Author: Reuters

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. consumer prices increased solidly in February amid higher costs for gasoline and shelter, suggesting stickiness in inflation that cast some doubts on whether the Federal Reserve would start cutting interest rates in June.

February marked the second straight month of firmer inflation readings. Inflation-weary Americans, however, got some relief from their grocery bills, as food prices were unchanged. U.S. central bank officials, including Fed Chair Jerome Powell have indicated they are in no rush to start lowering borrowing costs.

The higher cost of living is one of the key issues in the Nov. 5 U.S. presidential election.

“Officials want to see some more evidence of a sustained deceleration in prices towards target before they pivot to rate cuts,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “The latest data further reinforce the case for a patient and vigilant approach from Fed officials as they consider future policy decisions.”

The consumer price index (CPI) rose 0.4% last month after climbing 0.3% in January, the Labor Department’s Bureau of Labor Statistics (BLS) said on Tuesday. Gasoline prices rebounded 3.8% after declining 3.3% in January. Shelter, which includes rents, rose 0.4% after advancing 0.6% in the prior month.

These two categories contributed more than 60% to the monthly increase in the CPI. Food prices were unchanged after rising 0.4% in January. There were decreases in the prices of dairy products, fruits and vegetables as well as nonalcoholic beverages. But prices for cereals and bakery products rose while meat, fish and eggs were slightly more expensive.

In the 12 months through February, the CPI increased 3.2%, after advancing 3.1% in January.

Economists polled by Reuters had forecast the CPI would gain 0.4% on the month and increase 3.1% on a year-on-year basis. The annual increase in consumer prices has slowed from a peak of 9.1% in June 2022, but progress has stalled in recent months.

Financial markets continue to expect the Fed will cut rates in June. Since March 2022, the U.S central bank has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.

U.S. stocks opened higher. The dollar rose against a basket of currencies. U.S. Treasury prices fell.

UPWARD SPIRAL

“Something is wrong with the market’s assessment because services prices continue to spiral upward and commodity prices are no longer falling like they did, which helped to slow inflation’s advance,” said Christopher Rupkey, chief economist at FWDBONDS.

Inflation picked up in January, which was largely blamed on price raises at the start of the year by service providers, which economists said were not fully addressed by the model used by the government to strip out seasonal fluctuations from the data.

There was also a jump in owners’ equivalent rent (OER), a measure of the amount homeowners would pay to rent or would earn from renting their property, which diverged from rents. That was partly the result of some methodology changes by the government.

The BLS last week held a webinar to discuss the underlying methodology related to the January OER and rent data.

“There is a high likelihood that OER inflation will exceed rent inflation more often moving forward,” said Stephen Juneau, an economist at Bank of America Securities. “However, we think that much of the 20 basis points divergence was noise and not signal. Rent and OER inflation should continue to moderate over the course of this year, helping to drive core inflation lower as goods price deflation dissipates.”

Excluding the volatile food and energy components, the CPI increased 0.4% last month after rising by the same margin in January. Shelter was also the main driver of the so-called core CPI. Rents increased 0.5% after gaining 0.4% in January. OER climbed 0.4% after surging 0.6% in the prior month.

Airline fares accelerated 3.6% after rising 1.4% in January. Motor vehicle insurance cost 0.9% more. There were also increases in the prices of apparel, recreation, used cars and trucks. But the cost of healthcare was unchanged after rising 0.5% in the prior month. Hospital services costs decreased 0.6% and prescription medication was slightly cheaper. The cost of dental services, however, increased 0.4%.

In the 12 months through February, the core CPI advanced 3.8%. That was the smallest year-on-year increase since May 2021 and followed a 3.9% rise in January.

The Fed tracks the personal consumption expenditures price indexes for its 2% inflation target. These measures are running at tamer rates than the CPI. Though job growth accelerated in February, the unemployment rate increased to a two-year high of 3.9% and annual wage inflation moderated a bit.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

By Joseph White

DETROIT (Reuters) – Tesla’s Autopilot and Full Self Driving technology and nine other assisted-driving systems marketed by major automakers received “poor” ratings from the U.S. Insurance Institute for Highway Safety in a new study released on Tuesday.

