(NEW YORK) — A jury has found FTX founder Sam Bankman-Fried guilty on all charges in his federal fraud and conspiracy trial.
The jury deliberated for a little over four hours before reaching a verdict on Thursday.
“We will have decorum in the courtroom when the verdict is announced,” Judge Lewis Kaplan said before the reading.
Bankman-Fried, 31, sat motionless at the defense table in an ill-fitting grey suit. He was made to stand and face the jury for the reading. He showed no emotion.
Bankman-Fried was charged with seven counts of fraud, conspiracy and money laundering in what federal prosecutors have described as “one of the biggest financial frauds in American history.”
He was accused of using customer deposits on the crypto trading platform FTX to cover losses at his hedge fund, pay off loans and buy lavish real estate, among other personal expenses.
He pleaded not guilty to all counts. With the conviction on all charges, he could face a sentence of up to 110 years in prison. His sentencing was scheduled for March 28, 2024.
As he exited the Manhattan federal courtroom Thursday night, he turned to look at his parents. His mother put her hand over her chest in a farewell gesture, while his father put his arm around her.
With his head down, Bankman-Fried appeared overcome with emotion as he stood between his lawyers, who seemed to comfort him. He nodded slightly as defense attorneys Marc Cohen and Chris Everdell spoke quietly in his ear.
Cohen said in a statement that Bankman-Fried “maintains his innocence and will continue to vigorously fight the charges against him.”
“We respect the jury’s decision. But we are very disappointed with the result,” Cohen said.
U.S. Attorney Damian Williams said the verdict sends a message “to every single fraudster out there who thinks that they’re untouchable.”
“Those folks should think again. And if they don’t I promise we’ll have enough handcuffs for all of them,” Williams said.
Judge Kaplan said a second trial of counts that had been severed is currently scheduled for March 11, 2024.
“I would tell the government to let me know by Feb. 1 whether that’s going to proceed,” the judge said.
Bankman-Fried stepped down from his role at FTX in November 2022 amid a rapid collapse that ended with the company — once valued at $32 billion at its peak — declaring bankruptcy. Prosecutors charged Bankman-Fried the following month with an array of alleged crimes focused on a scheme to defraud investors.
During the month-long trial, the prosecution laid out the case that this was an elaborate and intentional fraud, while the defense tried to deflect blame for the FTX collapse and characterized Bankman-Fried as a naïve math geek.
While testifying in his own defense, Bankman-Fried conceded on the witness stand that he made mistakes but said he committed no fraud.
Bankman-Fried also testified that he only learned two months before FTX collapsed into bankruptcy that Alameda had spent $8 billion of FTX customer funds.
Caroline Ellison, the former co-chief executive of Alameda and Bankman-Fried’s ex-girlfriend, previously pleaded guilty to criminal charges and testified under a cooperation agreement with prosecutors. She has testified that she committed fraud with Bankman-Fried and at his direction.
Ellison additionally testified that Bankman-Fried believed in utilitarianism and thought rules against lying or stealing inhibited his ability to maximize the greatest benefit for the most people.
FTX co-founder Gary Wang also admitted to committing wire fraud, securities fraud and commodities fraud with other people, including Bankman-Fried, during his testimony. Wang agreed to testify under an agreement with the government after previously pleading guilty to fraud charges.
ABC News’ Mark Guarino contributed to this report.
(NEW YORK) — The cost of doing business in California could soon be slightly more expensive with minimum wages set to increase in April. But what does that mean for menu prices at fast food restaurants that employ hourly workers?
A spokesperson for Chipotle confirmed to ABC News Thursday that as of now, the company has “not made a decision to raise prices in California to offset the anticipated labor increase in California next year.”
However, on the company’s most recent earnings call, CFO Jack Hartung addressed that labor cost changes will impact Chipotle’s margins.
“We’ve been studying that… it’s going to be a pretty significant increase to our labor,” he said.
“We haven’t made a decision on exactly what level of pricing we’re going to take, but to take care of the dollar cost of that and/or the margin part of that, we haven’t decided yet where we will land,” he continued. “It’s going to be a mid to high single digit price increase, but we are definitely going to pass this on. We just haven’t made a final decision as to what level yet.”
