President Donald Trump announced Thursday the United States will impose steep tariffs on steel and aluminum imports.

Trump said tariffs of 25 percent on steel and 10 percent on aluminum imports will be in effect for a long period of time. He said the measure will be signed “sometime next week.”

In a Twitter post earlier Thursday, Trump said that “Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world.”

At the Thursday meeting, Trump said the NAFTA trade pact and the World Trade Organization have been disasters for the United States. He asserted “the rise of China economically was directly equal to the date of the opening of the World Trade Organization.” 

Trump told officials from steel and aluminum companies that the United States “hasn’t been treated fairly by other countries, but I don’t blame the other countries.”

Without more details about which countries will be affected by the tariffs, it is difficult to gauge their impact.

In 2017, Canada, Brazil, South Korea and Mexico accounted for nearly half of all U.S. steel imports. That year, Chinese steel accounted for less than 2 percent of overall U.S. imports.

Trump emphasized his respect for Chinese President Xi Jinping, and said he told Xi when visiting China, “I don’t blame you, if you can get away with almost $500 billion a year off of our country, how can I blame you? Somebody agreed to these deals. Those people should be ashamed of themselves for what they let happened.”

Xi’s top economic adviser, Liu He, is set to visit the White House on Thursday to meet with top administration officials, including Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and Trump’s chief economic adviser Gary Cohn.

A White House official speaking on condition of anonymity told Reuters that they expect a “frank exchange of views” and will focus on “the substantive issues.”

Ryan Hass, a fellow in the Foreign Policy program of the Brookings Institution, told VOA that, in the best-case scenario, Liu’s visit will assure both sides that “they are committed to solving underlying problems in the bilateral trade relationship.” Hass noted, “In such a scenario, both sides would agree on the problems that need to be addressed, the framework for addressing them, and the participants and timeline for concluding negotiations.”

Hass said if Liu’s visit fails to exceed the White House’s expectations, then the probability of unilateral U.S. trade actions against China will go up. “If the U.S. takes unilateral actions, China likely will respond proportionately, and that could set off a tit-for-tat cycle leading to a trade war,” he said.
…

President Donald Trump announced Thursday the United States will impose steep tariffs on steel and aluminum imports.

Trump said tariffs of 25 percent on steel and 10 percent on aluminum imports will be in effect for a long period of time. He said the measure will be signed “sometime next week.”

In a Twitter post earlier Thursday, Trump said that “Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world.”

At the Thursday meeting, Trump said the NAFTA trade pact and the World Trade Organization have been disasters for the United States. He asserted “the rise of China economically was directly equal to the date of the opening of the World Trade Organization.” 

Trump told officials from steel and aluminum companies that the United States “hasn’t been treated fairly by other countries, but I don’t blame the other countries.”

Without more details about which countries will be affected by the tariffs, it is difficult to gauge their impact.

In 2017, Canada, Brazil, South Korea and Mexico accounted for nearly half of all U.S. steel imports. That year, Chinese steel accounted for less than 2 percent of overall U.S. imports.

Trump emphasized his respect for Chinese President Xi Jinping, and said he told Xi when visiting China, “I don’t blame you, if you can get away with almost $500 billion a year off of our country, how can I blame you? Somebody agreed to these deals. Those people should be ashamed of themselves for what they let happened.”

Xi’s top economic adviser, Liu He, is set to visit the White House on Thursday to meet with top administration officials, including Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and Trump’s chief economic adviser Gary Cohn.

A White House official speaking on condition of anonymity told Reuters that they expect a “frank exchange of views” and will focus on “the substantive issues.”

Ryan Hass, a fellow in the Foreign Policy program of the Brookings Institution, told VOA that, in the best-case scenario, Liu’s visit will assure both sides that “they are committed to solving underlying problems in the bilateral trade relationship.” Hass noted, “In such a scenario, both sides would agree on the problems that need to be addressed, the framework for addressing them, and the participants and timeline for concluding negotiations.”

Hass said if Liu’s visit fails to exceed the White House’s expectations, then the probability of unilateral U.S. trade actions against China will go up. “If the U.S. takes unilateral actions, China likely will respond proportionately, and that could set off a tit-for-tat cycle leading to a trade war,” he said.
…

A company’s value is often tied to the message it portrays to customers. But what happens when other companies try to take advantage of your brand?

Take the Philadelphia Eagles, for instance. The American football team wants to exclusively own the phrase: “Philly Special.” That was the trick play that helped them win the Super Bowl, and the Philly Special is, by far, the most talked-about play of the Super Bowl.

Watch the play here:

It is a gutsy move. In football-speak, it is a direct-snap reverse pass to quarterback Nick Foles, who usually throws the ball. But the coach gives the OK, and Foles tells his teammates the plan in the huddle.

The team lines up, Foles runs up the field. Tight end Trey Burton throws the football, and Foles catches it in the end zone for a touchdown.

“Play of the century”

Now, the phrase, ‘Philly Special,’ has turned into a city-wide phenomena. Bakeries are making Philly Special pastries. Some people are getting the words or even a sketch of the play tattooed on themselves.

And stores, like Ashley Peel’s Philadelphia Independents, cannot keep enough Philly Special T-shirts in stock.

“It’s the ‘Nick Foles play of the century,’ as I’m dubbing it from the Super Bowl,” Peel said. “It has a layout of the [specifics] from the play. We just got it in and we’re almost already sold out of it. It’s definitely moving well.”

It’s moving well, even as several entrepreneurs are competing to be awarded a trademark — in other words, exclusive rights — to the phrase.  Many of the businesses filed their own trademark applications ahead of the Eagles.

“I do have a client that’s applied for the mark, ‘Philly Special,’” said Philadelphia-based lawyer Nancy Rubner Frandsen.

She filed a trademark application on behalf of a company called Whalehead Associates. She can’t comment too much about the application without violating attorney-client privilege, but admits the phrase goes beyond a football play.

“Obviously it brings everyone together, it was our Super Bowl championship that brought it all about,” she said. “It’s got the term ‘Philly’ in it — from the trademark standpoint, it would be deemed to be descriptive. But then you combine it with the term, ‘Special,’ and it could make a very unique trademark.”

Some of the other businesses that want to trademark the term include a sandwich maker, a gift shop manufacturer … and the Philadelphia Eagles. The team was actually the last to file a trademark application. Even so, experts say, it’s likely the rights will be awarded to the Eagles.

Newsjacking

“This particular term, ideally, should belong to the Eagles,” said Dr. Jay Sinha, an associate marketing professor at Temple University in Philadelphia.

He added the phenomenon around ‘Philly Special’ is not the first time there’s been a rush to trademark a term after a big event, like the Super Bowl. And it’s even got a name: ‘newsjacking.’

“The term, newsjacking, means where a company rides or takes advantage of some event happening in current affairs and uses it for their own commercial purposes, especially for marketing in branding,” Sinha said.

For example, think of famous movie lines, like: ‘May the force be with you,’ from “Stars Wars.” When sequels are released, other companies often try to take advantage of the film’s popularity for marketing purposes, like an ice cream shop that posts a sign reading, ‘May the swirl be with you.’

“If there’s anything which is relevant in popular culture as well as the news, companies like to ride on it,” Sinah said.

