BBC News - Federal Reserve raises interest rates again

The Federal Reserve has been gradually raising interest rates since 2015

The US Federal Reserve has raised interest rates again.

Officials increased the target for the bank's benchmark rate by 0.25%, to a range of 2%-2.25%. A majority of members also said they expect another rise before the end of the year.

The move marks the bank's eighth rate rise since 2015, continuing its policy of gradual rate rises.

Now investors are looking for clues about how high the Fed might go or signs its pace could accelerate.

So far, US interest rates remain relatively low, reflecting the Fed's decision to lower them dramatically during the financial crisis in an effort to encourage borrowing and boost economic activity.

But Federal Reserve Chair Jerome "Jay" Powell and other economists say today's economy is strong enough that such stimulus is no longer necessary - a shift the Fed marked on Wednesday by ending its description of its policy as "accommodative".

Mr Powell said Wednesday's rate rise reflected the Fed's confidence in the US economy, describing it as a "particularly bright moment",

But he acknowledged that the bank is hearing a "rising chorus of concerns" from businesses about the risk from new US trade tariffs, which have disrupted supply chains and led to retaliation against US exports.

Mr Powell warned that a permanent shift to a "more protectionist world" would hurt the US and global economies, but added that for now, he expects the overall economic impact to remain relatively modest.

"We don't see it in the numbers," he said at a press conference in Washington after the meeting.

US gross domestic product grew at an annual pace of more than 4% in the second quarter of this year, and the unemployment rate continues to hover below 4% - near historic lows.

Price inflation, which had been sluggish, has also started to pick up, hitting the Fed's 2% target - and exceeding it by some measures.

Fed officials now expect the US economy to grow by 3.1% this year - faster than the 2.8% forecast in March, according to projections released after the meeting.

Their predictions for inflation remained unchanged at around 2%.

The forecasts show Fed officials expect about three rate rises in 2019 and one more in 2020, which would lift the bank's important federal funds rate to about 3.4% that year.

Higher interest rates make borrowing more expensive, slowing economic activity and curbing price inflation.

There have already been slowdowns some sectors in the US, such as home and car sales, where higher interest rates have led some price-conscious consumers to pull back.

But Mr Powell said the US economy has successfully absorbed the increases so far, performing better than expected.

Image copyrightAFP

Image captionFederal Reserve Board Chair Jerome Powell says gradual rate rises have kept the US economy on an even keel

Analysts worry that raising rates too quickly could tip the economy into recession.

The increasing rates have also faced attacks from US President Donald Trump, who has broken with tradition by commenting on monetary policy.

On Wednesday, he repeated those attacks, saying he would prefer to be able to borrow more cheaply.

"I'm worried about the fact that they seem to like raising rates," he said. "We could do other things with the money."

Mr Powell said the US economy has successfully absorbed the increases so far. He said the Fed does not factor politics into its decisions.

Wednesday's rate rise "yet again demonstrates the Fed's faith that it can continue to raise rates gradually without slowing economic growth", said Kully Samra, UK managing director of Charles Schwab.

Bloomberg News - South Africa Business Cycle in Longest Slump Since 1945: Chart

  by Ana Monteiro
The business cycle in South Africa, where the economy entered its first recession in almost a decade in the second quarter, is in its longest downward phase since records started in 1945. It entered a 58th straight month of declines in September, central bank data showed Tuesday. The regulator monitors about 200 indicators representing economic processes such as production, sales, employment and prices to determine the direction of the trend.

BBC News - Donald Trump hails South Korea trade deal

Donald Trump has signed a revised trade pact with South Korea, aimed at expanding opportunities for US carmakers and pharmaceutical companies.

It marks the first such agreement finalised by the US president, who has promised to overhaul his country's trade relationships.

At a press conference in New York, Mr Trump called the updates to the 2012 agreement "a very big deal".

The White House first announced the outline of the changes in March.

Most analysts said the revisions were relatively modest.

The completion of the pact came as Mr Trump faced a number of political controversies, including the sexual harassment allegations against his nominee to the Supreme Court.