McDonald’s CEO Chris Kempczinski, meanwhile, addressed the same issue on his company’s Q3 earnings call Monday, saying it “is an impact that’s going to hit all of our competitors” and that McDonald’s will explore other areas outside of raising prices to offset increased labor costs, which is ultimately at the discretion of franchisees, and can vary by location.
“There is going to be a wage impact for our California franchisees. I don’t think, at this point, we can say exactly how much of that is going to work its way in through pricing,” Kempczinski said. “Certainly, there’s going to be some element of that, that does need to be worked through with higher pricing. There’s also going to be things that I know the franchisees and our teams there are going to be looking at around productivity.”
He added that in longer term discussions with franchisees, McDonald’s sees this as “an opportunity for us to gain share.”
“We believe we’re in a better position than our competitors to weather this. And so let’s use this as an opportunity to actually accelerate our growth in California,” Kempczinski said.
A spokesperson for McDonald’s told ABC News this week, “The assertion that raising prices is the only way the company is responding to wage increases is inaccurate.”
The wage legislation in question, AB 1228, was signed into law by California Gov. Gavin Newsom in late September, and “authorized the Fast Food Council to set fast-food restaurant standards for minimum wage, and develop proposals for other working conditions, including health and safety standards and training.”
(NEW YORK) — DoorDash is testing a new notification it hopes will encourage customers to leave a tip for delivery drivers.
The delivery giant is rolling out a message to some of its app users that states, “Orders with no tip might take longer to get delivered — are you sure you want to continue?”
“While the vast majority of customers do leave a tip, offers that don’t include a tip can be seen as less desirable — this impacts our entire community, leading to longer wait times for customers, orders sitting longer at merchants, and less value for Dashers,” the company said in a statement.
“I think DoorDash should pay their drivers more and meet their customers, their clientele in the middle,” David Slyder, who has been a DoorDash driver for nearly three years, told ABC News’ Good Morning America. “We use our own vehicles. We put our own gas.”
The move comes four months after a viral video showed a former DoorDash delivery man who was offended by a tip and yelled an expletive at the customer at her home.
Tipping has increased in recent years, especially in the wake of the COVID-19 pandemic that left restaurants reeling for every penny following the government shutdowns; expensive safety protocols and changes; rising food costs; supply chain hurdles; and other factors that raised the overall cost of eating out.
Square, a financial services platform developed by Block, Inc., previously told ABC News that tipping has skyrocketed across the board during the COVID-19 pandemic with tips up over 25% at restaurants and nearly 17% at quick service establishments in 2022.
But even as tip and fee fatigue has grown for some consumers, tipping prompts are popping up in more places.
“COVID caused people to be willing to tip more — but that increase in tipping kind of communicated to businesses, ‘Hey, consumers are willing to tip more. Let’s start asking for it,'” Mike Lynn, a professor of consumer behavior at Cornell University, told GMA.
DoorDash also reiterated that service fees and tips are separate.
“Those fees are shown to the customer before they decide what to tip. It varies by order. Our fees won’t change based on whether a customer does or doesn’t tip, separate thing entirely,” the DoorDash representative said.
(NEW YORK) — Uber and Lyft agreed Thursday to pay a combined $328 million for withholding money from drivers.
Uber agreed to pay $290 million and Lyft $38 million in what New York Attorney General Letitia James called the largest wage-theft settlement her office has ever secured.
The money will be distributed to cheated drivers who will get back pay along with mandatory paid sick leave and other benefits. Eligible drivers can file a claim to receive the money owed.
From 2014 to 2017, Uber deducted sales taxes and Black Car Fund fees from drivers’ payments when those taxes and fees should have been paid by passengers, the attorney general’s office said.
Uber misrepresented the deductions made to drivers’ pay in their terms of service, telling drivers that Uber would only deduct its commission from the drivers’ fare, and that drivers were “entitled to charge [the passenger] for any tolls, taxes or fees incurred,” though no method to do this was ever provided via the Uber Driver app.
