Connect with us

Economic

New UK finance minister warns some taxes will rise as tough decisions loom By Reuters

Avatar

Published

on


© Reuters. New Chancellor of the Exchequer Jeremy Hunt arrives at Downing Street in London, Britain, October 14, 2022. REUTERS/Henry Nichols

Written by Michael Holden and Alistair Smoot

LONDON (Reuters) – Britain’s new chancellor, Jeremy Hunt, said on Saturday that some taxes will rise and government spending will rise less than previously planned, warning of tough decisions ahead to restore the credibility of Britain’s economic policy.

With financial markets in turmoil, Prime Minister Liz Truss sacked Kwasi-Quarting as finance minister and scrapped parts of their controversial economic package on Friday in a bid for political survival less than 40 days into her premiership.

Truss said the corporate tax would increase, abandoning her plan to keep it at current levels.

Advertisement

Although large, unfunded tax cuts were a central item in Truss’ original plans, Hunt said tax increases were on the table.

“We’re going to have some very difficult decisions ahead,” he told Sky News.

“The thing that people and markets want and the country needs right now is stability,” Hunt said. “No minister can control the markets. But what I can do is show that we can pay our taxes and spending plans, and that’s going to take some very difficult decisions about both spending and taxation.”

He said spending will not rise as much as people want and all government departments will have to find more efficiencies than they had planned.

“Some taxes will not be reduced as quickly as people want and some taxes will rise. So it will be difficult,” he said.

Advertisement

Quarting’s September 23 financial statement triggered a backlash in financial markets that was so fierce that the Bank of England had to step in to prevent pension funds from falling into disarray as borrowing costs soared.

Hunt said he agreed with Truss’s basic approach to seeking to stimulate economic growth, but the approach she and Kwarting took about it didn’t work.

“There were mistakes. It was a mistake to demand tough decisions across the board about taxes and spending to lower the tax rate for the richest,” he said.

“It was a mistake to ignore the horizon and make these predictions without giving people the confidence of the Office of Budget Responsibility saying the amounts are piling up. The Prime Minister recognized that, and that’s why I’m here.”

Source link

Advertisement

Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published.

Economic

New York Federal Reserve Securities Link Reverse Repo to Bank Regulatory Change by Reuters

Avatar

Published

on


© Reuters. FILE PHOTO: The Federal Reserve building is seen in front of the Federal Reserve Board and is expected to signal plans to raise interest rates in March as it focuses on fighting inflation in Washington, US, January 26, 2022. REUTERS/Joshua Roberts

Written by Michael S Derby

(Reuters) – Continued massive cash flows at a key Fed facility are largely driven by a change in bank liquidity regulations from last year, a New York Federal Reserve report said on Friday.

The Fed offers what’s called a reverse repo, which allows eligible businesses to store cash at the central bank for a risk-free return. The rule that plays into the inflows is a regulation called the supplementary leverage ratio, which determines how much liquidity banks need on hand.

The SLR standard was relaxed during the most severe phase of the coronavirus pandemic in 2020, when concerns about market performance prevailed, and it was restored at the end of March 2021, to return to a more stringent level.

Advertisement

Banking economists Jara Afonso, Marco Cipriani, and Gabriel La Spada write: “After the end of the SLR exemption period, banks had less flexibility to expand their balance sheets by increasing their holdings of reserves and Treasuries.” This had a knock-on effect on money market funds, the main users of reverse repo, which drove liquidity into the reverse repo facility.

After the regulations changed, the newspaper said, banks were less inclined to take deposits, and instead the money flowed into financial funds, which had to invest that money somewhere. Meanwhile, banks have cut back on short-term debt offerings, restricting where money can be invested. Moreover, the federal interest rate increases pushed cash into money market funds as financial markets experienced a shift in the cost of short-term borrowing, according to the authors.

The Federal Reserve’s esteemed buyback facility is an essential part of the toolkit it uses to manage its federal funds rate target setting, which it uses to influence the economy’s trajectory to achieve its inflation and employment targets. A reverse repo tool provides money market funds and other companies a place to deposit cash into the Federal Reserve overnight and earn a return. It is currently at 3.8% and is an investment with a better return than many private securities that come with greater risks.

