By Steve Scherer and David Ljunggren

OTTAWA (Reuters) -Bank of Canada Governor Tiff Macklem on Thursday said interest rates may not be high enough to bring inflation back down to target, sending a hawkish message after holding borrowing costs at a 22-year high a day earlier.

The Bank of Canada (BoC) on Wednesday kept its key rate at 5%, noting that the economy had entered a period of weaker growth, but said it could hike again should price pressures persist. Inflation has remained above the bank’s 2% target for 27 months.

Macklem in a speech to the chamber of commerce in Calgary, Alberta, said one possible reason for inflation staying above target was that it might be taking longer for rates to work, but the other possibility “is that monetary policy is not yet restrictive enough to restore price stability.”

He added: “And unfortunately, the longer we wait, the harder it’s likely to be to reduce inflation.”

The central bank hiked rates by a quarter point in both June and July in a bid to tame stubbornly high inflation. However Macklem said that now “there is little downward momentum to underlying inflation.”

Canada’s gross domestic product unexpectedly shrank an annualized 0.2% in the second quarter, a sign the economy could have already entered a recession as higher rates sink in. But inflation accelerated in July to 3.3% and core measures remained at about 3.5%.

“We don’t want to raise our policy rate more than we have to,” Macklem said, adding that persistently high inflation would be worse for Canadians than high borrowing costs. “We need to stay the course.”

After Macklem’s comments, the Canadian dollar was trading 0.3% lower at 1.3678 to the greenback, or 73.11 U.S. cents, after touching its weakest in five months at 1.3694.

“Officials will remain highly vigilant and attuned to any changes in the direction of the economy and inflation,” said Royce Mendes, head of macro strategy at Desjardins Group. “In particular, the central bank will be watching a host of price measures,” including core measures, he said.

The tone of the speech clashed with the message coming from Canadian politicians in recent days. Before the Wednesday rate decision, three provincial premiers wrote to Macklem urging him to hold rates.

Finance Minister Chrystia Freeland after the announcement on Wednesday made a rare public comment on monetary policy, calling it “a welcome relief for Canadians.”

While Macklem did note that the economy had been slowing since overheating in the first half of 2022, and that slower growth helped ease price pressures, he stressed the importance of getting inflation all the way down to the 2% target.

“Going forward, we will be looking for further evidence that price pressures are easing,” Macklem said.

Money markets see a 14% chance for a rate hike when the bank next meets in late October.

A majority of economists polled by Reuters at the end of last month – 24 of 34 – expect the central bank to keep its policy rate at the current level or higher until at least the end of March 2024.

(Reporting by Steve Scherer and David Ljunggren; Editing by Mark Porter)

LONDON (Reuters) – A lack of consistent data to measure emissions down the supply chain of mining companies and through to customers makes it difficult to monitor and meet targets for decarbonising the sector, industry executives and investors said on Thursday.

The mining industry is a key focus for policymakers and investors because it provides the critical raw materials needed for electric vehicles and renewable energy infrastructure, but is also responsible for 4% to 7% of greenhouse-gas (GHG) global emissions.

Virginia Dundas, acting chief sustainability officer at Orsted, the world’s largest offshore wind farm developer, said she sees different levels of transparency from suppliers of the metals her company needs to build things like turbines.

“We try to engage in different ways to procure materials. We are putting in place some pilots to trace where they come from…but we are still seeing that for some (suppliers) it is very difficult to do that,” Dundas said, speaking at  the  Reuters IMPACT conference in London.

As metals are used across many different industries that serve customers across various geographies, it is difficult for mining companies to account for the whole supply chain.

The International Council on Mining and Metals , whose members include around 25 mining companies, on Thursday published guidance for all mining companies on how to account and report their Scope 3 – or indirect – emissions “to try and answer the problem of patchy data to make companies report consistently,” its CEO Rohitesh Dhawan said at the conference.

Scope 1 refers to a company’s direct emissions, Scope 2 to indirect emissions from purchased energy while Scope 3 refers to all other indirect emissions, for example from a company’s third-party suppliers.

