Hovering Over Federal Reserve Minutes, a Trump Shadow

The one thing Federal Reserve officials were in broad agreement about at their last meeting was this: not tipping their hands about what happens next.

Minutes released Wednesday showed a fractious meeting on many fronts last month when a divided Fed cut interest rates for the first time in a decade. But the consensus to not reveal their intentions was clear, and may show that the steady browbeating by President Donald Trump has begun to influence how the Fed communicates.

Undercommit, and it may throw markets off course and draw more fire from Trump, who has been relentless in demanding not one but a slew of rate cuts and even a return to crisis-era bond buying to supercharge a softening but still-growing economy.

Overcommit, and it looks like capitulation to the White House, a possible blow to the Fed’s perceived status as an independent, technical agency that does not consider politics in its policy decisions.

FILE – Federal Reserve board member Jerome Powell speaks after President Donald Trump announced him as his nominee for the next chair of the Federal Reserve in the Rose Garden of the White House in Washington, Nov. 2, 2017.

Trump adamant on rate cuts

Yet Trump has been adamant, particularly as market data has indicated some doubt about the future of the record-setting U.S. expansion, that the Fed should act to bolster an economy that seems on many fronts to be doing fine.

Safer in that situation to “be guided by incoming information and its implications for the economic outlook” and avoid “any appearance of following a preset course” of further rate cuts — in other words to stay mum.

There were serious policy disagreements at the last meeting when the Fed voted to cut the target policy rate 25 basis points, minutes of the meeting released Wednesday show.

Some wanted no cut at all, and two voting members dissented.

Some wanted a half-point cut, and in the last set of policymakers’ economic projections, a near majority said rates should fall again by year’s end.

But since then, in public, even those who wanted deeper cuts have dialed back their language a notch.

In a Financial Times column Wednesday, Minneapolis Fed President Neel Kashkari framed his call for the Fed to use more “forward guidance” in terms of a promise not to raise rates, not a promise to cut them.

In his first comments after the July meeting, St. Louis Federal Reserve president James Bullard said the Fed would not move again in response to changes in trade policy: It had bought its “insurance” against the administration’s trade war by cutting rates once and would now look at how the economic data responds.

All ears on Powell

But a return to “data dependence” at this point poses a dilemma for Fed chairman Jerome Powell, scheduled to speak here Friday in what will be a closely watched appearance at the central bank’s annual policy retreat in the Wyoming mountains.

With bond markets again sending a warning signal about the near-term economic future as short-term rates move above long-term ones, Powell may need to say more about what the Fed plans, or at least what is influencing its thinking.

“(W)hat Powell has to say on Friday is going to be much, much more important than these minutes,” said Mary Ann Hurley, vice president in fixed-income trading at D.A. Davidson in Seattle.

Is it inflation that is too weak, or job gains that may be too strong to sustain? If overseas data matters, would a German recession trigger lower U.S. rates?

“His main message is going to be some combination of trying to arrest the panic in fixed income markets without being seen as pandering to Trump,” said Adam Posen, president of the Peterson Institute for International Economics.

When they cut rates in July, contrary to the usual sense of a strong consensus narrative about the reason why, different policymakers seemed motivated by a hodgepodge of reasons.

Demands from the White House were not among them. Fed officials insist they are not hostages to Trump. But he may be holding their tongue.

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Experts: Trump’s Approach Could Push Pyongyang Toward Beijing

As a top North Korean military official concluded a visit to China this week in an effort to boost military ties with Beijing, experts said Washington’s big-deal approach could push Pyongyang to deepen its military relations with Beijing, a consequence that could create a rift between Seoul and Washington.

“If we are not going to play a sophisticated strategy … then I guess we’re going to just drive North Korea into the arms of China,” said Ken Gause, director for Adversary Analytics Program at CNA. “It puts China in a greater position to drive a wedge between the United States and South Korea if North Korea is leaning toward China.”

