SO YOU WANT to come to America. Venezuela, your home country, is suffering under Nicolás Maduro’s violent kleptocracy. What to do? Good luck getting a green card: employers won’t bother sponsoring a low-skilled worker like you, and you have no immediate family in America to vouch for you. Your WhatsApp is filled with news of friends who have crossed America’s southern border. You decide to follow them and, after a hellish trip, make it to the Rio Grande. You could try to slip across undetected—about 600,000 “gotaways” managed it last year. Or you can tell the border agents who intercept you that you want asylum. Odds are that they will release you with a court date scheduled in several months’ time, kickstarting a process that may take years. Welcome to America.
In November 2023 nearly 250,000 migrants crossed the southern border. The surge—and the perception that America’s borders are open—is a giant political liability for President Joe Biden. Just 27% of Americans tell pollsters that they approve of his handling of the border. More than twice as many trust Donald Trump on the issue. The fact that surging migration over the southern border could cost Mr Biden the election in November has made the problem trickier to solve. Wrangling over a deal to fund Ukraine in exchange for tighter border security and asylum limits has dragged on for months. Although Senate leaders say an agreement is close, some Republicans—reportedly including Mr Trump—seem to want the border chaos to fester, to better beat Mr Biden over the head with it during the election campaign.
Several factors explain the surge: violence and instability around the globe; plentiful job openings in America; the accurate perception that Mr Biden is more welcoming than his predecessor; and cumbersome, limited pathways to come legally. An overwhelmed border apparatus also invites more crossings, notes David Bier of the Cato Institute, a think-tank. When people hear that they are unlikely to be detained and deported, more try their luck.
Decades of neglect and partisan rancour have crippled America’s immigration system and created a situation where immigrants view asylum-seeking as the surest way to get into the country, rather than a long-shot attempt. Congress last made meaningful reform to immigration law in 1990. Comprehensive, bipartisan reform has seemed close several times since, only to fall apart in the end. In 2006, 2007 and 2013 bipartisan Senate bills included a path to citizenship for undocumented immigrants, more visas for workers and stricter enforcement at the border. In recent years Democrats have largely been animated by the desire to protect daca recipients, immigrants who were brought to America as children, from deportation.
Mr Trump’s candidacy upended the politics of immigration. When he launched his campaign in 2015, the number of migrants apprehended nationwide was at its lowest level since 1971. That fact did not, of course, stop Mr Trump from declaring that migrants threatened the American way of life. (“They’re bringing drugs. They’re bringing crime. They’re rapists. And some, I assume, are good people.”) In 2019 irregular entries at the southern border jumped. Mr Trump saw detention as a means of deterrence and made some migrants with pending asylum claims wait in Mexico. At one time during his presidency nearly 57,000 people were detained. The surge was so great that even Mr Trump released a quarter of migrants into the country immediately with a notice to appear (NTA) in immigration court.
Borderline, personalities, disorder
Mr Biden reduced detentions—the number in custody today is around 38,000—and scrapped the requirement to remain in Mexico. He has tried less effective deterrents. His administration wants to steer migrants towards ports of entry where they arrive for appointments made via a smartphone app. Most are admitted with permission to stay for a year or two. By contrast people caught crossing illegally are presumed ineligible for asylum, with a few narrow exceptions, and quickly deported.
At least that is how it is supposed to work. In reality most migrants who cross illegally are still being released into the country, and irregular arrivals far exceed those at official crossings. Once on American soil a migrant can request asylum, which involves a screening with an asylum officer. Because of Mr Biden’s reluctance to pursue detention and an insufficient number of asylum officers, in November seven in ten were handed an NTA and sent on their way.