In this case, it likely will be several months before the U.S. Patent Office announces who will be awarded the rights to the now famous phrase. By then, though, another Super Bowl will be approaching and the excitement of the Philly Special could be fading.
…

Two major U.S. retailers changed their gun sales policies Wednesday in the fallout over a Florida high school massacre.

Walmart, the country’s biggest retailer, announced it is raising the age restriction for buying guns and ammunition to 21.

“We take seriously our obligation to be a responsible seller,” it said in a statement. 

Walmart is also dropping toys and other items that resemble assault-style weapons from its website. The retail giant stopped selling assault-style guns in 2015 and does not sell handguns except for its stores in Alaska.

Earlier Wednesday, Dick’s Sporting Goods announced it would no longer sell assault-style rifles or any gun to anyone younger than 21.

The chain went one step further and urged Congress to ban assault-style weapons and raise the minimum age.

The alleged Parkland high school shooter, Nikolas Cruz, used an AR-15.

Dick’s says Cruz had bought a shotgun at one of its stores after going though all the proper procedures, but stressed it was not the exact weapon or the type allegedly used in the Feb. 14 massacre. 

Both Walmart and Dick’s say they are committed to serving sportsmen, hunters, and the majority of gun owners whom they call law-abiding citizens.

WATCH: Dick’s Sporting Goods CEO: ‘We Don’t Want to be a Part of This Story’

The mass shooting of 17 people at Marjory Stoneman Douglas High School has had an impact on the corporate world, which is seemingly taking a close look at nationwide polls that overwhelmingly favor tighter gun laws.

More than a dozen major companies are ending discounts for members of the National Rifle Association (NRA). They include Delta Airlines, Enterprise Rent-A-Car, MetLife Insurance and Best Western Hotels. 

President Donald Trump, who has been a huge supporter of the NRA and whose campaign was a recipient of millions of dollars in NRA funds, said earlier this week that sometimes you just have to fight the NRA.

At a discussion on gun safety with U.S. lawmakers Wednesday, he also accused Republican politicians who have given tepid support for stronger gun laws of being “afraid” of the powerful pro-gun lobby group.
…

When refugees arrive in a new country, they bring little to no material possessions. But many bring something more valuable: their talent and skills. Twenty refugee women and asylum seekers from different parts of the world recently came together at a pop-up store in Phoenix, Arizona, to display their homemade products and tell their compelling stories. VOA’s June Soh spoke with some of the women in this report narrated by Carol Pearson.
…

When refugees arrive in a new country, they bring little to no material possessions. But many bring something more valuable: their talent and skills. Twenty refugee women and asylum seekers from different parts of the world recently came together at a pop-up store in Phoenix, Arizona, to display their homemade products and tell their compelling stories. VOA’s June Soh spoke with some of the women in this report narrated by Carol Pearson.
…

Growth in China’s manufacturing sector in February cooled to the weakest in more than 11/2 years, raising concerns of a sharper-than-expected slowdown in the world’s second biggest economy this year as regulators tighten the screws on financial risks.

The weakness was driven by disruption to business activity by the Lunar New Year holidays and curbs to factory output from tougher pollution rules, but there are worries of a bigger loss in momentum.

“Although a recovery looks possible in the short-run as the anti-pollution campaign winds down, the risk is still that the economy fares worse this year than is generally expected,” said Julian Evans-Pritchard, senior China Economist at Capital Economics.

Index raises concern

The official Purchasing Managers’ Index (PMI) released Wednesday fell to 50.3 in February, from 51.3 in January. But it remained above the 50-point mark that separates growth from contraction on a monthly basis, the 19th straight month of expansion.

The drop may raise some concerns for China’s leaders as they prepare for the start of the National People’s Congress (NPC) next week where Beijing will unveil its economic targets for this year.

Globally, solid demand has kept many export-reliant economies humming over the past year or so, though a move toward tighter policy in advanced nations could cut into growth this year.

The latest PMI’s subindex of new export orders fell to 49.0, the lowest in at least a year, as the yuan currency appreciated against the dollar.

Chen Zhongtao, an official with China Logistics Information Center (CLIC), said that “13.6 percent of firms reported concerns over the appreciating Chinese currency and greater currency fluctuations,” the highest number of companies to do so since March 2017.

CLIC said in a statement that export sluggishness is expected to continue this year as steel firms are more reluctant to ship goods in the face of rising global protectionism.

Lunar New Year effect

The index for output stood at 50.7, down from 53.5 in January as the Lunar New Year holidays disrupted factory activities, the statistics bureau said. Total new orders also expanded much slower in February.

Raw material input prices fell for the second consecutive month to the lowest since July 2017, indicating cost pressure from price rises on manufacturing firms is easing.

“I think besides the Lunar New Year factor, the stricter pollution measures in the north before the National People’s Congress might have weighed on activities as well,” said Betty Wang, Senior China Economist at ANZ.

Wang expects momentum to pick up in the months ahead as the pollution crackdown tapers off.

Still, there are signs that China may continue with the pollution crackdown, with top steelmaking city of Tangshan proposing new restrictions on production once the current curbs expire in March.

The weeklong Lunar New Year holidays, which fell in February this year but January in 2017, tend to distort data early in the year.

Many factories and offices start to scale back operations ahead of time before shutting for the entire holiday or longer, while some manufacturers front-load shipments or replenish inventories ahead of the break.

Moderating growth in 2018

Boosted by government infrastructure spending, a resilient property market and unexpected strength in exports, China’s manufacturing and industrial firms helped the economy post better-than-expected growth of 6.9 percent in 2017.

A sister survey showed activity in China’s service sector slowed to lowest since October last year in February. The official non-manufacturing Purchasing Managers’ Index (PMI) fell to 54.4 from 55.3 in January.

The services sector accounts for more than half of China’s economy, with rising wages giving Chinese consumers more spending clout.

Chinese policymakers are counting on growth in services and consumption to rebalance their economic growth model from its heavy reliance on investment and exports.

Economists polled by Reuters expected China’s economic growth will moderate to around 6.5 percent this year as the property market cools and as authorities press ahead with a clamp down on riskier financial activity that is driving up borrowing costs.

Analysts and financial markets are widely expecting the government to announce a 2018 growth target of around 6.5 percent at the NPC, the same as last year.

A composite PMI covering both the manufacturing and services activity stood at 52.9 in February, down from January’s reading of 54.6.

“Looking ahead, we think growth is likely to fall short of expectations this year, with many underestimating the headwinds from slower credit growth and a cooling property sector,” Capital Economics’ Evans-Pritchard said.
…

Growth in China’s manufacturing sector in February cooled to the weakest in more than 11/2 years, raising concerns of a sharper-than-expected slowdown in the world’s second biggest economy this year as regulators tighten the screws on financial risks.

The weakness was driven by disruption to business activity by the Lunar New Year holidays and curbs to factory output from tougher pollution rules, but there are worries of a bigger loss in momentum.

“Although a recovery looks possible in the short-run as the anti-pollution campaign winds down, the risk is still that the economy fares worse this year than is generally expected,” said Julian Evans-Pritchard, senior China Economist at Capital Economics.

