetAccount. The firm also posted revenue of $652.4 million, better than the expected $649.2 million.
Dish Network — Shares of the telecom company jumped more than 9% in premarket trading after Bloomberg News reported that Dish would start selling its wireless service on Amazon this week.
Thermo Fisher Scientific — Shares sank 6.6% in the premarket. Thermo Fisher Scientific reported earnings and revenue that fell short of expectations, citing a difficult macro environment.
Union Pacific — The railroad operator’s stock popper more than 8% even after revenue fell short of expectations. The company named a new CEO and changes to its board.
— CNBC’s Sarah Min, Yun Li, Hakyung Kim and Jesse Pound contributed reporting More

Deutsche Bank on Wednesday reported a net profit of 763 million euros ($842 million) for the second quarter of 2023, narrowly beating expectations despite a 27% year-on-year decline.
The bank’s net profit attributable to shareholders slightly topped a prediction of 737 million euros in a Reuters poll of analysts, while net revenues rose 11% year-on-year to 7.4 billion euros.
However, second-quarter non-interest expenses rose 15% year-on-year to 5.6 billion euros, with adjusted costs up 4% to 4.9 billion euros.

A Deutsche Bank AG branch in the financial district of Frankfurt, Germany, on Friday, May 6, 2022.
Alex Kraus | Bloomberg | Getty Images

Deutsche Bank on Wednesday reported a net profit of 763 million euros ($842 million) for the second quarter of 2023, narrowly beating expectations despite a 27% year-on-year decline.
The bank’s net profit attributable to shareholders slightly topped a prediction of 737 million euros in a Reuters poll of analysts, though marked a significant drop from the 1.046 billion euros reported in the same quarter of 2022, while net revenues rose 11% year-on-year to 7.4 billion euros.

related investing news

19 hours ago

However, second-quarter non-interest expenses rose 15% year-on-year to 5.6 billion euros, with adjusted costs up 4% to 4.9 billion euros. Nonoperating costs includes 395 million euros in litigation charges and 260 million euros in “restructuring and severance related to execution of strategy.”
In its first-quarter report, the bank flagged job cuts for its non-client facing staff and reported a sharper-than-expected year-on-year fall in investment bank revenues.
Deutsche’s corporate and private banking divisions enjoyed a strong quarter with revenues up 25% and 11% year-on-year, respectively, benefiting from the higher interest rate environment. However, its businesses more closely tied to the financial market backdrop — the investment banking and asset management divisions — saw revenues fall 11% and 6%, respectively.
Deutsche Bank CFO James von Moltke told CNBC that this could be attributed to an unusually strong second quarter of 2022, as market volatility boosted trading volumes and revenues.

Cost savings

Speaking to CNBC’s Silvia Amaro on Wednesday, von Moltke said the bank had upped its target for cost savings from 2 billion euros to 2.5 billion euros in a bid to offset the impact of inflation, and was also making substantial business investments to “support future revenue growth,” invest in technology and improve its controls.

“So for us, it’s a balancing act between delivery on the expense objectives and some of those inflationary impacts. In recent quarters, we’ve succeeded very well, we’ve delivered on our guidance of costs essentially flat to the fourth quarter of last year,” von Moltke said.
“That’s something that we’re aiming to continue. We feel like the progress we’re making and those expense initiatives is considerable and accelerating.”

Wednesday’s result marked a 12th straight quarterly profit since the German lender completed a sweeping restructuring plan that began in 2019 with the aim of cutting costs and improving profitability.
“In the first half of 2023 we again demonstrated good growth momentum across a diversified business portfolio, underlying earnings power and balance sheet resilience. This puts us on a good track towards our 2025 financial targets,” said Deutsche Bank CEO Christian Sewing.
“Our planned share repurchases enable us to deliver on our goals to distribute capital to our shareholders.”
Deutsche Bank announced on Tuesday that it plans to initiate up to 450 million euros of share buybacks this year, starting in August, and expects total capital returned to shareholders through dividends and buybacks in 2023 to exceed 1 billion euros, compared with around 700 million in 2022.
Other highlights for the quarter:

Total revenues stood at 7.4 billion euros, up from 6.65 billion in the second quarter of 2022.
Total non-interest expenses were 5.6 billion euros, up 15% from 4.87 billion a year earlier.
The provision for credit losses was 401 million euros, up from 233 million in the same quarter of last year.
Common equity tier one CET1 capital ratio, a measure of bank liquidity, rose to 13.8% from 13.6% in the previous quarter and 13% a year ago.
Return on tangible equity stood at 5.4%, down from 7.9% a year ago.