Kim Su Gil, director of the General Political Bureau of the Korean People’s Army (KPA), returned to Pyongyang Tuesday after visiting Beijing to meet with his Chinese counterpart.

During the meeting Saturday with Zhang Youxia, vice chairman of China’s Central Military Commission, Kim said Pyongyang was ready to “strengthen friendly exchanges between the two armed forces” and bring the “two armed forces to a higher level.”

FILE – Chinese President Xi Jinping and North Korean leader Kim Jong Un walk during Xi’s visit in Pyongyang, North Korea, in this picture released by North Korea’s Korean Central News Agency, June 21, 2019.

Closer ties with China

The pledge to bolster military ties between Beijing and Pyongyang followed an agreement that North Korean leader Kim Jong Un and Chinese President Xi Jinping made during their fifth summit held in June in Pyongyang. The two leaders agreed to “maintain the tradition of high-level exchanges.”

Pyongyang and Beijing renewed relations when Kim and Xi met for their first summit in March 2018. Relations had been rocky since Kim took power in 2011 and carried out nuclear and missile tests despite Beijing’s opposition. The alliance between Beijing and Pyongyang dates to the Korean War in 1950 when the Chinese army fought on the side of North Korea against South Korea and the U.S.

Experts said while the latest military meeting was largely seen as Beijing’s effort to restore its relations with Pyongyang, including military ties, Washington’s so-called “big-deal approach” could prompt North Korea to pivot toward China, which has been more lax about enforcing sanctions.

“We can go and continue with maximum pressure like we are now,” said CNA’s Gause, referring to a key focus of U.S. policy. “And if we do, it’s going to just push China and North Korea closer together.” 


VOA Interview: John Bolton’s Take on World’s Hotspots video player.
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WATCH: VOA Interview: John Bolton’s Take on World’s Hotspots

What is ‘big-deal approach’?

White House national security adviser John Bolton reiterated U.S. President Donald Trump’s “big-deal approach” toward resolving nuclear issues with Pyongyang in his interview with VOA last week.

“What President Trump called the big deal, when he met with Kim Jong Un in Hanoi, is to make that strategic decision to give up nuclear weapons, and then implement it, and then all kinds of things are possible after that,” Bolton said.

Washington’s approach involves demanding that Pyongyang give up its entire nuclear program in exchange for sanctions relief while maintaining pressure through sanctions. At the Hanoi summit in February, the “big-deal approach” fell apart when Kim offered only a partial denuclearization.

Earlier this year, Pyongyang said it would give Washington until the end of this year to change its approach.

FILE – People watch a TV news program reporting about North Korea’s firing projectiles with a file image at the Seoul Railway Station in Seoul, South Korea, Aug. 16, 2019.

Missiles fly, talks do not

Talks between Washington and Pyongyang have been stalled since the Hanoi summit in February, but when Trump and Kim held an impromptu summit at the inter-Korean border in June, the two agreed to resume diplomatic efforts.

However, North Korea has launched six missile tests since late July. The series of missile launches suggests that North Korea has advanced its missile technology to the extent that it is capable of evading South Korea’s missile defense system

While demonstrating the new weapons, Pyongyang claimed South Korea’s military drills with the U.S. posed a threat to its national security, prompting North Korea to take “self-defense countermeasures” in response. The joint exercises concluded Tuesday.

Amid the missile launches, Kim sent a letter to Trump stating talks would resume once the exercises concluded. At the same time, Pyongyang said it could seek a “new road” in response to military drills

Pyongyang has yet to follow through on its promises to hold talks even as U.S. Special Representative to North Korea Steve Biegun is in Seoul, ready to talk with Pyongyang. Biegun arrived in Seoul on Tuesday and is expected to be there until Thursday. Although there has been some speculation that Biegun will continue on to Beijing, he’s expected to return to Washington.