Index raises concern

The official Purchasing Managers’ Index (PMI) released Wednesday fell to 50.3 in February, from 51.3 in January. But it remained above the 50-point mark that separates growth from contraction on a monthly basis, the 19th straight month of expansion.

The drop may raise some concerns for China’s leaders as they prepare for the start of the National People’s Congress (NPC) next week where Beijing will unveil its economic targets for this year.

Globally, solid demand has kept many export-reliant economies humming over the past year or so, though a move toward tighter policy in advanced nations could cut into growth this year.

The latest PMI’s subindex of new export orders fell to 49.0, the lowest in at least a year, as the yuan currency appreciated against the dollar.

Chen Zhongtao, an official with China Logistics Information Center (CLIC), said that “13.6 percent of firms reported concerns over the appreciating Chinese currency and greater currency fluctuations,” the highest number of companies to do so since March 2017.

CLIC said in a statement that export sluggishness is expected to continue this year as steel firms are more reluctant to ship goods in the face of rising global protectionism.

Lunar New Year effect

The index for output stood at 50.7, down from 53.5 in January as the Lunar New Year holidays disrupted factory activities, the statistics bureau said. Total new orders also expanded much slower in February.

Raw material input prices fell for the second consecutive month to the lowest since July 2017, indicating cost pressure from price rises on manufacturing firms is easing.

“I think besides the Lunar New Year factor, the stricter pollution measures in the north before the National People’s Congress might have weighed on activities as well,” said Betty Wang, Senior China Economist at ANZ.

Wang expects momentum to pick up in the months ahead as the pollution crackdown tapers off.

Still, there are signs that China may continue with the pollution crackdown, with top steelmaking city of Tangshan proposing new restrictions on production once the current curbs expire in March.

The weeklong Lunar New Year holidays, which fell in February this year but January in 2017, tend to distort data early in the year.

Many factories and offices start to scale back operations ahead of time before shutting for the entire holiday or longer, while some manufacturers front-load shipments or replenish inventories ahead of the break.

Moderating growth in 2018

Boosted by government infrastructure spending, a resilient property market and unexpected strength in exports, China’s manufacturing and industrial firms helped the economy post better-than-expected growth of 6.9 percent in 2017.

A sister survey showed activity in China’s service sector slowed to lowest since October last year in February. The official non-manufacturing Purchasing Managers’ Index (PMI) fell to 54.4 from 55.3 in January.

The services sector accounts for more than half of China’s economy, with rising wages giving Chinese consumers more spending clout.

Chinese policymakers are counting on growth in services and consumption to rebalance their economic growth model from its heavy reliance on investment and exports.

Economists polled by Reuters expected China’s economic growth will moderate to around 6.5 percent this year as the property market cools and as authorities press ahead with a clamp down on riskier financial activity that is driving up borrowing costs.

Analysts and financial markets are widely expecting the government to announce a 2018 growth target of around 6.5 percent at the NPC, the same as last year.

A composite PMI covering both the manufacturing and services activity stood at 52.9 in February, down from January’s reading of 54.6.

“Looking ahead, we think growth is likely to fall short of expectations this year, with many underestimating the headwinds from slower credit growth and a cooling property sector,” Capital Economics’ Evans-Pritchard said.
…

The U.S. Commerce Department on Tuesday recommended raising import duties on Chinese-made aluminum foil it said is being sold at unfairly low prices due to improper subsidies to producers.

The ruling was praised by the Aluminum Association, a trade group that pressed the case and said cheap imports were threatening thousands of jobs.

Beijing faces complaints from the United States, European Union and other trading partners that a flood of Chinese aluminum, steel and other exports are being sold at unfairly low prices, threatening jobs abroad.

The Commerce Department said it concluded Chinese exporters were selling aluminum foil at 49 to 106 percent below fair value and were receiving unfair subsidies of 17 to 81 percent of the goods’ value.

Importers will have to post cash bonds to pay potentially higher duties while the recommendation goes to the U.S. International Trade Commission for a final decision, said a Commerce statement.

China’s Ministry of Commerce complained Washington was harming Chinese exporters and said Beijing was ready to take unspecified “necessary measures” to defend its interests.

Beijing has accused Trump’s government of disrupting global trade regulation by taking action under U.S. law instead of through the World Trade Organization.

“China will take necessary measures to defend its interests in response to the wrong practice of the United States,” said a Commerce Ministry official, Wang Hejun, in a statement.

The Trump administration earlier raised duties on Chinese-made washing machines, solar modules and some aluminum and steel products to offset what it said were improper subsidies.

The American Chamber of Commerce in China says Chinese officials have warned of possible unspecified retaliation if Washington took excessive steps in trade disputes.
…

U.S. President Donald Trump has reached an agreement with the Boeing Co to provide two Air Force One planes for $3.9 billion, the White House said on Tuesday.

“President Trump has reached an informal deal with Boeing on a fixed-price contract for the new Air Force One Program,” Deputy Press Secretary Hogan Gidley told Reuters. He said the contract will save taxpayers more than $1.4 billion, but those savings could not be independently confirmed.

Trump has said Boeing’s costs to build replacements for Air Force One aircraft – one of the most visible symbols of the U.S. presidency – were too high and urged the federal government in a tweet to “Cancel order!”

The Boeing 747-8s are designed to be an airborne White House able to fly in worst-case security scenarios, such as nuclear war, and are modified with military avionics, advanced communications and a self-defense system.

“President Trump negotiated a good deal on behalf of the American people,” Boeing said in a news release.

U.S. aerospace analyst Richard Aboulafia said the White House was engaging in “political theater.”

“There’s no evidence of a discount,” said Aboulafia, vice president of analysis at Teal Group.

Earlier this month, the Pentagon released Air Force budget documents for fiscal year 2019 disclosing the $3.9 billion cost for the two-aircraft program. The same 2018 budget document, not adjusted for inflation, showed the price at $3.6 billion.

Boeing would only have so much room to offer discounts given the high proportion of supplier content on Air Force One, from refrigerators to missile warning systems, Aboulafia said by phone.

The big U.S. defense contractor said the deal includes work to develop and build two planes, including unique items such as a communications package, internal and external stairs, large galleys and other equipment.

The “informal deal” will need to be codified in a formal contract with comprehensive, complex terms and conditions said Franklin Turner, a partner specializing in government contracts at law firm McCarter & English, suggesting a final deal was still a ways off.

Boeing stock was up 1.4 percent at $368.54, trading at an all-time high.

 
…

U.S. President Donald Trump has reached an agreement with the Boeing Co to provide two Air Force One planes for $3.9 billion, the White House said on Tuesday.

“President Trump has reached an informal deal with Boeing on a fixed-price contract for the new Air Force One Program,” Deputy Press Secretary Hogan Gidley told Reuters. He said the contract will save taxpayers more than $1.4 billion, but those savings could not be independently confirmed.

Trump has said Boeing’s costs to build replacements for Air Force One aircraft – one of the most visible symbols of the U.S. presidency – were too high and urged the federal government in a tweet to “Cancel order!”

The Boeing 747-8s are designed to be an airborne White House able to fly in worst-case security scenarios, such as nuclear war, and are modified with military avionics, advanced communications and a self-defense system.

“President Trump negotiated a good deal on behalf of the American people,” Boeing said in a news release.