The IIHS, a safety research arm of the insurance industry, also said there is no evidence that Autopilot or other assisted-driving systems have real-world safety benefits, based on crash data.

“We are able to look at insurance claims data. We have been able to look at vehicles with and without these (systems) and determine there is no reduction in claims as a result of these more advanced systems,” IIHS President David Harkey told Reuters.

By comparison, there is evidence that automatic emergency braking systems cut rear-end collisions by 50% and cut incidents of a vehicle hitting a pedestrian by 30%, he said.

Tesla and its chief executive, Elon Musk, have said that a Tesla operating with Autopilot engaged is about 10 times safer than the U.S. average and five times safer than a Tesla without the technology enabled.

Federal regulators are investigating nearly 1,000 accidents in which Tesla’s Autopilot was in use. A civil case scheduled to go to trial next week in California will be the latest test of Tesla’s strategy of blaming crashes on drivers who fail to heed the EV maker’s warnings to pay attention to the road when Autopilot or Full Self Driving technology are engaged.

Tesla did not reply to an email seeking comment.

The IIHS study rated 14 assisted-driving systems from nine automakers against standards it developed. The U.S. National Highway Traffic Safety Administration has no formal standards governing advanced-driver assistance systems, or ADAS in industry terminology.

“There are no federal regulations, nor is there good consistent guidance,” Harkey said. “That was our reason for putting these safeguards together.”

Of the systems IIHS tested, only one earned an acceptable rating: The Lexus Teammate with Advanced Drive, offered last year on a small number of Toyota Motor’s luxury Lexus LS hybrid sedans.

“Toyota continuously aims to increase vehicle safety,” Toyota said in a statement. “As a part of that effort, Toyota, among other things, considers performance in third-party testing programs like NHTSA’s New Car Assessment Program and IIHS’s Top Safety Pick program.”

GM’s Super Cruise and Nissan’s “ProPILOT Assist with Navi-link” offered on the 2023-2024 Ariya electric vehicle received “marginal” overall ratings.

“We are evaluating the results from the first-ever Partial Automation Safeguards test and will continue to work with IIHS in all matters related to customer safety,” Nissan said.

GM said in a statement that Super Cruise “is meant to serve as an enhancement to the driving experience,” not as a safety feature.

Different assisted-driving systems from Tesla, Mercedes-Benz, BMW, Nissan, Ford, GM, Hyundai’s Genesis brand and Geely’s Volvo Cars brand received “poor” overall ratings, although all achieved “good” scores on certain elements of the IIHS tests, the group said.

“This new IIHS testing methodology does not assess the performance of the driver assistance systems, instead it focuses on safeguards to prevent misuse,” Mercedes said in a statement. “We take the findings of the IIHS partial driving automation safeguard ratings very seriously.”

Automakers could boost safety ratings by adopting existing technology for functions such as driver-monitoring or attention warnings that achieved “good” scores, Harkey said.

Tesla and other automakers are improving the capabilities of their systems, the IIHS said. Tesla revised its Autopilot software following a federal recall agreement, and IIHS will test the updated system, Harkey said.

“We are certainly going to take in the results of these tests as our cars and these systems continue to evolve,” BMW spokesman Jay Hanson said on Monday. BMW now offers in certain U.S. models a more sophisticated driving-assistance system than the one tested by the IIHS.

The Genesis GV80 SUV that launches in the U.S. this spring will the first model in the Hyundai luxury brand with an in-cabin camera to monitor the driver’s face and eyes while assisted driving is engaged. “This enhancement will also be rolling out to future Genesis products in the coming months and years,” the company said.

(Reporting by Joe White in Detroit; Editing by Matthew Lewis)

By David Shepardson

WASHINGTON (Reuters) -The Biden administration on Tuesday released a detailed timeline for studying significant government-owned spectrum with the aim of helping to expand wireless and other technology uses.