Benefiting from the Credit Suisse collapse
Deutsche Bank previously suggested it stood to gain from the collapse of Credit Suisse and its takeover by Swiss rival UBS. CFO von Moltke told CNBC on Wednesday that some of these benefits may already be materializing.
“All of these things take time. Certainly, on the hiring front, we’ve been able to attract talent as the fallout from the merger takes place, in two areas of our business in particular: wealth management, where we’ve been able to attract around 30 relationship managers over the past several months, and also in our origination and advisory franchise,” von Moltke said.
“It’s obviously early days to see the revenue impact of those hires, but we’re very confident that we’ve been able to attract strong talent to the platform and fill in gaps, where we can now take advantage more fully of our own platform and market presence.” More

China is changing its tone on the struggling real estate sector, paving the way for policy support.
The latest wording from such a high level of government indicates a significant shift in what Beijing will allow local authorities to do about the real estate sector, analysts said.
These rhetorical changes come as China’s real estate market has slumped further, along with the overall economic slowdown.

Construction on a real estate project in Yantai, Shandong province, gets under way on July 8, 2023.
Nurphoto | Nurphoto | Getty Images

BEIJING — China is changing its tone on the struggling real estate sector, paving the way for policy support.
Beijing’s crackdown on the once-hot property market has focused on financial risks of speculation and highly indebted developers such as Evergrande. Despite recent government efforts, home sales have slumped as the overall economy slows.

This week, a meeting of top Chinese leaders noted a “great change” in the relationship between supply and demand in the real estate market — and called for policy adjustments. That’s according to a CNBC translation of the Chinese readout of a Politburo meeting on Monday.
The readout also removed the phrase “houses are for living in, not for speculation” — frequently used in China as a mantra for a tight policy on the property market.
“For policymakers, the top property-related risk is no longer financial risk, but recession risk,” said Larry Hu, chief China economist at Macquarie.

“In an extremely top-down system like today’s China, the tone from the top is much more important than specific policy measures,” Hu said. He expects detailed policy announcements in the coming months.
The first time Chinese officials spoke of changes in real estate supply and demand was at a People’s Bank of China press conference on July 14, according to a state media report. Then, the PBOC official hinted at forthcoming property market policies.

This week, the higher-level Politburo meeting readout included similar language.
The statement reflects a “much clearer understanding about the seriousness of the situation,” said Qin Gang, executive director of China real estate research institute ICR. That’s according to a CNBC translation of his Mandarin-language remarks.
“This is a big change,” he said. He expects policies beneficial to the real estate market and consumption will come out in coming days.
The Hang Seng Property Development and Management Index rose by 9.78% on Tuesday. State media indicated relaxation in purchase restrictions could come later this year for China’s smaller cities.

More details needed

While Beijing’s tone is positive, Ricky Tsang, director of corporate ratings at S&P Global Ratings, said he’s watching for practical changes. Those include easing requirements for buying an apartment, lower down-payments and removing price caps.
He still expects property sales to fall this year and next, primarily dragged down by performance in less developed cities.
Residential property sales from July 1 to 20 dropped by more than a third from the same period last month – and one year ago, when China’s Covid controls were still in place, Tsang said, citing industry data published in state media. That’s based on floor space transaction volume.
Real estate investment has also fallen, down by 7.9% in the first half this year. It’s expected to remain low in the near term, according to the National Bureau of Statistics.
That kind of decline isn’t in line with China’s growth targets, said Zong Liang, chief researcher at the Bank of China.
Zong pointed out that policymakers’ overall tone has eased, in contrast to prior preference for greater control. The idea of a property tax didn’t even get a hint in the latest meeting, he said.
He said the Politburo meeting’s removal of a phrase about house speculation means policymakers have achieved a certain level of success — indicating they can move on. That could mean some price volatility might be allowed in segments of the real estate market, but not for properties meant to ensure basic living needs, he added.
Housing affordability is an area of Beijing’s focus, along with education and health care.