U.S. aerospace analyst Richard Aboulafia said the White House was engaging in “political theater.”

“There’s no evidence of a discount,” said Aboulafia, vice president of analysis at Teal Group.

Earlier this month, the Pentagon released Air Force budget documents for fiscal year 2019 disclosing the $3.9 billion cost for the two-aircraft program. The same 2018 budget document, not adjusted for inflation, showed the price at $3.6 billion.

Boeing would only have so much room to offer discounts given the high proportion of supplier content on Air Force One, from refrigerators to missile warning systems, Aboulafia said by phone.

The big U.S. defense contractor said the deal includes work to develop and build two planes, including unique items such as a communications package, internal and external stairs, large galleys and other equipment.

The “informal deal” will need to be codified in a formal contract with comprehensive, complex terms and conditions said Franklin Turner, a partner specializing in government contracts at law firm McCarter & English, suggesting a final deal was still a ways off.

Boeing stock was up 1.4 percent at $368.54, trading at an all-time high.

 
…

Federal Reserve Chairman Jerome Powell, pledging to “strike a balance” between the risk of an overheating economy and the need to keep growth on track, told U.S. lawmakers on Tuesday that the central bank would stick with gradual interest rate increases despite the added stimulus of tax cuts and government spending.

Fed policymakers anticipate three rate increases this year, and Powell gave no indication in prepared remarks to the House Financial Services Committee that the pace needs to quicken even as the “tailwinds” of government stimulus and a stronger world economy propel the U.S. recovery.

“The [Federal Open Market Committee] will continue to strike a balance between avoiding an overheating economy and bringing … price inflation to 2 percent on a sustained basis,” Powell said in prepared remarks for his first monetary policy testimony to Congress as Fed chief.

“Some of the headwinds the U.S. economy faced in previous years have turned into tailwinds,” Powell said, noting recent fiscal policy shifts and the global economic recovery. Still, “inflation remains below our 2 percent longer-run objective. In the (FOMC‘s) view, further gradual rate increases in the federal funds rate will best promote attainment of both of our objectives.”

The testimony sent Powell’s first signal as Fed chief that the massive tax overhaul and government spending plan launched by the Trump administration will not prompt any immediate shift to a faster pace of rate increases. “Gradual” has been the operative word since the Fed began raising rates under Powell’s predecessor, Janet Yellen, in late 2015.

The Fed is expected to approve its first rate increase of 2018 at the next policy meeting in March, when it will also provide fresh economic projections and Powell will hold his first press conference.

“This is a continuation of where this Fed was under Chair Yellen,” said Robert Albertson, principal and chief strategist at Sandler O‘Neill & Partners in New York.

“They are normalizing, they are not tightening … The surprises, if we are going to see them, are going to be after more data comes out in the next month or two,” and accounts for things like the tax cuts and whether business investment spending continues higher, he said.

Market reaction was muted. U.S. stocks were trading slightly lower while the dollar .DXY was stronger against a basket of currencies. Prices of U.S. Treasuries were mixed.

Valuation pressures

Powell’s appearance before the House panel is his first as Fed chief. He used his prepared remarks to strike notes likely to be welcomed by the Republican majority on the panel – including promises of “transparency” and a nod to the monetary policy rules some of them favor.

“I am committed to clearly explaining what we are doing and why we are doing it,” Powell said.

But in his remarks and in a monetary policy report issued to Congress by the Fed last week he also stuck close to a safe script, mentioning none of the new initiatives that some of his colleagues have pushed for, such as a review of the Fed’s system for managing inflation.

That report acknowledged “valuation pressures” in parts of the economy, and noted the recent return of volatility in stock markets.

Though rising long-term interest rates and recent equity market volatility have tightened financial conditions, Powell said, “we do not see these developments as weighing heavily on the outlook for economic activity, the labor market and inflation.”

Rather, “the robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment,” he said.
…

Federal Reserve Chairman Jerome Powell, pledging to “strike a balance” between the risk of an overheating economy and the need to keep growth on track, told U.S. lawmakers on Tuesday that the central bank would stick with gradual interest rate increases despite the added stimulus of tax cuts and government spending.

Fed policymakers anticipate three rate increases this year, and Powell gave no indication in prepared remarks to the House Financial Services Committee that the pace needs to quicken even as the “tailwinds” of government stimulus and a stronger world economy propel the U.S. recovery.

“The [Federal Open Market Committee] will continue to strike a balance between avoiding an overheating economy and bringing … price inflation to 2 percent on a sustained basis,” Powell said in prepared remarks for his first monetary policy testimony to Congress as Fed chief.

“Some of the headwinds the U.S. economy faced in previous years have turned into tailwinds,” Powell said, noting recent fiscal policy shifts and the global economic recovery. Still, “inflation remains below our 2 percent longer-run objective. In the (FOMC‘s) view, further gradual rate increases in the federal funds rate will best promote attainment of both of our objectives.”

The testimony sent Powell’s first signal as Fed chief that the massive tax overhaul and government spending plan launched by the Trump administration will not prompt any immediate shift to a faster pace of rate increases. “Gradual” has been the operative word since the Fed began raising rates under Powell’s predecessor, Janet Yellen, in late 2015.

The Fed is expected to approve its first rate increase of 2018 at the next policy meeting in March, when it will also provide fresh economic projections and Powell will hold his first press conference.

“This is a continuation of where this Fed was under Chair Yellen,” said Robert Albertson, principal and chief strategist at Sandler O‘Neill & Partners in New York.

“They are normalizing, they are not tightening … The surprises, if we are going to see them, are going to be after more data comes out in the next month or two,” and accounts for things like the tax cuts and whether business investment spending continues higher, he said.

Market reaction was muted. U.S. stocks were trading slightly lower while the dollar .DXY was stronger against a basket of currencies. Prices of U.S. Treasuries were mixed.

Valuation pressures

Powell’s appearance before the House panel is his first as Fed chief. He used his prepared remarks to strike notes likely to be welcomed by the Republican majority on the panel – including promises of “transparency” and a nod to the monetary policy rules some of them favor.

“I am committed to clearly explaining what we are doing and why we are doing it,” Powell said.

But in his remarks and in a monetary policy report issued to Congress by the Fed last week he also stuck close to a safe script, mentioning none of the new initiatives that some of his colleagues have pushed for, such as a review of the Fed’s system for managing inflation.

That report acknowledged “valuation pressures” in parts of the economy, and noted the recent return of volatility in stock markets.

Though rising long-term interest rates and recent equity market volatility have tightened financial conditions, Powell said, “we do not see these developments as weighing heavily on the outlook for economic activity, the labor market and inflation.”

Rather, “the robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment,” he said.
…

Just as “Black Panther” is setting records at the box office, a new study finds that diverse audiences are driving most of the biggest blockbusters and many of the most-watched hits on television.

UCLA’s Bunche Center released its fifth annual study on diversity in the entertainment industry Tuesday, unveiling an analysis of the top 200 theatrical film releases of 2016 and 1,251 broadcast, cable and digital platform TV shows from the 2015-2016 season. Among its results: minorities accounted for the majority of ticket buyers for five of the top 10 films at the global box office, and half of ticket buyers for two more of the top 10.