The Commerce Department’s National Telecommunications and Information Administration (NTIA), which in November announced steps to repurpose spectrum currently set aside for parts of the federal government, said it was setting detailed timelines for studying several spectrum bands including “the potential for repacking, compression and relocation of airborne radars and other federal systems in the Lower 3 GHz to allow for commercial use.” 

The Lower 3 GHz study is expected to be completed by October 2026 as will a study on the 7/8 GHz spectrum band.

“We must provide the spectrum access needed for federal agency missions while addressing the private sector’s need for greater spectrum access, which is required to maintain and improve our global competitiveness and sustain economic growth,” the implementation plan first reported by Reuters says.

Congress in March 2023 let the Federal Communications Commission’s authority to auction spectrum lapse for the first time in three decades amid debate about what spectrum used by the Defense Department could be repurposed or shared.

“Spectrum is a scarce national resource,” said NTIA Administrator Alan Davidson in an interview, saying the goal is to ensure enough spectrum for public and private sector needs. “What we needed is a step-by-step plan for how we are going to implement that mission.”

Demand for spectrum use is soaring, driven in part by advancements in drones, self-driving vehicles, moon missions and precision agriculture. Mobile U.S. wireless data traffic rose 38% in 2022, the largest-ever increase in mobile data traffic.

On Monday, two senators proposed legislation to require NTIA to identify at least 2,500 megahertz of mid-band spectrum that could be reallocated from federal government use to non-governmental or shared use over the next 5 years.

Last month, three other senators urged the Biden administration not to strip the Defense Department of spectrum used for military radar systems in favor of commercial wireless.

(Reporting by David Shepardson; Editing by Alex Richardson and Chizu Nomiyama)

By David Shepardson

WASHINGTON (Reuters) -U.S. District Judge Adrienne Nelson on Monday set Aug. 26 as the start of a hearing on the Federal Trade Commission’s bid for a preliminary injunction to block supermarket chain Kroger’s $24.6 billion deal to buy smaller rival Albertsons.

The FTC sued last month to block the deal that would create a supermarket empire with more than 4,000 stores, saying it would boost grocery prices for millions of Americans. The tie-up has drawn tough scrutiny from lawmakers and consumer groups worried about higher grocery prices, job losses and store closures.

Nelson of the U.S. District Court in Portland, Oregon said both sides must file a proposed briefing schedule by Friday.

Kroger said last week it was committed to defending the Albertsons merger in court following the U.S. FTC lawsuit, with Kroger CEO Rodney McMullen saying the company believes “this is the best outcome for America’s families.” The companies cannot close the deal with the legal challenges pending.

The FTC and eight states challenged the deal, which would strengthen Kroger’s position as the second largest player in the U.S. grocery market behind Walmart.

The FTC’s lawsuit comes at a time when the Biden administration has pressed for lower grocery prices and pushed back against big-ticket mergers that risk price hikes, affecting consumers in areas ranging from medicines to airlines.

The FTC said the deal first announced in October 2022 would eliminate fierce competition between Kroger and Albertsons.

But Kroger has defended its business model, saying it has reduced prices every year since 2003 and that strategy would be applied to the merged company.

Kroger, the biggest grocer in the U.S. by revenue, has proposed to divest 413 stores and eight distribution centers to C&S Wholesale Grocers, and said it may need to shed an additional 237 stores to gain regulatory approval.

The FTC called that proposal inadequate.

(Reporting by David Shepardson; Editing by Sandra Maler and Jamie Freed)

By Leah Douglas

WASHINGTON (Reuters) -The administration of U.S. President Joe Biden on Monday finalized a rule requiring meat, poultry, or eggs labeled as a U.S. product to come from animals born, raised, slaughtered, and processed in the country.

The rule, proposed last March, is a victory for U.S. ranchers who argued for years that use of the voluntary label by companies who raised animals abroad and only slaughtered or processed them in the U.S. was misleading and disadvantaged domestic producers.

“This final rule will ensure that when consumers see ‘Product of USA’ they can trust the authenticity of that label and know that every step involved, from birth to processing, was done here in America,” said Agriculture Secretary Tom Vilsack in a statement.