The Fed’s reverse repo facility was largely unused in the spring of 2021, and then flows increased steadily. Inflows peaked at $2.426 trillion at the end of September before easing slightly to Friday’s inflow of $2.05 trillion.

Fed officials were optimistic about the huge levels of inflows. Some have argued that as the Fed raises interest rates and reduces the size of its balance sheet to combat high inflation, inflows into the reverse repo facility should decrease over time. But so far it hasn’t really happened.

Advertisement

Meanwhile, issues related to the correct setup of the SLR are under consideration by the financial authorities, who are treading cautiously on the issue. “History shows the massive costs incurred by society when bank capital is inadequate, and therefore the urgency that the Fed properly adjusts capital regulation,” Michael Barr, the Fed’s official on bank supervision, said in comments Thursday.

Source link

Continue Reading

Economic

US Federal Reserve proposes plan for banks to manage climate-related financial risks By Reuters

Avatar

Published

on


© Reuters. FILE PHOTO: An eagle graces the facade of the US Federal Reserve Building in Washington, July 31, 2013. REUTERS/Jonathan Ernst

Written by Chris Prentice

WASHINGTON (Reuters) – The U.S. Federal Reserve on Friday joined other major bank regulators in proposing a plan for how big banks can manage climate-related financial risks, drawing immediate opposition from one member and reservations from another.

The proposed principles detail the expectations for banks with more than $100 billion in assets to incorporate climate-related financial risks into their strategic planning. The proposal was approved for public comment in a 6-1 vote of the Fed’s Board of Governors.

The proposal marks the latest effort by US policymakers to prepare for potential financial risks from climate change, bringing the Fed into line with the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), which have separately proposed their own plans.

Advertisement

The potential impacts of climate change — rising sea levels, worsening floods and fires, and government policies moving away from carbon-heavy industries — could destroy trillions of dollars in assets worldwide.

The Fed said these financial implications “constitute an emerging risk to the integrity and integrity of financial institutions and to the financial stability of the United States.”

The Fed’s plan requires banks to consider climate-related financial risks in their audits, manage other risks, and add climate-related scenario analysis to the traditional stress test. The report suggested that banks should also assess and consider whether they should include climate-related risks in their liquidity reserves.

The debate over the extent of financial system risks posed by climate change has been politically charged. Federal Reserve Governor Christopher Waller opposed Friday’s proposal, raising the question of whether it represented a serious risk to the safety of large banks or financial stability in the United States.

“Climate change is real, but I do not agree with the premise that it poses a serious risk to the safety and integrity of major banks and the financial stability of the United States,” Waller said in a statement released alongside the proposal. “The Fed conducts regular stress tests on large banks that deliver very severe macroeconomic shocks and show that banks are resilient.”

Advertisement

Gov. Michele Bowman endorsed the plan for public input with reservations, noting that the board should consider the “costs and benefits of any new projections.”

The proposal will be open to public comment for 60 days.

Source link

Advertisement
Continue Reading

Economic

More than 1,000 New York Times union employees plan to quit over payroll, reports Reuters

Avatar

Published

on


© Reuters. FILE PHOTO: The New York Times Building in Manhattan, New York, US, August 3, 2020. REUTERS/Shannon Stapleton/File Photo

(Reuters) – More than 1,000 unionized employees of The New York Times Company have pledged to quit if the news publisher does not agree to a “full and fair contract” by Dec. 8, according to a union tweet on Friday.

The New York Times NewsGuild sought “inflationary” wages as well as preserving and enhancing health insurance and retirement benefits promised during employment, according to a letter signed by 1,036 members.

“We will be out and about for 24 hours, Thursday, December 8th, if we do not have a full and fair contract agreement in place by then,” the letter said.

Union members are also asking for flexibility to work remotely, among other demands.

Advertisement

A spokesperson for The New York Times said “While we are disappointed that NewsGuild is threatening to strike, we stand ready to ensure The Times continues to serve our readers without interruption,” adding that the company’s current pay offer offered “significant increases.”

Earlier in March, a group of nearly 600 tech employees at The New York Times voted to unionize as the company faced allegations that it illegally interfered with organizing work.

In August, approximately 300 Thomson Reuters (NYSE: Corp) journalists in the US, represented by the same NewsGuild, also staged a 24-hour strike while the union negotiated a new three-year contract with the company.

Source link

Advertisement
Continue Reading
Advertisement

Trending