Lyft used a similar method to shortchange drivers from 2015 to 2017, deducting an 11.4% “administrative charge” from drivers’ payments in New York equal to the amount of sales tax and Black Car Fund fees that should have been paid by riders.
Uber and Lyft also failed to provide drivers with paid sick leave available to employees under New York City and New York State law.
“For years, Uber and Lyft systemically cheated their drivers out of hundreds of millions of dollars in pay and benefits while they worked long hours in challenging conditions,” James said in a statement. “These drivers overwhelmingly come from immigrant communities and rely on these jobs to provide for their families. This settlement will ensure they finally get what they have rightfully earned and are owed under the law.”
In addition to paying a total of $328 million in back pay to former drivers, Uber and Lyft agreed to an “earnings floor,” guaranteeing drivers across the state are paid a minimum rate. Drivers outside of New York City will receive a minimum of $26 per hour. Drivers operating in New York City already receive minimum driver pay under regulations established by the Taxi & Limousine Commission in 2019.
Uber and Lyft drivers will now also receive guaranteed paid sick leave. Drivers will earn one hour of sick pay for every 30 hours worked, up to a maximum of 56 hours per year.
(NEW YORK) — With less than one month until Thanksgiving and the start of the winter holiday season, Americans are already eyeing grocery prices to gauge how much their festive gatherings are going to cost this year.
Experts are encouraging consumers to start making shopping plans early for the holiday feast with a budget in mind, especially with inflation still putting the pinch on wallets at check out.
“It is still sticker shock — this year over last year prices are up about 2.4%, but that’s on top of the 11.4% from the year before that,” Phil Lempert, CEO of SupermarketGuru, told ABC News’ Good Morning America.
This year, major retailers are adjusting their game plans amid inflation in order to keep a traditional turkey dinner more affordable.
Target announced Wednesday that it will be serving up a Thanksgiving meal basket to feed four for under $25, including a turkey at less than $1 per pound, an assortment of sides and desserts under $5.
Starting Wednesday, customers can shop the Target Thanksgiving meal both online and in store that includes must-have staples: a 10-pound Good & Gather Premium Basted Young Turkey (Frozen); 5 pounds of Good & Gather Russet Potatoes; 14.5-ounces Good & Gather Cut Green Beans; Campbell’s Cream of Mushroom Soup; Ocean Spray Jellied Cranberry Sauce; Stove Top Turkey Stuffing Mix; and Heinz HomeStyle Roasted Turkey Gravy.
For shoppers who plan to host a larger feast, Target suggests doubling this list to serve eight guests.
John Furner, president and CEO of Walmart U.S. — the largest retailer in the country — joined Good Morning America last month and, in an ABC News Exclusive, revealed Walmart’s new plan to make Thanksgiving more affordable.
“Last Thanksgiving we decided we were going to sell a Thanksgiving meal at the same price as 2021,” Furner said of the strategy they implemented across other major holidays. “This year, finally, we are able to have the Thanksgiving basket that the prices are coming down versus a year ago — we are really proud to say that the price of a Thanksgiving meal is going to come down.”
This year, the Thanksgiving basket from Walmart includes ingredients to make a meal for up to 10 people, which Furner said will “sell for around $2 less than last year” at just over $70.
Furner added that the move comes on the heels of consumer feedback: “92% of our customers tell us they are concerned about food inflation.”
Inflation is up 3.7% from a year ago and, according to Moody’s Analytics, American households are spending $235 more per month on the same goods and services than they spent a year ago.
Staple items such as ham and potatoes will cost more this year, up 6.9% and 2.7% respectively. Egg prices are back down by 28.8% from last year, now costing $2.07 on average.
“Last year, bird flu caused panic with over 60 million birds having to be cold now, so far it’s only hit about 180,000 birds,” Lempert said. “It could be that turkey is gonna be less expensive this year than in previous years.”
Turkey is now $1.27 per pound, down 22% since the same time last year, thanks in part to a decrease in avian flu that previously sent prices soaring, and thus, has helped produce more turkeys.
As Americans have seen shifts in supply chains, changes in consumer habits and other financial impacts that came out of the pandemic, Furner said “it’s been an interesting couple years — from last year, when inflation really started things like food and consumables picked up and we see more people eating at home.”