Last year the Biden administration also began granting parole to up to 30,000 Cubans, Haitians, Nicaraguans and Venezuelans each month, if applicants identified a financial sponsor in America. Again the goal was to make flows more orderly and decrease illegal arrivals. Permission to stay lasts two years but can be revoked at any time. Illegal crossings by Haitians, Nicaraguans and Cubans plummeted. But Venezuelans, who are less likely to have social ties to America, continue to enter illegally. “Most of the Venezuelans arriving now don’t have family, friends, relatives,” says Theresa Cardinal Brown, who served in the Department for Homeland Security in the Bush and Obama administrations.
Once across the border, migrants head to cities. Shelter systems in New York City, Chicago and Denver are overwhelmed and their mayors want Mr Biden’s help. This is partly the doing of Greg Abbott, the Republican governor of Texas, who is busing migrants to Democratic-run cities. But big cities are also natural magnets for migrants.
With an NTA in hand, new arrivals enter the court system, where the backlog is growing faster than judges can keep up. Cases in immigration court surpassed 3m in November. It takes more than four years on average just to get an initial asylum hearing. Doubling the number of judges would clear the backlog—but only by 2032, according to an estimate from the Congressional Research Service.
Half of asylum cases are denied, and decisions are inconsistent. One judge in Houston denied 95% of her asylum cases last year; another in San Francisco denied just 1% of hers. But the immense wait, low chance of detention and the prospect of work in America encourage migrants with a weak claim to cross the border. Prioritising the most recent arrivals’ cases would reduce this incentive, notes Stephen Yale-Loehr of Cornell Law School. A long journey seems less worth it if the reward is deportation rather than an NTA.
The looming election, Mr Trump’s perceived strength on border issues and Mr Biden’s desire to arm Ukraine mean that the president wants to make a deal. His openness to tougher border enforcement is also no doubt fuelled by Americans’ rightward turn on immigration. Polling from YouGov suggests that more Americans favour building a southern border wall than don’t. Even 32% of Democrats now say they support the idea, up from 20% in 2022.
Whether the House and the Senate can agree on reform is questionable. A deal may include funding for more Border Patrol agents, the ability to shut down migrant intake if encounters reach a certain level, a higher bar for migrants to pass their interview—so that they are not released into the country unless they are likely to actually receive asylum—and limits on parole. Any changes to asylum rules will almost certainly be challenged in the courts.
But House Republicans have waffled, often insisting that they would accept nothing other than HR2, a hardline immigration bill passed along party lines last year that would be dead on arrival in the Senate. On the left, progressives do not want to tighten access to asylum. Both groups should beware. A new poll from The Economist and YouGov suggests that a plurality of Americans want Congress to pass a bill that both funds Ukraine and restricts asylum. The politicians should not ignore their voters. ■
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The columns of Royal Exchange are dressed for Christmas, at Bank in the City of London, the capital’s financial district, on 20th November 2024, in London, England.
Richard Baker | In Pictures | Getty Images
LONDON — U.K. inflation rose to 2.6% in November, the Office for National Statistics said Wednesday, marking the second straight monthly increase in the headline figure.
The reading was in line with the forecast of economists polled by Reuters, and climbed from 2.3% in October.
Core inflation, excluding energy, food, alcohol and tobacco, came in at 3.5%, just under a Reuters forecast of 3.6%.
Headline price rises hit a three-and-a-half year low of 1.7% in September, but was expected to tick higher in the following months, partly due to an increase in the regulator-set energy price cap this winter.
“This upwards trajectory looks set to continue over the next few months,” Joe Nellis, economic adviser at accountancy MHA, said in emailed comments on Wednesday, citing the energy market and “the long-term pressure of a tight domestic labor market.”
Persistent inflation in the services sector, the dominant part of the U.K. economy, has led money markets to price in almost no chance of an interest rate cut during the Bank of England’s final meeting of the year on Thursday. Those bets were solidified earlier this week when the ONS reported that regular wage growth strengthened to 5.2% over the August-October period, up from 4.9% over July-September.
The November data showed services inflation was unchanged at 5%.
The U.S. Federal Reserve is widely expected to trim rates by a quarter point at its own meeting on Wednesday, taking total cuts of the year to a full percentage point. Some skepticism lingers over whether it should take this step, given inflationary pressures.
