Reuters World News - U.S. and Russia clash over drone, the Fed’s risky path and Downton’s staff problem

Episode Date: March 15, 2023

Confrontation over the Black Sea raises stakes between U.S. and Russia. Price stability Vs financial stability -- the Fed’s tricky balancing act. Downton can’t get the staff – worker shortages in the UK. Nor'easter buries New England and New York, storms soak California. Learn more about your ad choices. Visit megaphone.fm/adchoices

The latest inflation numbers are in. What do they mean for a Federal Reserve trying to protect the banking system and American wallets? Our Fed correspondent in Washington weighs the risks faced by the central bank as it heads into another rate decision. And Britain unveils its latest budget and tries to woo more workers back into the Labor Force. We visit Downton Abbey to find out why the fictional seat of the Crawley family just can't get the staff. It's Wednesday, March 15th. 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 begin with a diplomatic crisis over the Black Sea. A US military drone downed by two Russian fighter jets in international airspace near Ukraine. The incident pitting Moscow and Washington directly against each other as the war rages on. Air Force Brigadier General Pat Ryder describing to reporters how two Russian S-U-DU-TRAs. 27 jets carried out an intercept of the American MQ9 Reaper drone before one collided with it. You know, we are continuing to assess exactly what happened, but I think based on the actions of the Russian pilots, it's clear that it was unsafe, unprofessional, and I think the actions speak for themselves. What we saw, again, were fighter aircraft dumping fuel in front of this

UAV and then getting so close to the aircraft that it actually... damaged the propeller on the MQ9. We assess that it likely caused some damage to the Russian aircraft as well. Russia's Ministry of Defense denied that its aircraft had come into contact with the drone. It said the UAV had crashed after sharp maneuvering. The big questions now was this a deliberate act and how will both countries react? The diplomatic fallout was immediate. The White House summoned the Russian ambassador. And NATO allies were immediately briefed about the first such incidents since Russia's invasion of Ukraine. Chuck Schumer on the floor of the Senate. This intercept was so dangerous and so brazen that the U.S. Air Force was forced to crash their

drone into international waters. It is another reckless act by President Putin and his military. And I want to tell Mr. Putin, stop this behavior before you are the cause of an unintended escalation. To Lahore and supporters of former Pakistani Prime Minister Imran Khan clashing with police, tear gas was fired into his residence and his supporters beaten with batons. The violence erupted a week after an arrest warrant was issued for Khan, who is accused of unlawfully selling state gifts when Prime Minister. In this video address on Wednesday, Khan said he would obey the summons. He said there are security concerns about the court appearance in Islamabad after previous attacks there. Extreme weather is wreaking havoc in the US once again. A nor'easter

has New England and parts of New York digging out this morning. Two feet of snow's been dumped, knocking out power for nearly a quarter of a million homes and businesses. On the west coast, California has seen more heavy rain, with flooding across farms and damaging in infrastructure. Our reporter Nathan Frandino is on the ground. Ten counties here on the coast are seeing anywhere from one to eight inches of rain over less than two days. On the border of Monterey and Santa Cruz counties, a section of a major highway remains closed. It sits surrounded by many acres of flooded farmland. Those same floodwaters are rushing under Highway 1 and causing major erosion to the concrete support beams underneath. I'm Nathan

Brandino in Monterey County. From California to Peru. Here, Cyclone Yaku has led to several deaths, with homes buried under torrential rain. A state of emergency has been declared. In southeastern Africa, meanwhile, Cyclone Freddie continues to cause devastation. One of the most powerful storms ever recorded in the southern hemisphere is now heading Malawi, where at least 190 people have been killed. The collapse of Silicon Valley Bank is now the focus of U.S. prosecutors.

