Federal Reserve Policymakers See Rate Hikes Ahead, Note Worries

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Federal Reserve policymakers on Friday signaled further interest rate  increases ahead, but raised relatively muted concerns over a potential global  slowdown that has markets betting heavily that the Fed’s rate hike cycle will soon peter out.

The widening chasm between market expectations and the rate path the Fed laid out just two months ago underscores the biggest question in front of U.S. central bankers: How much weight to give a growing number of potential red flags, even as U.S. economic growth continues to push down unemployment and create new jobs?

“We are at a point now where we really need to be especially data dependent,” Richard Clarida, the newly appointed vice chair of the Federal Reserve, said in a CNBC interview. “I think certainly where the economy is today, and the Fed’s projection of where it’s going, that being at neutral would make sense,” he added, defining “neutral” as interest rates somewhere between 2.5 percent and 3.5 percent.

But that range that implies anywhere from two more to six more rate hikes, and Clarida declined to say how many more increases he would prefer.

He did say he is optimistic that U.S. productivity is rising, a view that suggests he would not see faster economic or wage growth as necessarily feeding into higher inflation or, necessarily, requiring higher interest rates. But he also

sounded a mild warning.

“There is some evidence of global slowing,” Clarida said. “That’s something that is going to be relevant as I think about the outlook for the U.S. economy, because it impacts big parts of the economy through trade and through capital markets and the like.”

Federal Reserve Bank of Dallas President Robert Kaplan, in a separate interview with Fox Business, also said he is seeing a growth slowdown in Europe and China.

“It’s my own judgment that global growth is going to be a little bit of a headwind, and it may spill over to the United States,” Kaplan said. .

The Fed raised interest rates three times this year and is expected to raise its target again next month, to a range of 2.25 percent to 2.5 percent. As of September, Fed policymakers expected to need to increase rates three more times next year, a view they will update next month.

Over the last week, betting in contracts tied to the Fed’s policy suggests that even two rate hikes might be a stretch. The yield on fed fund futures maturing in January 2020, seen by some as an end-point for the Fed’s current rate-hike cycle, dropped sharply to just 2.76 percent over six trading days.

At the same time, long-term inflation expectations have been dropping quickly as well. The so-called breakeven inflation rate on Treasury Inflation Protected Securities, or TIPS, has fallen sharply in the last month. The breakeven rate on five-year TIPS hit the lowest since late 2017 earlier this week.

Those market moves together suggest traders are taking the prospect of a slowdown seriously, limiting how far the Fed will end up raising rates.

But not all policymakers seemed that worried. Sitting with his back to a map of the world in a ballroom in Chicago’s Waldorf Astoria Hotel, Chicago Federal Reserve Bank President Charles Evans downplayed risks to his outlook, noting that the leveraged loans that some of his colleagues have raised concerns about are being taken out by “big boys and girls” who

understand the risks.

He told reporters he still believes rates should rise to about 3.25 percent so as to mildly restrain growth and bring unemployment, now at 3.7 percent, back up to a more sustainable level.

Asked about risks from the global slowdown, he said he hears more talk about it but that it is not really in the numbers yet.

But the next six months, he said, bear close watching.

“There’s not a great headline” about risks to the economy right now, Evans told reporters. “International is a little slower; Brexit — nobody’s asked me about that, thank you; [the slowing] housing market: I think all of those are in the mix for uncertainties that everybody’s facing,” he said.

“But at the moment, it’s not enough to upset or adjust the trajectory that I have in mind.”

Still, Evans added, the risks should not be counted out: “They could take on more life more easily because they are sort of more top of mind, if not in the forecast.”

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Report: Russia Has Access to UK Visa Processing

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Investigative group Bellingcat and Russian website The Insider are suggesting that Russian intelligence has infiltrated the computer infrastructure of a company that processes British visa applications.

The investigation, published Friday, aims to show how two suspected Russian military intelligence agents, who have been charged with poisoning a former Russian spy in the English city of Salisbury, may have obtained British visas.