“There has been some progress, undeniably. Things are not what they were five years ago,” said Darnell Hunt, director of the center, which focuses on African American studies, at the University of California, Los Angeles. “People are actually talking about diversity today as a bottom-line imperative as opposed to just the right thing to do. We’ve amassed enough evidence now that diversity does, in fact, sell.”

Minorities make up nearly 40 percent of the U.S. population, but Hispanic and African-American moviegoers over-index among moviegoers. According to the Motion Picture Association of America, Latinos make up 18 percent of the U.S. population but account for 23 percent of frequent moviegoers. Though African Americans are 12 percent of the population, they make up 15 percent of frequent moviegoers.

UCLA found that films with casts that were 21 to 30 percent minority regularly performed better at the box office than films with the most racially and ethnically homogenous casts.

Hunt believes that the wealth of data, as well as box-office successes like “Black Panther,” have made obvious the financial benefits of films that better reflect the racial makeup of the American population.

“I think the industry has finally gotten the memo, at least on the screen in most cases, if not behind the camera,” said Hunt. “That’s where there are the most missed opportunities.”

The report, titled “Five Years of Progress and Missed Opportunities,” covers a period of some historic high points for Hollywood, including the release of the best picture-winning “Moonlight,” along with fellow Oscar nominees “Hidden Figures” and “Fences.”

But researchers found the overall statistical portrait of the industry didn’t support much improvement in diversity from 2015 to 2016.

“With each milestone achievement, we chip away at some of the myths about what’s possible and what’s not,” said Hunt. “Every time a film like this does really well, every time we see a TV show like ‘Empire,’ it makes it harder for them to make the argument that you can’t have a viable film with a lead of color. Or you can’t have a universally appealing show with a predominantly minority cast. It’s just not true anymore because the mainstream, itself, is diverse.”

Some of the largest disparities for minorities detailed by the UCLA report were in roles like film writers (8.1 percent of 2016’s top films) and creators of broadcast scripted shows (7.1 percent). Hunt blamed the lag behind the camera on, among other factors, executive ranks that are still overwhelmingly male.

“It’s a white-male controlled industry and it hasn’t yet figured out how to incorporate other decision-makers of color and women into the process. So you have these momentary exceptions to the rule,” said Hunt, pointing to “Black Panther,” which has grossed $700 million worldwide in two weeks of release.

Such films, he said, show the considerable economic sense of making movies and television series that don’t ignore nearly half of their potential audience.

“It’s business 101,” Hunt said.
…

Just as “Black Panther” is setting records at the box office, a new study finds that diverse audiences are driving most of the biggest blockbusters and many of the most-watched hits on television.

UCLA’s Bunche Center released its fifth annual study on diversity in the entertainment industry Tuesday, unveiling an analysis of the top 200 theatrical film releases of 2016 and 1,251 broadcast, cable and digital platform TV shows from the 2015-2016 season. Among its results: minorities accounted for the majority of ticket buyers for five of the top 10 films at the global box office, and half of ticket buyers for two more of the top 10.

“There has been some progress, undeniably. Things are not what they were five years ago,” said Darnell Hunt, director of the center, which focuses on African American studies, at the University of California, Los Angeles. “People are actually talking about diversity today as a bottom-line imperative as opposed to just the right thing to do. We’ve amassed enough evidence now that diversity does, in fact, sell.”

Minorities make up nearly 40 percent of the U.S. population, but Hispanic and African-American moviegoers over-index among moviegoers. According to the Motion Picture Association of America, Latinos make up 18 percent of the U.S. population but account for 23 percent of frequent moviegoers. Though African Americans are 12 percent of the population, they make up 15 percent of frequent moviegoers.

UCLA found that films with casts that were 21 to 30 percent minority regularly performed better at the box office than films with the most racially and ethnically homogenous casts.

Hunt believes that the wealth of data, as well as box-office successes like “Black Panther,” have made obvious the financial benefits of films that better reflect the racial makeup of the American population.

“I think the industry has finally gotten the memo, at least on the screen in most cases, if not behind the camera,” said Hunt. “That’s where there are the most missed opportunities.”

The report, titled “Five Years of Progress and Missed Opportunities,” covers a period of some historic high points for Hollywood, including the release of the best picture-winning “Moonlight,” along with fellow Oscar nominees “Hidden Figures” and “Fences.”

But researchers found the overall statistical portrait of the industry didn’t support much improvement in diversity from 2015 to 2016.

“With each milestone achievement, we chip away at some of the myths about what’s possible and what’s not,” said Hunt. “Every time a film like this does really well, every time we see a TV show like ‘Empire,’ it makes it harder for them to make the argument that you can’t have a viable film with a lead of color. Or you can’t have a universally appealing show with a predominantly minority cast. It’s just not true anymore because the mainstream, itself, is diverse.”

Some of the largest disparities for minorities detailed by the UCLA report were in roles like film writers (8.1 percent of 2016’s top films) and creators of broadcast scripted shows (7.1 percent). Hunt blamed the lag behind the camera on, among other factors, executive ranks that are still overwhelmingly male.

“It’s a white-male controlled industry and it hasn’t yet figured out how to incorporate other decision-makers of color and women into the process. So you have these momentary exceptions to the rule,” said Hunt, pointing to “Black Panther,” which has grossed $700 million worldwide in two weeks of release.

Such films, he said, show the considerable economic sense of making movies and television series that don’t ignore nearly half of their potential audience.

“It’s business 101,” Hunt said.
…

The governor of Sao Paulo and likely centrist presidential candidate Geraldo Alckmin said on Monday that he would privatize Brazil’s state-run oil company Petroleo Brasileiro SA if he wins the elections in October.

Alckmin, who has single digit support in opinion polls, said during a television interview with Band TV that he favored private ownership of Petrobras, as Brazil’s biggest company is known, as long as the sale was conducted within a strict regulatory framework.

Once a taboo issue in Brazilian politics because of national sovereignty concerns, the privatization of Petrobras is set to become a campaign issue this year as Brazil struggles to bring an unsustainable budget deficit under control.

Brazil’s left fiercely rejects the sale of Petrobras, but the leftist leader leading early opinion polls, former President Luiz Inacio Lula da Silva, will likely be barred from running because of a corruption conviction and there are no obvious politicians who can fill his shoes.

It is not clear where the far right candidate Jair Bolsonaro, who is currently second in opinion polls, stands on relinquishing state control of Petrobras.

But his economic policy advisor Paulo Guedes told Valor newspaper in an interview published on Monday that he favored selling all state companies to raise 700 billion reais that would help pay off one fifth of Brazil’s public debt.
…

President Emmanuel Macron on Saturday faced heckles and whistles from French farmers angry with reforms to their sector, as he arrived for France’s annual agricultural fair.

For over 12 hours, Macron listened and responded to critics’ rebukes and questions — only to return home to the Elysee Palace with an adopted hen.

“I saw people 500 meters away, whistling at me,” Macron said, referring to a group of cereal growers protesting against a planned European Union free-trade pact with a South American bloc, and against the clampdown on weedkiller glyphosate.

“I broke with the plan and with the rules and headed straight to them, and they stopped whistling,” he told reporters.

“No one will be left without a solution,” he said.

