Latest news with #financialCrisis
Wall Street Journal
19 hours ago
- Business
- Wall Street Journal
Tom Hayes, Libor ‘Ringleader,' Wins U.K. Appeal to Clear His Name
Tom Hayes, the former trader who became the face of the Libor scandal, won a last-ditch appeal to clear his name, undoing one of the most high-profile cases to emerge from the global financial crisis. The U.K. Supreme Court on Wednesday quashed the landmark 2015 conviction, which saw Hayes spend more than five years in prison before he was released in 2021.
Reuters
07-07-2025
- Business
- Reuters
Fed paper says risk of falling back to near zero rates still in play
July 7 (Reuters) - The prospect of the Federal Reserve once again setting its short-term interest rate target at near zero levels at some point in coming years remains real despite current relatively high levels of short-term borrowing costs, a new paper, opens new tab published jointly between the New York and San Francisco Federal Reserve banks said. The medium- to long-term risk that the central bank's interest rate target will return to super low levels 'is currently at the lower end of the range observed over the past fifteen years,' said a paper that counted New York Fed President John Williams as a co-author. It was published on Monday. But the researchers added the chance of a return to near-zero rates 'remains significant over the medium to long term…due to recent elevated uncertainty.' A near-zero federal funds rate target is associated with troubled economic times and their aftermaths. The Fed pegged its short-term interest rate target at such levels from 2008 and the onset of the financial crisis until late 2015, and found itself again at such levels in March 2020 due to the COVID-19 pandemic, before hiking interest rates aggressively starting into the spring of 2022 to combat the worst inflation readings seen in decades. A near zero level for the interest rate target the Fed uses to achieve its job and employment mandates creates substantial challenges for central bankers. To provide stimulus beyond what a super low target can provide, officials have had to turn to controversial bond buying programs aimed at lowering long-term rates, which have in turn massively increased the size of the Fed's balance sheet. The Fed has also had to resort to communications strategies which officials also hoped would bolster the stimulative power of low rates. The recent chapters of hitting near-zero rates came during what had been a multi-decade trend of declining rates amid a long-running trend of declining inflation pressures. The experience of the last few years has ushered in a new landscape for the central bank. High levels of pandemic-driven inflation have cooled considerably. But the Fed, at a current target rate of between 4.25% and 4.5%, is still at a level that is relatively high relative to recent years' experience. It also faces considerable uncertainty over the outlook due to trade policy. As of June, Fed officials expected to cut their target to 3.4% by 2027 and to start on that path this year. The central bank is also being pressured by President Donald Trump for aggressive easings. Meanwhile, officials have also been revising up the forecast of the rate that's neutral relative to the economy's performance. Now at 3%, that projection as well as the June forecasts suggests the Fed may have more of a buffer to cut rates without hitting zero relative to recent years. The paper, which based its analysis on interest rate derivatives, noted that even with the current buffer, the interest-rate outlook is complex. The risk of hitting near-zero rates 'tends to fall with higher expected levels of interest rates and tends to rise with interest rate uncertainty," the authors wrote.