The Insider and Bellingcat said they interviewed the former chief technical officer of a company that processes visa applications for several consulates in Moscow, including that of Britain.

The man, who fled Russia last year and applied for asylum in the United States, said he had been coerced to work with agents of the main Russian intelligence agency FSB, who revealed to him that they had access to the British visa center’s CCTV cameras and had a diagram of the center’s computer network. The two outlets say they have obtained the man’s deposition to the U.S. authorities but have decided against publishing the man’s name, for his own safety.

The Insider and Bellingcat, however, did not demonstrate a clear link between the alleged efforts of Russian intelligence to penetrate the visa processing system and Alexander Mishkin and Anatoly Chepiga, who have been charged with poisoning Sergei Skripal in Salisbury in March this year.

The man also said that FSB officers told him in spring 2016 that they were going to send two people to Britain and asked for his assistance with the visa applications. The timing points to the first reported trip to Britain of the two men, who traveled under the names of Alexander Petrov and Anatoly Boshirov. The man, however, said he told the FSB that there was no way he could influence the decision-making on visa applications.

The man said he was coerced to sign an agreement to collaborate with the FSB after one of its officers threatened to jail his mother, and was asked to create a “backdoor” to the computer network. He said he sabotaged those efforts before he fled Russia in early 2017.

In September, British intelligence released surveillance images of the agents of Russian military intelligence GRU accused of the March nerve agent attack on double agent Skripal and his daughter in Salisbury. Bellingcat and The Insider quickly exposed the agents’ real names and the media, including The Associated Press, were able to corroborate their real identities.

The visa application processing company, TLSContact, and the British Home Office were not immediately available for comment.

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South Africa Cannabis Ruling Leads to Pot-Themed Products

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Now that South Africa’s highest court has relaxed the nation’s laws on marijuana, local entrepreneurs are trying to cash in on the popular herb. Among the latest entries to the market: several highly popular cannabis-laced alcohol products, which deliver the unique taste, though without the signature high. Marijuana activists say this could just be the beginning and that the famous plant could do much more for the national economy. VOA’s Anita Powell reports from Johannesburg.

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Amazon’s ‘National Landing’ Leads to Confusion and Jokes

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Place names in Arlington County have never been a simple matter. A major fight broke out when National Airport was named for Ronald Reagan in 1998. A fight continues over whether to name a park next to the airport for Nancy Reagan. And in the 1920s, the Postal Service refused to establish a post office in Arlington because the street names were so confusing and haphazard.

So it is fitting that as Arlington officials celebrated Amazon’s decision to locate a new headquarters in the area, there was a bit of confusion over the place name.

Amazon announced Tuesday that it was coming to National Landing, a place people had not heard of because it doesn’t exist. Economic development officials who were wooing the online retailing giant came up with the name as a way to describe the multiple neighborhoods that were being offered as a site.

Those neighborhoods — Crystal City and Pentagon City in Arlington County, and Potomac Yard in the city of Alexandria — span multiple jurisdictions, so the name allowed Alexandria and Arlington to work cooperatively without marketing one locality over another.

Unfortunately, because the yearlong process of wooing Amazon had been so secretive, the moniker that had become so commonplace in the economic-development discussions had zero recognition among the general public. So Amazon’s use of the name in its big announcement left people scratching their heads.

Some people confused it with National Harbor, a new development in Maryland that has attracted one of the biggest casinos on the East Coast. Comedian Remy Munasifi, who made his name poking fun at Arlington in a YouTube rap that has been viewed more than 2 million times, suggested that Arlington National Cemetery would soon be renamed “Kindle Shores.”

Rep. Don Beyer, whose congressional district encompasses the neighborhoods, got in on the act when he suggested that the location of a new $1 billion graduate campus be dubbed “Hokie Landing.” The campus was a key incentive offered to Amazon by Virginia, which promised to double the number of students who graduate each year with bachelor’s and master’s degrees in computer science and related fields.

