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Tag: US central bank

  • Russians succeeds in tricking Jerome Powell, head of the Federal Reserve

    Russians succeeds in tricking Jerome Powell, head of the Federal Reserve

    The president of the US central bank looks to be the most recent public figure to fall victim to two Russian practical jokers.

    A video call with Federal Reserve chairman Jerome Powell was shared on Russian television from the duo, whose prior targets include Prince Harry and former German Chancellor Angela Merkel.

    The Fed said Mr Powell had spoken to someone in January he thought was Ukrainian President Volodymyr Zelensky.

    It said it had referred the matter to law enforcement.

    “It was a friendly conversation and took place in a context of our standing in support of the Ukrainian people in this challenging time,” a spokesperson said. “No sensitive or confidential information was discussed.”

    Comedians Vladimir Krasnov and Alexei Stolyarov – known as Vovan and Lexus – claimed credit for the stunt.

    They previously claimed to have pranked the likes of Elton John, Polish President Andrzej Duda, the head of the European Central Bank, Christine Lagarde, and Canadian Prime Minister Justin Trudeau.

    As foreign secretary in 2018, Boris Johnson had a conversation credited to the pair, who are supporters of Vladimir Putin.

    The UK government said then it believed the Kremlin was behind the call.

    The Fed said the video with Mr Powell appeared to have been edited and it could not confirm its accuracy.

    In one of the clips shared on Russian television, Mr Powell praised Russia’s central bank chief Elvira Nabiullina for managing the Russian economy amid Western sanctions, according to the BBC Monitoring service.

    Other video now circulating on the internet shows Mr Powell describing a sharp slowdown in growth in the US, following the bank’s efforts to rein in price rises.

    “We would tell you that a recession is almost as likely as very slow growth,” he said of expectations for 2023. “I think that is partly because of us having raised rates quite a bit but this is what it takes to get inflation down.”

    News of the call set social media abuzz in the business world, where commentary from Mr Powell often moves financial markets.

    “The Federal Reserve can’t get a break these days,” economist Mohamed A El-Erian wrote, while sharing the story which was first reported by Bloomberg.

    “Embarrassing moment for the Fed,” chimed in Jesse Cohen, global markets analyst at Investing.com.

  • US interest rates hit 14-year high in inflation battle

    The US central bank has pushed interest rates to the highest level in almost 15 years as it fights to rein in soaring prices in the world’s largest economy.

    The Federal Reserve announced it was raising its key rate by another 0.75 percentage points, lifting the target range to 3% to 3.25%.

    Borrowing costs are expected to climb more – and remain high, the bank said.

    The move comes despite mounting concern that the cost of controlling inflation could be a harsh economic downturn.

    Federal Reserve chairman Jerome Powell has said the rate rises are necessary to slow demand, easing the pressures putting up prices and avoiding long-term damage to the economy.

    Banks in nearly every country – with the big exceptions of Japan and China – are taking similar steps as they wrestle with their own inflation problems.

    Inflation is a global problem

    The Bank of England is widely expected to announce its seventh consecutive rate rise at its meeting on Thursday, while Indonesia and the Philippines are among the other countries also poised for increases.

    Analysts are starting to worry that the global sweep of the rate hikes, which ripple out to the public in the form of more expensive mortgages, loans and credit card debt, could lead to greater economic slowdown than policymakers expect.

    “That is definitely one of the downside risks – that the synchronised nature of the tightening could make it that much more powerful,” said Brian Coulton, chief economist at Fitch Ratings.

    How much will interest rates go up?

    In the US, the Fed is raising rates at one of the fastest paces in its modern history, a sharp reversal after years of low borrowing costs.

    Wednesday’s increase – the fifth in a row – lifts the rate the Fed charges banks to borrow from near zero at the start of the year to 3% for the first time since early 2008.

    Forecasts released by the Fed on Wednesday show policymakers expect it to reach 4.4% by the end of the year – and rise to 4.6% in 2023, sharply higher than its prior forecasts.

    “What is striking is the speed,”Mr Coulton said. “They’re having to move very quickly … and it means it’s more likely to be a surprise to firms and households.”

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    Uncertainty weighs heavily

    Sean V

    Sean is scrapping holiday plans, uncertain what the economy may bring

    New Yorker Sean V said he felt lucky that he bought a two-bedroom condo last year, before borrowing costs started their climb, locking in a mortgage rate around 2.6%.

    But the 30-year-old works in the home loan industry, which has seen business plunge as mortgage rates cross 6% for the first time since 2008.

    He said he feared losing his job “every single day” and was cutting back spending and scrapping holiday plans amid the uncertainty.

    “I don’t know what 2023 is going to bring,” he said. “All of that weighs heavily – not just on me, on everybody.”

    “I don’t know how stalling the economy is helping anyone.”

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    How do higher interest rates reduce inflation?

    By raising borrowing costs for businesses and households, central banks intend to reduce demand for big-ticket items like cars, homes or business expansions, which should ease the pressures pushing up prices.

    But it also means less economic activity, which typically leads to job losses and other economic pain.

    The World Bank recently warned that the rate rises could tip the global economy into recession next year.

    Even if it avoids the two quarters of contraction that typically define a recession, the 2023 world economy is expected to be at its weakest in more than a decade, excepting the 2020 pandemic year, said Ben May, director of global macro research at Oxford Economics.

    “What has become clear is that if given the choice between allowing inflation to remain high for a sustained period …. or pushing the economy into a recession, [central bank leaders] would rather push the economy into recession and get inflation back towards target,” he said.

    Will rate rises lead to a recession?

    Forecasts released by the Fed show policymakers expect growth in the US to slow to a crawl this year, to 0.2%. They see growth picking up to 1.2% next year, but predict the unemployment rate will rise to 4.4%.

    The forecasts do not show inflation returning to the bank’s 2% target until 2025.

    Many analysts are forecasting a recession in the US next year but remain hopeful it will be relatively mild, noting that household finances are in better shape than in prior downturns.

    But the war in Ukraine and concerns about energy supplies raise the risks, JP Morgan Chase boss Jamie Dimon warned lawmakers at a congressional hearing on Wednesday.

    “There’s a chance – not a big chance – a small chance, of a soft landing, there is a chance of a mild recession, a chance of a harder recession. And because of the war in Ukraine… and the uncertainty that causes in the global energy supply and food supply, there’s a chance could be worse,” he said. “I think policymakers should be prepared for the worst.”

    Source: BBC