Powell Likely to Stress Inflation Fight02/01 06:08

   

   WASHINGTON (AP) -- Inflation is cooling, and parts of the economy appear to 
be weakening. But Chair Jerome Powell is likely Wednesday to underscore that 
the Federal Reserve's primary focus remains the need to fight surging prices 
with still-higher interest rates.

   With financial markets anticipating that the Fed will stop raising rates 
soon and possibly even cut them later this year, analysts say Powell will need 
to push back against such optimism. If financial markets expect lower rates 
than what the Fed plans to deliver, the central bank's already treacherous task 
can become even harder.

   Powell's tough message will likely emerge at a news conference after the 
Fed's 19-member policy committee announces its latest action. The policymakers 
are set to raise their benchmark rate by a quarter-point to a range of 4.5% to 
4.75%, its highest level in about 15 years. The move could further increase 
borrowing rates for consumers as well as companies, ranging from mortgages to 
auto and business loans.

   In some ways, the Fed's challenge is trickier than it was last year, when 
inflation accelerated much faster than officials had expected. After being 
caught off guard -- Powell had initially characterized high inflation as only a 
temporary phenomenon -- officials developed a clear view of what was needed: An 
aggressive series of rate hikes to slow borrowing and spending, cool growth and 
curb high inflation.

   Now, though, inflation has weakened since the fall. As a result, the risks 
that the Fed's rate hikes could send the economy into a painful recession, with 
waves of job losses, are rising. Consumer prices, by the Fed's preferred 
measure, have risen at just a 2.9% annual rate in the past three months. Yet 
Fed officials have said they would need to see further evidence that inflation 
was declining closer to its 2% target before they would consider suspending 
their rate hikes.

   The latest sign that inflation is cooling came Tuesday in a report that 
showed wage growth slowed in the final three months of last year for a third 
straight quarter. That report could reassure Fed officials that rising 
paychecks are now less likely to fuel inflation.

   Over the past year, with businesses offering healthy raises to try to 
attract and keep enough workers, Powell has expressed concern that hefty pay 
growth in the labor-intensive service sector would keep inflation too high. 
Businesses typically pass their increased labor costs on to their customers by 
charging higher prices, thereby perpetuating inflation pressures.

   Some economists think the Fed doesn't need to push rates much higher -- and 
that doing so would heighten the risk of a deep recession. Economists at Morgan 
Stanley suggest that as inflation continues to ease in the coming months, 
Wednesday's rate hike will end up being the last one this year.

   The Fed could signal that a pause in rate hikes is on the horizon by 
changing some language in the statement it issues after each policy meeting.

   Since March, the statement has said that "ongoing increases in the (interest 
rate) target range will be appropriate." Some economists expect officials to 
slightly alter that part of the statement to make it a less specific commitment 
and give the Fed more flexibility.

   Still, Powell isn't likely to signal that a pause in rate increases will 
occur anytime soon, out of concern that such a message could touch off rallies 
in stocks and bonds. Those trends could boost the economy -- and inflation -- 
by giving consumers more money to spend and encouraging people and businesses 
to borrow more. That's just the opposite of what the Fed wants.

   "He's got to put a hawkish tint to everything he says," said Vincent 
Reinhart, chief economist at Dreyfus and Mellon and a former top Fed staffer. 
(In Fed parlance, "hawks" typically favor higher rates to control inflation, 
while "doves" often lean toward lower rates to support employment.)

   "Everybody is basically saying, 'Hey, Chair Powell, let's do your victory 
lap,' ''Reinhart said. "And he's like, 'We're only where we are because of our 
vigilance, and we can't let it down now.' "

   Financial markets have strengthened in anticipation of lower rates ahead. In 
December, Fed officials had forecast that they would raise their key rate above 
5%. Investors, though, expect them to stop at a range of 4.75% to 5% and to end 
up cutting rates before the year is out. That's true even though Powell has 
gone out of his way to stress that the Fed doesn't expect to cut rates this 
year.

   The divide between the Fed and financial markets is important because rate 
hikes need to work through markets to affect the economy. The Fed directly 
controls its key short-term rate. But it has only indirect control over the 
borrowing rates that people and businesses actually pay -- for mortgages, 
corporate bonds, auto loans and many others.