Businesses are also worried about the impact of retaliatory tariffs to those Mr Trump's administration has imposed on steel and aluminium imports and Chinese goods.

Mr Trump said the signing, which took place on the sidelines of the United Nation's General Assembly, was "a great day" for the US and South Korea.

He described the revised pact as a "brand new agreement" and a sign that his trade strategy was working.

"In addition to this deal, we have many in the works, and they are fair deals," he said.

South Korean President Moon Jae-In focused his remarks on denuclearisation talks with North Korea, in which the US has been involved.

He said the new trade agreement, which still needs approval by South Korea's parliament, was a sign of the strong partnership between the US and South Korea.

Details of the deal

The US started negotiations with South Korea last year, following Mr Trump's criticism of the 2012 deal as a "one-way street".

Under the new terms, South Korea has agreed to exempt up to 50,000 cars per US manufacturer per year from South Korean safety requirements - double the current number and far higher than any American company currently exports.

The country has also agreed to changes such as improvements to its customs procedures and amendments to its drug pricing policies.

The agreement also extends a 25% US tariff against South Korean trucks to 2041. It had been scheduled to expire in 2021.

Separately, the US agreed to exempt a certain amount of South Korean steel from the 25% tariffs Mr Trump announced in March - equivalent to 70% of the country's average imports from 2015-2017.

South Korea and the US are major trade partners, exchanging nearly $155bn in goods and services in 2017.

Reuters News - China says U.S. trying to bully it into submission as fresh tariffs kick in

BEIJING (Reuters) - The United States and China imposed fresh tariffs on each other’s goods on Monday as the world’s biggest economies showed no signs of backing down from an increasingly bitter trade dispute that is expected to knock global economic growth.

Soon after the fresh duties went into effect, China accused the United States of engaging in “trade bullyism” and said it was intimidating other countries to submit to its will through measures such as tariffs, the official Xinhua news agency said.

But Beijing also said it was willing to restart trade negotiations with the United States if the talks are “based on mutual respect and equality,” Xinhua said, citing a white paper on the dispute published by China’s State Council.

U.S. tariffs on $200 billion worth of Chinese goods and retaliatory tariffs by Beijing on $60 billion worth of U.S. products took effect at midday Asian time, though the initial level of the duties was not as high as earlier feared.

The U.S. will levy tariffs of 10 percent initially, rising to 25 percent at the end of 2018. Beijing has imposed rates of 5-10 percent and warned it would respond to any rise in U.S. tariffs on Chinese products accordingly.

The two sides had already slapped tariffs on $50 billion worth of each other’s goods.

For U.S. consumers, the new duties could translate into higher prices for Chinese products ranging from vacuum cleaners to technology gear such as home modems and routers, while U.S. goods targeted by Beijing include liquefied natural gas and certain types of aircraft.

President Donald Trump is pressuring China to reduce its huge bilateral trade surplus and make sweeping changes to its policies on trade, technology transfers and high-tech industrial subsidies. Beijing has denied accusations that U.S. firms are being forced to transfer technology and sees Washington’s demands on rolling back its industrial policies as an attempt to contain China’s economic rise.

The U.S. administration “has brazenly preached unilateralism, protectionism and economic hegemony, making false accusations against many countries and regions, particularly China, intimidating other countries through economic measures such as imposing tariffs,” Xinhua quoted the State Council’s white paper as saying.

BOTH SIDES DIGGING IN

Several rounds of Sino-U.S. trade talks in recent months have yielded no major breakthroughs and attempts at arranging another meeting in coming weeks have fallen through.

China, which has accused Washington of being insincere in trade negotiations, has decided not to send Vice Premier Liu He to Washington this week, The Wall Street Journal reported late last week.

News of Beijing’s decision to skip the talks pushed China’s yuan currency down 0.3 percent on Monday in offshore trade, reinforcing global investors’ fears that both sides are digging in for a long fight. Mainland China markets were closed for a holiday.

A senior White House official said last week the U.S. will continue to engage China, but added there was no date set for the next round of talks.