“Whether it’s food or getting ready for guest, people are buying early,” Furner also said.
Starting Nov. 1, the holiday food basket at Walmart will be offered at the lower price through Dec. 26. There will be two purchasing options: one with ingredients for customers who want to cook from scratch, and one for customers that like more convenient, ready-to-bake options.
“Walmart’s Thanksgiving meal includes customers’ favorites and fixings including many national brands, from turkey (for under $1/lb.!) and ham to stuffing and pumpkin pie,” a Walmart press release stated.
The holiday meal baskets are available for online order, pickup and delivery, as well as in-store.
Other retailers including Aldi have announced savings up to 50% on a list of 70 Thanksgiving items, including gravy, potatoes and pumpkin pies.
According to experts, one way to help maximize your dollar is to shop early for things that won’t spoil and opting for generic over name brand products.
“Shop early. Make sure you have that shopping list and look at the circulars,” Lempert said of the upcoming “price war.”
“You’re going to see Kroger, Albertson’s, Shop Right — just about everybody else wanting to get our money,” he added.
(NEW YORK) — Jurors will soon begin deliberating in the trial of FTX founder Sam Bankman-Fried, nearly a year after the cryptocurrency trading platform’s collapse, as federal prosecutors are accusing him of orchestrating one of the largest financial frauds in U.S. history.
Bankman-Fried, 31, faces seven counts of fraud, conspiracy and money laundering centered on his alleged use of customer deposits on FTX — once valued at $32 billion — to cover losses at his privately controlled hedge fund, Alameda Research, as well as to buy lavish real estate and make political donations.
The defense has characterized Bankman-Fried as a math geek who was naïve and didn’t set out to defraud anyone, while the prosecution laid out the case that this was an elaborate and intentional fraud.
Bankman-Fried has pleaded not guilty to all counts. If convicted, he could face a sentence of up to 110 years in prison.
With closing statements slated to begin on Wednesday, here’s a look back at key moments of the trial:
Bankman-Fried takes the stand
The last witness to take the stand was Bankman-Fried himself, testifying in his own defense across three days.
Judge Lewis Kaplan allowed certain questions about the involvement of lawyers in FTX policies but declined to give defense attorneys the wide berth they were seeking to show Bankman-Fried acted in good faith because he relied on the advice of FTX lawyers.
During his testimony on Oct. 27, Bankman-Fried recognized that “a lot of people got hurt” due to the collapse of FTX. He said he “made a number of small mistakes and a number of big mistakes” — but denied intentional wrongdoing.
“There were significant oversights,” he said.
On cross-examination, prosecutors portrayed Bankman-Fried as a hypocrite out for good publicity. He testified on Oct. 31 he was unaware that Alameda Research employees were spending $8 billion of FTX customer funds. No one was fired as a result, he said, suggesting it would not be unusual for him not to know which of his employees spent the money.
Alameda CEO reveals wrongdoings to employees in secret recording played in court
Caroline Ellison, the former CEO of Alameda Research and Bankman-Fried’s former girlfriend, was one of the government’s star witnesses.
On Oct. 12, prosecutors played portions of a secretly made recording of a November 2022 all-hands Alameda employee meeting during which Ellison revealed the firm had been siphoning billions of dollars in FTX customer funds and was on the verge of collapse.
“I mean, the basic story here is that starting last year, Alameda was kind of borrowing a bunch of money via open-term loans and used that to make various illiquid investments,” Ellison is heard saying. “Then with crypto being down, the crash, the — like, credit crunch this year, most of Alameda’s loans got called. And in order to, like, meet those loan recalls, we ended up like borrowing a bunch of funds on FTX, which led to FTX having a shortfall in user funds.”
An Alameda employee secretly recorded the Hong Kong meeting and passed the recording to a colleague, Christian Drappi, who testified at trial that he submitted the audio files to federal prosecutors after consulting with an attorney.
When asked by a staff member whose idea it was to make up Alameda’s losses with FTX customer money, Ellison replied, “Um, Sam, I guess.”
