The Federal Reserve on Tuesday began its two-day policy meeting as the US lurches towards a possible recession and debt default.
Policymakers at the Fed are under pressure to cut interest rates as banking crisis and recession fears linger, but that remains unlikely for now, with inflation still running hot.
Like the Fed's previous meeting, the latest verdict follows a bank failure: First Republic was acquired by JP Morgan on Monday after California state regulators seized the midsized lender.
First Republic's failure came about two months after Silicon Valley Bank's sudden collapse sparked fears of a new global financial crisis, leading the Fed to impose a smaller rate increase of 25 basis points.
The Fed is again expected to raise interest rates by another 25 basis points at the conclusion of its two-day meeting, data from the CME Group showed. It would be the central bank's tenth rate increase since March 2022.
From there, it is expected to keep interest rates steady until the end of the year.
Tightening lending conditions caused by the banking crisis are likely to constrain the US economy further, leading Fed officials to acknowledge the likelihood of a “mild recession”.
“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” according to minutes released by the Fed from its March meeting.
The economy has already felt the implications of the Fed's aggressive rate raises. The nation's gross domestic product slowed to 1.1 per cent growth in the first quarter of 2023 after growing 2.6 per cent in the fourth quarter of 2022.
The housing market, which is particularly vulnerable to interest rates, shrank for the eighth consecutive quarter. And while the labour market has shown some signs of cooling, it still remains hot.
Government data released on Tuesday showed employers posted 9.6 million vacancies last month, the lowest level since April 2021, and layoffs rose to their highest level since March 2020.
Unemployment is still at a near-historic low of 3.5 per cent and wages increased by 4.8 per cent last month, adding to inflationary pressures.
Federal Reserve Chairman Jerome Powell has repeatedly pointed to the strength of the labour market as to why he believes inflation in the US will remain elevated for some time.
Even as recession fears could come into focus later this year, the risk of a debt default poses an immediate threat to the world's largest economy.
The US may be unable to pay its bills as soon as June 1 if Congress does not raise or suspend the debt limit before then, Treasury Secretary Janet Yellen said in a letter addressed to congressional leaders on Monday.
The US has never defaulted on its debt.
Failing to make good on its payment obligations would have disastrous consequences for the US. The federal government would no longer be able to pay for programmes such as Social Security, unemployment would soar, the US credit rating would be downgraded and a recession would be all but assured.
Mr Powell has previously called on Congress to raise the debt ceiling.
Republicans in the House of Representatives last month voted to raise the debt limit by $1.5 trillion. But President Joe Biden is resolute in his opposition to the proposal's cuts to federal agencies and other restrictions.
The White House's public position remains to raise the debt ceiling without conditions.
Mr Biden called for a meeting with congressional leaders on May 9.
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
FA Cup quarter-final draw
The matches will be played across the weekend of 21 and 22 March
Sheffield United v Arsenal
Newcastle v Manchester City
Norwich v Derby/Manchester United
Leicester City v Chelsea
Zayed Sustainability Prize
UAE currency: the story behind the money in your pockets
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The%20specs
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UAE currency: the story behind the money in your pockets
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
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Tips for job-seekers
- Do not submit your application through the Easy Apply button on LinkedIn. Employers receive between 600 and 800 replies for each job advert on the platform. If you are the right fit for a job, connect to a relevant person in the company on LinkedIn and send them a direct message.
- Make sure you are an exact fit for the job advertised. If you are an HR manager with five years’ experience in retail and the job requires a similar candidate with five years’ experience in consumer, you should apply. But if you have no experience in HR, do not apply for the job.
David Mackenzie, founder of recruitment agency Mackenzie Jones Middle East
UAE currency: the story behind the money in your pockets
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
ONCE UPON A TIME IN GAZA
Starring: Nader Abd Alhay, Majd Eid, Ramzi Maqdisi
Directors: Tarzan and Arab Nasser
Rating: 4.5/5