   The consequences can be seen in housing. The average fixed rate on a 30-year 
mortgage soared after the Fed first began hiking rates. Eventually, it topped 
7%, more than twice where it had stood before the hiking began.

   Yet since the fall, the average mortgage rate has eased to 6.13%, the lowest 
level since September. And while home sales fell further in December, a measure 
of signed contracts to buy homes actually rose. That suggested that lower rates 
might be luring some home buyers back to the market.

   Broader measures of so-called "financial conditions," which include things 
like corporate borrowing costs, also show looser credit.

Austin in Philippines to Discuss Troops02/01 06:17

   Defense Secretary Lloyd Austin was in the Philippines on Wednesday for talks 
about deploying U.S. forces and weapons in more Philippine military camps to 
ramp up deterrence against China's increasingly aggressive actions toward 
Taiwan and in the disputed South China Sea.

   MANILA, Philippines (AP) -- Defense Secretary Lloyd Austin was in the 
Philippines on Wednesday for talks about deploying U.S. forces and weapons in 
more Philippine military camps to ramp up deterrence against China's 
increasingly aggressive actions toward Taiwan and in the disputed South China 
Sea.

   Austin flew from South Korea, where he said the U.S. would increase its 
deployment of advanced weapons such as fighter jets and bombers to the Korean 
Peninsula to bolster joint training with South Korean forces in response to 
North Korea's growing nuclear threat.

   In the Philippines, Washington's oldest treaty ally in Asia and a key front 
in the U.S. battle against terrorism, Austin visited southern Zamboanga city 
and met Filipino generals and a small contingent of U.S. counterterrorism 
forces based in a local military camp, regional Philippine military commander 
Lt. Gen. Roy Galido said. The more than 100 U.S. military personnel have 
provided intelligence and combat advice for years to Filipino troops battling a 
decades-long Muslim insurgency, which has considerably eased but remains a key 
threat.

   More recently, U.S. forces have intensified and broadened joint training 
focusing on combat readiness and disaster response with Filipino troops in the 
Southeast Asian nation's western coast, which faces the South China Sea, and in 
its northern Luzon region across the sea from the Taiwan Strait.

   American forces have been granted access to five Philippine military camps, 
where they could rotate indefinitely under a 2014 defense pact called the 
Enhanced Defense Cooperation Agreement.

   In October, the U.S. sought access for a larger number of its forces and 
weapons in an additional five military camps, mostly in the north. That request 
would be high on the agenda in Austin's meetings, according to Philippine 
officials.

   "The visit of Secretary Austin definitely, obviously will have to do with 
many of the ongoing discussions on the EDCA sites," Philippine Ambassador to 
Washington Jose Romualdez said at a news briefing.

   Austin was scheduled to hold talks Thursday with his Philippine counterpart, 
Carlito Galvez Jr., and National Security Adviser Eduardo Ano, Romualdez said. 
Austin will separately call on President Ferdinand Marcos Jr., who took office 
in June and has since taken steps to boost relations with Washington.

   The U.S. defense chief is the latest senior official to visit the 
Philippines after Vice President Kamala Harris in November in a sign of warming 
ties after a strained period under Marcos's predecessor, Rodrigo Duterte.

   Duterte had nurtured cozy ties with China and Russia and at one point 
threatened to sever ties with Washington, kick visiting American forces out and 
abrogate a major defense pact.

   Romualdez said the Philippines needed to cooperate with Washington to deter 
any escalation of tensions between China and self-ruled Taiwan -- not only 
because of the treaty alliance but to help prevent a major conflict.

   "We're in a Catch-22 situation. If China makes a move on Taiwan militarily, 
we'll be affected -- and all ASEAN region, but mostly us, Japan and South 
Korea," Romualdez told The Associated Press, referring to the Association of 
Southeast Asian Nations, the 10-nation regional bloc that includes the 
Philippines.

   The Philippines and ASEAN members Brunei, Malaysia and Vietnam, along with 
Taiwan, have been locked in increasingly tense territorial disputes with China 
in the South China Sea. The U.S. has been regarded as a crucial counterweight 
to China in the region and has pledged to come to the defense of the 
Philippines if Filipino forces, ships or aircraft come under attack in the 
contested waters.