BBC News - UK visas: High-skilled migrants cap 'should be scrapped'

Image copyrightGETTY IMAGES

Image captionA report says there should be no limit on the number of high-skilled workers, such as doctors, coming to the UK to work

The cap on the number of high-skilled migrants coming to the UK should be scrapped, according to a key report commissioned by the government ahead of Brexit.

The Migration Advisory Committee says these workers make a more positive contribution to the public finances.

It suggests EU workers should be subject to the same visa rules as other migrants.

But it notes the UK might offer them special status under a Brexit deal.

The government has said it will "carefully consider" the committee's proposals.

• How has EU migration changed the UK?

Labour backed the report, calling for an "end to discrimination" against non-EU migrants.

Under the current system, workers from the European Economic Area (EEA) - which includes all EU countries including the UK, as well as Norway, Iceland and Lichtenstein - enjoy freedom of movement, travelling and working within the area without visas.

High v low skilled workers

The committee recommends a policy allowing greater access for higher-skilled migration while restricting access for lower-skilled workers.

It suggests extending the current scheme for high-skilled non-EEA migrants - known as a Tier 2 visa - to those from EEA countries as well.

As part of this process, the cap on the total amount of workers allowed to enter under Tier 2 should be abolished and the range of jobs eligeable for the visas expanded, the committee says.

Current policy is to allow 20,700 high-skilled workers into the UK each year on Tier 2 visas.

The current salary threshold for such visas is £30,000, which the report says should be retained.

Top priority is given to jobs on a "shortage occupation list".

Examples include:

• Geophysicists
• Mining engineers
• 3D computer animators
• Games designers
• Cyber security experts
• Emergency medicine consultants
• Paediatric consultants

With regard to low-skilled workers, the committee says it is "not convinced there needs to be a work route for low-skilled workers" from the EU to fill jobs in industries such as catering or hospitality.

The "possible exception" to this rule could be for seasonal agriculture, where 99% of the workers come from EU countries.

• Reality Check: Who are the low-skilled EU workers?

It also does not recommend that there should be exceptions for workers coming to the UK to work in the public sector.

Different rules?

The committee - which is made up of independent experts, says it does not seen any "compelling reasons to offer a different set of rules" for workers from the EEA than those from other countries - unless such a position has been arrived at as part of the Brexit negotiations.

"A migrant's impact depends on factors such as their skills, employment, age and use of public services, and not fundamentally on their nationality," it says.

• Do we really know how many people come to the UK?
• Taking stock of where we are with Brexit
• Brexit: All you need to know

The report goes on to say there is no evidence that increased European migration has damaged life in the UK.

It concludes that EU migrants pay more in tax than they receive in benefits, contribute more to the NHS workforce than the healthcare they access, and have no effect on crime rates.

It says the impact of all EEA migration to the UK since 2004 was almost certainly less than that of the fall in the value of the pound following the referendum vote.

---

'The Brexit elephant in the room'

By Dominic Casciani, BBC home affairs correspondent

Image copyrightGETTY IMAGES

Image captionThe report says there should be no route to ensure low-skilled workers can come in from the EU

Ministers commissioned this report because they needed clear facts on the role of European workers in the country - and the implications of ending their freedom of movement.

But it's too soon to know how many of the committee's recommendations will be adopted because of the Brexit elephant in the room.

So while the experts want no special immigration deal for future EU workers (the report does not concern those who are already living in the UK), it doesn't consider whether a special deal would be good or bad for Britain.

Such a deal is a possibility. The prime minister's Chequers plan proposes a "mobility framework" - a system allowing British and EU citizens to study and work in each other countries, potentially linked to a trade deal.

So if the ministers offer special access for future EU workers, in return for something they want for the UK, this report won't help us know whether it is worth it.

---

'Pressure on the PM'

The MAC was asked to do the research in July 2017 by then Home Secretary Amber Rudd.

It is thought it could shape the government's post-Brexit immigration policy.

BBC assistant political editor Norman Smith said Mrs May might start "sketching out" her plans for this at October's Conservative Party conference.

He added that the report would increase pressure on her to not compromise on freedom of movement during the Brexit negotiations.