Ellison says Sam Bankman-Fried didn’t think rules applied to him
Ellison testified that Bankman-Fried believed in utilitarianism and thought rules against lying or stealing inhibited his ability to maximize the greatest benefit for the most people.
“He didn’t think rules like don’t lie or don’t steal fit into that framework,” Ellison testified on Oct. 11.
Ellison said Bankman-Fried cautioned her against putting anything in writing, once telling her “anything we put on Slack should be something we’re comfortable seeing in The New York Times.”
Ellison previously pleaded guilty to fraud charges and, during her testimony, said she confessed her wrongdoing to the FBI to get a plea deal.
Ellison details $100 million bribe to China
While on the stand on Oct. 11, Ellison described a “large bribe” Alameda paid to Chinese government officials in November 2021 “to get some of our trading accounts unlocked.” Alameda had two trading accounts worth about $1 billion on exchanges based in China which were both frozen in 2021 as part of a Chinese government investigation into money laundering.
It was a substantial amount of Alameda’s trading capital at the time, and Ellison said Bankman-Fried “said that we should send the cryptocurrency transfers” — equaling about $100 million.
Prosecutors use Bankman-Fried’s GMA interview against him
After his cryptocurrency exchange FTX collapsed, Bankman-Fried tried to explain himself to ABC’s George Stephanopoulos on Good Morning America. Federal prosecutors used that interview against him during the trial.
The interview was played for the jury on Oct. 19, after FTX’s former general counsel, Can Sun, testified he “never” would have approved lending FTX customer money to Alameda.
“Never approved anything like that, and I would never have done it either,” Sun said. “No, absolutely not.”
The jury then saw an excerpt of Stephanopoulos’ interview in which he asked Bankman-Fried, “If Alameda is borrowing the money that belongs to FTX depositors, that’s a bright red line, isn’t it?”
In response, Bankman-Fried said, “There existed a borrow-lending facility on FTX and I think that’s probably covered, I don’t remember exactly where, but somewhere in the terms of service.”
“But they’d have to approve of that,” Stephanopoulos countered. “They’re saying they didn’t approve of it here — they’re saying you approved of it.”
After the excerpt concluded, prosecutor Danielle Sassoon turned back to Sun and asked, “Was the borrow-lend facility a potential justification that you had discussed with the defendant on Nov. 7, 2022?”
“Yes,” Sun said.
“And what had you said to the defendant about that?” Sassoon asked.
“It was not supported by the facts,” Sun said.
When asked what was Bankman-Fried’s response, Sun said, “He acknowledged it.”
Ellison testifies SBF wanted to cultivate ‘eccentric’ image
Bankman-Fried’s disheveled image — from his hair to his clothing — often came up during the trial. Ellison testified on Oct. 11 that FTX’s founder was “trying to cultivate an image of himself as sort of a very smart, competent, somewhat eccentric founder” to attract the attention of certain financial media, such as Michael Lewis, whose new book Going Infinite: The Rise and Fall of a New Tycoon chronicles the collapse of FTX.
When the prosecution showed photos of Sam dressed slobbily, Ellison testified it was part of the image he wanted: “He said he thought his hair had been very valuable. He said ever since [his job at trading firm] Jane Street, he thought he had gotten higher bonuses because of his hair and that it was an important part of FTX’s narrative and image.”
While on the stand on Oct. 27, Bankman-Fried denied his image was calculated to draw attention to himself, but that the T-shirts, shorts and unruly hair were because he was “kind of busy and lazy.” He said he became a media personality by “accident.”
FTX co-founder admits to committing crimes
FTX co-founder Gary Wang — another government witness — admitted to committing crimes during his testimony.
“Did you commit financial crimes while working at FTX?” assistant U.S. Attorney Nicholas Roos asked Wang on Oct. 6.
“Yes,” Wang answered, adding he committed wire fraud, securities fraud and commodities fraud with other people, including Bankdman-Fried.
Wang agreed to testify as part of an agreement with prosecutors. He previously pleaded guilty to fraud charges.
