Reuters World News - Economics 101: What next for U.S. and Turkey?

Episode Date: May 25, 2023

What's next for interest rates? Our U.S. Fed interpreter analyses the latest minutes - and if there's a difference between a hold, skip or pause. In Turkey, more rates decisions as President Erdogan could be on the verge of reelection – and a rehaul of his economic policy. Plus, how an in-flight request for a blanket sparked controversy in Hong Kong and what's behind the Chinese hacking of Kenya's government. Visit the Thomson Reuters Privacy Statement for information on our privacy and data protection practices. You may also visit megaphone.fm/adchoices to opt-out of targeted advertising. Learn more about your ad choices. Visit megaphone.fm/adchoices

Today, it's all about the economies. No, I'm not being stupid, economies, plural, was a bad pun. But we are following the money today to dig into the economic stories, shaping the news and the world, including what the latest Fed Minutes say about US interest rates, the future of Turkey's Erdogomics, and a Chinese hack of Kenya's government as it tries to renegotiate debt. It's Thursday, May 25th. This is Reuters World News, bringing you everything you need to know from the front lines in 10 minutes.

I'm Kim Vennel in London. Convierre your passion in a business with Shopify and bathe records of ventas with the form of pay with a better conversion of the world. Has you heard of bien. The incredible system of Pago of Shopify facilitates the company on your site web, in the networks, in the networks, and in whatever place. But let's start with your music for your eyes. No let's more

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per cente but let's start with the top stories making news. First to this week's big political announcement. Tonight I'm pleased to introduce

two individuals who've done more to loosen the grid. Whoops, and not the smoothest of starts for Ron DeSantis, launching his presidential bid on Twitter,

with Elon Musk. All right, sorry about that. We've got so many people here that I think we are kind of melting the servers, which is a good sign. The glitches eventually eased, allowing DeSantis to say he wants to end the culture of losing that has infected the Republican Party. Back in DeSantis' home state of Florida, there's been criticism of a library for removing a poem

that author Amanda Gorman recited at Joe Biden's inauguration. The Miami-Dade County Public School confirmed the hill we climb has been moved, but denied that it's been banned. Cathay Pacific fired three flight attendants caught on video making fun of passengers who couldn't speak English. The CEO of Hong Kong's Premier Airline has apologized. Hong Kong's leader also weighed in, vowing that it wouldn't happen again. So why did this incident cause such an uproar? Reuters Faro Master explains.

This incident caused a lot of anger amongst mainland Chinese who said they were being insensitive and rude by mocking the passenger who couldn't ask for a blanket in English. This speaks to underlying tension between Hong Kongers and mainland Chinese, which kind of erupted with the protests that we saw in 2019. And there's still this underlying bubbling at the surface that you can see. And this Cathay incident kind of just. explodes in a way because of this.

So it plays into the narrative that Hong Kong's being disrespectful of mainland China and its cultures and traditions. And because Hong Kong is part of China, this is something that obviously the government really doesn't want to see. Love for Tina Turner has come from across the musical spectrum, from Beyonce to Mick Jagger after her death, aged 83. Joe Biden also paid tribute to the Queen of Rock and Roll. Fans flocked to the Hollywood Walk of Fame to lay flowers

and reflect on an extraordinary woman who overcame poverty and abuse to triumph on the world stage. She went through so much in her personal life and then when you got in said you would never know what she's been through. Most women that have gone through the struggles that she did would want to give up on life. I grew up on soul music just for my parents handing down their records to me. So that's what got me into being a deed.

I love seeing her performance. I love seeing her dance. Minutes of the May meeting of the Federal Reserve are out. Here to analyze them with me is our resident Fed interpreter, Howard Schneider, in D.C. Hey, Howard, what have we learned? Well, it was pretty much as expected and as communicating, you know, consistent with the message that Fed Chair Pell delivered after the meeting, which is that they're likely to hold fire from here. Look, this wasn't an ironclad guarantee.