No official steps were ever taken to rename the region, and local officials have made clear they have no intention of trying to rename Crystal City or any other neighborhood.

In a tweet posted by Arlington Economic Development on Thursday, Arlington County Manager Mark Schwartz explained that National Landing was simply “a way to avoid saying, ‘Parts of Arlington, parts of Alexandria.’ ”

Christina Winn, director of business investment for Arlington Economic Development, said officials never imagined “there would be so much conversation” about the concept. Winn said there’s no intention to supplant or override the name of Crystal City, which draws its name from a big chandelier in one of the first apartment buildings to go up in the area in the 1960s.

Still, she said, if Arlington and Alexandria team up on another economic-development pitch in the future, she said that the moniker might be revived.

“It worked once,” she said.

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Tech Firm Pays Refugees to Train AI Algorithms

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Companies could help refugees rebuild their lives by paying them to boost artificial intelligence (AI) using their phones and giving them digital skills, a tech nonprofit said Thursday.

REFUNITE has developed an app, LevelApp, which is being piloted in Uganda to allow people who have been uprooted by conflict to earn instant money by “training” algorithms for AI.

Wars, persecution and other violence have uprooted a record 68.5 million people, according to the U.N. refugee agency.

People forced to flee their homes lose their livelihoods and struggle to create a source of income, REFUNITE co-chief executive Chris Mikkelsen told the Trust Conference in London.

“This provides refugees with a foothold in the global gig economy,” he told the Thomson Reuters Foundation’s two-day event, which focuses on a host of human rights issues.

$20 a day for AI work

A refugee in Uganda currently earning $1.25 a day doing basic tasks or menial jobs could make up to $20 a day doing simple AI labeling work on their phones, Mikkelsen said.

REFUNITE says the app could be particularly beneficial for women as the work can be done from the home and is more lucrative than traditional sources of income such as crafts.

The cash could enable refugees to buy livestock, educate children and access health care, leaving them less dependant on aid and helping them recover faster, according to Mikkelsen.

The work would also allow them to build digital skills they could take with them when they returned home, REFUNITE says.

“This would give them the ability to rebuild a life … and the dignity of no longer having to rely solely on charity,” Mikkelsen told the Thomson Reuters Foundation.

Teaching the machines

AI is the development of computer systems that can perform tasks that normally require human intelligence.

It is being used in a vast array of products from driverless cars to agricultural robots that can identify and eradicate weeds and computers able to identify cancers.

In order to “teach” machines to mimic human intelligence, people must repeatedly label images and other data until the algorithm can detect patterns without human intervention.

REFUNITE, based in California, is testing the app in Uganda where it has launched a pilot project involving 5,000 refugees, mainly form South Sudan and Democratic Republic of Congo. It hopes to scale up to 25,000 refugees within two years.

Mikkelsen said the initiative was a win-win as it would also benefit companies by slashing costs.

Another tech company, DeepBrain Chain, has committed to paying 200 refugees for a test period of six months, he said.

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Facebook CEO Details Company Battle with Hate Speech, Violent Content

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Facebook says it is getting better at proactively removing hate speech and changing the incentives that result in the most sensational and provocative content becoming the most popular on the site.

The company has done so, it says, by ramping up its operations so that computers can review and make quick decisions on large amounts of content with thousands of reviewers making more nuanced decisions.

In the future, if a person disagrees with Facebook’s decision, he or she will be able to appeal to an independent review board.

Facebook “shouldn’t be making so many important decisions about free expression and safety on our own,” Facebook CEO Mark Zuckerberg said in a call with reporters Thursday.

But as Zuckerberg detailed what the company has accomplished in recent months to crack down on spam, hate speech and violent content, he also acknowledged that Facebook has far to go.

“There are issues you never fix,” he said. “There’s going to be ongoing content issues.”

Company’s actions

In the call, Zuckerberg addressed a recent story in The New York Times that detailed how the company fought back during some of its biggest controversies over the past two years, such as the revelation of how the network was used by Russian operatives in the 2016 U.S. presidential election. 

