Senior Mexican and U.S. officials have spoken ahead of a meeting in April on tackling drugs and weapons trafficking, the two governments said on Tuesday, even as Mexico sought to argue it is not a production hub for synthetic opioid fentanyl.

Officials are set to meet in Washington to discuss the so-called Bicentennial Framework, which will address the production of synthetic drugs, particularly fentanyl, and weapons smuggling.

U.S. Secretary of State Antony Blinken and Mexican Foreign Minister Marcelo Ebrard had a phone conversation on Monday, the State Department said, with Blinken expressing a U.S. commitment to “protecting [both] communities from criminal networks.”

Mexico’s foreign ministry said on Monday evening security officials had “no record” of fentanyl production in Mexico and that the drug and its ingredients largely came from Asia.

In February, the Mexican Army reported its largest synthetic drug lab bust, nabbing half-a-million fentanyl pills in the northwestern state of Sinaloa.

Tensions over security rose this month, following the kidnapping of a group of Americans in the northeastern state of Tamaulipas. Two were killed in an attack officials have suggested was carried out by a drug gang.

Blinken and Ebrard discussed the kidnapping, the State Department said.

Some U.S. Republicans have called for military intervention in Mexico to fight cartels, which Mexico has rejected.

 
…

U.S. consumer prices increased in February amid sticky rental housing costs, but economists are divided on whether rising inflation will be enough to push the Federal Reserve to hike interest rates again next week after the failure of two regional banks.

The Consumer Price Index (CPI) rose 0.4% last month after accelerating 0.5% in January, the Labor Department said on Tuesday. That lowered the year-on-year increase in the CPI to 6.0% in February, the smallest annual gain since September 2021. The CPI rose 6.4% in the 12 months through January.

The annual CPI peaked at 9.1% in June, which was the biggest increase since November 1981.

Excluding the volatile food and energy components, the CPI increased 0.5% after rising 0.4% in January. In the 12 months through February, the so-called core CPI gained 5.5% after advancing 5.6% in January.

Economists polled by Reuters had forecast both the CPI and core CPI climbing 0.4% on a monthly basis. Monthly inflation is rising at double the rate that economists say is needed to bring inflation back to the Fed’s 2% target.

The inflation report was published amid financial market turmoil triggered by the collapse of Silicon Valley Bank in California and Signature Bank in New York, which forced regulators to take emergency measures to shore up confidence in the banking system.

It was also released before the Fed’s policy meeting next Tuesday and Wednesday, and followed a report last Friday showing a still-tight labor market, but cooling wage inflation. Economists said Tuesday’s report remained important for policymakers despite the angst in financial markets.

Fed Chair Jerome Powell told lawmakers last week that the U.S. central bank would likely need to raise rates more than expected, leading financial markets to expect that a half-percentage-point rate increase was on the table next week.

But those expectations were dialed back to 25 basis points after the employment report.

While financial markets on Tuesday still expected a quarter-percentage-point hike, according to CME Group’s FedWatch tool, fear of contagion from the banking crisis prompted some economists, including those at Goldman Sachs, to expect the Fed next week to pause its fastest monetary policy tightening cycle since the 1980s.

The Fed has increased its benchmark overnight interest rate by 450 basis points since last March from the near-zero level to the current 4.50%-4.75% range.
…

Stock markets in Asia fell Tuesday, with shares of banks hit particularly hard, following a decline in U.S. markets amid the fallout from the collapse of two U.S. banks. 

Japan’s Nikkei 225 Index closed down 2.2% with shares of Softbank falling 4.1%, Mizuho Financial Group dropping 7.1% and Sumitomo Mitsui Financial Group sinking 9.8%.  Hong Kong’s Hang Seng Index closed down 2.4% Tuesday. 

U.S President Joe Biden Monday sought to reassure Americans that the U.S. banking system is secure and that taxpayers would not bail out investors at California-based Silicon Valley Bank and the New York-based Signature Bank.    

“Americans can have confidence the banking system is safe. Your deposits are safe,” Biden said in a five-minute statement delivered at the White House.     

He said customers’ deposits will be covered by funds banks routinely pay into a U.S. government-held account for such emergencies.      

Biden vowed, “We must get a full accounting of what happened” at the two banks.     

Despite the assurances, U.S. banks lost about $90 billion in stock market value on Monday as investors feared additional bank failures. The biggest losses came from midsize banks, of the size of Silicon Valley Bank.     

While shares of the country’s biggest banks — such as JP Morgan Chase, Citigroup and Bank of America — also fell Monday, the selloff was not as sharp. The huge banks have been strictly regulated since the 2008 financial crisis and have been repeatedly stress tested by regulators.    

Biden ignored reporters’ questions Monday about the cause of the U.S. bank failures, but financial experts say both banks were affected by a rise in interest rates, which negatively affected the market values of significant portions of their assets, such as bonds and mortgage-backed securities.       

Banks don’t lose money if they hold such notes until maturity. But if they must sell them to cover depositor withdrawals, as was the case in recent days, the losses can quickly mount.       

The Federal Deposit Insurance Corp. reported that industrywide, U.S. banks at the end of last year reported $620 billion in such paper losses caused by rising interest rates.     

The U.S. Federal Reserve, the country’s central bank, announced Monday that it would review its oversight of Silicon Valley Bank in the wake of the bank’s failure.    

“We need to have humility and conduct a careful and thorough review of how we supervised and regulated this firm, and what we should learn from this experience,” said Fed vice chair for supervision Michael Barr.      

