Economy
Most Fed officials see another rate hike by year-end: Minutes
Most U.S. Federal Reserve policymakers expect another interest rate hike by the end of the year as stubborn inflation and elevated energy prices continue to complicate the central bank’s efforts to bring price pressures under control, minutes released Wednesday showed.
The Federal Open Market Committee (FOMC) voted unanimously at its September meeting to raise its benchmark interest rate by 25 basis points to a range of 3.75% to 4%.
U.S. households and businesses have faced years of elevated prices since the COVID-19 pandemic, while inflation has remained above the Fed’s long-term 2% target for more than five years.
“With regard to the outlook for monetary policy beyond the current meeting, most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end,” the minutes said.
Several policymakers said they believed the previous policy rate had not been sufficiently restrictive to curb economic activity.
The Fed has a dual mandate to maintain price stability while supporting maximum employment.
The U.S. unemployment rate has remained relatively stable over the past year despite fluctuations in job growth, partly reflecting demographic shifts and lower immigration.
“Almost all participants assessed that, while inflation risks were tilted to the upside, risks to the labor market had diminished and were now broadly balanced,” the minutes said.
Inflation measured by the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred gauge, peaked at 7.2% in June 2022 before declining.
It fell to 2.2% in September 2024 before accelerating again, partly amid the Trump administration’s tariffs on U.S. imports and other economic policy changes.
Energy prices have risen further since the outbreak of the U.S.-Iran war in February, as Iranian retaliation disrupted energy markets.
PCE inflation reached 3.8% in May, its highest level in three years, before easing to 3.4% in August, the latest month for which data is available.
Policymakers said recent progress in bringing inflation down had been insufficient.
They noted that geopolitical developments had driven up crude oil and refined fuel prices, while a surge in artificial intelligence-related investment was also contributing to inflationary pressures.
Officials also warned that the longer energy prices remain elevated, the greater the risk that rising costs in individual sectors could spread into broader price pressures.
Türkiye set out Wednesday a detailed plan to repay nearly half a million investors who have been caught up in the liquidation of more than 130 investment funds.
The first payments are due on Thursday, according to Vice President Cevdet Yılmaz, who told Parliament on Thursday the plan would be funded from the funds’ own assets and not from public money.
Here is how the process is expected to work.
Why are funds being liquidated?
Turkish authorities launched a sweeping investigation and market intervention last month after suspected price manipulation in a number of thinly traded stocks triggered heavy losses and redemption pressures at investment funds.
Capital Markets Board (SPK) halted trading in funds run by seven management companies on Sept. 17 and ordered the funds wound down. Authorities have also detained or ordered the detention of top executives.
The 131 funds ordered to be liquidated account for about 4.6% of all funds in Türkiye and 7.7% of portfolio value, Yılmaz said on Thursday.
When will first payments be made?
Payments will begin on Thursday for 43,643 investors in 17 funds run by three of the companies: A1 Capital, Bulls and Pardus. These funds are being wound down under the “ordinary” liquidation method, which started on Monday.
Authorities are also preparing ordinary liquidation for Atlas Portföy. If the necessary collateral is secured, its 56,614 investors in 16 funds would be paid quickly, Yılmaz said. Another 49 private funds under the first three companies, with 2,098 investors, will be dealt with separately.
The remaining three portfolio management companies include Tera, Hedef and Pusula.
What about other funds?
The remaining funds will go through “extraordinary” liquidation, a new process that depends on a bill now before Parliament and expected to pass soon.
Under the plan, investors would receive an interim payment of up to TL 1 million ($20,326) of their original investment.
Key features of the plan:
The limit applies to each fund separately. An investor with money left in three funds could receive up to TL 1 million from each.
Small investors come first. Roughly 350,000 investors are said to have less than TL 1 million in the funds. They are due to be paid first, with payments planned within October. Money market funds will also be given priority.
Larger claims will be paid later. Investors owed more than TL 1 million lira will receive the rest in stages.
The interim payment is an advance. It will be deducted from what each investor is finally owed.
How will amounts be calculated?
The Central Registry Agency (MKK) will calculate each investor’s “net investment amount,” which forms the basis of the payment.
Officials say the calculation method has been written, and the figures will be produced once price data arrives from Takasbank, the clearing and settlement institution.