Mining companies have set targets to decarbonise and mostly aim to reach net zero by 2040 and 2050, but some are struggling to keep up. The world’s second largest miner Rio Tinto said in July that it would miss its 2025 target unless it resorted to buying carbon offsets – credits to reduce emissions through projects such as tree planting.

“You can publish your data on Scope 3, but where investors have clear expectations is to see the companies’ targets aligned to net zero across Scope 1, 2 and 3…setting the targets short, medium and long term is absolutely critical to know that the company is walking down that path,” said Adam Matthews, chief responsible investment officer for the Church of England Pensions Board, which invests in mining companies.

To view the live broadcast of the Road to COP Stage go to the Reuters IMPACT news page:

(Reporting by Clara Denina;Editing by Elaine Hardcastle)

By Hadeel Al Sayegh, Andres Gonzalez and Belén Carreño

DUBAI/MADRID (Reuters) – Jose Maria Alvarez-Pallete, chairman and chief executive of debt laden Spanish telephone and internet service company Telefonica, got an unexpected call this week when he was in Silicon Valley to meet companies and investors in America’s tech capital.

He learned Saudi Arabia’s largest telecoms operator, STC Group, aimed to be Telefonica’s biggest shareholder, with an interest of 9.9%. Within hours of Tuesday’s call, Alvarez-Pallete was en route to Riyadh, according to people with knowledge of the situation.

STC had spent months building its 2.1 billion-euro ($2.25 billion) stake, said the people, requesting anonymity because of the sensitivity of the matter. The move is a vote of confidence in Telefonica, burdened by billions of dollars in debt while STC gains expertise to modernize Saudi telecoms infrastructure.

But some in Spain worry the deal could give Saudi Arabia too much sway over the country’s telecom and internet infrastructure.

STC is 64% owned by Saudi Arabia’s Public Investment Fund (PIF), the main engine of Crown Prince Mohammed bin Salman’s Vision 2030 effort to build stakes in a variety of global companies and wean the Saudi economy off its dependence on the oil that made it one of the world’s richest nations.

STC hopes the ties with Telefonica will help it develop digital cities in Saudi Arabia, importing technological know-how from countries like Spain, according to a person who had advised the company. For Telefonica, whose market value has sunk to a third of its level eight years ago, the investment offers long-suffering shareholders some respite.

As Telefonica’s rivals slashed prices to attract internet users, the Spanish company also borrowed to invest in new mobile and internet networks. Exacerbating the problems, Telefonica has expanded in Latin America, where flagging local currencies, tighter regulation and competition sapped profit in the last decade.

“This provides a much needed boost for Telefonica given the huge investment to rollout fibre broadband 5G in key core markets,” said an analyst at PP Foresight.

The new investor “brings confidence and value,” Telefonica’s main trade union UGT conceded on Thursday, but it worried about growing influence of sovereign funds from theocracies.

Telefonica does not view STC as an aggressive investor that will seek management changes, according to a person with knowledge of the management’s thinking.

But the secrecy with which STC built its stake did catch some observers off guard, the person said.

Speculation about a major new shareholder at Telefonica had been mounting. Last year, Telefonica management twice met with other companies and funds in the Middle East, said the people familiar with the matter.

Telefonica said it was informed Tuesday about STC’S investment, after the companies had become more acquainted in recent months. In February, they sealed a strategic partnership to work in fields such as cybersecurity and the metaverse.

By May, STC had hired advisers, including investment bank Morgan Stanley and law firm Linklaters, and started buying Telefonica shares on the market, said two other sources with knowledge of the move.

When the stake neared 3%, STC paused stock purchases to avoid having to make an official market disclosure, one of the people said. STC sought to keep the stake under wraps until it could buy at least 9.9% of Telefonica, the person said.

On Tuesday, STC hit that target, after acquiring an additional 2% stake from undisclosed investors, one of the people said. The balance, 5%, consists of derivatives arranged by Morgan Stanley, and is pending of regulatory approval by the Spanish government, they said. 

