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Tag: U.S. Treasury

  • US Treasury secretary takes aim at Fed’s interest rate control system

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    By Michael S. Derby

    (Reuters) -U.S. Treasury Secretary Scott Bessent said on Tuesday the Federal Reserve’s system of managing interest rates is struggling and needs to be simplified.

    “We’ve gotten to this point where monetary policy has gotten very complicated” and the U.S. central bank should “simplify things,” Bessent said in an ​interview with CNBC.

    “The Fed has taken us into a new regime, and what is called ample-reserves regime. And it looks like that might be fraying a bit here in terms of whether ‌the reserves are actually ample,” Bessent said.

    The Treasury secretary did not say what he meant by fraying.

    The Fed has faced and continues to face challenging money market conditions tied to how it has been managing its $6.56 trillion balance sheet and financial system liquidity levels.

    Officials at ‌the Fed’s last policy meeting announced that they would stop the contraction of the central bank’s overall balance sheet at the start of December. They did so as liquidity in financial markets in the run-up to the late October policy meeting tightened enough to complicate control of the federal funds rate, the Fed’s primary tool to achieve its inflation and employment goals.

    The turbulence was such that it drove eligible financial firms to borrow notable levels of cash from the Fed via its Standing Repo Facility, a tool used to put a ceiling over short-term interest rates. There were also intermittent large inflows of cash into the Fed’s reverse repo tool, which is used to set a floor ⁠underneath money market rates.

    CRITIC OF FED BALANCE SHEET

    Bessent has been a persistent Fed critic ‌who has expressed particular concern about its large balance sheet, which is primarily stocked with trillions in bonds bought in large part to stabilize financial markets and to provide stimulus to the economy.

    The large footprint, at least in dollar terms, is seen by Bessent and others, including some at the Fed, as distorting market pricing levels. ‍There also has been concern about the complex way the Fed manages rates, which relies on liquidity facilities and eschews the highly managed system it used prior to the financial crisis that began nearly 20 years ago.

    “A large balance sheet increases the Fed’s footprint in financial markets, distorts the price of duration and the slope of the yield curve, and potentially blurs the line between monetary and fiscal policy,” Kansas City Fed President Jeffrey Schmid said in a speech on November 14.

    Others have ​lamented that managing liquidity under the current system has led the Fed to pay out substantial sums to financial institutions. That approach turned the Fed from an institution that made substantial profits to one that is currently ‌$240 billion in the red, even as those losses have no impact on its ability to operate.

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  • Turn Your Spare Pennies Into Double-Value Gift Cards at Giant Eagle

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    Source: steverts / Getty

    It may finally be time to take a hammer to that piggy bank.

    From 11 a.m. to 4 p.m. this Saturday, Giant Eagle is giving customers a chance to turn spare pennies into gift cards worth double their value. Bring at least 50 cents in pennies, and you’ll leave with a $1 gift card.

    Bring up to $100 in pennies, and you’ll walk out with a $200 card.

    The nationwide one-day event supports Giant Eagle’s effort to maintain a proper penny supply while the U.S. Treasury phases out penny production.

    Company president and CEO Bill Artman said the promotion is a fun way to reward shoppers and help those who still pay in cash. The promo applies at more than 200 Giant Eagle and Market District locations in the region. Shoppers are encouraged to dig out their couch cushions and change jars for the event.

    This special offer also highlights a bigger shift in the way pennies will circulate in the future. As coin production winds down, retailers are preparing for possible rounding practices. For one day only, Giant Eagle is inviting customers to turn small change into value while supplies last.

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    Matty Willz

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  • Bessent met with BlackRock’s Rieder as search for next Fed chair continues, source says

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    By Andrea Shalal

    WASHINGTON (Reuters) -U.S. Treasury Secretary Scott Bessent met with BlackRock Inc executive Rick Rieder in New York on Friday, as the Trump administration continued its search for a new chair for the Federal Reserve, a source familiar with the matter said.

    Bessent has now spoken with four of the 11 candidates on the administration’s list of candidates to replace Fed chair Jerome Powell, whose term expires in May, the source said.

    Bloomberg first reported Bessent’s meeting with Rieder, BlackRock’s CIO of fixed income, and called him a rising contender for the post. The two met for two hours and discussed monetary policy, the Fed’s organizational structure and regulatory policy, it said.