The plan being drawn up also envisages paying investors an inflation adjustment on top of their principal.
Is there government guarantee?
No. Officials say public money cannot be used to cover private investment losses. Unlike bank deposits, investment funds carry no state guarantee, and that applies especially to higher-risk hedge funds.
The government’s stated aim is to resolve the problem using the money and assets inside the funds.
Where will money come from?
Each fund’s securities, property and other assets will be sold for cash. The funds’ debts will be paid and amounts owed to them collected.
To handle this, the SPK has opened 131 refund accounts, one per fund, and one general share refund account at the Savings Deposit Insurance Fund (TMSF). Money collected in each fund’s account will go to that fund’s creditors. Money in the general account will be distributed among the funds using a method the SPK will set.
Justice Minister Akın Gürlek said earlier this week that five people had returned profits that authorities say were made unfairly, and that such gains will be transferred to the TMSF fund.
How long will it take?
Authorities expect the full liquidation to take up to six months, after which the final balance left in each fund will be known.
If the bill passes, officials say the interim payments will be made in October, meaning most of the 455,758 affected investors would be repaid in full.
How many people are affected?
According to officials, the 131 funds have 455,758 investors. Ziraat Bank is responsible for liquidating 125 funds, with 151,247 investors, and Işbank for six funds, with 388,718 investors.
What about criminal investigation?
As of Wednesday, authorities had taken legal action against 220 people, including managers of the troubled fund companies. Of these, 85 are in custody, arrest warrants have been issued for 23 suspects, and 81 people face travel bans.
Prosecutors have issued 21 seizure orders covering property of 63 individuals and 12 legal entities. The bank, cryptocurrency and safe-deposit box assets of 67 people and companies have also been seized.
Türkiye’s capital markets will emerge from the fund turmoil cleansed of “greedy parasites,” President Recep Tayyip Erdoğan said Wednesday, reiterating that the government would do whatever is necessary to resolve the problem.
Erdoğan said the administrative and political burden of the affair rested on the government’s shoulders.
Regulators last month ordered the liquidation of over 130 investment funds managed by seven asset managers following warnings by some that they could not meet redemption payments.
Authorities have since widened their investigation into suspected market manipulation in stocks and fund markets. Eighty-five suspects have been arrested so far in the probe, Justice Minister Akın Gürlek said Tuesday.
The funds ordered to be wound down had reached more than $20 billion (TL 983.94 billion) in assets over just three years. Nearly half a million investors have been affected, according to authorities.
Erdoğan said all relevant bodies were following the matter closely and had taken measures. He said those who infringed on the public’s rights, made unjust gains or committed fraud would be held accountable.
He said the economic leadership and other institutions were taking the steps needed for financial markets to come out of the crisis stronger and healthier. He said the government was also following the investor side of the problem carefully.
“We are putting in motion the necessary administrative and legal processes so that our citizens’ savings are paid as soon as possible, without placing a burden on the public,” he said.
Inquiry into possible negligence
The newly created Fund Coordination Board, chaired by Vice President Cevdet Yılmaz, has been tasked with overseeing the liquidation of the funds. The State Supervisory Council (DDK) has also been assigned to examine the issue.
“We will not turn a blind eye to the slightest negligence or any breach of law or rules,” Erdoğan said.
He said some were waiting eagerly for Türkiye’s economy to fall into crisis, but that at the end of this process Turkish capital markets would shed their impurities and rid themselves of “greedy parasites that feed on small investors’ savings.” He said the financial system would emerge sounder and healthier and continue to grow stronger.
Judiciary, administration, politics
Erdoğan said the matter had judicial, administrative and political dimensions.
The independent judiciary would do its own work, he said. Economic actors were taking the steps required in their own areas of responsibility. Questions of conscience, ethics and belief, he said, were a matter for each individual. “But the burden on the administrative and political side of the issue is on our shoulders,” he said.
On the political side, Erdoğan said the issue could not be separated from conscience, morality and faith. He said his party had adopted the principle that “politics has only one harbor, and that is morality” when it was founded. He said the movement was built on belief, ethics and trust.
“No matter who stands in our way as we serve our people, our country, and our Muslim community, we will leave them aside and keep walking,” said the president.