The Department of Justice and Securities Exchange Commission, both launching probes into the sudden demise of the regional bank. As investigators sift through the financial rubble, investors this morning asking if it's a lull or the calm after the storm. US stocks gained some ground as fears of contagion risk appeared to be contained. Part of the relief coming with expectations of a small. rate hike by the Federal Reserve next week. It's a tricky path ahead for Jerome Powell and the Board of Governors. Here to help us understand how they'll navigate it is our Federal Reserve correspondent Howard Schneider in Washington. Hi, Howard. Hey, Kim. How are you doing? Very well. So let's jump straight in. What does the CPI data mean for the Fed's aggressiveness on rate rises at such a

critical time? Yeah, well, listen, despite the turbulence over the weekend with the failure of Silicon Brown Valley Bank. Inflation is still strong, and this has been their focus. It's going to remain their focus. Markets calm down a bit today. It doesn't seem like this is turning into a giant fracture. So absent that, it's likely, it seems, they're going to go ahead with a quarter point rate increase next week because this CPI is still high. But with the financial turmoil going on right now, there must be a sort of balancing act here. Oh, sure. It was just a week ago. It seems like ages now, but a week ago, the pal told Congress they might have to actually go 50 basis points at this meeting. I think you can throw that out the window altogether. I had an interesting conversation with a former regional president who said, listen, cutting back to zero, not only is inconsistent with where

inflation is, it also says, we're not confident in what we just did. Remember, over the weekend, they just threw this big liquidity rug underneath the banking sector. So to suddenly come out and say, well, markets are still fragile, we're not going to raise rates anymore. That's kind of saying we don't trust what we just did. The collapse of SVB and the sort of turmoil it's causing, particularly with medium, smaller size banks, is this a crisis or is it a cleansing? That's a nice turn of phrase. That remains to be seen. I think it's a cleansing to the extent that these are banks that were kind of, you know, playing some pretty adventurous games, it seems. It's a crisis to the extent when you think about it, that we have kind of outed a systemic fragility, it seems to me, in the deposit

insurance space. Because all of a sudden, it seems like that $250,000 limit for depositors and people's lack of faith in what's going to happen tomorrow may itself be a systemic problem that has to be addressed. There are growing cries over how the supervision of SVB worked. What do we know about the investigation? Listen, there are going to be a lot of questions coming out this, the investigation into the supervision of SVV is just getting started. Fed promises to have an answer on that or report on that by the first of May. A whole suite of regulatory questions also that are going to have to be probably revisited here. You know, wasn't a mistake to let these banks, SVB and some other regional ones out of the stricter supervision, stricter stress tests and things like

that that the larger banks are forced to undergo. That is all going to be spooling out here in coming months. All right. Howard, thank you. Sure thing. From one economic challenge to another, this time in the UK, where finance minister Jeremy Hunt is set to present his latest fiscal plans with the country on the verge of recession. Staff shortages are one of the economy's biggest problems. Some Brits don't want to go back to work after COVID, plus there's Brexit. One place you'd think people would be lining up to work is the Downton Abbey Castle, owned by Lady Fiona Carnivan.

I'm here in the saloon of Highclay Castle, or down to an abbey as you may think of it. And this was, of course, the room in which we used to hold wedding ceremonies. It's just so beautiful. Used to, is right. High Clare Castle used to host hundreds of weddings a year. Now there are fewer ceremonies, and the banquets have become buffets. There are no staff, and we can't run a wedding for 120 people with four people. and the rest of us running around.

It is serious, and I don't know when it's going to change. She can't find people. She blames Brexit. When we go to our usual agencies and try to find people, they are not there. If we ask for 10, three might turn up. We are wrapped in red tape now in every piece of our business that we do. It's a very challenging world. A challenging world, whether you live in a castle, or not. If only Lady Carnivant could tap the metaverse for some help. That's Maeve,

a South Korean girl band that only exists in virtual reality. Its first music video went viral, racking up nearly 20 million views. It solves some of the human problems big K-pop bands face, like exhaustion from overworking. I wonder if the group's developers could get them to serve tea in the drawing room at Highclair Castle. That's it for this edition of Reuters' World. We'll be back on Thursday. In the meantime, you can find more trusted news at Reuters.com.