Reuters World News - Powell can’t lay eggs: The Fed’s tricky inflation fight

Episode Date: March 9, 2023

What the war on inflation means for American pocketbooks. Li Qiang, who is China’s No.2? The silent war in Mexico’s Matamoros. All work and then play? South Korea’s population plan. Learn more about your ad choices. Visit megaphone.fm/adchoices

If, and I stress that no decision has been made on this, but if the totality of the data were to indicate that faster tightening is warranted, we'd be prepared to increase the pace of rate hikes. He speaks and the guessing games begin. But what to Fed Chair Jerome Powell's latest statements about the war on inflation really mean for American pocketbooks? Our Fed correspondent breaks it all down. I don't think Jerome Powell can lay more eggs for us. Meanwhile, in South Korea, the government hopes to end.

increase the working week to boost the population. So how does more work mean more babies? We visit one of Seoul's nap cafes to explain. It's Thursday, March 9th. 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. We start in Ukraine.

Air raid sirens sounding as Russian missiles strike the cities of Kiev, Kharkiv and Odessa. The barrage of attacks has knocked out power to Europe's largest nuclear facility in Zaporizia. In eastern Ukraine, Ukrainian forces continue to defend the city of Bakruth from Russian assaults. To Eastern Europe and violent protests on the streets of the former Soviet Republic of Georgia, police using tear gas and stun grenades after two nights of demonstrations over a bill on foreign agents. Protesters claim Russia was influencing the move. Their opposition won out. The government had to be.

has dropped the draft law, requiring organisations to register as foreign agents if they receive more than 20% of their funding from abroad. The Kremlin said it was not involved in any way with the proposal. Protests like this last weekend on the streets of Tel Aviv are threatening a visit from US Defence Secretary Lloyd Austin. He's in Israel for talks on Iran and tensions in the occupied West Bank. But the location's been changed and the arrival delayed because of the violence. Tens of thousands of protesters have taken to the streets, angry over government reforms to the judicial system, and more bloodshed in the West Bank. Israeli forces killed three Palestinians near a village close to the city of Janine on Thursday. In China, much pomp and ceremony accompanies what is essentially a rubber stamp session of Parliament.

The annual National People's Congress meeting of nearly 3,000 delegates in Beijing, another sign of President. Xi Jinping's grip on power in his third term. One name, however, is grabbing some of the attention. Li Chiang is set to be confirmed as China's premier year, the second in power. But who exactly is he? China's bureau chief, Tony Monroe, is in Beijing and has the background on Xi and Lee's long relationship. They came up together with Xi very much,

the senior member of the partnership. They worked most closely together in the early 2000s when Xi Jinping was the party secretary in Jujang province. This is a province bordering Shanghai. It's one of China's wealthiest and most economically dynamic. Li Qiang was his chief of staff. And that is a role that is very much for the most trusted of confidants. What we do know is, you know, having spoken with people who have.

interacted with him, he does seem to be skilled bureaucratic operator, a doer, somebody who's, when he says he's going to do something, he gets it done. The kidnapping of four Americans last week has thrust the border town of Matamoros, Mexico, into the headlines. Our photographer, Daniel Bacerell, has reported from the region for more than a decade. He's on the ground now, with locals and my... migrants were often targeted by drug cartels. Matamoros is a small city.

You could call it a calm area. Even knowing that the cartel controls the city, you can go in and out during the daylight without any problems. But the situation here and now is totally different. The killing of two of the American hostages scares residents. The streets of Matamoros look less busy. than usual. The atmosphere feels tense. It gives me the feeling of walking in a lowless territory. It makes me think about every step I take. U.S. lawmakers are calling for the Biden administration

to draw a harder line on drug trafficking into the U.S. and the violence that accompanies it. But those living in Matamoros have been navigating this reality for years. This is not the first time that something like that, it's. happen in Mexican territory. We're living in the middle of a silent war for as long as I can remember. I am Daniel Besserill in Matamoros, Mexico. Now, Jerome Powell goes to the hill and investors scatter in panic. Stocks are down, the dollar is up, and the bond market is flashing a big fat recession warning, or an inverted yield curve to use the technical term. Here to break it all down for what it really means to us regular people is our resident Fed watcher, Howard Schneider.

Hi, Howard. Kim, how are you? Very well. Hey, let's talk about Jerome Powell, Federal Reserve Chair Powell. What is he pointing to now? Should we be preparing for an all-new world of pain? Yeah, he's basically telling Congress that they may be slipping a little bit behind again in the inflation fight and are likely to have to raise rates higher and possibly even faster than they have.

been expecting just a couple weeks ago. Why is that? Why is it not working? Well, listen, this is one of the big mysteries. It's incredibly tight job market. Wages continue rising. People still have money to spend. Consumption, basis of the economy, two-thirds, 70% of GDP just isn't cracking yet. And until that happens, you know, probably you're going to see inflation still rising. So Howard, we're hearing a lot about the yield curve, that it's inverted, that that's a problem. Can you explain that for us? So, yeah, usually investors need a return to hold money for longer periods of time. So a 10-year bond will return more, for example, than a two-year bond.

When that gets upside down, it means they really see risk in the short-term, risk of a recession. Why is that? Because the fence raising short-term interest rates, which is one of the reasons people will buy those instruments anyway. So it kind of is a distortion of the usual return you demand over time and assign that investors think, gross is going to slow. If we're looking at potentially those big rate hikes and other 50 basis points yet, what's that going to mean for us ordinary joes? You know, what is it going to mean when we go to the supermarket? But could that also mean potentially layoffs? Yeah. Okay, so let's walk through this. If you're going to the supermarket, hey, it may actually be a good thing if it gets inflation down,

right? Although people are in dispute about whether some of the things that are causing inflation now, like, you know, avian flu killing chickens and decreasing egg production are really going to be affected by Fed policy. But, you know, if you're a stockholder, not so much because when interest rates rise that tends to make equities less attractive, you'd expect mortgage rates to rise again. So if you want to get in the housing market, probably, you know, it's going to get tougher rather than easier down the road. In terms of the unemployment, don't get ahead of yourself on this. This economy has surprised time and time again. They want to see the labor market slow. They want to see wages slow, but you're looking at half percentage point rise in unemployment, one percentage

point rise, probably more on the low side, I would guess. All right, Howard, thanks so much. To South Korea, where the government wants to allow people to work up to 69 hours a week. They think it will encourage people to have more children. Confused? Our correspondent, Hjonsor Yim, explains the logic from one of Seoul's nap cafes, where sleep-deprived workers, Go to recharge. I'm curled up on a massage chair at a nap cafe in central Seoul. The lights are deemed and is very relaxing here. Around me, office workers in shirts and ties are snuggled up for a siesta.

Sleeping off a nap at a cafe is not unusual in South Korea. The country has some of the longest working hours in the world. Now, the government wants to increase the potential working with, from 52 hours to 69. The government says maximizing the amount of time someone can work will help employees navigate busy periods and accumulate days off when things are slow. Officials say under the proposal people ultimately work less

and that will encourage them to have time for childcare. The government doesn't really have a good track record of baby making however. A few years ago, the previous administration cut the maximum working week to 52 hours from 68. But the country still has the world's lowest birth rate. One mother we spoke to, Paksukhi, said that she had to quit her job to take care of her son. If the working week increased, she said she couldn't dream of having a second child. That's it for this edition of Reuters World News.

We'll be back on Friday with our special Oscars podcast. In the meantime, you can find more trusted news at Reuters.com.