Lavish lifestyle in the Bahamas was focus of prosecution
Prosecutors have been exploring the unusual living arrangements and the luxurious lifestyle Bankman-Fried had while living with nine other employees at a $35 million apartment in the Bahamas. Government witness Adam Yedidia, who worked as a developer at FTX, testified at the start of the trial that Alameda paid for the apartment.
The defense tried to downplay the prosecution’s characterization of lavish spending, making Yedidia testify that Bankman-Fried drove a Toyota Corolla, did not own a yacht and slept on a beanbag chair in the Bahamas.
(WASHINGTON) — Two senators are asking U.S. regulators to address “unfair” practices in airlines’ frequent flyer programs.
In a letter sent Monday night, Dick Durbin, D-Ill., and Roger Marshall, R-Kan., asked the Department of Transportation and the Consumer Financial Protection Bureau to help “protect consumers against unfair and deceptive practices in airlines’ frequent flyer and loyalty programs.” The programs encourage customer loyalty with a system where they can accumulate points that they can then redeem for travel with the airline or other rewards.
“While these programs may have originated to incentivize and reward true ‘frequent flyers,’ they have evolved to include co-branded credit cards and now often significantly or exclusively focus on dollars spent using these co-branded credit cards,” Durbin and Marshall wrote in the letter they sent to the agencies.
The letter cited reports that “airlines are engaged in unfair, abusive, and deceptive practices with respect to these loyalty programs.”
Durbin and Marshall’s letter said the airlines can make changes to their loyalty programs without notifying the consumer; that there’s a disparity between the value of points at purchase and at redemption; and that the charge for transferring points is so steep that consumers ultimately lose the value of the points in the transaction.
An industry analyst predicted that the airlines will push back on the lawmakers’ letter.
“I expect the airlines are going to fight this aggressively and paint a picture of doom,” Henry Harteveldt said. “There’s going to be some drama around this, that’s for sure.”
“Airlines have been changing the value of their loyalty program credits for decades,” Harteveldt said. “This is not new. And airlines have constantly been changing the benefits people receive and don’t receive.”
The senators on Monday also asked how the DOT and CFPB are planning to address the airlines’ practices and if they have the regulatory authority needed to protect consumers.
A DOT spokesperson confirmed that the department received the letter and plans to respond to the senators directly. A CFPB spokesperson said they received the letter and are reviewing it.
Harteveldt, the analyst, said the letter brought up valid points.
“I do think there is some merit to what they want to explore in this,” he said. “Do airlines provide enough transparency into their programs? Are they truthful enough with consumers when enticing them to sign up for the loyalty programs?”
Earlier this year, Durbin and Marshall introduced legislation to increase competition in the credit card market and bring down swipe fees.
The airlines have spoken out against that bill, saying it would devastate rewards programs.
(WASHINGTON) — The Federal Reserve left interest rates unchanged on Wednesday, despite stubborn inflation that has resisted the central bank’s fight to cool price increases.
The move allows previous rate increases to take greater hold of the economy and grants the central bank time to assess whether another hike will be necessary.
Inflation stands well below its peak last year of over 9%, but progress has stalled in recent months and price growth remains more than a percentage point higher than the central bank’s target rate.
Speaking in Washington D.C. on Wednesday, Fed Chair Jerome Powell said the central bank drew closer to its inflation goal over the past year, opting to hold rates steady as it weighs the steps necessary to bring inflation down to normal levels.
“Inflation has been coming down but it’s still running well above our 2% target,” Powell said. “Given how far we have come, along with the uncertainties and risks we face, the committee is proceeding carefully.”
Once bemoaned as a source of recession worries, the U.S. economy has become a wellspring of good news: blistering growth, robust hiring and consumers opening their wallets for everything from concert tickets to bar tabs.
The strong performance complicates the fight to dial back inflation, posing a quandary for the Fed.
Since last year, the Fed has raised its benchmark interest rate at the fastest pace in more than two decades, seeking to slash price hikes by slowing the economy and reducing consumer demand.
In theory, the economy should eventually falter as it becomes more expensive for businesses and consumers to borrow. But the economy has so far resisted a cooldown.