Macron was seeking to appease farmers who believe they have no alternative to the widely used herbicide, which environmental activists say probably causes cancer.

Mercosur warning

He also wanted to calm fears after France’s biggest farm union warned Friday that more than 20,000 farms could go bankrupt if the deal with the Mercosur trade bloc (Brazil, which is the world’s top exporter of beef, plus Argentina, Uruguay and Paraguay) goes ahead.

Meanwhile, Macron was under pressure over a plan to allow the wolf population in the French countryside to grow, if only marginally.

“If you want me to commit to reinforce the means of protection … I will do that,” he responded.

And he called on farmers to accept a decision on minimum price rules for European farmers, “or else the market will decide for us.”

But it wasn’t all jeers and snarls for Macron at the fair.

He left the fairground with a red hen in his arms, a gift from a poultry farm owner.

“I’ll take it. We’ll just have to find a way to protect it from the dog,” he said, referring to his Labrador, Nemo.

It was a far cry from last year, when, as a presidential candidate not yet in office, Macron was hit on the head by an egg launched by a protester.
…

President Emmanuel Macron on Saturday faced heckles and whistles from French farmers angry with reforms to their sector, as he arrived for France’s annual agricultural fair.

For over 12 hours, Macron listened and responded to critics’ rebukes and questions — only to return home to the Elysee Palace with an adopted hen.

“I saw people 500 meters away, whistling at me,” Macron said, referring to a group of cereal growers protesting against a planned European Union free-trade pact with a South American bloc, and against the clampdown on weedkiller glyphosate.

“I broke with the plan and with the rules and headed straight to them, and they stopped whistling,” he told reporters.

“No one will be left without a solution,” he said.

Macron was seeking to appease farmers who believe they have no alternative to the widely used herbicide, which environmental activists say probably causes cancer.

Mercosur warning

He also wanted to calm fears after France’s biggest farm union warned Friday that more than 20,000 farms could go bankrupt if the deal with the Mercosur trade bloc (Brazil, which is the world’s top exporter of beef, plus Argentina, Uruguay and Paraguay) goes ahead.

Meanwhile, Macron was under pressure over a plan to allow the wolf population in the French countryside to grow, if only marginally.

“If you want me to commit to reinforce the means of protection … I will do that,” he responded.

And he called on farmers to accept a decision on minimum price rules for European farmers, “or else the market will decide for us.”

But it wasn’t all jeers and snarls for Macron at the fair.

He left the fairground with a red hen in his arms, a gift from a poultry farm owner.

“I’ll take it. We’ll just have to find a way to protect it from the dog,” he said, referring to his Labrador, Nemo.

It was a far cry from last year, when, as a presidential candidate not yet in office, Macron was hit on the head by an egg launched by a protester.
…

Investor Warren Buffett says Wall Street’s lust for deals has prompted CEOs to act like oversexed teenagers and overpay for acquisitions, so it has been hard to find deals for Berkshire Hathaway.

In his annual letter to shareholders Saturday, Buffett mixed investment advice with details of how Berkshire’s many businesses performed. Buffett blamed his recent acquisition drought on ambitious CEOs who have been encouraged to take on debt to finance pricey deals.

“If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it’s a bit like telling your ripening teenager to be sure to have a normal sex life,” Buffett said.

Berkshire is also facing more competition for acquisitions from private equity firms and other companies such as privately held Koch Industries.

Sticking with guideline

Buffett is sitting on $116 billion of cash and bonds because he’s struggled to find acquisitions at sensible prices. And Buffett is unwilling to load up on debt to finance deals at current prices.

“We will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own,” Buffett wrote.

He said the conglomerate recorded a $29 billion paper gain because of the tax reforms Congress passed late last year. That helped it generate $44.9 billion profit last year, up from $24.1 billion the previous year.

Investors left wanting

Buffett’s letter is always well-read in the business world because of his remarkable track record over more than five decades and his talent for explaining complicated subjects in plain language. But this year’s letter left some investors wanting more because he didn’t say much about Berkshire’s succession plan, some noteworthy investment moves or the company’s new partnership with Amazon and JP Morgan Chase to reduce health care costs.

Edward Jones analyst Jim Shanahan said he expected Buffett to devote more of the letter to explaining his decision to promote and name the top two candidates to eventually succeed him as Berkshire’s CEO. Buffett briefly mentioned that move in two paragraphs at the very end of his letter.

That surprised John Fox, chief investment officer at FAM Funds, which holds Berkshire stock.

“He didn’t say a lot about succession. I was expecting more,” Fox said.

Greg Abel and Ajit Jain joined Berkshire’s board in January and took on additional responsibilities. Jain will now oversee all of the conglomerate’s insurance businesses while Abel will oversee all of the conglomerate’s non-insurance business operations.

Bet pays off for charity

Buffett, 87, has long had a succession plan in place for Berkshire to ensure the future of the conglomerate he built even though he has no plans to retire. Until January, he kept the names of Berkshire’s internal CEO candidates secret although investors who follow Berkshire had long included Jain and Abel on their short lists.

Shanahan said it also would have been nice to read Buffett’s thoughts on why he is selling off Berkshire’s IBM investment but maintaining big stakes in Wells Fargo and US Bancorp.

But Buffett did offer some sage investment advice based on his victory in a 10-year bet he made with a group of hedge funds. The S&P 500 index fund Buffett backed generated an 8.5 percent average annual gain and easily outpaced the hedge funds. One of Buffett’s favorite charities, Girls Inc. of Omaha, received $2.2 million as a result of the bet.

Buffett said it’s important for people to invest money regularly regardless of the market’s ups and downs, but watch out for investment fees, which will eat away at returns.

Succeeding in the stock market requires the discipline to act sensibly when markets do crazy things. Buffett said investors need “an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period — or even to look foolish — is also essential.”

Buffett said investors shouldn’t assume that bonds are less risky than stocks. At times, bonds are riskier than stocks.

Berkshire owns more than 90 subsidiaries, including clothing, furniture and jewelry firms. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
…

Investor Warren Buffett says Wall Street’s lust for deals has prompted CEOs to act like oversexed teenagers and overpay for acquisitions, so it has been hard to find deals for Berkshire Hathaway.

In his annual letter to shareholders Saturday, Buffett mixed investment advice with details of how Berkshire’s many businesses performed. Buffett blamed his recent acquisition drought on ambitious CEOs who have been encouraged to take on debt to finance pricey deals.

“If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it’s a bit like telling your ripening teenager to be sure to have a normal sex life,” Buffett said.

Berkshire is also facing more competition for acquisitions from private equity firms and other companies such as privately held Koch Industries.

Sticking with guideline

Buffett is sitting on $116 billion of cash and bonds because he’s struggled to find acquisitions at sensible prices. And Buffett is unwilling to load up on debt to finance deals at current prices.

“We will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own,” Buffett wrote.

He said the conglomerate recorded a $29 billion paper gain because of the tax reforms Congress passed late last year. That helped it generate $44.9 billion profit last year, up from $24.1 billion the previous year.

Investors left wanting

Buffett’s letter is always well-read in the business world because of his remarkable track record over more than five decades and his talent for explaining complicated subjects in plain language. But this year’s letter left some investors wanting more because he didn’t say much about Berkshire’s succession plan, some noteworthy investment moves or the company’s new partnership with Amazon and JP Morgan Chase to reduce health care costs.