Central to the deal is STC’s chief investment officer, Motaz Al Angari, formerly a banker at Morgan Stanley, one person with knowledge of the situation said. STC confirmed his involvement. While at the bank, Al Angari advised on giant Saudi Aramco’s record public listing.

Officials for STC declined to comment further. Morgan Stanley and Linklaters declined to comment. Telefonica said: “Our management, strategy and investment teams travel regularly to meet with potential investors, not only in the Middle East, but all over the world.”

In a bid to pare debt, Telefonica has sold swathes of telecoms infrastructure, and is set to present a new strategic plan on Nov. 8 with a focus on growing free cash flow, which its CEO has said could reach 4 billion euros this year.

STC has a cash pile of 22.4 billion riyals ($6 billion) that has been underutilised for many years, equity analysts at EFG Hermes said in a note to clients, so the deal should also be good for the Saudi company. However they warned “unsuccessful deals” by STC in the past may worry some.

Middle Eastern investors have been taking stakes in Spanish companies for some time. The United Arab Emirates’ Mubadala sovereign wealth fund owns stakes in oil company Cepsa and gas pipeline operator Enagas, while Qatar’s QIA is a shareholder in Iberdrola.

In October, Saudi Arabia hosts its annual financial conference attended by the world’s top bankers and billionaires, dubbed ‘Davos in the Desert’.

“They want their local champions to become global players,” said a Gulf banker. “With time they will become as important as a Vodafone or Telefonica itself.”

($1 = 0.9348 euros)

(Additional reporting by Inti Landauro, Tomas Cobos in Madrid and Amy-Jo Crowley and Pablo Mayo in London; Writing By John O’Donnell and Anousha Sakoui; Editing by Elisa Martinuzzi and David Gregorio)

By Anna Tong

(Reuters) – OpenAI’s ChatGPT, the wildly popular artificial intelligence chatbot launched in November, saw monthly website visits decline for the third month in a row in August, though there are signs the decline is coming to an end, according to analytics firm Similarweb.

Worldwide desktop and mobile website visits to the ChatGPT website decreased by 3.2% to 1.43 billion in August, following approximately 10% drops from each of the previous two months. The amount of time visitors spent on the website has also been declining monthly since March, from an average of 8.7 minutes on site to 7 minutes on site in August.

But August worldwide unique visitors ticked up to 180.5 million users from 180 million.

School coming back into session in September may help ChatGPT’s traffic and usage, and some schools have begun to embrace it. U.S. ChatGPT traffic in August rose slightly, in concert with American schools being back in session.

“Students seeking homework help appears to be part of the story: the percentage of younger users of the website dropped over the summer and is now starting to bounce back,” said David F. Carr of Similarweb, who regularly tracks ChatGPT and its competitors. 

ChatGPT set off a frenzied use of generative AI in daily tasks from editing to coding and reached 100 million monthly active users in January, two months after its launch. Generative AI technology uses past data to create new content, for instance to write essays or poems.

Before Meta’s Threads launch, it was the fastest-growing consumer application ever, and is now one of the top 30 websites in the world.

A few ChatGPT competitors, including Google’s Bard chatbot, have been launched this year. Microsoft’s search engine Bing also provides a chatbot powered by OpenAI for free.

OpenAI also released the ChatGPT app on the iOS system in May, which could sap some traffic from its website. ​ChatGPT is free to use but also provides a premium subscription for $20 a month. 

Besides ChatGPT, OpenAI makes money by selling access to its AI models for developers and enterprises directly and through a partnership with Microsoft, which invested over $10 billion into the company.

(Reporting by Anna Tong in San Francisco; editing by Kenneth Li and Chizu Nomiyama)

By David Shepardson

(Reuters) -General Motors on Thursday made a counterproposal to the union representing its U.S. hourly workers in a bid to avoid a costly strike, but United Auto Workers President Shawn Fain called the offer “insulting.”