Gross domestic product data released last week showed that the U.S. economy expanded at a 4.9% annualized rate over three months ending in September. That breakneck pace more than doubled growth over the previous quarter and reinforced other recent indicators of sturdy performance.
A blockbuster jobs report last month exceeded economist expectations by nearly twofold. Consumer spending, which accounts for nearly three-quarters of U.S. economic activity, surged in September, government data showed.
On Wednesday, Fed Chair Jerome Powell noted the unexpectedly strong economic performance in recent months.
“Recent indicators suggest that economic activity has been expanding at a strong pace,” Powell said.
Recent economic growth, however, belies an alarm sounded by one of the most important economic indicators: the 10-year Treasury yield.
A rapid rise in U.S. government bond yields over recent weeks has elevated long-term borrowing costs for consumers seeking mortgage loans and corporations pursuing funds to expand their businesses.
“Higher treasury yields are showing through to higher borrowing costs for households and businesses, and those higher costs are going to weigh on economic activity,” Powell said on Wednesday.
The onset of some financial pain is exemplified by the housing market, where the average interest rate for a 30-year fixed mortgage briefly exceeded 8% on Monday, Mortgage News Daily data shows.
High mortgage rates have dramatically slowed the housing market, since homebuyers have balked at the stiff borrowing costs and home sellers have opted to stay put with mortgages that lock them into comparatively low rates.
Mortgage applications have fallen to their lowest level since 1996, the Mortgage Brokers Association said last month.
The Fed may consider the sharp increase in bond yields as indication that a string of previous rate hikes has begun to make its way through the economy, rendering an additional rate hike unnecessary, at least for now.
But the central bank hinted at its most recent meeting in September that it expects to raise rates one more time this year, according to projections included alongside a statement last month from the Federal Open Market Committee, the Fed’s decision-making body on interest rates.
The benchmark interest rate currently stands at a range 5.25% to 5.5%, as a result of a near-historic series of rate increases.
Powell said the rate hikes have yielded progress in the central bank’s fight against inflation. But, he added, the effort remains far from over.
“The process of getting inflation sustainably down to 2% has a long way to go,” Powell said. “We remain strongly committed.”
(WASHINGTON) — Once bemoaned as a source of recession worries, the U.S. economy has become a wellspring of good news: blistering growth, robust hiring and consumers opening their wallets for everything from concert tickets to bar tabs.
The strong performance complicates the fight to dial back inflation, posing a quandary for the Federal Reserve as it readies to make a decision on Wednesday about whether to impose another rate hike.
Since last year, the Fed has raised its benchmark interest rate at the fastest pace in more than two decades, seeking to slash price hikes by slowing the economy and reducing consumer demand.
In theory, the economy should eventually falter as it becomes more expensive for businesses and consumers to borrow. But the economy has so far resisted a cooldown.
Inflation stands well below its peak last year of over 9%, but progress has stalled in recent months and price growth remains more than a percentage point higher than the central bank’s target rate.
Economists expect the Fed to leave interest rates unchanged on Wednesday, allowing previous rate increases to take greater hold of the economy and granting the central bank time to assess whether another hike will be necessary.
Investors and policymakers will closely scour comments made by Fed Chair Jerome Powell for clues about the central bank’s path over the remainder of the year.
Gross domestic product data released last week showed that the U.S. economy expanded at a 4.9% annualized rate over three months ending in September. That breakneck pace more than doubled growth over the previous quarter and reinforced other recent indicators of sturdy performance.
A blockbuster jobs report last month exceeded economist expectations by nearly twofold. Consumer spending, which accounts for nearly three-quarters of U.S. economic activity, surged in September, government data showed.
Speaking at a luncheon in New York City last month, Fed Chair Jerome Powell noted the unexpectedly strong economic performance in recent months.
“We are attentive to recent data showing the resilience of economic growth and demand for labor,” Powell said, adding that such growth could “put further progress on inflation at risk.”
Recent economic growth, however, belies an alarm sounded by one of the most important economic indicators: the 10-year Treasury yield.
A rapid rise in U.S. government bond yields over recent weeks has elevated long-term borrowing costs for consumers seeking mortgage loans and corporations pursuing funds to expand their businesses.