The FDIC, which insures deposits up to $250,000 and supervises financial institutions, said Monday it transferred all Silicon Valley Bank deposits to a so-called “bridge bank.” The new bank is run by a board appointed by the agency until it can stabilize operations.          

The Bank of England also announced Monday the sale of Silicon Valley Bank’s United Kingdom subsidiary to HSBC to stabilize the bank, “ensuring the continuity of banking services, minimizing disruption to the U.K. technology sector and supporting confidence in the financial system.”      

The actions were prompted by the failure of Silicon Valley Bank, which U.S. regulators seized on Friday after concerns about the bank’s financial health led to a large number of depositors withdrawing their money at the same time.          

With about $200 billion in assets, Silicon Valley Bank’s failure was the second largest in U.S. history. The bank was heavily involved in financing for venture capital firms, especially in the tech sector.            

Signature Bank also had a large portion of clients in the tech sector, including cryptocurrency.  Its failure, with more than $100 billion in assets, was the third largest in U.S. history, behind Washington Mutual and Silicon Valley Bank.           

Some information for this story came from The Associated Press, Agence France-Presse and Reuters. 
…

Australia will buy three nuclear-powered attack submarines from the United States as part of a three-nation, multi-decade deal with Great Britain that is aimed at strengthening the allies’ presence in the Asia-Pacific region as China grows bolder militarily. VOA’s Anita Powell reports from Washington.
…

U.K. Prime Minister Rishi Sunak pledged Monday to increase military funding by 5 billion pounds ($6 billion) over the next two years in response to Russia’s invasion of Ukraine and the “epoch-defining challenge” posed by China. 

The increase, part of a major update to U.K. foreign and defense policy, is less than military officials wanted. Sunak said the U.K. would increase military spending to 2.5% of gross domestic product “in the longer term,” but didn’t set a date. Britain currently spends just over 2% of GDP on defense, and military chiefs want it to rise to 3%. 

The extra money will be used, in part, to replenish Britain’s ammunition stocks, depleted from supplying Ukraine in its defense against Russia. Some will also go toward a U.K.-U.S.-Australia deal to build nuclear-powered submarines. 

“The world has become more volatile, the threats to our security have increased,” Sunak told the BBC during a visit to the U.S. “It’s important that we protect ourselves against those.” 

Sunak met U.S. President Joe Biden and Australian Prime Minister Anthony Albanese in San Diego on Monday to confirm next steps for the military pact, known as AUKUS, struck by the three countries in 2021 amid mounting concern about China’s actions in the Pacific. 

Under the deal, the U.K. and Australia will build new nuclear-powered, conventionally armed subs from a British design, with U.S. technology and support. Most of the U.K. construction will take place in shipyards at Barrow-in-Furness in northwest England, with the first subs completed by the late 2030s. Australia will also buy up to five Virginia-class subs from the U.S. 

The three leaders said the submarine plan “elevates all three nations’ industrial capacity to produce and sustain interoperable nuclear-powered submarines for decades to come, expands our individual and collective undersea presence in the Indo-Pacific, and contributes to global security and stability.” 

Britain last produced a defense, security and foreign policy framework, known as the Integrated Review, in 2021. 

The government ordered an update in response to an increasingly volatile world. The new report, released Monday, said “there is a growing prospect that the international security environment will further deteriorate in the coming years, with state threats increasing and diversifying in Europe and beyond.” 

Moscow’s February 2022 invasion of Ukraine upended European security order, and the review said Russia poses “the most acute threat to the U.K.’s security.” 

The U.K. is also increasingly concerned about what the government calls “the epoch-defining challenge presented by the Chinese Communist Party’s increasingly concerning military, financial and diplomatic activity.” 

The defense review said that “wherever the Chinese Communist Party’s actions and stated intent threaten the U.K.’s interests, we will take swift and robust action to protect them.” 

U.K. intelligence agencies have expressed growing concern about China’s military might, covert activities and economic muscle. Ken McCallum, head of domestic spy agency MI5, said in November that “the activities of the Chinese Communist Party pose the most game-changing strategic challenge to the U.K.” MI5 said in January 2022 that a London-based lawyer had tried to “covertly interfere in U.K. politics” on behalf of the Chinese Communist Party — including by channeling money to an opposition Labour Party lawmaker. 

Concern about Beijing’s activities has sparked a government-wide catch-up campaign on China, including Mandarin-language training for British officials and a push to secure new sources of critical minerals that are essential to technology. 

The review doesn’t brand China itself a threat to the U.K., and Sunak has stressed the need for economic ties with China, to the annoyance of more hawkish members of the governing Conservative Party. 

“We are sliding towards a new Cold War,” said Conservative lawmaker Tobias Ellwood, who chairs the House of Commons Defense Committee. “Threats are increasing, but here we are staying on a peacetime budget.”

Speaking as he traveled to the U.S., Sunak said China’s Communist government “is increasingly authoritarian at home and assertive abroad — and has a desire to reshape the world order.”

But, he added, “you can’t ignore China” given the size of its economy.

“It’s right to engage with China, on the issues that we can find common ground and make a difference on, for example climate change, global health, macroeconomic stability,” he said.

“That’s the right approach whilst being very robust in defending our values and our interests.” 
…

Fourteen children of injured or fallen Ukrainian war heroes got a chance to spend two weeks of vacation in Denver, Colorado, thanks to local volunteers from this U.S. state. Svitlana Prystynska has the story, narrated by Anna Rice. Camera: Volodymyr Petryniv
…