Vilsack announced the final rule to cheers at the annual meeting of the National Farmers Union in Scottsdale, Arizona.

“The abuse of the ‘Product of U.S.A.’ label stripped America’s cattle producers of a vital opportunity to market their USA beef while denying consumers the opportunity to support them,” said Joe Maxwell, co-founder of the farm group Farm Action, in a statement.

Producers using “Product of USA” or “Made in the USDA” labels will need to comply with the rule by Jan. 1, 2026.

The USDA also announced $9.5 million in grants for 42 projects expanding small-scale local meat processing capacity.

The labeling rule and the processing funds are part of a broader suite of USDA actions to enhance competition in the meat industry.

Mexico, a key U.S. trading partner, expressed “disappointment and worry” after the rule announcement.

“This measure does not consider the nature of the deep integration of the North American livestock and meat sectors,” Mexico’s agriculture ministry said, adding Mexico exported $3 billion of beef, live cattle and derivatives to the U.S. in 2023.

Meat labeling has been a point of contention between the U.S. and Mexico in the past.

In 2012, the World Trade Organization sided with Mexico and Canada when it ruled that U.S. meat labeling regulations were not fully in line with international fair trading rules and unfairly discriminated against Canada and Mexico because they gave less favorable treatment to beef and pork imported from those countries than to U.S.

Mexico on Monday said the Biden administration’s decision could create incentives for incompliance with the WTO’s ruling.

(Reporting by Leah Douglas; Additional reporting by Brendan O’Boyle and Adriana Barrera in Mexico City; Editing by Marguerita Choy and Michael Perry)

By Luc Cohen

NEW YORK (Reuters) -Donald Trump on Monday asked the New York judge overseeing his criminal case on charges stemming from hush money paid to a porn star to delay the trial until the U.S. Supreme Court finishes reviewing his claim of presidential immunity in a separate case.

The first-ever criminal trial of a former U.S. president is set to begin on March 25 in a New York state court in Manhattan.

Trump has pleaded not guilty to 34 counts of falsification of business records.

Prosecutors say he directed his former lawyer and fixer, Michael Cohen, to pay porn star Stormy Daniels $130,000 to keep quiet before the 2016 election about a sexual encounter she says they had a decade earlier, and then falsely recorded his reimbursement to Cohen as legal expenses.

Trump denies the encounter with Daniels, whose real name is Stephanie Clifford.

The move was the latest by Trump seeking to delay the four upcoming criminal trials he faces until closer to, or even after, his expected Nov. 5 election rematch with Democratic President Joe Biden.

The Supreme Court last month handed Trump a win when it agreed to hear in late April his argument that he is immune from federal prosecution for trying to overturn his 2020 election defeat, a decision that will delay the start of any trial by at least several months.

The court, by contrast, moved faster in acting to ensure that Trump remained on Colorado’s primary ballot, rejecting an effort to disqualify him the day before the contest.

Trump has pleaded not guilty in all criminal cases, which he has termed “election interference.”

‘PRESSURE CAMPAIGN’

In their court filing on Monday, Trump’s lawyers said the outcome of the Supreme Court’s review was relevant to the hush money case because prosecutors were seeking to present evidence of statements Trump made while he was president.

Last month, prosecutors said they planned to introduce evidence of a “pressure campaign” by Trump in 2018 to ensure Cohen did not cooperate with a federal investigation into the payment to Daniels. Cohen pleaded guilty that year to violating campaign finance law.

In their court filing on Monday, Trump’s lawyers called prosecutors’ claim of a pressure campaign “fictitious.” They said Trump’s social media posts about Cohen were “official communications” about “matters of public concern” and thus immune from state prosecution.

“Without immunity from criminal prosecution based on official acts, the President’s political opponents will seek to influence and control his or her decisions via de facto extortion,” Trump’s lawyers wrote.

A spokesperson for the Manhattan district attorney’s office, which brought the charges, declined to comment.

Last year, Trump made a similar argument as part of an unsuccessful push to move the hush money case from state court to federal court. In denying Trump’s request in July 2023, U.S. District Judge Alvin Hellerstein wrote that the payment to Daniels “was a purely personal item.”