There was a lot of discussion in this document about May. maintaining optionality. They don't make any promises, keep the doors open, don't let people think there's going to be a rate cut, for goodness sakes, but don't rule out a hike, don't rule out a pause. That's pretty much where they've been for a few weeks now, and there was nothing in the minutes that would make you think otherwise. Not to split hairs here, but does that mean we are looking at a pause,

but not necessarily the end? No, I don't think that's splitting hairs at all. I think there's a fun little linguistic game. Does it a pause? It's a skip. Is it a hole? Look, it's not a hold. Nobody's saying that this is at the end for sure. Even the ones that are ready to, that have been a little more leaning into this idea, probably want to keep their eyes open on inflation going forward. And yet you have some of the chief hawkish voices like Chris Waller coming out and saying, yeah, you know, probably we may need to skip ahead to July, let this thing evolve a little bit and see what's going to happen. But, you know, a skip is not a hold. A skip is maybe it's a pause, depending on how long it lasts. I don't know. Look, they'll play all sorts of games with the words. But it's probably. June's off the table. I wouldn't say off the table, but highly, highly, highly unlikely unless

something really bad happens. What about the debt ceiling negotiations? How much will that complicate things? Well, look, the debt ceiling, I sort of consider for them a hard constraint. If this is not resolved by their June 13th, 14th meeting, there's no way they would consider a rate increase, no matter what's happening in the economy or with inflation. They just wouldn't take that risk until they know this is behind them. Erdogomics was a buzzword bandied about a lot in the run-up to Turkey's election. President Tayyip Erdogan's policy of fueling growth with low interest rates, in spite of rampant inflation, became a key issue for voters.

Now, days before the presidential runoff, there appears to be a split within his party over whether to stick with his controversial economic program, or scrap it. Jonathan Spicer in Istanbul has found an informal group of ruling party members is circling. Erdogan's party, the AKP, has always had two camps, as it were, jockeying for position, jockeing for influence, jockeing for Erdogan's ear. One camp is a more orthodox camp. They have sometimes had the levers of power. We've seen central bank governors, for example, come and go from this camp.

There is some people within the party who are plotting, out how they might possibly reverse course or adjust things away from this highly unsustainable program where the foreign reserves are running out. The whole credit economy is sewed together by a tangle of regulations where it's very difficult to lend and borrow and where the policy interest rate has been completely sidelined as a lever for the economy. And yet he's stuck by this policy saying it's correct. And still, it looks like he may well be elected back into power. So why would he change anything now? Right. Part of this policy, part of Erdogan's program, is to encourage exports and to encourage Turks to use the lira. A major plank of this program

is actually stabilizing the lira. And in fact, it's had some success. We had years of Turks turning to hard currencies, I think it got up to about 60. of hard currency holdings nationwide versus the lira. It's quite dramatic. And that has actually reversed in the last couple of years. And then, you know, Erdogan turns around and says, despite it all, I was reelected, or at least we expect him to potentially win this runoff. He has the advantage here. And so he could look at his program and say, in fact, I was proven right. In fact, I was able to keep growth on track. In fact, I was able to keep unemployment rate, while high, stable, and not too high.

China is a major investor in Kenya, and the African nation is key to Beijing's Belt and Road infrastructure project. But a new report by Reuters reveals China hacked the Kenyan government for years. James Pearson in London and Aaron Ross in Nairobi were part of an international team that identified the hacking. So James, why is China hacking Kenya's government? As far as we could work out from some of the activity that we were able to try, and from speaking to at least one person with direct knowledge of some of these hacks, they were trying to get some idea of future decisions that Kenyan government might be making with regards to Chinese debt.

One of our sources mentioned that there were many documents taken from the foreign and finance ministries which supported this idea. Aaron, what does that say to us then about China's strategy? So China has been a major lender to African countries over the past decade or two. But now it's been slowing its lending because a lot of countries have been having trouble paying back those loans. And so China has to be looking really hard at who it's giving money to and how it's going to be reimbursed. And a number of countries like Kenya are struggling to find that financing to pay China back. So does this mean that other nations that China invests in may also be at risk?

One of the interesting things we found in the course of reporting this was that the scale of this as a cyber operation is much bigger than we were able to confirm for this. particular story. I think there's an interesting question looking at the same group to just look at the number of different countries that do have debt relations with China that have also being targeted in similar ways. What did the Kenyan and Chinese governments have to say? The Kenyan government basically downplayed this. They said that we are targeted by hackers from a variety of countries, from China to the US to European countries, and the Chinese government denied that it had done this and said these accusations were baseless. But We're keeping an eye on the fallout and the reactions that will come in the days to come.

That's it for this edition of Reuters World News. We'll be back tomorrow. To get all our shows in your podcast feed, make sure to follow us on your favorite platform or download the Reuters app.