'An end to low-skilled migration'

Stephen Clarke, senior economic analyst at the Resolution Foundation, said if the recommendations were adopted, it would signal "the biggest change to the UK labour market in a generation" and would represent a "huge shift" for sectors such as hotels and food manufacturing.

He said: "If enacted, these proposals would effectively end low-skilled migration, while prioritising mid- and high-skill migration in areas where we have labour shortages.

The Royal College of Nursing welcomed the recommendations, saying the UK had long depended on recruiting nursing professionals from around the world.

But Lord Green of Deddington, chairman of Migration Watch UK, said the report was "blind to the impact" of EU migration to a number of communities.

He said the proposals would "permit continued high levels of immigration" and "the overall outcome would be to weaken immigration control".

Report 'puzzling'

The government says it will listen to the report and bring in an immigration system that works for the whole of the UK, adding: "EU citizens play an important and positive role in our economy and society and we want that to continue after we leave".

Shadow home secretary Diane Abbott said the UK's immigration policy should be "based on our economic needs, while meeting our legal obligations and treating people fairly".

"[This] means ending the discrimination against non-EU migrants, especially from the Commonwealth," she added.

But Yvette Cooper, Labour MP and chair of the Home Affairs Select Committee, said the report was "puzzling" with "significant gaps" between the MAC's research and recommendations.

"The MAC admit they have ignored the crucial relationship between immigration and trade," she said.

BBC News - China won't devalue yuan to boost exports, says Premier Li

China has hit back at accusations that it is using its currency as a tool in the trade war with the US.

At a forum in Tianjin, China's premier Li Keqiang said Beijing will not actively weaken the yuan to boost exports.

President Donald Trump has repeatedly accused China of manipulating its currency to combat US tariffs.

Mr Li's comments come amid an escalating trade war between the world's two largest economies.

The Chinese premier also said at the World Economic Forum it was essential that the basic principles of "multilateralism and free trade" were upheld.

The US has engaged in a protectionist agenda since Mr Trump took office in 2016, challenging the global system of free trade which has prevailed for decades.

His accusation that China has manipulated the yuan raised concerns that the currency market could become the next front in the economic battle between the two countries.

"The recent fluctuations in the [yuan] exchange rate have been seen by some as an intentional measure on the part of China. This is simply not true," Premier Li said.

"Persistent depreciation of the [yuan] will only do more harm than good to our country. China will never go down the path of stimulating exports by devaluating its currency," he added.

This week Washington raised the stakes by saying it would impose new tariffs on $200bn (£152.1bn) worth of Chinese goods from Monday. Beijing will hit back with new duties on $60bn of American imports.

• China hits back at Trump with new tariffs
• US trade: A tale of two Chinas

During his campaign for president, Mr Trump also called China a currency manipulator but retracted those comments early last year.

Reuters News - Trump hits China with fresh tariffs, threatens more if Beijing retaliates

WASHINGTON/TIANJIN (Reuters) - U.S. President Donald Trump escalated his trade war with Beijing, imposing 10 percent tariffs on about $200 billion worth of imports in a move one senior Chinese regulator said “poisoned” the atmosphere for negotiations.

Trump also warned in a statement on Monday that if China takes retaliatory action against U.S. farmers or industries, “we will immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”

China is reviewing plans to send a delegation to Washington for fresh talks in light of the U.S. decision, the South China Morning Post reported on Tuesday, citing a government source in Beijing, raising the risk of a prolonged trade battle between the world’s largest economies that could hit global growth.

U.S. trade actions against China will not work as China has ample fiscal and monetary policy tools to cope with the impact, a senior securities market official said.

“President Trump is a hard-hitting businessman, and he tries to put pressure on China so he can get concessions from our negotiations. I think that kind of tactic is not going to work with China,” Fang Xinghai, vice chairman of China’s securities regulator, said at a conference in the port city of Tianjin.

Collection of tariffs on the long-anticipated list will start on Sept. 24 but the rate will increase to 25 percent by the end of 2018, allowing U.S. companies some time to adjust their supply chains to alternate countries.