Yahoo
07-07-2025
- Business
- Yahoo
Fed paper says risk of falling back to near zero rates still in play
By Michael S. Derby (Reuters) -The prospect of the Federal Reserve once again setting its short-term interest rate target at near zero levels at some point in coming years remains real despite current relatively high levels of short-term borrowing costs, a new paper published jointly between the New York and San Francisco Federal Reserve banks said. The medium- to long-term risk that the central bank's interest rate target will return to super low levels 'is currently at the lower end of the range observed over the past fifteen years,' said a paper that counted New York Fed President John Williams as a co-author. It was published on Monday. But the researchers added the chance of a return to near-zero rates 'remains significant over the medium to long term…due to recent elevated uncertainty.' A near-zero federal funds rate target is associated with troubled economic times and their aftermaths. The Fed pegged its short-term interest rate target at such levels from 2008 and the onset of the financial crisis until late 2015, and found itself again at such levels in March 2020 due to the COVID-19 pandemic, before hiking interest rates aggressively starting into the spring of 2022 to combat the worst inflation readings seen in decades. A near zero level for the interest rate target the Fed uses to achieve its job and employment mandates creates substantial challenges for central bankers. To provide stimulus beyond what a super low target can provide, officials have had to turn to controversial bond buying programs aimed at lowering long-term rates, which have in turn massively increased the size of the Fed's balance sheet. The Fed has also had to resort to communications strategies which officials also hoped would bolster the stimulative power of low rates. The recent chapters of hitting near-zero rates came during what had been a multi-decade trend of declining rates amid a long-running trend of declining inflation pressures. The experience of the last few years has ushered in a new landscape for the central bank. High levels of pandemic-driven inflation have cooled considerably. But the Fed, at a current target rate of between 4.25% and 4.5%, is still at a level that is relatively high relative to recent years' experience. It also faces considerable uncertainty over the outlook due to trade policy. As of June, Fed officials expected to cut their target to 3.4% by 2027 and to start on that path this year. The central bank is also being pressured by President Donald Trump for aggressive easings. Meanwhile, officials have also been revising up the forecast of the rate that's neutral relative to the economy's performance. Now at 3%, that projection as well as the June forecasts suggests the Fed may have more of a buffer to cut rates without hitting zero relative to recent years. The paper, which based its analysis on interest rate derivatives, noted that even with the current buffer, the interest-rate outlook is complex. The risk of hitting near-zero rates 'tends to fall with higher expected levels of interest rates and tends to rise with interest rate uncertainty," the authors wrote.
Yahoo
07-07-2025
- Business
- Yahoo
Fed paper says risk of falling back to near zero rates still in play
By Michael S. Derby (Reuters) -The prospect of the Federal Reserve once again setting its short-term interest rate target at near zero levels at some point in coming years remains real despite current relatively high levels of short-term borrowing costs, a new paper published jointly between the New York and San Francisco Federal Reserve banks said. The medium- to long-term risk that the central bank's interest rate target will return to super low levels 'is currently at the lower end of the range observed over the past fifteen years,' said a paper that counted New York Fed President John Williams as a co-author. It was published on Monday. But the researchers added the chance of a return to near-zero rates 'remains significant over the medium to long term…due to recent elevated uncertainty.' A near-zero federal funds rate target is associated with troubled economic times and their aftermaths. The Fed pegged its short-term interest rate target at such levels from 2008 and the onset of the financial crisis until late 2015, and found itself again at such levels in March 2020 due to the COVID-19 pandemic, before hiking interest rates aggressively starting into the spring of 2022 to combat the worst inflation readings seen in decades. A near zero level for the interest rate target the Fed uses to achieve its job and employment mandates creates substantial challenges for central bankers. To provide stimulus beyond what a super low target can provide, officials have had to turn to controversial bond buying programs aimed at lowering long-term rates, which have in turn massively increased the size of the Fed's balance sheet. The Fed has also had to resort to communications strategies which officials also hoped would bolster the stimulative power of low rates. The recent chapters of hitting near-zero rates came during what had been a multi-decade trend of declining rates amid a long-running trend of declining inflation pressures. The experience of the last few years has ushered in a new landscape for the central bank. High levels of pandemic-driven inflation have cooled considerably. But the Fed, at a current target rate of between 4.25% and 4.5%, is still at a level that is relatively high relative to recent years' experience. It also faces considerable uncertainty over the outlook due to trade policy. As of June, Fed officials expected to cut their target to 3.4% by 2027 and to start on that path this year. The central bank is also being pressured by President Donald Trump for aggressive easings. Meanwhile, officials have also been revising up the forecast of the rate that's neutral relative to the economy's performance. Now at 3%, that projection as well as the June forecasts suggests the Fed may have more of a buffer to cut rates without hitting zero relative to recent years. The paper, which based its analysis on interest rate derivatives, noted that even with the current buffer, the interest-rate outlook is complex. The risk of hitting near-zero rates 'tends to fall with higher expected levels of interest rates and tends to rise with interest rate uncertainty," the authors wrote.