“Hush money paid to an adult film star is not related to a President’s official acts,” Hellerstein wrote.

(Reporting by Luc Cohen in New York, editing by Scott Malone and Deepa Babington)

By Mike Stone

WASHINGTON (Reuters) – Castelion, a startup trying to build a hypersonic weapon for the Pentagon, tested its system for the first time, it told Reuters on Monday, as a growing group of small hypersonic arms makers challenge large defense contractors with less expensive, rapidly produced products.

The United States and China are engaged in an arms race to develop the most lethal hypersonic weapons, which travel in the upper atmosphere at more than five times the speed of sound and are designed to evade traditional defenses.

“This test flight, this first of many planned for this year, demonstrates our rapid development approach and is a major milestone for the company. We now have a low-cost hypersonic test platform ready to launch on demand,” Bryon Hargis, Castelion’s CEO and co-founder, told Reuters in a statement.

U.S. companies like Castelion, RTX’s Raytheon unit and Lockheed Martin are all working to develop the new class of weapon, which will translate to large contracts if production can be scaled.

Private U.S. company Stratolaunch on Saturday said it had successfully completed the first powered flight of its Talon-A reusable hypersonic test vehicle.

Castelion already has contracts with the U.S. Air Force and the Navy, the company told Reuters in a statement regarding the test, which did not include an explosive device, which it said took place on Saturday.

Backed by $14.2 million in funding co-led by investors Andreessen Horowitz and Lavrock Ventures, the tiny startup has secretly conducted dozens of component tests since June 2023.

The company has set a goal of designing and building a complete weapons system that includes a hypersonic missile, a control station and a data link.

Saturday’s successful test of the missile system raises the stakes for rivals RTX and Lockheed Martin – Pentagon weapons contractors vying for billions of funds to build hypersonic weapons.

China and Russia both have competitive hypersonic weapons programs in what has become a geopolitical race to develop and field missiles that can change direction while traveling at several times the speed of sound.

(Reporting by Mike Stone in Washington; editing by Jonathan Oatis and Leslie Adler)

By Tim Reid

WASHINGTON (Reuters) -Donald Trump’s election campaign on Monday sought to clarify his stance on popular U.S. entitlement programs such as Social Security and Medicare after President Joe Biden blasted him for talking about “cutting” them.

The Republican presidential candidate told CNBC on Monday there was “a lot you can do in terms of cutting” entitlement programs, adding he wants to find cost savings by targeting “theft and bad management.”

Democrats seized on Trump’s mention of cuts to Social Security and Medicare, which many elderly Americans rely on for retirement income and healthcare, respectively.

“Not on my watch,” Biden responded on the X social media platform.

Trump’s campaign quickly sought to clarify his remarks, releasing a statement that “President Trump was talking about cutting waste.”

The former president had shied away from advocating cuts to the entitlement programs, which many conservatives have called for because of their impact on the federal deficit.

In an interview on CNBC’s “Squawk Box,” Trump also defended his call for a 10% across-the-board tariff on foreign imports, which some economists say would increase the cost of goods for the American consumer.

Trump said any increase in the costs of goods could be offset by tax cuts he is proposing if he is reelected as president in November’s general election rematch with Biden.

Asked about concerns over the impact of increased political polarization on the nation’s financial stability, Trump said he was concerned about Fitch’s 2023 downgrade of the U.S. credit rating.

But he dismissed one of Fitch’s reasons for the credit downgrade: political polarization and instability following the Jan. 6, 2021, attack by his supporters on the U.S. Capitol.

Trump’s comments were his first extended remarks on his economic plans since he became the party’s likely presidential nominee following last week’s Super Tuesday primary elections. His last remaining rival for the nomination, Nikki Haley, dropped out of the race the following day.

Trump’s tariff plan has spurred talk of inflation by economists, and U.S. Treasury Secretary Janet Yellen has said it would raise costs for American consumers.