This is a breaking news story and will be updated shortly.
Federal Reserve Chair Jerome Powell speaks during a news conference following the November 6-7, 2024, Federal Open Market Committee meeting at William McChesney Martin Jr. Federal Reserve Board Building, in Washington, DC, November 7, 2024.
Andrew Caballero-Reynolds | AFP | Getty Images
Inflation is stubbornly above target, the economy is growing at about a 3% pace and the labor market is holding strong. Put it all together and it sounds like a perfect recipe for the Federal Reserve to raise interest rates or at least to stay put.
That’s not what is likely to happen, however, when the Federal Open Market Committee, the central bank’s rate-setting entity, announces its policy decision Wednesday.
Instead, futures market traders are pricing in a near-certainty that the FOMC actually will lower its benchmark overnight borrowing rate by a quarter percentage point, or 25 basis points. That would take it down to a target range of 4.25%-4.5%.
Even with the high level of market anticipation, it could be a decision that comes under an unusual level of scrutiny. A CNBC survey found that while 93% of respondents said they expect a cut, only 63% said it is the right thing to do.
“I’d be inclined to say ‘no cut,'” former Kansas City Fed President Esther George said Tuesday during a CNBC “Squawk Box” interview. “Let’s wait and see how the data comes in. Twenty-five basis points usually doesn’t make or break where we are, but I do think it is a time to signal to markets and to the public that they have not taken their eye off the ball of inflation.”
Inflation indeed remains a nettlesome problem for policymakers.
While the annual rate has come down substantially from its 40-year peak in mid-2022, it has been mired around the 2.5%-3% range for much of 2024. The Fed targets inflation at 2%.
The Commerce Department is expected to report Friday that the personal consumption expenditures price index, the Fed’s preferred inflation gauge, ticked higher in November to 2.5%, or 2.9% on the core reading that excludes food and energy.
Justifying a rate cut in that environment will require some deft communication from Chair Jerome Powell and the committee. Former Boston Fed President Eric Rosengren also recently told CNBC that he would not cut at this meeting.
“They’re very clear about what their target is, and as we’re watching inflation data come in, we’re seeing that it’s not continuing to decelerate in the same manner that it had earlier,” George said. “So that, I think, is a reason to be cautious and to really think about how much of this easing of policy is required to keep the economy on track.”
Fed officials who have spoken in favor of cutting say that policy doesn’t need to be as restrictive in the current environment and they don’t want to risk damaging the labor market.
Chance of a ‘hawkish cut’
If the Fed follows through on the cut, it will mark a full percentage point lopped off the federal funds rate since September.
While that’s a considerable amount of easing in a short period of time, Fed officials have tools at their disposal to let the markets know that future cuts won’t come so easily.
One of those tools is the dot-plot matrix of individual members’ expectations for rates over the next few years. That will be updated Wednesday along with the rest of the Summary of Economic Projections that will include informal outlooks for inflation, unemployment and gross domestic product.
Another is the use of guidance in the post-meeting statement to indicate where the committee sees policy headed. Finally, Powell can use his news conference to provide further clues.
It’s the Powell parley with the media that markets will be watching most closely, followed by the dot plot. Powell recently said the Fed “can afford to be a little more cautious” about how quickly it eases amid what he characterized as a “strong” economy.
“We’ll see them leaning into the direction of travel, to begin the process of moving up their inflation forecast,” said Vincent Reinhardt, BNY Mellon chief economist and former director of the Division of Monetary Affairs at the Fed, where he served 24 years. “The dots [will] drift up a little bit, and [there will be] a big preoccupation at the press conference with the idea of skipping meetings. So it’ll turn out to be a hawkish cut in that regard.”
What about Trump?
Powell is almost certain to be asked about how policy might position in regard to fiscal policy under President-elect Donald Trump.
