ECB Amends Bank Capital Reviews to Reflect Extreme Weather Risks
The intention is to 'incorporate, more decisively and in a more business-as-usual way, climate change and nature-related risks' in the ECB's methodology for its so-called Supervisory Review and Evaluation Process, Patrick Amis, director general for specialized institutions and less significant institutions, said in an interview.
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Yahoo
35 minutes ago
- Yahoo
Trump says Powell costs US $900B a year in interest by not cutting rates. Is he right?
In his stinging monthslong campaign to badger Federal Reserve Chair Jerome Powell into lowering interest rates, President Donald Trump has relied on a variety of arguments. He's pointed to the European Central Bank's two percentage points of rate cuts and a report showing weakening private-sector job growth. Most recently, he has cited a claim that Fed's refusal to slash its key rate is costing the federal government hundreds of billions of dollars a year in interest payments on its debt. Is Trump right? In the short term, analyst say, lower rates likely would save the government money. But that comes with some big caveats. This week, on his Truth Social site, Trump shared a handwritten note he wrote to Powell. 'You are, as usual, 'Too Late,' he wrote. 'You have cost the USA a fortune and continue to do so. You should lower the interest rate by a lot! Hundreds of billions of dollars being lost! No inflation.' Attaching a list of central bank interest rates, Trump drew two arrows pointing to a rate between Japan's 0.5% and the 1.75% shared by Denmark, Seychelles and Thailand. That suggests Trump thinks the Fed should chop its key short term interest rate by a whopping 3 percentage points or so, from a range of 4.25% to 4.5% to about 1.25%. Last week, calling Powell a 'numbskull,' a 'dumb guy,' and a 'Trump Hater,' the president said a 3 point rate cut would save the government $900 billion a year in interest payments. Broadly speaking, 'If the Fed were to lower rates… it would indeed likely lower the cost of Treasury debt,' said John Canavan, lead financial market analyst at Oxford Economics. 'Lower rates are probably going to save the government money,' added Wells Fargo senior economist Mike Pugliese. However, Trump appears to be overstating the savings, said Gbenga Ajilore, chief economist of the Center on Budget and Policy Priorities. The Fed is an independent agency and its job is not to reduce interest rates to make borrowing cheaper for the federal government, Canavan and Pugliese said. Under its two congressional mandates, the central bank reduces rates to lower borrowing costs for Americans and bolster a sluggish economy. It hikes rates or keeps them high longer to head off inflation. The Fed slashed its key rate by a percentage point late last year after a pandemic-related inflation spike eased but has paused since. In testimony before Congress in late June, Powell agreed the Fed's preferred inflation measure, now at 2.3%, has dropped closer to its 2% goal. But he said Trump's tariffs are expected to spark a 'meaningful increase in inflation' in coming months and officials want to wait and see how that plays out before reducing rates again. Putting aside the Fed's mandates, it's reasonable to wonder if a Fed rate decrease would save the government lots of money at a time the national debt tops $36 trillion. Trump's 'big, beautiful' budget bill is projected to add $3.3 trillion to the red ink, according to the Congressional Budget Office. It's not clear how Trump came up with the $900 billion and a White House spokesperson did not return an email seeking an explanation. But Trump told Fox News on June 29 that the government must refinance $9 trillion in debt coming due this year. The Treasury Department's total annual interest payments on all its debt are projected to grow to about $1 trillion in fiscal 2026, according to the Committee for a Responsible Federal Budget. Just taking the $9 trillion that must be refinanced, interest rates that have risen sharply since the U.S. first issued the debt could cost the government as much as an additional $300 billion a year, Axel Funhoff, a corporate finance professor at Antwerp Management School in Belgium, wrote in a LinkedIn article earlier this year. That suggests the U.S. Treasury could save more than $100 billion a year if the Fed cut its key rate by 3 percentage points. But that would be a massive cut, unprecedented during a time the economy is generally stable and far larger than the percentage point drop Fed officials estimate they'll approve through gradual quarter-point decreases by 2027. Also, large rate cuts could have unintended consequences for U.S. debt costs. The Fed's benchmark interest rate is a short-term rate and so it directly affects short-term assets such as Treasury bills with terms up to a year, Canavan said. Thus, a quarter-point Fed rate cut, he said, likely would have a similar affect on such Treasury bills. But only about 20% of the Treasury's outstanding debt is in such short-term securities, though almost all new debt is short term because long-term rates are high, Canavan said. More than half the debt is in 2- to 10-year Treasury bonds, he said, and the rest is in longer term securities of up to 30 years, floating rate bonds and other assets. Those securities are affected by Fed rate moves because they influence investor expectations about future Fed actions, Canavan said. But only partly. Because investors hold those assets for long periods of time, they're mostly affected by factors such as the economic outlook, inflation expectations, the size of the federal deficit and investors' confidence in Treasury bonds as a safe and reliable investment, Canavan said. 'If the market decides the Fed is cutting too much' to satisfy Trump or lower borrowing costs for the U.S. Treasury, investors likely would worry about a future inflation spike, causing them to demand higher rates to lend the government money, Canavan said. Otherwise, he said, inflation could erode the value of their bonds. In that case, 'You may see long term rates rise' even though the Fed is reducing its short term rate, he said. In other words, by causing investors to question the Fed's independence, Trump's calls for rate cuts could result in the outcome he least desires, assuming the Fed acquiesced to his pleas. "Monetary policy only works if the Fed has credibility," Ajiilore said. Canavan said it's difficult to say if government savings from a drop in short-term rates – which must be refinanced more frequently – would more than offset any losses from a rise in long-term rates. Pugliese said the U.S. Treasury likely still would come out ahead in the near term. But 'over the long term it would probably cost money,' he said. By contrast, if the Fed reduces rates twice later this year and once in 2026 as officials expect, investors would be more confident that officials are making the moves because inflation is easing and not because of political pressure. The result likely would be lower short-term and long-term rates, and lower interest payments for the government. This article originally appeared on USA TODAY: Trump claims Fed rate cuts would save $900B a year: Reality check