Reuters
02-07-2025
- Business
- Reuters
UK bond rout draws Truss comparisons as public finances rattle investors
LONDON, July 2 (Reuters) - British government bonds tumbled sharply on Wednesday as a tearful appearance by Chancellor Rachel Reeves in parliament a day after the government backed down on its welfare reforms reignited concern over Britain's finances. Reeves was attending Prime Minister's Questions on Wednesday following the government's decision to sharply scale back plans to cut benefits. The sharp plunge in British assets immediately drew comparisons with Liz Truss' short-lived premiership nearly three years ago, which was derailed by a bond market selloff. Investors are monitoring Reeves' status after the British government's reversal on welfare reforms meant the plans would no longer save taxpayers any money, shredding the margin Britain relies on to meet its fiscal rules. The welfare reform U-turn was "signalling that the Labour Party is a lot less concerned about what the gilt market thinks," said Gordon Shannon, portfolio manager, TwentyFour Asset Management. "I would have thought it was seared into politicians' memories what happened to Liz Truss." The yield on the 10-year government bond, or gilt, rose as much as 22 basis points on the day at one point, to 4.681% , as investors ditched British debt. It then recovered somewhat to 4.60%. At its peak, the benchmark yield was set for its largest one-day jump since October 2022, the aftermath of Truss' chaotic package of large, unfunded tax cuts that scuttled her premiership. During the depths of the 2022 crisis, the yield on the 10-year gilt rose by 50 bps in a single day at one point. The selloff also hit very long dated gilts, and 30-year yields rose 17 basis points. 'The latest headline would suggest more uncertainty with regards to the current government," said Simon Blundel, head of European fundamental fixed income investments at BlackRock. "It's another thing for us to look at and position for,' he said, though he added that BlackRock had generally taken a positive stance towards gilts and the market was not as vulnerable as it was in 2022, when turmoil in Britain's pensions sector exacerbated moves. Investors in bonds around the world are growing increasingly nervous about government deficits from Japan to the United States, with Britain seen as among the more vulnerable. Earlier on Wednesday, British assets were trading slightly lower, but the selloff intensified rapidly after Reeves appeared alongside Prime Minister Kier Starmer during the weekly prime minister's questions looking exhausted and upset. Traders also focused on comments from Starmer seemingly not endorsing Reeves, though Starmer's press secretary later said Reeves has his full support, and she was upset because of "a personal matter". Reeves has repeatedly emphasised her commitment to self-imposed fiscal rules, limiting the amount Britain will borrow, and, analysts said, Wednesday's market moves reflected fears that she would be replaced, creating even more uncertainty. "The gilt market is largely concerned that a new chancellor will rip up Reeves' fiscal rules and go for excessive unfunded borrowing. Combine that with a plan that has not delivered or is unlikely to deliver much growth or productivity gains, then it looks a very risky strategy to adopt!" Craig Inches, head of rates and cash at Royal London Asset Management, said. Reeves has also been blamed by some Labour members of parliament for pushing for billions of pounds of savings that were described as cruel and targeting the most vulnerable. Sterling dropped around 1% against the dollar and also weakened sharply against the euro, which rose 0.8% to its highest on the pound in two months. , Britain's domestically focused mid-cap index (.FTMC), opens new tab was down 1.3% on the day, sharply underperforming European stocks. "The deficit is going to have to be closed somehow, clearly the signal from yesterday is that can't come from substantial spending cuts, I don't think it's possible for the government to borrow the money, that leaves tax rises," Nick Rees, head of macro research at Monex Europe, said. "It's a pretty ugly outlook for sterling."