The largest U.S. automaker said it offered workers a 10% wage hike and two additional 3% annual lump sum payments over four years in its offer to the union ahead of the Sept. 14 contract expiration.

Last week, Ford said it had offered a 9% wage increase through 2027 and 6% lump sump payments, much less than the 46% wage hike being sought by the union. The UAW has said 97% of members voted in favor of authorizing a strike if agreement is not reached.

Fain, who represents 146,000 workers at the Detroit Three, said GM’s offer was “an insulting proposal that doesn’t come close to an equitable agreement for America’s autoworkers…. The clock is ticking. Stop wasting our members’ time. Tick tock.”

GM shares were down 1.3% in mid-day trading.

GM said the wage hike is the largest proposed since 1999. It is also offering a $6,000 one-time inflation-related payment and $5,000 in inflation-protection bonuses over the life of the agreement, along with a $5,500 ratification bonus.

Chrysler-parent Stellantis said Wednesday it planned to make a counteroffer to the UAW this week.

GM said that under its offer, current temporary employees will receive a 20% increase to $20 per hour wage and it would shorten the time it takes to get to the maximum wage rate for permanent employees – mirroring proposals from Ford.

GM President Mark Reuss said in a video posted on Thursday “we need a fair contract that both rewards our employees and protects the long-term health of our business.”

A UAW strike that shuts the Detroit Three manufacturers could cost carmakers, suppliers and workers over $5 billion, Michigan-based Anderson Economic Group estimated.

With new car inventories tight, consumer experts have said that could translate into higher car prices – an important component of inflation.

Last week, the UAW filed unfair labor practice charges with the National Labor Relations Board against GM and Stellantis saying they refused to bargain in good faith.

The union’s demands include a 20% immediate wage increase followed by four 5% annual wage hikes, defined-benefit pensions for all workers, 32-hour work weeks and additional cost of living hikes. GM is proposing to give employees an additional paid holiday.

The UAW also wants all temporary workers at U.S. automakers to be made permanent, seeks enhanced profit sharing and the restoration of retiree health-care benefits and cost-of-living adjustments.

The UAW said Ford’s profit-sharing formula change would have cut payouts by 21% over the last two years.

J.P.Morgan on Thursday said supply chain disruptions from a potential UAW strike would cut new vehicle production, drive up used car prices and put pressure on margins in the personal auto insurance business.

(Reporting by David Shepardson; additional reporting by Ben Klayman; Editing by Nick Zieminski and Tomasz Janowski)

(Reuters) -Microsoft researchers said on Thursday they found what they believe is a network of fake, Chinese-controlled social media accounts seeking to influence U.S. voters by using artificial intelligence.

A Chinese embassy spokesperson in Washington said that accusations of China using AI to create fake social media accounts were “full of prejudice and malicious speculation” and that China advocates for the safe use of AI.

In a new research report, Microsoft said the social media accounts were part of a suspected Chinese information operation. The campaign bore similarities to activity which the U.S. Department of Justice has attributed to “an elite group within (China’s) Ministry of Public Security,” Microsoft said.

The researchers did not specify which social media platforms were affected, but screenshots in their report showed posts from what appeared to be Facebook and Twitter, now known as X.

The report highlights a fraught social media environment as Americans prepare for the 2024 presidential election.

The U.S. government has accused Russia of meddling in the 2016 election with a covert social media campaign and has warned of subsequent efforts by China, Russia and Iran to influence voters.

The report provided limited examples of the recent activity and did not explain in detail how researchers attributed the posts to China.

A Microsoft spokesperson told Reuters that the company’s researcher used a “multifaceted attribution model,” which relies on “technical evidence, behavioral evidence and contextual evidence.”

The campaign began using generative artificial intelligence technology in about March 2023 to create politically charged content in English and “mimic U.S. voters,” Microsoft said.

Generative AI can create images, text and other media from scratch.