Developers’ difficulties

Last year, not only were house prices elevated, but developers had delayed construction on many units due to financing difficulties. Apartments in China are typically sold ahead of completion, and falling sales cut into developers’ cash flows.
So far, the biggest real estate policy change has been this month’s extension of measures to support developers, which were first revealed in November.
Still, “developers are having a hard time raising funds from the equity and bond markets,” said Tommy Wu, senior China economist, Commerzbank.
He expects policy to focus on helping developers get enough funding to complete construction of houses.
“Confidence of potential homebuyers and housing sales could improve in a sustainable manner only when housing completion is on a firm footing,” Wu said. “This in turn would support developers’ funding and their debt repayment more generally and build a virtuous cycle.”

What about defaults?

Worries about China’s real estate market came to the forefront in late 2021 when highly indebted developer Evergrande defaulted.
Moody’s expects far fewer Chinese developers to default this year since many were able to push back maturities to late next year.
In 2022, Moody’s recorded 26 defaults among Chinese real estate developers that it covers – a peak, according to senior vice president Kaven Tsang. He said only one issuer has defaulted in the first half of this year.
But more clarity from Beijing is still needed.
Despite a 70-basis point decline in mortgage rates since the last peak, home prices and transactions still haven’t gone up, said Gary Ng, senior economist, Natixis CIB Asia Pacific.
Ten years ago, “the home price would have gone to the moon already,” he said. “That shows quite clearly there is a confidence issue here.” More

Wells Fargo announced a $30 billion share buyback program.
Its stock rose more than 3% in extended trading.

Wells Fargo building in San Francisco.
Source: CNBC

Wells Fargo shares popped Tuesday after the bank said it would buy back $30 billion in stock.
The company also said its board of directors approved a previously announced dividend increase, to 35 cents per share from the previous 30 cents. The sum is payable on Sept. 1 to shareholders of record on Aug. 4.

related investing news

2 days ago

Wells Fargo’s stock rose more than 3% in extended trading Tuesday.
The moves come after the bank beat second-quarter earnings and revenue expectations, driven by a 29% increase in net interest income. A flurry of rate increases by the Federal Reserve since last year has boosted key financial institutions — as borrowers face a larger interest burden.
The central bank is expected to hike rates again Wednesday as it tries to rein in elevated inflation.
Democratic lawmakers have introduced multiple bills that aim to curb stock buybacks by major corporations. They say the businesses are passing profits on to wealthier shareholders instead of increasing their employees’ pay.
The largest U.S. banks have announced plans to raise their quarterly dividends after they cleared the Federal Reserve’s annual stress test last month.
“Even with these significant investments, our capital levels are strong and we expect them to remain so, allowing us to return excess capital to our shareholders,” Wells Fargo CEO Charlie Scharf said in a statement accompanying the bank’s announcement. More

Visitors are seen at Google Headquarters in Mountain View, California, United States on May 15, 2023.
Tayfun Coskun | Anadolu Agency | Getty Images

Check out the companies making headlines after the bell.
Alphabet — Shares of the Google parent jumped 7% as investors cheered better-than-expected second- quarter results, lifted by strong growth in cloud sales. The company posted earnings of $1.44 per share on $74.6 billion of revenue. Analysts called for earnings of $1.34 per share, adjusted, and revenue of $72.82 billion, per Refinitiv. Strong growth in cloud sales lifted results. The company also announced that Alphabet CFO Ruth Porat would become the president and chief investment officer.

related investing news

10 hours ago

Snap — Snap tumbled 17% after reporting weak guidance for its current quarter. However, the company posted an adjusted loss of 2 cents a share, compared to consensus estimates of a 4 cent loss per share, per Refinitiv. Revenue came in at $1.07 billion, higher than the $1.05 billion expected by analysts.
Microsoft — The big technology stock slid about 1% after reporting slowing revenue growth in its cloud business in the fiscal fourth quarter. Still, the company posted earnings of $2.69 per share, compared to the $2.55 per share anticipated by analysts, per Refinitiv. Microsoft reported $56.19 billion in revenue, beating estimates of $55.47 billion.
Wells Fargo — Shares of the bank jumped 3% in extended trading after Wells Fargo announced a $30 billion share buyback program.
Texas Instruments — Texas Instruments fell 3.7%. The company said to expect between $1.68 and $1.92 in earnings per share for the current quarter, putting much of the range below the $1.91 consensus estimate of analysts polled by FactSet. Texas Instruments guided revenue for the quarter to come in between $4.36 billion and $4.74 billion, a range that includes analysts’ consensus estimate of $4.59 billion, per FactSet.
Intuitive Machines — The space exploration stock advanced 1% after the company was designated part of an award from NASA to assist in the development of lunar night technology.