The Times story suggested that company executives first dismissed early concerns about foreign operatives, then tried to deflect public attention away from Facebook once the news came out.

Zuckerberg said the firm made mistakes and was slow to understand the enormity of the issues it faced. “But to suggest that we didn’t want to know is simply untrue,” he said.

Zuckerberg also said he didn’t know the firm had hired Definers Public Affairs, a Washington, D.C., consulting firm that spread negative information about Facebook competitors as the social networking firm was in the midst of one scandal after another. Facebook severed its relationship with the firm.

“It may be normal in Washington, but it’s not the kind of thing I want Facebook associated with, which is why we won’t be doing it,” Zuckerberg said.

The firm posted a rebuttal to the Times story.

Content removed

Facebook said it is getting better at proactively finding and removing content such as spam, violent posts and hate speech. The company said it removed or took other action on 15.4 million pieces of violent content between June and September of this year, about double what it removed in the prior three months.

But Zuckerberg and other executives said Facebook still has more work to do in places such as Myanmar. In the third quarter, the firm said it proactively identified 63 percent of the hate speech it removed, up from 13 percent in the last quarter of 2017. At least 100 Burmese language experts are reviewing content, the firm said.

One issue that continues to dog Facebook is that some of the most popular content is also the most sensational and provocative. Facebook said it now penalizes what it calls “borderline content” so it gets less distribution and engagement.

“By fixing this incentive problem in our services, we believe it’ll create a virtuous cycle: by reducing sensationalism of all forms, we’ll create a healthier, less-polarized discourse where more people feel safe participating,” Zuckerberg wrote in a post. 

Critics of the company, however, said Zuckerberg hasn’t gone far enough to address the inherent problems of Facebook, which has 2 billion users.

“We have a man-made, for-profit, simultaneous communication space, marketplace and battle space and that it is, as a result, designed not to reward veracity or morality but virality,” said Peter W. Singer, strategist and senior fellow at New America, a nonpartisan think tank, at an event Thursday in Washington, D.C.

VOA national security correspondent Jeff Seldin contributed to this report.

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Climate Change, Steel, Migration Bedevil G20 Communique

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Climate change, steel and migration have emerged as sticking points in the final communique that world leaders will issue at the end of the Group of 20 summit in Argentina later this month, an Argentine government official said on Thursday.

Those issues were the “most complicated” areas of discussion, said Argentina’s Pedro Villagra Delgado, the lead organizer, or “sherpa,” for the summit of leaders from key industrialized and developing economies. 

But he told a press briefing he was optimistic these issues would be resolved in time.

The G20 communique is a non-binding agreement on key international policy issues and will be presented at the conclusion of the two-day summit, which begins on Nov. 30.

Climate goals concern United States

Villagra Delgado said the United States was resistant to including language that outlined guidelines for climate goals in the document.

After withdrawing from the Paris Climate Agreement last year, the United States broke with other G20 member countries who have pledged to end coal usage and take steps to reach the goals outlined in the accord.

Villagra Delgado also said China disagreed with the rest of the G20 countries on steel, but did not provide further details over the specifics of their disagreement.

The United States has skirmished with a number of its trading partners — including China — over steel, imposing a 25 percent duty on imports of steel and a tariff of 10 percent on aluminum.

Other countries objected to including language about immigration in the communique, Villagra Delgado said, but would not elaborate on which countries expressed concern.

WTO reform may be on table

Reform of the World Trade Organization (WTO) may also be a topic of discussion at this month’s meeting, Villagra Delgado said, but added that specific issues to be discussed in the G20 sessions were still being worked out.

U.S. President Donald Trump has threatened to pull out of the WTO, while China has claimed the 20-year-old organization’s dispute resolution mechanisms are outdated in the current global economy.

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Realistic Masks Made in Japan Find Demand from Tech, Car Companies

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Super-realistic face masks made by a tiny company in rural Japan are in demand from the domestic tech and entertainment industries and from countries as far away as Saudi Arabia.