    U.S. President Donald Trump had told reporters at the White House a week ago that his short list for the job included his aide Kevin Hassett, former Fed Governor Kevin Warsh and current Fed Governor Christopher Waller.

    At the time, Trump said he had eyed Bessent for the job, but the Treasury secretary declined.

    Bessent has said he will meet with the candidates to whittle down the list and present Trump with a list of top contenders.

    TRUMP HAS RAILED AGAINST POWELL

    Trump has made clear he intends to install a Fed leader more aligned with his push for rapid interest-rate cuts after months of railing against Powell for being “too late” to lower interest rates and bring down borrowing costs.

    Powell’s Fed has kept rates on hold all year on concern that Trump’s tariffs could reignite inflation, although his concerns have shifted recently to focus more on the slowing labor market.

    The U.S. Senate is slated to vote on Monday to confirm White House Council of Economic Advisers Chair Stephen Miran to the Fed, which starts a two-day meeting Tuesday at which it is expected to cut its policy rate by a quarter of a percentage point. Miran will retain his White House job, but take an unpaid leave while at the Fed.

    Miran would replace Adriana Kugler, who was appointed by former President Joe Biden and resigned as Fed governor last month.

    Trump has sought to fire another Fed governor appointed by Biden, Lisa Cook, but that move has been blocked for now by a federal judge.

    (Reporting by Andrea Shalal; editing by Edward Tobin)

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  • After new US strikes hitting Yemen, Iran issues a warning about suspected spy ships in the Mideast

    After new US strikes hitting Yemen, Iran issues a warning about suspected spy ships in the Mideast

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    JERUSALEM (AP) — Iran issued a warning Sunday to the U.S. over potentially targeting two cargo ships in the Mideast long suspected of serving as forwarding operating base for Iranian commandos, just after America and the United Kingdom launched a massive airstrike campaign against Yemen’s Houthi rebels.

    The statement from Iran on the Behshad and Saviz ships appeared to signal Tehran’s growing unease over the U.S. strikes in recent days in Iraq, Syria and Yemen targeting militias backed by the Islamic Republic.

    Those attacks, themselves a retaliatory campaign for the killing of three U.S. soldiers and wounding of dozens of others in Jordan, all stem back to Israel’s war on Hamas in the Gaza Strip, which has escalated tensions across the wider Middle East and raised fears about a regional conflict breaking out.

    The Yemen strikes overnight Sunday struck across six provinces of Yemen held by the Houthi rebels, including in Sanaa, the capital. The Houthis gave no assessment of the damage but the U.S. described hitting underground missile arsenals, launch sites and helicopters used by the rebels.

    “These attacks will not discourage Yemeni forces and the nation from maintaining their support for Palestinians in the face of the Zionist occupation and crimes,” Houthi military spokesman Brig. Gen. Yahya Saree said. “The aggressors’ airstrikes will not go unanswered.”

    U.S. Defense Secretary Lloyd Austin warned the Houthis after the strikes that “they will continue to bear further consequences if they do not end their illegal attacks on international shipping and naval vessels.” That message was echoed by British Foreign Secretary David Cameron, who said: “The Houthi attacks must stop.”

    The Behshad and Saviz are registered as commercial cargo ships with a Tehran-based company the U.S. Treasury has sanctioned as a front for the state-run Islamic Republic of Iran Shipping Lines. The Saviz, then later the Behshad, have loitered for years in the Red Sea off Yemen, suspected of serving as spy positions for Iran’s paramilitary Revolutionary Guard.

    In 2017, Saudi Arabia described the Saviz as a maritime base and weapons transshipment point for the Guard, staffed by men in military fatigues. Footage aired by Saudi-owned television channels showed the vessel armed with what appeared to be a covered machine gun bolted to the ship’s deck.

    In the video statement Sunday by the Iran’s regular army, a narrator for the first time describes the vessels as “floating armories.” The narrator describes the Behshad as aiding an Iranian mission to “counteract piracy in the Red Sea and the Gulf of Aden.” However, Iran is not publicly known to have taken part in any of the recent campaigns against rising Somali piracy in the region off the back of the Houthi attacks.