Robert Half — Shares dropped 12.7% after the employment agency missed expectations for earnings. Management said the company was affected by clients’ elongated hiring cycles. The company posted $1 in earnings per share on $1.64 billion in revenue, while analysts polled by Refinitiv expected $1.14 per share in earnings and revenue of $1.69 billion.
Teladoc — The virtual health care stock rallied 6% following a better-than-expected earnings report. Teladoc said it lost 40 cents per share in its second quarter, beating analysts’ estimates for a 41 cent loss per share, per Refinitiv. The company also beat expectations for revenue, posting $652 million against a consensus estimate of $649 million. More

The Fed is widely expected on Wednesday to approve what would be the 11th interest rate increase since March 2022, taking the benchmark borrowing rate to its highest level since early 2001.
More pressing will be whether Federal Open Market Committee officials feel they’ve gone far enough.
Hiking more from here carries risks to an economy that many think is heading for at least a mild recession.

WASHINGTON, DC – JUNE 21: Federal Reserve Chairman Jerome Powell testifies before the House Committee on Financial Services June 21, 2023 in Washington, D.C. Powell testified on the Federal Reserve’s Semi-Annual Monetary Policy Report during the hearing.
Win Mcnamee | Getty Images News | Getty Images

Despite an improving inflation picture, the Federal Reserve is expected on Wednesday to approve what would be the 11th interest rate increase since March 2022.
Investors are hoping it will be the last one for a long time.

Markets are pricing in an absolute certainty that the Fed will approve a quarter percentage point hike that will take its benchmark borrowing rate to a target range of 5.25%-5.5%. That would push the upper boundary of the federal funds rate to its highest level since January 2001.
The more pressing matter will be whether Federal Open Market Committee officials feel they’ve gone far enough or if there’s still more work to do in the fight against pernicious inflation.
“The signal will probably be, yes, we’re hiking, but then we think we can sit here for a while and see,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “But no promises. They can’t give up the option.”
Indeed, the Fed’s course is far less certain. Central bank policymakers almost unanimously believe inflation is too high, but hiking more from here carries risks to an economy that many think is heading for at least a mild recession.

‘The Fed should be done’

Jones is part of a growing market chorus that thinks the central bank has gone far enough. With the annual inflation rate declining to 3% in June — it was 9.1% a year ago — the danger is growing that the Fed could unnecessarily push the economy into contraction.

“The Fed should be done already,” Jones said. “They’re walking a difficult line here. To me, the decision would be, hey, we’ve done enough for now, and we can wait and see. But apparently the folks at the Fed think they need one more at least.”
In fact, Fed officials indicated strongly at their last meeting — the first one during this tightening cycle that didn’t see a rate increase — that they see at least two more hikes this year.
Since that meeting, policymakers have done little to dispel the likelihood of higher rates.

Markets, though, haven’t seemed to mind. Wall Street has been on a tear all year, with the Dow Jones Industrial Average jumping more than 5% over the past month alone. That could be because traders are ignoring the Fed’s rhetoric and pricing in just a 35% probability of another hike before the end of the year, according to CME Group’s FedWatch gauge of futures market pricing.
One key from the meeting will be whether Fed Chairman Jerome Powell indicates that, at the least, the FOMC will again skip a hike at its next meeting in September while it analyzes the impact the previous increases have had on the economy. Powell has said the Fed is not locked in to an every-other-meeting pattern of hikes, but he has indicated that a slower pace of hikes is likely.
“The hike that’s going to happen [Wednesday] is unnecessary, and probably the last couple were unnecessary,” said Luke Tilley, chief economist at Wilmington Trust Investment Advisors. “By the time we get to November, that’ll be even clearer.”