The new content is much more “eye-catching than the awkward visuals used in previous campaigns by Chinese nation-state actors, which relied on digital drawings, stock photo collages, and other manual graphic designs,” the researchers wrote.

The paper cited an example of one AI-generated image, which Microsoft said came from a Chinese account, that depicts the Statue of Liberty holding an assault rifle with the caption: “Everything is being thrown away. THE GODDESS OF VIOLENCE.”

The Microsoft spokesperson said the identified accounts had attempted to appear American by listing their public location as within the United States, posting American political slogans, and sharing hashtags relating to domestic political issues.

(Reporting by Christopher Bing; Editing by Cynthia Osterman and Edmund Klamann)

SYDNEY (Reuters) – Australian billionaire Mike Cannon-Brookes on Thursday stood by the economics of a plan to ship energy from a giant solar farm in the country’s north to Singapore via undersea cable as he took possession of the A$20 billion ($12.73 billion) project.

Cannon-Brookes, the co-founder of tech firm Atlassian turned environmental activist, said he continued to believe outside investors would be drawn to the Sun Cable project, adding it already had demand for more energy than it could produce.

“We have spent a lot of time with customers and are pretty clear on the unit economics,” Cannon-Brookes told reporters after his business Grok Ventures’ purchase of the project for an undisclosed sum was completed on Thursday.

“We believe that there’s enough margin … to make it an investable project,” he added.

Sun Cable under Cannon-Brookes’ control will be split into two business units, focusing on Australia and Singapore, which may broaden its appeal to investors, Cannon-Brookes said.

Sun Cable was owned by the private firms of Cannon-Brookes and Fortescue Metals billionaire founder Andrew Forrest. But it was put into voluntary administration, Australia’s closest equivalent to Chapter 11 bankruptcy, in January after the two parties failed to agree on future funding.

Forrest had said he was unconvinced of the commercial viability of sending power via undersea cable.

Cannon-Brookes said the company would apply for a licence with Singapore’s Energy Market Authority this month with hopes of meeting that country’s objective of importing at least 4 gigawatts (GW) from low-carbon sources by 2035.

The company was also in talks with the Indonesian government about building the cable in its waters, he added.

The proposed Australia-Asia PowerLink would send power from a 20 GW solar farm with the world’s biggest battery in Australia through a 4,200 km (2,610 miles) undersea cable to Singapore.

($1 = 1.5706 Australian dollars)

(Reporting by Byron Kaye; Editing by Jamie Freed)

By Aditya Soni

(Reuters) -Beijing’s widening curbs on iPhone use by government staff rattled Apple and other U.S. technology stocks on Thursday as investors fretted over the financial impact of rising Sino-American tensions on companies with large China exposure.

Apple fell more than 3% and was on track for its worst two-day decline since November after media reports said Beijing has told employees at some central government agencies in recent weeks to stop using their Apple mobiles at work.

Several Wall Street analysts said the curbs show that even a company with a good relationship with the Chinese government and a large presence in the world’s second-largest economy was not immune to rising tensions between the two nations.

Apple supplier Qualcomm, one of the U.S. companies with the largest China presence, tumbled nearly 7% to lead losses among major tech firms.

The wider ban is not surprising and highlights efforts to limit a Western company’s market access to China, said U.S. Representative Mike Gallagher, the chairman of the House panel on China.

“This is textbook Chinese Communist Party behavior – promote PRC (People’s Republic of China) national champions in telecommunications, and slowly squeeze Western companies’ market access,” Gallagher, a Republican, told Reuters.

Sino-U.S. friction has risen in recent months as Washington tries to restrict China’s access to key technologies including cutting-edge chips, and Beijing looks to reduce its reliance on American tech. China has curbed shipments from prominent U.S. firms including planemaker Boeing and memory chipmaker Micron.

“This announcement seems to have just refocused investors that the relationship between the U.S. and China is a big risk to current equity prices, particularly in technology,” said Rick Meckler, partner at Cherry Lane Investments.