    Just before the new campaign of U.S. airstrikes began, the Behshad traveled south into the Gulf of Aden. It’s now docked in Djibouti in East Africa just off the coast from a Chinese military base in the country.

    The statement ends with a warning overlaid with a montage of footage of U.S. warships and an American flag.

    “Those engaging in terrorist activities against Behshad or similar vessels jeopardize international maritime routes, security and assume global responsibility for potential future international risks,”

    The U.S. Navy’s Mideast-based 5th Fleet did not immediately respond to a request for comment over the threat.

    The Saviz, which is now in the Indian Ocean near where the U.S. alleges Iranian drone attacks recently have targeted shipping, has come under attack before. In 2021, a likely limpet mine explosion blew a hole through the hull of the Saviz, forcing Iran to bring the ship home. That attack, suspected to have been carried out by Israel, is part of a wider shadow war between Tehran and Israel after the collapse of the Iran nuclear deal.

    ___

    Baldor and Copp reported from Washington. Associated Press writers Nasser Karimi in Tehran, Iran, and Brian Melley in London contributed to this report.

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  • More EVs lose US tax credits including Tesla Cybertruck, Nissan Leaf

    More EVs lose US tax credits including Tesla Cybertruck, Nissan Leaf

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    By David Shepardson

    WASHINGTON (Reuters) – Many electric vehicles lost eligibility for tax credits of up to $7,500 after new battery sourcing rules took effect on Monday, including the Nissan Leaf, Tesla Cybertruck All-Wheel Drive and Chevrolet Blazer EV, the U.S. Treasury said.

    The Treasury issued guidelines in December detailing new battery sourcing requirements aimed at weaning the U.S. electric vehicle supply chain away from China. They took effect on Monday.

    The number of EV models qualifying for U.S. EV tax credits fell from 43 to 19. Those figures include different versions of the same vehicle type. Treasury said some manufacturers have yet to submit information on eligible vehicles, which could lead to changes in the list.

    The new rules allow buyers to claim the tax credit of up to $7,500 at a participating dealership at the point of sale. The tax credit sets limits on vehicle price and buyer income to qualify.

    The Volkswagen ID.4, Tesla Model 3 Rear Wheel Drive, BMW X5 xDrive50e, Audi Q5 PHEV 55, Cadillac Lyriq and Ford E-Transit are among the vehicles that fell off the list of vehicles eligible for tax credits.

    Volkswagen said on Monday it “is in the process of confirming eligibility for a federal EV tax credit for vehicles” after Jan. 1.

    “We are optimistic that MY2023 ID.4s and all MY2024 ID.4s will be eligible under the new rules,” VW added.

    BMW, Nissan and Tesla did not immediately comment.

    FILE PHOTO: A technician works on the final inspection of an electric Volkswagen ID. 4 car model, in Zwickau

    FILE PHOTO: A technician works on the final inspection of an electric Volkswagen ID. 4 car model, in Zwickau

    The Treasury said “automakers are adjusting their supply chains to ensure buyers continue to be eligible for the new clean vehicle credit, partnering with allies and bringing jobs and investment back to the United States.”

    Ford Motor said last month its E-Transit would lose the $3,750 tax credit, as would the Mach-E and Lincoln Aviator Grand Touring plug-in hybrid, but its F-150 EV Lighting and the Lincoln Corsair Grand Touring retained credits.

    General Motors noted all of its EVs would temporarily lose eligibility except the Chevrolet Bolt, adding the Lyriq and Blazer EV are losing the credit because of two minor components.

    GM expects after a sourcing change the Lyriq and Blazer EV will regain eligibility in early 2024 and said its Chevrolet Equinox EV, Chevrolet Silverado EV, GMC Sierra EV and Cadillac OPTIQ produced “after the sourcing change will be eligible for the full incentive.”

    The 2022 Inflation Reduction Act law reformed the EV tax credit, requiring vehicles to be assembled in North America to qualify for any tax credits, eliminating nearly 70% of eligible models at the time.

    Tesla disclosed in December its Model 3 Rear-Wheel Drive and Long Range vehicles would lose federal tax credits starting Jan. 1. The Model 3 Performance retains the $7,500 credit.

    (Reporting by David Shepardson; Editing by Marguerita Choy)

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