The 300,000-yen ($2,650) masks, made of resin and plastic by five employees at REAL-f Co., attempt to accurately duplicate an individual’s face down to fine wrinkles and skin texture.

Company founder Osamu Kitagawa came up with the idea while working at a printing machine manufacturer.

But it took him two years of experimentation before he found a way to use three-dimensional facial data from high-quality photographs to make the masks, and started selling them in 2011.

The company, based in the western prefecture of Shiga, receives about 100 orders every year from entertainment, automobile, technology and security companies, mainly in Japan.

For example, a Japanese car company ordered a mask of a sleeping face to improve its facial recognition technology to detect if a driver had dozed off, Kitagawa said.

“I am proud that my product is helping further development of facial recognition technology,” he added. “I hope that the developers would enhance face identification accuracy using these realistic masks.”

Kitagawa, 60, said he had also received orders from organizations linked to the Saudi government to create masks for the king and princes.

“I was told the masks were for portraits to be displayed in public areas,” he said.

Kitagawa said he works with clients carefully to ensure his products will not be used for illicit purposes and cause security risks, but added he could not rule out such threats.

He said his goal was to create 100 percent realistic masks, and he hoped to use softer materials, such as silicon, in the future.

“I would like these masks to be used for medical purposes, which is possible once they can be made using soft materials,” he said. “And as humanoid robots are being developed, I hope this will help developers to create [more realistic robots] at a low cost.”

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Ukraine PM Upbeat on IMF Loan Prospects

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Ukrainian Prime Minister Volodymyr Groysman expects to get new loans from the International Monetary Fund as early as December, once parliament passes a budget of stability that refrains from making pre-election populist moves, he said Thursday.

Securing IMF assistance will also unlock loans from the World Bank and the European Union. Groysman also said Ukraine was in negotiations with Washington for a new loan guarantee for sovereign debt.

Groysman negotiated a new deal with the IMF last month aimed at keeping finances on an even keel during a choppy election period next year. The new loans are contingent on his steering an IMF-compliant budget through parliament.

“This budget is a budget of stability and continuation of reforms,” Groysman said in an interview with Reuters. “This is fully consistent with our IMF program.”

“Yes. We are counting on a tranche in December,” he added, when asked about when IMF loans were expected, though he did not elaborate on the possible size of the loan.

Ukraine’s government approved a draft budget in September but it will typically undergo a slew of amendments before parliament finally approves it. 

Tax proposal dropped

Groysman said a proposal to change how companies are taxed — on withdrawn capital, rather than profits — had been dropped from the budget because of the IMF’s concerns.

He also said he would not bow to opposition parties’ demands to reverse a recent increase in household gas tariffs, a step that his government reluctantly took to qualify for more IMF assistance.

“Populism led to the weakness of Ukraine,” he said. “This should not be allowed.” 

The IMF and Kyiv’s foreign allies came to Ukraine’s rescue after it plunged into turmoil following Russia’s annexation of Crimea in 2014 and support for separatist rebels occupying the eastern industrial Donbass region. 

The United States has also sold coal to plug a domestic shortage caused by rebels taking control of mines in the east. U.S. Energy Secretary Rick Perry visited Ukraine this week. 

In response to a question about whether Ukraine would continue to buy coal from the United States and potentially also liquefied natural gas, Groysman said that “liquefied gas is very interesting for Ukraine. We talked about the whole spectrum of our cooperation in the energy sector.”

As for coal, he added, “we will buy it from our international partners until we cover the domestic deficit.” 

Washington has also previously issued loan guarantees for Ukrainian debt. Groysman said another such guarantee was “under discussion.” 

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Business Bosses Alarmed as Resignations Imperil Brexit Deal

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Business leaders expressed growing alarm Thursday as a draft Brexit agreement seen as the only chance of preserving some stability in U.K.-EU trading threatened to unravel, sending stock prices and the pound plunging.