Fatma Betül Sayan Kaya resigned last month as a deputy chair of the Justice and Development Party (AK Party) after she and her husband were alleged to have made substantial profits trading shares ahead of the turmoil.
The two were to give statements as suspects on Wednesday as part of the investigation, the Justice Ministry said.
The ministry said they would be questioned by the Istanbul Chief Prosecutor’s Office’s money laundering crimes investigation bureau.
The Capital Markets Board (SPK) is also expected to file criminal complaints against the two under the country’s Capital Markets Law as part of the investigation, the ministry said.
Türkiye’s central bank chief said Wednesday that a clearer slowdown in domestic demand and fading shocks would let disinflation regain momentum, stressing that policymakers would remain cautious to preserve gains achieved in lowering inflation.
Annual consumer price growth eased more than expected to 29.73% in September from 31.51% in August, official data showed Monday. That marked the first time inflation dipped below 30% in almost five years.
Inflation had peaked at 75.5% in May 2024 and has fallen substantially since, although the downward trend stalled earlier this year following a sharp rise in energy prices caused by the Iran war.
The Middle East conflict that began in February pushed up commodity prices, especially for energy, raised transport costs and disrupted supply chains.
That has caused global growth to weaken and inflation to rise, Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan said.
Underlying trend points lower
Policymakers at the central bank are particularly looking at underlying trend indicators, Karahan told an event in Istanbul.
Three-month averages pointed to a rising underlying trend between March and June, when the war’s effects were most visible. The trend has declined again since July, he said.
On an annualized basis, he said, the underlying trend, which rose to around 30% during the war, stood at 23.7% in September, about 6 percentage points below the current annual rate.
Karahan said this suggests disinflation will speed up if supply-side pressures fade, and he credited the tight policy stance’s effect on demand and pricing behavior.
Energy the exception
In September, annual inflation was lower than a year earlier in every category except energy.
Annual energy price increases reached 46.1%, about 11 percentage points above last year’s level, said Karahan, describing it as the main reason disinflation lost pace.
In services, annual inflation fell by 7 percentage points to 37.%. Monthly rent increases, which had long run well above services inflation, have slowed noticeably in recent months and are now below the services average. Karahan said this shows inertia from rents is weakening.
Annual inflation in the food and nonalcoholic drinks category fell to 27.6% from 36.1% a year earlier, helped by a recovery in agricultural output after last year’s adverse weather. Karahan said the bank is watching global agricultural prices and climate risks closely.
In core goods, Karahan said annual inflation fell to 15.9% from 19.9%. He added that moderate core goods inflation, despite cost pressures, indicates weak demand is limiting the pass-through of costs.
He noted some upward pressures. Education services inflation slowed from a year earlier but ran higher than expected after September increases. Transport services inflation was 44%, above the previous year because of the indirect effects of higher energy prices. Communications services inflation jumped to 44% from 24%.
Some analysts said the September inflation reading raises the prospect of an interest rate cut at the Oct. 22 meeting.
The bank has kept its benchmark one-week repo rate at 37% this year, as it monitored the inflation impact of the Iran war.
Weak demand, but expectations a concern
Karahan said first-half national income data and indicators for the third quarter point to weak domestic demand. Excluding gold, retail sales growth slowed in the third quarter, he said, and limited growth in quarterly card spending also confirmed the slowdown.
Inflation expectations have not improved as the bank had forecast at the start of the year, which Karahan said remains a risk to disinflation and requires continued caution.
Early in the war, the bank had said the effect on the medium-term outlook would run through two channels: a possible deterioration in expectations and a cooling of economic activity. Karahan said that, thanks to the tight stance, deterioration in expectations has been limited, while weaker demand has pushed the underlying trend lower.
Reserves and current account
Karahan said the current account deficit narrowed in the second quarter despite adverse external conditions and remained roughly flat as a share of national income. He said high energy prices carry upside risk for the trade deficit, but the bank expects this year’s current account deficit to come in below its long-term average relative to national income.
He said gross reserves, which stood at $210 billion (TL 10.33 trillion) in late February, fell to $149 billion at the end of June under the war’s impact, before rebounding to $171 billion by the end of September.