Other suppliers of the iPhone maker including Broadcom, Skyworks Solutions and Texas Instruments were also lower, falling between 2% and 7.3%. The drop in the technology sector weighed on the three main U.S. stock indexes, particularly the tech-heavy Nasdaq Composite, which lost 1.1% in afternoon trading.

IPHONE SLOWDOWN

China has been a bright spot for Apple in an otherwise tough period for iPhone sales.

“China is a crucial market for Apple, not just because it’s a super-important manufacturing hub, but because the country is an increasingly important source of revenues,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Apple gets nearly a fifth of its revenue from the country.

“Already rivals are closing the gap in high-end smartphone sales, and if the situation were to escalate this could potentially allow competitors to have a greater chance of stealing Apple’s crown,” Streeter said.

China’s Huawei last week launched its new Mate 60 Pro smartphone, which is powered by an advanced chip made by Chinese contract chipmaker SMIC and marks a breakthrough for the duo hit by U.S. sanctions.

Those sanctions cut Huawei’s access to chipmaking tools essential for producing the most advanced handset models, hammering the company’s business and allowing Apple to take some market share from the national favourite in China.

“If Huawei has the capability to supply and scale its home-grown Kirin 9000S (chips), we see the Mate series phone as an opportunity for Huawei to increase its shipments and regain its market share,” analysts at BofA Global Research said.

Apple could, however, see a demand boost after an event next week where it is expected to unveil its iPhone 15 line-up, as well as new smartwatches.

(Reporting by Aditya Soni in Bengaluru; Additional reporting by Jaspreet Singh and Shristi Achar; Editing by Shounak Dasgupta and Devika Syamnath)

By Dan Burns

(Reuters) – U.S. employers have yet to ramp up layoffs as many economists have predicted, data out on Thursday showed in the latest indication of a job market refusing to buckle in the face of the Federal Reserve’s efforts to slow it down.

New filings for state unemployment benefits fell unexpectedly last week to the lowest level since February, and the ranks of those receiving jobless benefits for more than a week slid in the week before that to the lowest since July, the Labor Department said in its weekly reading of layoff activity across the country.

While other data on the job market recently have shown signs it is softening from the extremely tight conditions that arose during the COVID-19 pandemic, Thursday’s data reinforces the view that it remains robust by historical standards.

That may lead the Fed – which has jacked up interest rates aggressively over the last 18 months – to keep borrowing costs high for some time in order to bring inflation back to its 2% target.

Indeed, while a separate Labor Department report on Thursday showed labor cost pressures had eased substantially in the second quarter and worker productivity jumped by the most in nearly three years, those improvements are unlikely to be sufficient to allow the Fed to let its guard down in the battle to subdue inflation.

“The Fed still needs to see labor market conditions weaken further to be confident it is on track to bring inflation back to target,” Michael Pearce, lead U.S. economist at Oxford Economics, wrote.

CLAIMS DROP

Initial claims for state unemployment benefits fell 13,000 to 216,000 in the week ended Sept. 2 from a revised 229,000 in the prior week, the Labor Department said on Thursday. That was the lowest since the same level was touched in the week ended Feb. 11 and it marked the fourth straight weekly decline.

Economists polled by Reuters had forecast new claims would rise to 234,000 in the latest week.

Meanwhile, the rolls of those continuing to receive jobless benefits beyond the first week fell by 40,000 to 1.679 million in the week ended Aug. 26 from a revised 1.719 million a week earlier. That was the lowest since the same level was hit in the week ended July 15.

Continued claims, followed by some economists as a proxy for hiring, had climbed notably from last year at this time through early April when they briefly rose above 1.85 million. Since then, however, they have declined and the latest reading is well below the 1.9 million average over the five years before the pandemic, also a period when the job market was viewed as robust.

Overall, the jobless claims figures do not indicate any danger of the U.S. job market rolling over in the near term, with recorded layoff activity still low even though corporate layoff announcements have recently increased.

“The claims data do not show any real evidence of a pickup in layoff activity,” Jefferies U.S. economist Thomas Simons wrote after the data release. “There have been brief periods of elevated counts during 2023, specifically in June, but these periods have been short-lived and often explainable by special factors.”