Limited military support

Even if Pyongyang does not want its military, the Korean People’s Army (KPA), to be under Chinese influence because of a reluctance to give Beijing “more control over them,” North Korea could seek Beijing’s limited military support, according to Gause.

Evans Revere, acting assistant secretary for East Asia and Pacific Affairs during the George W. Bush administration, said North Korea “is reluctant to allow Beijing to dictate or dominate [the] KPA.”

However, he continued, “it is reasonable to assume that the North Koreans will press the Chinese for logistical and technical support, and perhaps even ask for more advanced weaponry.”

Scott Snyder, a senior fellow for Korean studies at the Council on Foreign Relations, said, “The KPA may also benefit from better relations with China.”

FILE – U.S. Defense Secretary Mark Esper, left, and South Korean Defense Minister Jeong Kyeong-doo, right, shake hands ahead of a meeting at Defense Ministry in Seoul, South Korea, Aug. 9, 2019.

China may also seek tighter military cooperation with North Korea if the U.S. decides to deploy intermediate-range missiles in Asia. U.S. Defense Secretary Mark Esper said earlier this month that he favored placing the missiles in Asia, which angered China.

“If we are destined for increased U.S.-[China] strategic rivalry, then it would make sense for Beijing to ensure that North Korea remain within its orbit, even while making every effort to wean [South Korea] away from the U.S. alliance structure,” Revere said.

The U.S. consideration for the missile deployment came after it formally withdrew from the Intermediate Range Nuclear Forces (INF) Treaty Aug. 2. Washington said the move was a response to repeated treaty violations by Russia.

The U.S. and former Soviet Union agreed upon the Cold War arms control treaty in 1987. It banned them from deploying their nuclear and conventional land-based missiles with ranges between 480 to 5,500 kilometers anywhere in the world.

Bolton said earlier this month that the U.S. willingness to deploy intermediate-range missiles in Asia is in part an effort to protect South Korea.

“Such a move would increase likelihood of expanded strategic military cooperation among China, North Korea and the Russians,” said Revere, adding, “The ‘great game’ in East Asia is about to get more interesting and dangerous.”

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Mexico’s ‘Accordion Rebel,’ Celso Pina Dies at 66

Mexican musician Celso Pina, famed as “the rebel of the accordion” for mixing eclectic styles with traditional Colombian cumbia, died Wednesday of a heart attack in his hometown of Monterrey, his record label La Tuna Records said.

He was 66 years old, according to local media.

With an interest in genres ranging from ska to hip-hop, Pina collaborated with a number of major Mexican rock artists including Cafe Tacvba, Lila Downs and Julieta Venegas. In 2002 his solo album “Barrio Bravo” was nominated for a Latin Grammy.

The composer and singer began playing music with his brothers growing up in Monterrey near the northern border, according to his official website. He picked up the accordion in his late 20s, and, still in Monterrey, learned Colombia’s celebrated vallenato style, central to the bouncy cumbia genre.

“Nobody can resist cumbia,” Pina wrote in his last tweet before his death, ahead of concerts planned in the United States, one of about 30 countries he had toured, according to his profile on the Spotify music streaming platform.

“The rebel of the accordion has left us. His music united Latin American cultures and captivated Americans,” the U.S. Embassy in Mexico wrote on Twitter.

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Pentagon: State Dept Approves Possible $8B Fighter Jet Sale to Taiwan

The U.S. State Department has approved a possible $8 billion sale of F-16 fighter jets to Taiwan, the Defense Security Cooperation Agency said on Tuesday in an official notification to Congress.

The potential deal is for 66 aircraft, 75 General Electric Co engines, as well as other systems, the agency said in a statement, adding it served the interests of the United States and would help Taiwan maintain a credible defense.

China has already denounced the widely discussed sale, one of the biggest yet by the United States to Taiwan, which Beijing considers a renegade province. It has warned of unspecified “countermeasures.”

Senate Foreign Relations Committee Chairman Jim Risch, a Republican, has welcomed the proposed sale of the Lockheed Martin Corp F-16 jets.