Edward Jones analyst Jim Shanahan said he expected Buffett to devote more of the letter to explaining his decision to promote and name the top two candidates to eventually succeed him as Berkshire’s CEO. Buffett briefly mentioned that move in two paragraphs at the very end of his letter.

That surprised John Fox, chief investment officer at FAM Funds, which holds Berkshire stock.

“He didn’t say a lot about succession. I was expecting more,” Fox said.

Greg Abel and Ajit Jain joined Berkshire’s board in January and took on additional responsibilities. Jain will now oversee all of the conglomerate’s insurance businesses while Abel will oversee all of the conglomerate’s non-insurance business operations.

Bet pays off for charity

Buffett, 87, has long had a succession plan in place for Berkshire to ensure the future of the conglomerate he built even though he has no plans to retire. Until January, he kept the names of Berkshire’s internal CEO candidates secret although investors who follow Berkshire had long included Jain and Abel on their short lists.

Shanahan said it also would have been nice to read Buffett’s thoughts on why he is selling off Berkshire’s IBM investment but maintaining big stakes in Wells Fargo and US Bancorp.

But Buffett did offer some sage investment advice based on his victory in a 10-year bet he made with a group of hedge funds. The S&P 500 index fund Buffett backed generated an 8.5 percent average annual gain and easily outpaced the hedge funds. One of Buffett’s favorite charities, Girls Inc. of Omaha, received $2.2 million as a result of the bet.

Buffett said it’s important for people to invest money regularly regardless of the market’s ups and downs, but watch out for investment fees, which will eat away at returns.

Succeeding in the stock market requires the discipline to act sensibly when markets do crazy things. Buffett said investors need “an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period — or even to look foolish — is also essential.”

Buffett said investors shouldn’t assume that bonds are less risky than stocks. At times, bonds are riskier than stocks.

Berkshire owns more than 90 subsidiaries, including clothing, furniture and jewelry firms. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
…

Australia appears to be failing in its efforts to crack down on bribery, according to the latest survey conducted by Transparency International, a non-governmental organization based in Germany.

The group said developed countries – including Australia – appeared to be lagging in their efforts to combat corruption in the public sector.  It pointed to an inadequate regulation of foreign political donations in Australia, conflicts of interest in planning approvals, revolving doors and improper industry lobbying in large-scale mining projects.  

While Australia’s ranking is unchanged – it remains ranked 13th out of 180 countries – its corruption score has slipped eight points since the index started in its current form in 2012.

Concern about Australia’s ranking comes as debate continues about the need for a nationwide anti-corruption body similar to the Independent Commission Against Corruption in the state of New South Wales.  It was set up in 1989 and has scored many notable victories, including the jailing of corrupt state politicians.

Professor A.J. Brown, who leads a project called “Strengthening Australia’s National Integrity System” for Transparency International, says much more work needs to be done.

“We do not have a federal anti-corruption body amongst other things, so it is also about the fact that our track record in terms of government commitment to controlling foreign bribery or money laundering and some of the things that the private sector is also involved in internationally is not that strong.  We are moving but we have been moving very slow and very late, and not very comprehensively,” Brown said.

This year, New Zealand and Denmark were ranked highest in the Transparency International survey, the U.S. is ranked 16th, while South Sudan and Somalia were the lowest-ranked nations. The best performing region was Western Europe, while the most corrupt regions were Sub-Saharan Africa, followed by Eastern Europe and Central Asia.

The survey found that more than 6 billion people live in countries that are corrupt. Transparency International said most countries failed to protect the independence of the media, which plays a crucial role in preventing corruption.

 
…

Federal Reserve policymakers fretted on Friday that they could face the next U.S. recession with virtually the same arsenal of policies used in the last downturn and, with interest rates still relatively low, those will not pack the same punch.

In the midst of an unprecedented leadership transition, Fed officials are publicly debating whether to scrap their approach to inflation targeting, how much of its bond portfolio to retain, and how much longer they can raise interest rates in the face of an unexpectedly large boost from tax cuts and government spending.

After years of near-zero rates and $3.5 trillion in bond purchases all meant to stimulate the economy in the wake of the 2007-09 recession, the Fed has gradually tightened policy since late 2015. Its key rate is now in the range of 1.25 to 1.5 percent, and while the Fed plans to hike three more times this

year it has also forecast that it is about halfway to its goal.

That could leave little room to provide stimulus when the world’s largest economy, which is heating up, eventually turns around.

“We would be better off, rather than thinking about what we would do next time when we hit zero, making sure that we don’t get back there. We just don’t want to be there,” Boston Fed President Eric Rosengren told a conference of economists and the majority of his colleagues at the central bank.

Rosengren, one of only a few sitting policymakers who also served during the last downturn, said the expanding U.S. deficits could further erode the government’s ability to help curb any future recession. “With the deficits we are running up, it’s not likely [fiscal policy] will be helpful in the next

recession either,” he said.

Since mid-December, the Republican-controlled Congress and U.S. President Donald Trump aggressively cut taxes and boosted spending limits, two fiscal moves that are expected to push the annual budget deficit above $1 trillion next year and expand the $20 trillion national debt.

Overheating

That stimulus, combined with synchronized global growth, signs of U.S. inflation perking up, and unemployment near a 17-year low could set the stage for overheating that ends one of the longest economic expansions ever.

“We want more shock absorbers out there and really … the main shock absorber is the ability to reduce the fed funds rate, which means that you want to get to a higher inflation rate so that the pre-shock fed funds rate is 4 and not 2,” said Paul Krugman, the Nobel Prize-winning economist and professor at City University of New York.

In a speech to the conference hosted by the University of Chicago Booth School of Business, Krugman said every recession since 1982 has been caused by “private sector over-reach” and not Fed tightening, as in decades past.

The conference’s main research paper argued the central bank should focus on cutting rates in the next recession and avoid relying on asset purchases that are less effective in stimulating investment and growth than previously thought.

In October the Fed began trimming some of its assets and it has yet to decide how far it will go. William Dudley, president of the New York Fed, told the conference that, to be sure, the ability to again purchase bonds if and when rates hit zero “seems like a good tool to have.”

The Fed’s approach to any economic slowdown would likely be to cut rates, pledge further stimulus, and only then buy bonds.

Rosengren and others dismissed the possibility of adopting negative interest rates, as some other central banks have done.

Yet five years of below-target inflation, combined with an aging population and slowdown in labor force growth, has sparked a debate over ditching a long-standing 2 percent price target.

Some see this month’s succession of Fed Chair Janet Yellen by Jerome Powell as ideal timing to consider new frameworks that could help drive inflation, and rates, higher. Cleveland Fed President Loretta Mester, whom the White House is considering for Fed vice chair, told the conference the central bank could begin to reassess the framework later this year, though she added that the threshold for change should be high.
…

Federal Reserve policymakers fretted on Friday that they could face the next U.S. recession with virtually the same arsenal of policies used in the last downturn and, with interest rates still relatively low, those will not pack the same punch.

