The US Federal Reserve is expected to keep interest rates on hold despite a predicted recession this year, according to a poll of economists. A number of policy makers have said they will maintain or raise the federal funds rate, despite the 34 of 46 respondents who predicted a US recession in 2023. The uncertainty surrounding the ongoing debt limit crisis will increase the risk of a default, according to the poll.
House Speaker Kevin McCarthy believes that the United States will not default on its debt now that congressional leaders and President Joe Biden's administration are negotiating. McCarthy defended Republican proposals such as spending caps and work requirements, stating that both would help the US economy. He also confirmed that there would not be a discussion on taxes in the current negotiations with the White House on raising the US debt ceiling.
US President Joe Biden will continue discussions with congressional leaders over America's debt limit after his visit to the G7 summit this week. The President, who had a successful hour-long meeting with House Republican Speaker Kevin McCarthy this week, plans to telephone top lawmakers during his trip to Japan, said White House spokeswoman Karine Jean-Pierre. The Republican bullet points including health care cuts and increased poverty in parts of the country, which the Democrats oppose. Biden hopes to reach a bilateral budget agreement next week that can be signed into law.
Comments from Federal Reserve officials on high interest rates have impacted US markets, with bond yields and rate futures reacting to the news. Chicago Federal Reserve President Austan Goolsbee said on Tuesday that it was "too premature" to consider interest rate cuts. The New York Fed's John Williams also noted inflation remained high. Loretta Mester, President of the Cleveland Fed, stated that rates were not going to be put on hold yet. Meanwhile, US President Joe Biden has cut his trip to Japan short amid the ongoing debt ceiling crisis, with just two weeks to go before a US debt default.
US President Joe Biden believes that a potential US debt default can be avoided by making a deal with Congress. Biden shared that his recent meeting with Kevin McCarthy, Republican Speaker, was “civil and respectful". He said that all parties understood the “consequences of the failure to pay our bills”. Janet Yellen, Treasury Secretary, has already warned that a default could happen as early as 1 June if Congress did not take any action to increase the borrowing limit. The fiscal stand-off had become a critical threat to the global economy and finance systems. Biden shortened his international trip to Japan to work on the debt limit negotiations in Washington. The White House and Republicans in Congress are discussing a fiscal deal with limits to discretionary spending over the next several years. Republicans are putting pressure on adding new work requirements for the government's large anti-poverty schemes.
The International Monetary Fund (IMF) has approved a $3bn, three-year extended credit facility for Ghana to help resolve its worst economic crisis in a generation. The deal has been approved by the IMF’s executive board following staff-level approval in December 2021. Although viewed as an important step, sources warn that the Ghanaian authorities will face long negotiations with creditors. The country is in discussions with both official sector and private creditors to restructure its debt. Roughly $5.4bn of debt to official creditors has been earmarked for restructuring, as well as $14.6bn of debt to private, overseas creditors.
Debt ceiling threat: Time to take this political football off the field
CNN
23-05-17 16:31
The debt ceiling debate in Washington should be abandoned to save US living standards, family budgets, and global financial stability, according to economics experts. Theoretically, the debt ceiling should work as a fiscal restraint during the budgeting process. But after near meltdowns in 2011, 2013 and recently, economists argue it is time to take the political football off of the field. The CEO of JPMorgan Chase, Jamie Dimon said last week that he would be in favour of getting rid of the debt ceiling. The Fed's former vice-chairman, Roger Ferguson, said the debt ceiling is an antiquated mechanism that should be scrapped.
President Joe Biden’s visit to Asia to reassure allies of the US focus on China’s aggressiveness in the region has backfired. The trip, which was originally intended to be a tour of three nations to highlight the US commitment to the Asia region, has been hugely diminished as Biden has cancelled stops in Papua New Guinea and Australia to focus on debt-limit talks with Republicans. Furthermore, there is speculation that if the US defaults on its debt, in conjunction with Biden’s decision to leave Asia early, this would undermine Biden’s message of strength and provide a potentially favourable contrast with China’s President Xi Jinping. Despite this, Biden still plans to attend a Group of 7 meeting in Japan where allies will confront what they call China’s economic pressure on less powerful countries. One foreign diplomat has claimed that skipping the G-7 would undermine a sense of unity towards China.
Global debt rose to $304.9trn in Q1 2022, nearing a record, the Institute of International Finance said in a report. The world's debt pile increase by $8.3tn during that time. Last year in Q1 it surpassed $306.3tn. Emerging markets saw a 1Q record high, with $100.7tn of debt, or 250% of GDP. Such debt rose by 34% from 2019, led by Japan, the US, France and the UK. The IIF report also addressed leverage in the financial system, the growing cost of serviced debt due to rising interest rates, and liquidity problems caused by swift monetary tightening.
Climate scientists face a communications challenge to convey the scale of the climate emergency to which they are alerting the world, according to Bloomberg Opinion’s David Fickling. Scientific projections of the future impact of global warming may seem abstract and distant to many, even as the effects of the crisis become blindingly apparent. The broad techniques used by scientists to make verifiable forecasts about the future, and the way the human brain processes statistical data, exacerbate this disconnect, Fickling argues. There are also substantive obstacles to predicting some of the short-term effects that generate media coverage and to forecasting things like the highest temperature ever recorded in a particular region. Meanwhile, the public faces a constant barrage of short-term distractions. Fickling argues that, instead of accusing scientists of alarmism when their predictions are confounded, society should take such concerns seriously.