Newsweek
36 minutes ago
- Newsweek
Putin Faces Coal Crisis in Russia
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. One of Russia's top mining companies has become the first coal producer to get government aid in a deepening crisis for an industry hit hard by plummeting global demand and sanctions due to Vladimir Putin's war on Ukraine. Mechel announced the government reprieve, although has warned the industry faces significant difficulties as producers brace for a slump in sales. Russia is the world's sixth biggest producer of coal, but the industry in the country faces what has been described as the worst crisis since the 1990s. Issac Levi from the Centre of Research on Energy and Clean Air (CREA) told Newsweek that state support is one of the only ways for Russian coal firms to avoid bankruptcy. Newsweek has contacted Mechel for comment. Russian President Vladimir Putin at the Kremlin, on June 30, 2025, in Moscow, Russia. Russian President Vladimir Putin at the Kremlin, on June 30, 2025, in Moscow, Russia. Getty Images Why It Matters While a smaller contributor to GDP than oil and gas, Russia's coal industry is still a critical sector for dozens of single-industry towns where it employs hundreds of thousands of workers. European sanctions for Putin's aggression included a ban on Russian coal imports in 2022, and other markets like China and India have not made up the shortfall. Dwindling coal exports could be a political headache for Putin, especially amid other bad news for the wartime economy, such as a downturn in manufacturing and warnings by Russian officials about inflation and high interest rates. What To Know Mechel's deputy finance director, Nelli Galeeva, said it had received a three-year deferral on tax and social security payments worth 13 billion rubles ($166 million). The government support will also include saving an extra 500 million rubles ($6 million) per month through industry-wide assistance measures like deferred mineral extraction tax and social insurance payments, according to the agency Interfax, as cited by The Moscow Times. Mechel chief executive Oleg Korzhov said the coal industry was in a "very difficult situation" and despite the government's help, his firm would cut shipments in 2025 by about a quarter compared with last year. A view of the coal terminal of the far-eastern Russian port of Vladivostok on September 5, 2022. A view of the coal terminal of the far-eastern Russian port of Vladivostok on September 5, 2022. KIRILL KUDRYAVTSEV//Getty Images Levi, CREA's Europe-Russia policy and energy analysis team lead, told Newsweek Russia's coal industry problems partially stem from a sharp drop in global demand—especially from China, where steel production and coal prices had plunged. Amplifying these problems are a strong ruble, low domestic and global coal prices and sanctions which have restricted market access, raised logistics costs, and limited financing, he said. As the Russian coal sector continues to struggle, state support seems to be one of the few reasons many companies can survive and avoid bankruptcy, he added. The Spiridonovskaya mine in Siberia's Kemerovo region suspended operations last month due to a lack of financing, according to the regional coal industry ministry. It comes as business activity in Russia's manufacturing sector had its biggest drop since the start of the war, according to S&P Global. It said the Purchasing Managers' Index (PMI) for Russian manufacturing dropping from 50.2 in May to 47.5, where a reading below 50 indicates a contraction. Meanwhile, Russian officials have warned about Russia's economy, such as German Gref, CEO of the country's biggest bank Sberbank, who said high inflation and the high key interest rate could not be solved quickly. Central Bank Governor Elvira Nabiullina and economy minister Maxim Reshetnikov also issued warnings— the former that the conditions for growth were "exhausted", with the latter saying the country was on the "brink of recession." What People Are Saying Mechel's deputy finance director Nelli Galeeva, per Interfax: "We received an installment plan for the payment of taxes, fees, insurance payments of more than 13 billion will use the released cash flow to support our operating activities." Mechel chief executive Oleg Korzhov: "Nearly all coal producers are facing extremely difficult the current exchange rate, selling coal is unprofitable." Isaac Levi, CREA's Europe-Russia policy and energy analysis team lead, to Newsweek: "Industry-wide, the Russian coal sector is struggling, and state support seems to be one of the few reasons many companies can survive and avoid bankruptcy." What Happens Next Levi said if coal production in Russia is curtailed further and interest rates decline—raising the dollar exchange rate—the financial burden on coal firms may ease. This may potentially stabilize coal prices, but the country's export prospects will largely hinge on demand from China, he added. "Any fluctuation in Chinese import activity could significantly impact the industry's recovery and pricing stability."
The Verge
40 minutes ago
- The Verge
Ikea's smart home hub is now a Matter controller.
Ikea's smart home hub is now a Matter controller. The Swedish retail giant's latest update for its Dirigeria hub adds the feature in beta. Matter controller functionally means you can add Matter devices from other brands to the hub and control them with Ikea's Home Smart app. The hub is already a Matter bridge, allowing its lights, blinds, and sensors to be used on other Matter platforms (Apple Home, Alexa, etc.). With a Matter controller, Ikea can become a Matter platform in its own right.