Repeating history

Fed policy, though, has been informed by a belief that when it comes to fighting inflation, it’s better to do too much than too little. The current bout of price increases was the most severe the U.S., and many other developed nations, has had to face since the early 1980s.
That last period also is behind a lot of the Fed thinking, with a particular focus on how policymakers then backed off the inflation fight too soon and ended up having an even worse problem.
“It’s easy for me to say that I think they’re going too much,” Tilley said. “But I’m also quick to say that if I was in their seats, I might be doing the same thing, because they really are playing a game of risk management.”
That game is familiar by now: Retreating from the inflation fight soon could lead to a repeat of the 1970s-early 1980s stagflation of high prices and weak growth, while going too far risks tipping the country into a recession.
Recent indicators are showing that credit conditions are tightening significantly, with higher interest rates and tougher lending standards substantial headwinds to future growth.
“Recently softer core inflation will be welcomed by Powell, but he is likely to want several more months of softer inflation data before confidently terminating the hiking cycle,” Citigroup economist Andrew Hollenhorst said in a client note. “In our view the U.S. economy is not headed toward a soft landing. After a summer of projected softer core inflation data, we see upside inflation risks reemerging in the fall.”
Likewise, Steven Blitz, chief U.S. economist at Globaldata.TSLombard, said a “dovish hike and talk of soft landings” at Wednesday’s meeting would be a mistake for the Fed.
“Planes land, economies do not. Economies are an ongoing dynamic process, and no recession will prove more problematic for the Fed than not,” Blitz wrote. “The economy is heading into recession, but if it is somehow avoided, then the disinflation of this moment will prove fleeting, so too the Fed’s confidence that they are at the end of this hiking cycle.” More

JPMorgan Chase executive Mary Callahan Erdoes sought advice for a $600 million tax issue from disgraced former financier Jeffrey Epstein in 2005, according to legal filings.
Erdoes “personally sought” help from Epstein to resolve the matter, according to a filing from the U.S. Virgin Islands.
The request from Erdoes was on behalf of someone else, but that information was redacted in the filing.

Mary Callahan Erdoes, chief executive officer of asset management at JPMorgan Chase & Co.
Simon Dawson | Bloomberg | Getty Images

JPMorgan Chase executive Mary Callahan Erdoes sought advice for a $600 million tax issue from disgraced former financier Jeffrey Epstein in 2005, legal filings alleged.
Erdoes, a veteran JPMorgan executive who became head of the bank’s asset and wealth management division in 2009, “personally sought” help from Epstein to resolve the massive tax issue, according to court documents the U.S. Virgin islands filed overnight.

The request from Erdoes was on behalf of someone else, but that information was redacted in the filing.
“It was simply a request for an introduction and it was well before Epstein was arrested or officially accused of any crimes,” a JPMorgan spokeswoman said Tuesday in a statement.
The new allegations about the bank’s yearslong relationship with Epstein came as part of the U.S. territory’s lawsuit accusing JPMorgan of facilitating the notorious ex-money manager’s sex trafficking operation. Epstein killed himself in August 2019 while in jail in Manhattan on child sex trafficking charges.
The USVI in court filings Monday night asked the court for partial summary judgment in its favor. JPMorgan also filed a motion for partial summary judgment overnight.
The territory alleged that Epstein was a “personal resource” for Erdoes and her former boss at JPMorgan, Jes Staley, and that the two bankers decided to keep Epstein as a client for years after he was accused of paying to have underaged girls brought to his home. In a deposition this year, Erdoes acknowledged that JPMorgan was aware of the accusations against Epstein by 2006.

The bank took years to decide to cut Epstein off, only doing so in 2013. JPMorgan agreed to pay $290 million to settle a lawsuit from Epstein’s victims, but the USVI suit has continued.
In 2008, after the Bernie Madoff ponzi scheme was uncovered, Erdoes allegedly asked Staley to reach out to Epstein “to get the scoop from down there,” according to USVI’s latest court filing.
On that, JPMorgan had this statement: “Jeffrey Epstein was in Florida where many of Madoff’s victims lived. If she had made any call at all, it would have been to reach out [to] Jes to see if Epstein had any more details about what was happening there.” More