“These fighters are critical to improving Taiwan’s ability to defend its sovereign airspace, which is under increasing pressure from the People’s Republic of China,” he said in a recent statement. 

Secretary of State Mike Pompeo told Fox News on Monday that President Donald Trump notified Congress of the sale last week.

Pompeo told Fox News the sale was “consistent with past U.S. policy” and that the United States was “simply following through on the commitments we’ve made to all of the parties.”

In Tapei, President Tsai Ing-wen said the sale would help Taiwan build a new air force and boost its air defense capacity.

In a post on Facebook, Tsai said she was grateful for Washington’s “continuous support for Taiwan’s national defense.”

“With strong self-defense capacity, Taiwan will certainly be more confident to ensure the cross-strait and regional peace and stability while facing security challenges,” she said.

Taiwan unveiled its largest defense spending increase in more than a decade last week, amid rising military tensions with China.

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Envoy Says US Ready to Restart North Korea Nuclear Talks

U.S. envoy for North Korea Stephen Biegun says the Trump administration is ready to resume stalled negotiations over North Korea’s nuclear program.

Speaking Wednesday in Seoul where he was meeting with South Korean officials, Biegun said the United States is “prepared to engage as soon as we hear from our counterparts in North Korea.”

President Donald Trump wrote on Twitter earlier this month that he had received a letter from North Korean leader Kim Jong Un expressing a desire “to meet and start negotiations” after the conclusion of U.S.-South Korean joint military exercises, which ended Tuesday.

North Korea considers the exercises a threat to its existence, and since late last month it carried out six short-range ballistic missile tests that Kim said were in response to the drills.

U.S. Secretary of State Mike Pompeo said Tuesday he was concerned about the latest missile tests, disagreeing with Trump, who has shrugged off their importance.

“I wish that they would not” launch the missiles, the top U.S. diplomat told CBS News.

The two latest projectiles, fired last Friday, flew 230 kilometers into the waters off North Korea, but, aimed differently, could reach South Korea as well as American troops and civilians living there.

Trump has voiced his discontent as well, not about North Korea’s missile tests, but about the costs of the military drills with Seoul.

President Donald Trump and South Korean President Moon Jae-in, left, walk up to view North Korea from the Korean Demilitarized Zone from Observation Post Ouellette at Camp Bonifas in South Korea, Sunday, June 30, 2019.

Asked about the missile tests, Trump told reporters, “I have no problem. These are short-range missiles.”

Trump called the missiles “smaller ones.”  He said earlier this month that Kim had sent him “a really beautiful letter” that included a “small apology” for conducting the missile tests.

The U.S. leader has held out hope that he can bring about Pyongyang’s denuclearization by the time his first term in the White House ends in January 2021.

Pompeo acknowledged in the CBS interview, however, that the United States and North Korea “haven’t gotten back to the table as quickly as we would have hoped” to continue the nuclear weapons talks.

Pompeo said the U.S. knew “there will be bumps along the way” in the negotiations.

“We hope Chairman Kim will come to the table and a get a better outcome” than by maintaining North Korea’s nuclear arsenal, he said.

“It will be better for the North Korean people,” Pompeo concluded. “It’ll be better for the world.”

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China Hopes US Will Come Back to the Table at Chile Climate Talks

China hopes to welcome the United States “back to the negotiating table” to discuss global efforts to limit climate change at a United Nations summit to be hosted by Chile in December, its top climate change envoy said on Tuesday.

Xie Zhenhua, China’s Special Representative for Climate Change Affairs, told journalists during a visit to a solar energy plant outside the Chilean capital Santiago that China would provide “full support to the Chilean presidency of this meeting.”

The summit was “strong proof that a multilateral negotiation process is successful, that multilateralism is working,” he said.