In the midst of an unprecedented leadership transition, Fed officials are publicly debating whether to scrap their approach to inflation targeting, how much of its bond portfolio to retain, and how much longer they can raise interest rates in the face of an unexpectedly large boost from tax cuts and government spending.

After years of near-zero rates and $3.5 trillion in bond purchases all meant to stimulate the economy in the wake of the 2007-09 recession, the Fed has gradually tightened policy since late 2015. Its key rate is now in the range of 1.25 to 1.5 percent, and while the Fed plans to hike three more times this

year it has also forecast that it is about halfway to its goal.

That could leave little room to provide stimulus when the world’s largest economy, which is heating up, eventually turns around.

“We would be better off, rather than thinking about what we would do next time when we hit zero, making sure that we don’t get back there. We just don’t want to be there,” Boston Fed President Eric Rosengren told a conference of economists and the majority of his colleagues at the central bank.

Rosengren, one of only a few sitting policymakers who also served during the last downturn, said the expanding U.S. deficits could further erode the government’s ability to help curb any future recession. “With the deficits we are running up, it’s not likely [fiscal policy] will be helpful in the next

recession either,” he said.

Since mid-December, the Republican-controlled Congress and U.S. President Donald Trump aggressively cut taxes and boosted spending limits, two fiscal moves that are expected to push the annual budget deficit above $1 trillion next year and expand the $20 trillion national debt.

Overheating

That stimulus, combined with synchronized global growth, signs of U.S. inflation perking up, and unemployment near a 17-year low could set the stage for overheating that ends one of the longest economic expansions ever.

“We want more shock absorbers out there and really … the main shock absorber is the ability to reduce the fed funds rate, which means that you want to get to a higher inflation rate so that the pre-shock fed funds rate is 4 and not 2,” said Paul Krugman, the Nobel Prize-winning economist and professor at City University of New York.

In a speech to the conference hosted by the University of Chicago Booth School of Business, Krugman said every recession since 1982 has been caused by “private sector over-reach” and not Fed tightening, as in decades past.

The conference’s main research paper argued the central bank should focus on cutting rates in the next recession and avoid relying on asset purchases that are less effective in stimulating investment and growth than previously thought.

In October the Fed began trimming some of its assets and it has yet to decide how far it will go. William Dudley, president of the New York Fed, told the conference that, to be sure, the ability to again purchase bonds if and when rates hit zero “seems like a good tool to have.”

The Fed’s approach to any economic slowdown would likely be to cut rates, pledge further stimulus, and only then buy bonds.

Rosengren and others dismissed the possibility of adopting negative interest rates, as some other central banks have done.

Yet five years of below-target inflation, combined with an aging population and slowdown in labor force growth, has sparked a debate over ditching a long-standing 2 percent price target.

Some see this month’s succession of Fed Chair Janet Yellen by Jerome Powell as ideal timing to consider new frameworks that could help drive inflation, and rates, higher. Cleveland Fed President Loretta Mester, whom the White House is considering for Fed vice chair, told the conference the central bank could begin to reassess the framework later this year, though she added that the threshold for change should be high.
…

European Union leaders staked out opening positions Friday for a battle over EU budgets that many conceded they are unlikely to resolve before Britain leaves next year, blowing a hole in Brussels’ finances.

At a summit to launch discussion on the size and shape of a seven-year budget package to run from 2021, ex-communist states urged wealthier neighbors to plug a nearly 10 percent annual revenue gap being left by Britain, while the Dutch led a group of small, rich countries refusing to chip in any more to the EU.

Germany and France, the biggest economies and the bloc’s driving duo as Britain prepares to leave in March 2019, renewed offers to increase their own contributions, though both set out conditions for that, including new priorities and less waste.

Underlining that a divide between east and west runs deeper than money, French President Emmanuel Macron criticized what he said were poor countries abusing EU funds designed to narrow the gap in living standards after the Cold War to shore up their own popularity while ignoring EU values on civil rights or to undercut Western economies by slashing tax and labor rules.

Noting the history of EU “cohesion” and other funding for poor regions as a tool of economic “convergence,” Macron told reporters: “I will reject a European budget which is used to finance divergence, on tax, on labor or on values.”

Poland and Hungary, heavyweights among the ex-communist states which joined the EU this century, are run by right-wing governments at daggers drawn with Brussels over their efforts to influence courts, media and other independent institutions.

The European Commission, the executive which will propose a detailed budget in May, has said it will aim to satisfy calls for “conditionality” that will link getting some EU funding to meeting treaty commitments on democratic standards such as properly functioning courts able to settle economic disputes.

But its president, Jean-Claude Juncker, warned on Friday against deepening “the rift between east and west” and some in the poorer nations see complaints about authoritarian tendencies as a convenient excuse to avoid paying in more to Brussels.

At around 140 billion euros ($170 billion) a year, the EU budget represents about 1 percent of economic output in the bloc or some 2 percent of public spending, but for all that it remains one of the bloodiest subjects of debate for members.

Focus on payments

The Commission has suggested that the next package should be increased by about 10 percent, but there was little sign Friday that the governments with cash are willing to pay that.

“When the UK leaves the EU, then that part of the budget should drop out,” said Dutch Prime Minister Mark Rutte, who leads a group of hawks including Sweden, Denmark and Austria.

“In any case, we do not want our contribution to rise and we want modernization,” he added, saying that meant reconsidering the EU’s major spending on agriculture and regional cohesion in order to do more in defense, research and controlling migration.

On the other side, Czech Prime Minister Andrej Babis said his priorities were “sufficient financing of cohesion policy” a good deal for businesses from the EU’s agricultural subsidies.

German Chancellor Angela Merkel said there had been broad agreement that new priorities such as in defense, migration and research should get new funding and she called for a “debureaucratization” of traditional EU spending programs.

Summit chair Donald Tusk praised the 27 leaders — Prime Minister Theresa May was not invited as Britain will have left before the new budget round starts — for approaching the issue “with open minds, rather than red lines.” But despite them all wanting to speed up the process, a deal this year was unlikely.

Quick deal unlikely

Although all agree it would be good to avoid a repeat of the 11th-hour wrangling ahead of the 2014-20 package, many sounded doubtful of a quick deal even early next year.

“It could go on for ages,” Rutte said. He added that it would be “nice” to finish by the May 2019 EU election: “But that’s very tight.”

Among the touchiest subjects will be accounting for the mass arrival of asylum-seekers in recent years. Aggrieved that some eastern states refuse to take in mainly Muslim migrants, some in the west have suggested penalizing them via the EU budget.

Merkel has proposed that regions which are taking in and trying to integrate refugees should have that rewarded in the allocation of EU funding — a less obviously penal approach but one which she had to defend on Friday against criticism in the east. It was not meant as a threat, the chancellor insisted.

In other business at a summit which reached no formal legal conclusions, leaders broadly agreed on some issues relating to next year’s elections to the European Parliament and to the accompanying appointment of a new Commission for five years.

They pushed back against efforts, notably from lawmakers, to limit their choice of nominee to succeed Juncker to a candidate who leads one of the pan-EU parties in the May 2019 vote. They approved Parliament’s plan to reallocate some British seats and to cut others altogether and also, barring Hungary, agreed to a Macron proposal to launch “consultations” with their citizens this year on what they want from the EU.
…