Wall Street rallied on Wednesday on hopes that the US government will avoid defaulting on its debt. The S&P 500 was up 1.2% and the Dow Jones Industrial Average was up over 1.3%. The Nasdaq composite was also up roughly 1.3%. Despite the recent optimism, fears that the US may default on 1 June continue to grip markets. If Congress does not allow the government to borrow more money by this date, it could be disastrous for Treasurys, likely leading to a wider damage across the US economy.
Leaders of the G7 countries – the US, Japan, Germany, France, the UK, Italy and Canada – face several challenges as they gather in Hiroshima. The global economic outlook is unstable, while Russia continues its actions in Ukraine and China expands its economic and strategic growth. The G7 will need to address several issues, including enlisting middle countries such as those in Africa, and addressing China without creating undue confusion. Moreover, with concerns around nuclear proliferation and use re-emerging, the monitoring architecture of nuclear arsenals needs to be maintained to avoid future use of nuclear weapons. Finally, as global temperatures continue to rise and heatwaves become deadlier, coordinated responses and the regulation of cryptocurrency will become increasingly important.
Oil prices saw a slight decline over worries of increasing supply, with Brent crude futures dropping by 24 cents to $76.72 a barrel, and US West Texas Intermediate crude dipping 21 cents to $72.62. While both benchmarks showed a near 3% rise on Wednesday in relation to optimism over US debt ceiling negotiations and oil, US oil inventories rose by five million barrels to 467.6 million barrels last week due to another release from the Strategic Petroleum Reserve. However, US gasoline inventories fell as demand increased to its highest since 2021. Price concerns also revolve around US debt ceiling negotiations.
City of Regina questions sustainability of REAL business model, as company seeks to take on debt
CBC
23-05-17 23:59
Regina Exhibition Association Limited (REAL) has requested Regina city council to let them take on debt to dig themselves out of debt and create a plan to ensure long-term sustainability. REAL owes $6.9 million by September, and the organization said that COVID-19 was causing many of the issues with the company's debt. REAL's president, Tim Reid, and Director of Finance, Dallas Skulski, presented the company's financial position to the committee, stating they think COVID-19 was the leading cause of the financial situation.
Charles Schwab Corp is seeking to raise $2.5bn in long-term debt, a filing with the SEC said. The company will issue $1.2bn in debt due in 2029 and $1.3bn due in 2034, according to a report in the Wall Street Journal. Charles Schwab said it will use the proceeds for "general corporate purposes". The banks managing the offering are BofA Securities, Citigroup, Credit Suisse, Goldman Sachs & Co, JPMorgan and Wells Fargo Securities.
Stricter work requirements for people on US social safety net programmes have become a sticking point in negotiations over raising the US debt ceiling. Kevin McCarthy, the Republican Speaker of the House of Representatives, said that tougher work requirements for recipients of the programmes were a “red line”. However, President Joe Biden’s apparent openness to some reforms to the social safety net, which dismayed progressive Democrats, has led to a complex situation that could potentially lead to a revolt from the left of Biden’s party.
The US dollar has remained near a seven-week peak as President Joe Biden and Kevin McCarthy, the top congressional Republican, work towards avoiding a US debt default. There were positive signs of progress as the two leaders underscored their determination to raise the government's $31.4tn debt ceiling. However, caution still remains in the markets. The Australian dollar fell after disappointing jobs data was released, as well as the euro which was pressured near an over six-week low of $1.0841. Meanwhile, sterling fell to a three-week low in the previous session.
China and Western governments may have found an answer to the problem of restructuring billions of dollars of African country debt by reaching a compromise over test case Ghana. The IMF agreed a $3bn bailout for Ghana last month, with a $600m first tranche released, following assurances from China and the Paris Club of mainly Western countries that they would take losses on their loans. However, worries remain that other countries facing high levels of debt will be unable to obtain the write-downs they require, with cuts to education and health funding undermining progress. African government debt in most countries is the highest in two decades, and the average cost of servicing external debt now consumes 17% of government revenues. Donors may need to help with concessional loans and grants, and debts must be restructured to prevent a repeat of past austerity.
From Ukraine war to China’s rising power: 5 reasons this G7 matters
CNN
23-05-18 08:48
The leaders of the world’s most advanced democracies will meet in Hiroshima today to discuss the ongoing conflict in Ukraine and emerging threats from China. The meeting’s location has placed nuclear arms at the top of the agenda, with the Hiroshima Peace Memorial Museum looming close by. The museum reminds visitors of the risks of nuclear war with dozens of exhibits, including timepieces stopped at 8.16am, the exact timing of the atomic bomb that was dropped on the city in August 1945 by a US Army Air Force B-29 bomber. Global risk monitors, the Bulletin of Atomic Scientists, states that the Doomsday Clock, an annual indicator of how close the world is to nuclear disaster, now stands at 90 seconds to midnight, an unprecedentedly dangerous rating; Russia’s war on Ukraine is cited as a major cause, together with Chinese weapons building, and a North Korea testing nuclear capable missiles.
Ghana's efforts to restructure its debt have been revealed as targeting $10.5bn of debt service relief from 2023 to 2026, with a view to achieving a return to a "moderate" risk of debt distress by 2028. The country has a $15bn financing gap in its balance of payments from 2023 to 2026, and had already completed a domestic debt exchange earlier this year. The International Monetary Fund board approved a $3bn, three-year rescue loan on Wednesday.