Asked if the U.S. approach to the threat of climate change under President Donald Trump and the U.S.-China trade dispute might affect the outcome in Santiago, Xie replied: “China and the U.S. has many differences but we do have some common grounds on climate change issues as well and we welcome them back to the negotiating table on climate change, we are very open to that.”

Trump has signaled his intention to withdraw the United States from the 2015 Paris climate accord and been dismissive of regulations aimed at slashing greenhouse gas emissions. He has also expressed his preference for bilateral trade pacts over multilateral agreements.

In July, China pledged on the sidelines of the G20 summit in Osaka to show “the highest possible ambition” in the fight against climate change. Experts and policy advisors say the world’s biggest greenhouse gas emitter could introduce new and more stringent carbon targets next year. 

Xie said China would back a bid by the U.N. secretary-general and climate change envoy to persuade all countries to update their Nationally Determined Contributions (NDC) goals to keep global warming to well below two degrees centigrade.

“The most important objective is to identify the new NDCs for the post-2020 period and link those new NDCs together with the financial support from the developed countries as promised,” Xie said. “To have that financial support in place is very important and that’s the objective we would like to achieve.”

China is a key investor in Chilean renewable energy projects and manufactured half of the solar panels at the 110MW Parque Quilapilún solar plant Xie visited with environment minister Carolina Schmidt.

Schmidt will serve as president of the COP25 U.N. climate change summit in December.

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Taiwan’s Tsai Expresses Thanks over Approval of F-16V Sale

Taiwanese President Tsai Ing-wen thanked the United States on Tuesdsay for approving the sale of 66 advanced F-16V fighter jets and urged rival China to respect Taiwan’s right to defend itself.
 
President Donald Trump announced approval of the $8 billion deal on Sunday. The sale is expected to further inflame U.S. relations with China, which claims Taiwan as its own territory to be annexed by force if necessary.

Tsai on Tuesday also applauded previous arm sales already announced by Trump’s administration, saying those reaffirmed the United States’ “long-standing commitment to helping maintain peace and stability in the Taiwan Strait.”

Trump’s announcement begins a period of consultation with Congress, and a formal announcement of the sale could be made as early as next month unless lawmakers object. The State Department, which would ultimately authorize the sale, declined to comment, but members of Congress from both parties welcomed the proposal.

China fiercely opposes all arms sales to Taiwan but has specifically objected to advanced fighter jets such as the F-16V, whose Active Electronically Scanned Array, or AESA, radar is compatible with the F-35 stealth fighters operated by the U.S. Air Force, Navy and Marines. The U.S. is also installing upgraded electronics, including AESA radars, on Taiwan’s existing fleet of 144 older F-16s.
 
While the U.S. cut formal diplomatic relations with Taiwan in 1979 in order to recognize Beijing, U.S. law requires Washington to ensure Taiwan has the means to defend itself.

Since 2008, U.S. administrations have notified Congress of more than $24 billion in foreign military sales to Taiwan, including in the past two months the sale of 108 M1A2 Abrams tanks and 250 Stinger missiles, valued at $2.2 billion. The Trump administration alone has notified Congress of $4.4 billion in arms sales to Taiwan.

Tsai has rejected Chinese pressure to unite Taiwan and China under a “one-country, two-systems” framework and soon after her 2016 inauguration, Beijing cut contacts with her government over her refusal to endorse its claim that Taiwan is part of China.
 
Beijing has sought to increase Taiwan’s international isolation by reducing its diplomatic allies to just 17 and stepped up military intimidation, including by holding military exercises across the Taiwan Strait and circling the island with bombers and fighters in what are officially termed training missions.

On Monday, Chinese foreign ministry spokesman Geng Shuang said Beijing had “made solemn complaints” to the U.S. over the planned F-16V sale. Geng called on Washington to “fully recognize the serious dangers of the arms sale to Taiwan” and cancel it immediately or bear the consequences.

 “China will take necessary measures to safeguard its own interests according to the development of the situation,” Geng said.

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