Just 12 hours after British Prime Minister Theresa May announced that her cabinet had agreed to the terms of the draft agreement, Brexit minister Dominic Raab and work and pensions minister Esther McVey quit, saying they could not support it.

Their departures and those of other, junior ministers, revived the specter for business of Britain leaving the European Union without a deal next March, and sent shares in British housebuilders, retailers and banks tumbling.

“The political situation remains uncertain,” German carmaker BMW said in a statement. “We must therefore continue to prepare for the worst-case scenario, which is what a no-deal Brexit would represent.

“We continue to call on all sides to work toward a final agreement which maintains the truly frictionless trade on which our international production network is based.”

The European Union is Britain’s biggest trading partner, accounting for 44 percent of U.K. exports and 53 percent of imports to the UK.

After 45 years of membership, industries including defense, cars and aerospace have created intricate supply chains that rely on smooth, “just-in-time” delivery of thousands of parts across the sea that divides Britain from the continent.

Business leaders fear that the country could stumble toward a no-deal Brexit where border checks block ports and fracture the supply chains that support the likes of Rolls-Royce and BAE Systems.

Karen Betts, the head of the Scotch Whisky Association, said a no-deal Brexit would cause “considerable difficulties” for the industry and increase cost and complexity. It accounts for around 20 percent of all U.K. food and drink exports.

‘Only deal in town’

A senior executive at one of Britain’s biggest banks said this was the most disastrous government he had ever seen.

“The rest of the world is looking at us and laughing. It is time to have some stability so business can get some certainty. This is what the country needs.”

Industry bosses who had been briefed on the draft agreement by ministers late Wednesday had broadly welcomed it as the best chance of a compromise that would secure a transition period and avert the chaos of no deal at all.

May’s office also released statements from a number of major companies such as Diageo, the London Stock Exchange and Royal Mail welcoming the draft deal.

“Most business people ultimately are pragmatists and this is about playing the cards we have been dealt rather than wishing for a better hand,” Roger Carr, chairman of BAE Systems, told BBC Radio.

Iain Anderson, executive chairman of public affairs firm Cicero, which represents many finance companies, said although most executives did not like May’s deal they realized it was now the only game in town.

“Business is watching with horror the resignations now taking place,” he said. “Yesterday we had a plan and stability and today we do not.

“There is now no time to negotiate another deal. We thought we had stability — now we have instability writ large.”

The U.K. chief of German industrial group Siemens, which employs 15,000 people in the U.K., reiterated his call to get behind the draft agreement even as senior politicians called for May to quit.

“We hope all sides keep calm, look at the facts, and move to support this draft to provide UK business with greater certainty,” Juergen Maier said in an emailed statement.

Even if May survives, her chances of winning a vote in parliament to approve the draft agreement are seen as slim.

Market jitters

Lawmakers across the political spectrum have said May’s deal will leave Britain bound by EU rules without having any say.

Many have argued it will also damage the integrity of the United Kingdom by aligning Northern Ireland with the rest of the EU in order to avoid a hard border with EU-member Ireland.

Many executives spoken to by Reuters were trying to guess what could happen next, either a national election, a second referendum or the extension of the negotiating period.

One senior executive at a FTSE 100 company was still holding out hope, however, that lawmakers would eventually be persuaded to vote for the deal when it comes before parliament before the end of the year.

“We’re going to need the market to throw up and scare them all into voting for it,” he said. The pound was down 1.8 percent against the dollar in early evening trading.

The CEO of French outdoor advertising company JCDecaux, which runs London’s bus-shelter advertising and makes 10 percent of its sales in Britain, called the situation “obviously very serious.”

“Today’s events reinforce the uncertainties in the market,” Jean-Charles Decaux told Reuters in an interview on the sidelines of an industry conference in Barcelona.

Martin Sorrell, ex-CEO and founder of ad agency group WPP and one of Britain’s best-known businessmen, said the country was in a state. “The situation this morning saps the confidence of the city and the country,” he told Reuters.

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