Thus far, the chair and his colleagues have brushed aside questions about the impact Trump’s initiatives could have on monetary policy, citing uncertainty over what is just talk now and what will become reality later. Some economists think the incoming president’s plans for aggressive tariffs, tax cuts and mass deportations could aggravate inflation even more.
“Obviously the Fed’s in a bind,” Reinhart said. “We used to call it the trapeze artist problem. If you’re a trapeze artist, you don’t leave your platform to swing out until you’re sure your partner is swung out. For the central bank, they can’t really change their forecast in response to what they believe will happen in the political economy until they’re pretty sure there’ll be those changes in the political economy.”
“A big preoccupation at the press conference is going to the idea of skipping meetings,” he added. “So it’ll turn out to be, I think, a hawkish easing in that regard. As [Trump’s] policies are actually put in place, then they may move the forecast by more.”
Other actions on tap
Most Wall Street forecasters see Fed officials raising their expectations for inflation and reducing the expectations for rate cuts in 2025.
When the dot plot was last updated in September, officials indicated the equivalent of four quarter-point cuts next year. Markets already have lowered their own expectations for easing, with an expected path of two cuts in 2025 following the move this week, according to the CME Group’s FedWatch measure.
The outlook also is for the Fed to skip the January meeting. Wall Street is expecting little to no change in the post-meeting statement.
Officials also are likely to raise their estimate for the “neutral” rate of interest that neither boosts nor restricts growth. That level had been around 2.5% for years — a 2% inflation rate plus 0.5% at the “natural” level of interest — but has crept up in recent months and could cross 3% at this week’s update.
Finally, the committee may adjust the interest it pays on its overnight repo operations by 0.05 percentage point in response to the fed funds rate drifting to near the bottom of its target range. The “ON RPP” rate acts as a floor for the funds rate and is currently at 4.55% while the effective funds rate is 4.58%. Minutes from the November FOMC meeting indicated officials were considering a “technical adjustment” to the rate.
A briefcase filled with Iranian rial banknotes sits on display at a currency exchange market on Ferdowsi street in Tehran, Iran, on Saturday, Jan. 6, 2018.
Ali Mohammadi | Bloomberg | Getty Images
Iran is confronting its worst set of crises in years, facing a spiraling economy along with a series of unprecedented geopolitical and military blows to its power in the Middle East.
Over the weekend, Iran’s currency, the rial, hit a record low of 756,000 to the dollar, according to Reuters. Since September, the embattled currency has suffered the ripple effects of devastating hits to Iran’s proxies, including Lebanon’s Hezbollah and Palestinian militant group Hamas, as well as the November election of Donald Trump to the U.S. presidency.
With the fall of Syrian President Bashar al-Assad amid a shock offensive by rebel groups, Tehran lost its most important ally in the Middle East. Assad, who is accused of war crimes against his own people, fled to Russia and left a highly fractured country behind him.
“The fall of Assad has existential implications for the Islamic Republic,” Behnam ben Taleblu, a senior fellow at the Foundation for Defense of Democracies in Washington, told CNBC. “Lest we forget, the regime ahs spent well over a decade in treasure, blood, and reputation to save a regime which ultimately folded in less than two weeks.”
The currency’s fall exposes the extent of the hardship faced by ordinary Iranians, who struggle to afford everyday goods and suffer high inflation and unemployment after years of heavy Western sanctions compounded by domestic corruption and economic mismanagement.
Trump has pledged to take a hard line on Iran and will be re-entering the White House roughly six years after unilaterally pulling the U.S. out of the Iranian nuclear deal and re-imposing sweeping sanctions on the country.
Iranian President Masoud Pezeshkian has expressed his government’s willingness to negotiate and revive the deal, officially known as the Joint Comprehensive Plan of Action, which lifted some sanctions on Iran in exchange for curbs to its nuclear program. But the attempted outreach comes at a time when the International Atomic Energy Agency says Tehran is enriching uranium at record levels, reaching 60% purity — a short technical step from the weapons-grade purity level of 90%.