Of the decline since February, $23 billion was due to the fall in gold prices, Karahan said. Net reserves excluding swaps were about $40 billion as of the end of September, he added.
The global economy is under threat from several issues simultaneously, including persistently high energy prices, record public debt and risks from the AI investment boom, the International Monetary Fund’s (IMF) chief warned on Wednesday, urging governments to implement protective fiscal and monetary policy measures.
In a speech previewing the IMF and World Bank Annual Meetings next week in Bangkok, IMF Managing Director Kristalina Georgieva said the world was being pulled in two directions – a negative energy supply shock from the Middle East conflicts and a positive demand shock from artificial intelligence that is also fueling inflation.
“The combined impact of these two forces is highly uneven across the world,” Georgieva said, adding that the AI boom was bypassing many countries.
New IMF growth forecasts to be released during the Bangkok meetings will show that the biggest growth downgrades will come in economies ravaged by war, Georgieva said.
These include Ukraine, suffering significant damage to civilian and economic infrastructure, and Gulf countries hit by Iranian strikes and sharply reduced energy exports.
Georgieva did not indicate in her prepared remarks whether the IMF’s latest World Economic Outlook would change the overall 2026 global growth forecast from the sluggish 3.0% rate forecast in July.
That forecast, which predicted a rebound to 3.4% growth in 2027, assumed the Strait of Hormuz would start to reopen in mid-July and return to pre-war conditions by March 2027. It assumed oil prices would average $89 a barrel in 2026 and $78 a barrel in 2027.
Georgieva said oil prices remain at $100 a barrel, with impaired refining capacity adding another $100 in “crack-spread” margins per barrel for key products including diesel. The winter heating season will boost demand even as natural gas supplies remain restricted by threats to LNG shipping through the Strait of Hormuz, she added.
“Even if the war in the Gulf were to end soon, the problem of high energy prices will likely persist for some time,” Georgieva said, adding that Brent crude oil futures predict high oil prices through 2027.
Higher energy prices are pushing up inflation, policy rates and benchmark bond yields, she said, noting that U.S., German and Japanese 10-year sovereign yields are now at their highest levels since 2007, 2009 and 1996, respectively, and still climbing.
Growing debt load
Adding to the worries to be discussed by the IMF’s 191 member countries next week is a growing public debt burden that is sapping growth and adding inflationary pressures, Georgieva said. The IMF says public debt is at the highest level since World War II and is projected to exceed 100% of GDP before 2030.
Georgieva singled out advanced economies, led by the U.S., as the “worst offenders” on debt loads, with debt-to-GDP ratios higher than those of emerging markets and low-income countries.
Policymakers can no longer rely on higher growth rates alone to solve fiscal problems, she said.
“And yet we don’t see decisive action in the high-debt advanced economies where the need of the hour is for credible medium-term fiscal consolidation plans, supported in some cases by upfront fiscal measures, including to take some pressure off monetary policy,” she said.
After 5.5 years of above-target inflation, Georgieva said inflationary pressures were persisting, from the AI build-out, energy and food price shocks, tariffs, higher defense spending and higher debt service costs.
“Now may be a good time for a prudently hawkish bias in many countries’ monetary policy,” Georgieva said, adding that rate hikes by the U.S. Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of Japan (BOJ) were “highly appropriate.”
In a fireside chat following her speech, Georgieva added that the “most important task” for monetary policy in the current environment is to focus on price stability and for central banks to communicate their resolve in maintaining it.
“They can only do it when central banks are independent, and when central banks resist pressure that may come from the fiscal side to ease the burden by basically stepping up, buying debt, making it so that the situation from the fiscal side eases,” she said.
“I would call this monetary cowboys, running to the rescue of the fiscal agents, and my message is: please don’t.”
AI risks abound
Georgieva highlighted other risks from AI, where investment as a share of GDP is likely to exceed that of railroads, the electricity grids or telecommunications infrastructure.
The rising economic and financial concentration puts pressure on AI companies to deliver productivity and earnings gains to justify lofty valuations, she said, warning that market disappointment could turn into “a far-reaching shock.”
But she said IMF research suggests that AI, done right, could add a half percentage point of extra world growth annually.
AI preparedness is key, she said, including regulatory guardrails that “help manage AI’s substantial perils, which include large-scale labor market fallout, serious cyber and stability risks and frontier models threatening to escape human control and run amok.”