So far, the United States has imposed tariffs on $50 billion worth of Chinese products to pressure Beijing to make sweeping changes to its trade, technology transfer and high-tech industrial subsidy policies. China has retaliated in kind.

Vice Premier Liu He was set to convene a meeting in Beijing on Tuesday morning to discuss the government’s response, Bloomberg News reported, citing a person briefed on the matter.

China has vowed to retaliate against new U.S. tariffs, with state-run media arguing for an aggressive “counterattack.”

Last month, it unveiled a proposed list of tariffs on $60 billion of U.S. goods ranging from liquefied natural gas to certain types of aircraft - should Washington activate the tariffs on its $200 billion list.

The effect of the 10 percent tariffs will gradually show up in China’s fourth-quarter data, and the full impact of the total 25 percent tariffs is expected to be felt next year, dragging down China’s gross domestic product (GDP) growth rate by 0.83 percentage point, Citi analysts wrote in a note.

Fang said that even if Trump puts tariffs on all Chinese exports to the United States, the negative impact on China’s economy will be about 0.7 percent. He did not say whether he was referring to the impact on the amount of GDP or the GDP growth.

FURTHER TALKS IN DOUBT

Trump’s latest escalation of tariffs on China comes after several meetings yielded no progress. U.S. Treasury Secretary Steven Mnuchin last week invited top Chinese officials to a new round of talks, but thus far nothing has been scheduled.

“We have been very clear about the type of changes that need to be made, and we have given China every opportunity to treat us more fairly,” Trump said in his statement. “But, so far, China has been unwilling to change its practices.”

Fang told the Tianjin forum that he hopes the two sides can sit down and talk, but added that the latest U.S. move has “poisoned” the atmosphere.

A senior Trump administration official told reporters that the United States was open to further talks with Beijing, but offered no immediate details on when they may occur.

“This is not an effort to constrain China, but this is an effort to work with China and say, ‘It’s time you address these unfair trade practices that we’ve identified that others have identified and that have harmed the entire trading system,’” the official said.

So far, China has either imposed or proposed tariffs on $110 billion of U.S. goods, representing most of its imports of American products.

“Tensions in the global economic system have manifested themselves in the U.S.-China trade war, which is now seriously disrupting global supply chains,” the European Union Chamber of Commerce in China said in a statement on Tuesday.

China's yuan currency CNY=CFXSslipped 0.3 percent against the U.S. dollar in Asian trade on Tuesday. It has weakened by about 6.0 percent since mid-June, offsetting the 10 percent tariff rate by a considerable margin.[MKTS/GLOB]

CONSUMER TECH TRIMMED

The latest U.S. move spared smart watches from Apple (AAPL.O) and Fitbit (FIT.N) and other consumer products such as baby car seats. But if the administration enacts the additional tariffs on $267 billion in goods, it would engulf all remaining U.S. imports from China and Apple products like the iPhone and its competitors would not likely be spared.

The U.S. Trade Representative’s office eliminated 297 product categories from the proposed tariff list, along with some subsets of other categories.

But the adjustments did little to appease technology and retail groups who argued U.S. consumers would feel the pain.

“President Trump’s decision...is reckless and will create lasting harm to communities across the country,” said Dean Garfield, president of the Information Technology Industry Council, which represents major tech firms.

“Tariffs are a tax on American families, period,” said Hun Quach,” RILA’s vice president for international trade.

“Consumers – not China – will bear the brunt of these tariffs and American farmers and ranchers will see the harmful effects of retaliation worsen.”

Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai, said three quarters of its members will be hit by the tariffs, and they will not bring jobs back to the United States.

“Most of our member companies are ‘in China, for China’ - selling goods to Chinese companies and consumers, not to Americans - and thus ultimately boosting the U.S. economy,” Jarrett said.

Reporting by Steve Holland, David Lawder, Ginger Gibson, Eric Beech and David Shepardson; Additional reporting by Kevin Yao in TIANJIN, John Ruwitch in SHANGHAI and Michael Martina and Ryan Woo in BEIJING; Editing by Clive McKeef and Kim Coghill

Our Standards:The Thomson Reuters Trust Principles.