The data point to laid-off workers finding new jobs with relative ease or that “realized layoff activity is far less than what is announced by large businesses,” Simons said. Taken altogether, the figures suggest the “chances of a soft landing in the labor market seem to be increasing somewhat.”

Last week, the Labor Department said job growth picked up in August, although employment gains reported in the previous two months were revised sharply lower in an indication that labor market conditions were loosening. The unemployment rate rose unexpectedly to 3.8% from 3.5%, but that was driven by an increase in the labor force participation rate to the highest in more than three years.

PRODUCTIVITY REBOUND

The Labor Department on Thursday separately said worker productivity rebounded in the second quarter, albeit not to the degree initially reported.

Nonfarm productivity – measuring hourly output per worker – increased at a 3.5% annualized rate in the period from April through June – the highest since the third quarter of 2020 – versus a -1.2% reading in the first three months of the year. Second-quarter productivity growth had initially been estimated at 3.7%.

The report also showed unit labor costs, a key focus of the Fed, rose at a 2.2% annualized rate, a somewhat faster pace than the 1.6% rate initially reported, but softer than the 3.3% rate in the first quarter.

While those developments will be welcome news to the Fed — since improvements in productivity and easing of labor costs both factor favorably in the bid to further lower inflation from the 40-year highs experienced about a year ago — officials at the central bank are unlikely any time soon to relax the pressure they are exerting on the economy.

Still, it does add to the case for holding their policy rate unchanged at the current 5.25% to 5.50% range when officials gather in Washington on Sept. 19-20 for their next rate-setting meeting.

“The trend over the past year is clear – wage pressures have moderated, which supports the case for holding rates unchanged at upcoming meetings,” Oxford’s Pearce wrote.

(Reporting by Dan Burns; Editing by Chizu Nomiyama, Paul Simao and Andrea Ricci)

(Reuters) -The U.S. Senate on Thursday confirmed World Bank economist Adriana Kugler to the Federal Reserve Board of Governors, where she will help set interest rates for the world’s biggest economy.

Kugler, whose research has focused on labor markets, is the first Latina to join the U.S. central bank’s board in its 109-year history. The vote was 53-45, with a few Republicans supporting a nomination that was championed by Democratic Senator Bob Menendez.

“It is time for Latinos to be taken seriously as an essential part of our American family and economy,” said Menendez, a Cuban American, noting that 62 million Latinos call the United States home.

Confirming Kugler, he added, “is about changing the face of leadership so that our institutions – these bodies that we entrust with the future wealth and prosperity of our country – can fully reflect the nation that they serve.”

The Senate on Wednesday also confirmed Fed Governor Philip Jefferson as Fed vice chair and Fed Governor Lisa Cook to a second term. Both Jefferson and Cook are Black, have a PhD in economics and had long careers in academia.

With Kugler’s addition, the Fed’s board now has its full seven members, who along with the central bank’s 12 regional bank presidents set monetary policy as the U.S. economy approaches a crossroads.

The Fed has raised interest rates by an aggressive 5.25 percentage points over the last 18 months in a bid to rein in inflation that, based on the personal consumption expenditures price index, surged to 7% last summer.

Since then, supply chains that were damaged during the coronavirus pandemic have continued to heal, easing the root cause of much of that inflation, and the U.S. central bank’s higher borrowing costs have helped cool demand and restore more balance to the labor market, Fed Chair Jerome Powell has said.

Now, with the PCE price index having risen just 3.3% in July, officials are weighing whether they have done enough to put it on track toward their 2% goal.

The Fed is widely expected to leave its benchmark overnight interest rate in the current 5.25%-5.50% range at its Sept. 19-20 policy meeting, as officials take time to assess the state of the economy.

They are also expected to leave the door open to another rate hike before the end of the year should price pressures reemerge.

(Reporting by Ann Saphir; Editing by Paul Simao)