In addition to building fiscal strength, even at difficult political costs, Georgieva said governments should take other steps to boost growth, including reforms that would develop improved workforce skills, make corporate startups and wind-downs easier, boost energy security and streamline regulations.
African countries moved to launch their own credit rating agency on Wednesday, aimed at countering what many see as unfair assessments by top global institutions that make it more expensive to borrow money.
The Africa Credit Ratings Agency (AfCRA), backed by the African Union after nearly a decade of talks, will judge the creditworthiness of countries, businesses and institutions.
The Indian Ocean island of Mauritius was chosen as the agency’s home, partly due to its established financial services industry.
It aims to offer an alternative viewpoint to the “big three” global credit ratings – Fitch, Moody’s and S&P – which have been accused in the past of unfairly playing down African economies.
The African Peer Review Mechanism, the institution behind AfCRA, says 23 countries on the continent are not rated at all by the traditional agencies.
They can also overlook Africa’s huge informal sectors, which do not easily show up in official data, analysts say.
“Africa is not asking for favorable ratings,” Nigeria’s President Bola Tinubu wrote on X last month, welcoming AfCRA.
“We are asking for fair ratings, grounded in our fundamentals and in the reforms our economies are actually carrying out.”
Real-world effects
Low credit ratings have real-world effects as investors charge more interest to lend money.
On average, it costs Africa $9 for every $100 borrowed in international markets in 2024, compared to about $4.70 for emerging markets in Asia and $6.50 in Latin America, according to estimates by the Organisation for Economic Co-operation and Development (OECD), a club of mostly rich nations.
AfCRA is not just a response to “Africa’s unhappiness with the incumbent players,” Hannah Wanjie Ryder, chief executive of consultancy Development Reimagined, told a recent seminar organised by the Chatham House think tank.
“The theory of change is they would actually be able to look with clearer eyes,” she said.
First test
It remains to be seen whether AfCRA would be able to persuade investors that its ratings can be trusted over those of the leading agencies.
AfCRA’s founders say there will be no government interference.
Analysts say the first test is whether the agency will downgrade an African government. If not, investors risk seeing it as the continent marking its own homework.
“African borrowers have long paid a high-risk premium and standard models can miss the informal economy, domestic savings and reforms,” said Jacob Oreki, a management consultant at Kenya’s Strathmore University Foundation.
“But a rating agency is judged on independence and accuracy, not where it sits. If it will not downgrade an African sovereign, markets will treat it as advocacy,” he told Agence France-Presse (AFP).
Investors will base their decisions on the rating, he added, if “it is credible, not because it is African.”
Uber Technologies announced Tuesday it would acquire U.S. catering platform ezCater in an all-cash deal for $2.3 billion, marking a venture into a new area – in its latest move to strengthen delivery, the company’s fastest-growing business segment.
The deal comes months after Uber agreed in July to buy German firm Delivery Hero in a $14.8 billion transaction aimed at creating the largest food delivery group outside China.
Founded in 2007, ezCater lets companies order food from caterers for corporate events, meetings and workplace meals. It generated more than $2.5 billion in gross bookings over the past 12 months, Uber said.
The deal would combine ezCater’s catering business with Uber Eats’ restaurant network and Uber for Business’ corporate customer base, the company said.
Uber Eats has a wider global reach, but DoorDash holds the majority of the U.S. food delivery market, according to analysts, and the ezCater deal is expected to help Uber narrow that gap.
Uber said ezCater’s average order value exceeds $400 and the deal is expected to boost margins.
The acquisition adds a new line of business built on high-value group orders paid for by companies, expanding Uber’s business-focused segment, whose gross bookings grew more than 40% in the second quarter, Rosenblatt analyst Scott Devitt said.
“Importantly, bringing workplace buyers into the ecosystem supports the membership flywheel,” Devitt said.
The ride-hailing and delivery company’s shares have fallen 15% this year as investors weigh how well it can compete once robotaxis begin to reshape the ride-hailing market.
Uber’s delivery segment accounted for about 37% of total revenue in the second quarter and has been its biggest growth driver in the recent past.
The deal is subject to regulatory approval and is expected to close in the coming months.
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