“I think taxes could be cut, I think other things could happen to more than adjust that. But I’m a big believer in tariffs,” Trump told CNBC, saying they help American industries when they are “being taken advantage of” by China and other nations.

“Beyond the economics, it gives you power in dealing with other countries,” he said, adding that he was not concerned about any possible retaliatory tariffs if he were to regain the White House.

On Bitcoin and other cryptocurrencies, Trump said he was not in favor of banning them, as some economists and U.S. lawmakers have advocated. “I’m not sure that I’d want to take it away,” he said.

(Reporting by Tim Reid, additional reporting by Susan Heavey; Editing by Bernadette Baum, Chizu Nomiyama, Ross Colvin and Jonathan Oatis)

(Reuters) – Elon Musk said on Monday his artificial intelligence startup xAI would open-source its ChatGPT challenger “Grok” this week, days after he sued OpenAI for abandoning its original mission in favor of a for-profit model.

The billionaire has warned on several occasions against the use of technology for profit by big technology companies such as Google.

He filed the lawsuit against Microsoft-backed OpenAI, which he co-founded in 2015 but left three years later, earlier this month. In response, OpenAI publicized emails that showed the Tesla CEO supported a plan to create a for-profit entity and wanted a merger with the EV maker to make the combined company a “cash cow.”

“This week, @xAI will open source Grok,” Musk said in a post on X, the social media firm he owns.

The move could give the public free access to experiment with the code behind the technology and aligns xAI with firms such as Meta and France’s Mistral, both of which have open-source AI models.

Google has also released an AI model called Gemma that outside developers can potentially fashion according to their needs.

Tech investors including OpenAI backer Vinod Khosla and Marc Andreessen, co-founder of venture capital firm Andreessen Horowitz, have been debating about open-sourcing in AI since Musk filed the lawsuit against the ChatGPT maker.

While open-sourcing technology can help speed up innovations, some experts have warned that open-source AI models could be used by terrorists to create chemical weapons or even develop a conscious super-intelligence beyond human control.

Musk said at Britain’s AI Safety Summit last year that he wanted to establish a “third-party referee” that could oversee firms developing AI and sound the alarm if they have concerns.

Seeking an alternative to OpenAI and Google, Musk launched xAI last year to create what he said would be a “maximum truth-seeking AI”. In December, the startup rolled out Grok for Premium+ subscribers of X.

In a podcast episode with computer scientist and podcaster Lex Fridman, Musk suggested in November that he favored the concept of open-source AI.

“The name, the open in open AI, is supposed to mean open source, and it was created as a nonprofit open source. And now it is a closed source for maximum profit,” Musk had said.

(Reporting by Gursimran Kaur and Akash Sriram in Bengaluru; Editing by Sonia Cheema and Pooja Desai)

By Leah Douglas

WASHINGTON (Reuters) – The administration of U.S. President Joe Biden on Monday finalized a rule requiring meat, poultry, or eggs labeled as a U.S. product to come from animals born, raised, slaughtered, and processed in the country.

The rule, proposed last March, is a victory for U.S. ranchers who argued for years that use of the voluntary label by companies who raised animals abroad and only slaughtered or processed them in the U.S. was misleading and disadvantaged domestic producers.

“This final rule will ensure that when consumers see ‘Product of USA’ they can trust the authenticity of that label and know that every step involved, from birth to processing, was done here in America,” said Agriculture Secretary Tom Vilsack in a statement.

Vilsack announced the final rule to cheers at the annual meeting of the National Farmers Union in Scottsdale, Arizona.

“The abuse of the ‘Product of U.S.A.’ label stripped America’s cattle producers of a vital opportunity to market their USA beef while denying consumers the opportunity to support them,” said Joe Maxwell, co-founder of the farm group Farm Action, in a statement.

Producers using “Product of USA” or “Made in the USDA” labels will need to comply with the rule by Jan. 1, 2026.

The USDA also announced $9.5 million in grants for 42 projects expanding small-scale local meat processing capacity.

The labeling rule and the processing funds are part of a broader suite of USDA actions to enhance competition in the meat industry.

(Reporting by Leah Douglas; Editing by Marguerita Choy)