The onset of some financial pain is exemplified by the housing market, where the average interest rate for a 30-year fixed mortgage briefly exceeded 8% on Monday, Mortgage News Daily data shows.
High mortgage rates have dramatically slowed the housing market, since homebuyers have balked at the stiff borrowing costs and home sellers have opted to stay put with mortgages that lock them into comparatively low rates.
Mortgage applications have fallen to their lowest level since 1996, the Mortgage Brokers Association said last month.
The Fed may consider the sharp increase in bond yields as indication that a string of previous rate hikes has begun to make its way through the economy, rendering an additional rate hike unnecessary, at least for now.
But the central bank hinted at its most recent meeting in September that it expects to raise rates one more time this year, according to projections included alongside a statement last month from the Federal Open Market Committee, the Fed’s decision-making body on interest rates.
The benchmark interest rate currently stands at a range 5.25% to 5.5%, as a result of a near-historic series of rate increases.
The Fed plans to “proceed carefully” with its interest rate policy, Powell said last month, citing a “range of uncertainties.”
Still, he added, the central bank will prioritize its goal of bringing inflation down to normal levels.
(DETROIT) — General Motors has reached a tentative deal with United Auto Workers to end their strike, GM and the union confirmed Monday.
GM joins Stellantis and Ford, which reached deals in the last week.
The tentative agreements, which must be ratified by union members at each of the respective carmakers, could end the strike against the Big 3 that began last month. The at-times contentious work stoppage thrust UAW President Shawn Fain into the national spotlight and drew support from President Joe Biden.
Tentative agreements struck with Ford, Stellantis and GM each called for a roughly 25% raise over four years, as well as significant improvements on pensions and the right to strike plant closures.
In a statement on Monday, the UAW celebrated the tentative deal with GM, calling it a “historic tentative agreement that paves the way for a just transition and wins record economic gains for autoworkers.”
“Like the agreements with Ford and Stellantis, the GM agreement has turned record profits into a record contract,” the union added.
GM CEO Mary Barra, in a separate statement, praised the tentative agreement for striking a balance between the needs of the car company and its employees.
“GM is pleased to have reached a tentative agreement with the UAW that reflects the contributions of the team while enabling us to continue to invest in our future and provide,” Barra said. “We are looking forward to having everyone back to work across all of our operations, delivering great products for our customers, and winning as one team.”
Speaking at the White House on Monday, meanwhile, President Joe Biden hailed the recent contract agreements at the Big 3 as “historic.”
“These agreements ensure the iconic Big 3 can still lead the world in quality and innovation,” said Biden, who visited UAW members on the picket lines in Michigan last month. “Due to the commitment and solidarity of UAW workers willing to exercise their right to collectively bargain, they won a record contract.”
The automakers had expressed reluctance to meet some demands from the union that they considered ambitious, saying such moves would take investment away from a costly shift to electric vehicles. The companies have also cited the need to compete with non-union competitors.
GM, Ford and Stellantis faced pressure to reach a deal as financial losses piled up amid the strike. As of last week, the strike had cost the auto industry an estimated $9.3 billion, according to a report released on Monday by Michigan-based research firm Anderson Economic Group.
In a live-streamed address on Facebook on Sunday, Fain said the recent contract agreements would fuel the UAW’s wider ambitions to organize non-union carmakers, including Tesla, Honda and Toyota.
“One of our biggest goals coming out of this historic contract victory is to organize like we’ve never organized before,” Fain said. “When we return to the bargaining table in 2028, it won’t just be with the Big 3. It will be the Big 5 or Big 6.”
The union, which represents nearly 150,000 autoworkers, launched a work stoppage against the Big 3 carmakers more than a month ago, deploying a “stand-up” strike method to target specific plants and add to the list if a deal wasn’t reached. At the peak of the strike, 46,000 employees refused to work.
The UAW sought ambitious demands such as a 40% pay increase combined over the four-year duration of a new contract, as well as a 32-hour workweek at 40-hour pay. Tentative agreements with Ford and Stellantis appeared to fall short of those terms but delivered significant raises and job security protections.