   The Philippines used to host two of the largest U.S. Navy and Air Force 
bases outside the American mainland. The bases were shut down in the early 
1990s after the Philippine Senate rejected an extension, but American forces 
returned for large-scale combat exercises with Filipino troops under a 1999 
Visiting Forces Agreement.

   The Philippine Constitution prohibits the permanent basing of foreign troops 
and their involvement in local combat.

NATO Chief Wants More 'Friends'        02/01 06:01

   China's growing assertiveness and collaboration with Russia poses a threat 
not only to Asia but also to Europe, NATO Secretary-General Jens Stoltenberg 
said Wednesday as he sought stronger cooperation and more "friends" for NATO in 
the Indo-Pacific region.

   TOKYO (AP) -- China's growing assertiveness and collaboration with Russia 
poses a threat not only to Asia but also to Europe, NATO Secretary-General Jens 
Stoltenberg said Wednesday as he sought stronger cooperation and more "friends" 
for NATO in the Indo-Pacific region.

   Stoltenberg said China is increasingly investing in nuclear weapons and 
long-range missiles without providing transparency or engaging in meaningful 
dialogue on arms control for atomic weapons, while escalating coercion of its 
neighbors and threats against Taiwan, the self-ruled island it claims as its 
own territory.

   "The fact that Russia and China are coming closer and the significant 
investments by China and new advanced military capabilities just underlines 
that China poses a threat, poses a challenge also to NATO allies," Stoltenberg 
told an audience at Keio University in Tokyo. "Security is not regional but 
global."

   "NATO needs to make sure we have friends," he said. "It is important to work 
more closely with our partners in the Indo-Pacific."

   China is increasingly working with Russia and they lead an "authoritarian 
pushback" against the rules-based, open and democratic international order, he 
said.

   Stoltenberg said NATO does not regard China as an adversary or seek 
confrontation, and that the alliance will continue to engage with China in 
areas of common interest, such as climate change.

   Chinese Foreign Ministry spokesperson Mao Ning defended China as "a force 
for regional and global peace and stability" and criticized NATO for labeling 
China a threat and for expanding its military ties to Asia.

   "NATO has constantly sought to reach beyond its traditional defense zone and 
scope, strengthen military and security ties with Asia Pacific countries and 
played up China's threats," Mao said. "I would like to stress that the 
Asia-Pacific is not a battlefield for the geopolitical contest and does not 
welcome the Cold War mentality and bloc confrontation."

   Stoltenberg and Japanese Prime Minister Fumio Kishida held talks Tuesday and 
agreed to step up their partnership in security in cyberspace, space, defense 
and other areas.

   Besides Japan, NATO is also strengthening "practical cooperation" with 
Australia, New Zealand and South Korea in maritime cybersecurity and other 
areas and stepping up participation of their leaders and ministers in NATO 
meetings, he said.

   Kishida on Tuesday announced Japan's plans to open a representative office 
at NATO.

   Japan, already a close ally of the United States, has in recent years 
expanded its military ties with other Indo-Pacific nations as well as with 
Britain, Europe and NATO amid growing security threats from China and North 
Korea.

   Tokyo was quick to join in U.S.-led economic sanctions against Russia's war 
in Ukraine and provided humanitarian aid and non-combative defense equipment 
for Ukrainians. Japan fears that Russian aggression in Europe could be 
reflected in Asia, where concerns are growing over increasing Chinese 
assertiveness and escalating tensions over its claim to Taiwan.

   Stoltenberg arrived in Japan late Monday from South Korea, where he called 
for Seoul to provide direct military support to Ukraine to help it fight off 
the prolonged Russian invasion.

   North Korea condemned Stoltenberg's visits to South Korea and Japan, saying 
that NATO was trying to put its "military boots in the region" to pressure 
America's Asian allies into providing weapons to Ukraine.

   North Korea also criticized increasing cooperation between NATO and U.S. 
allies in Asia as a process to create an "Asian version of NATO," saying it 
would raise tensions in the region.

Santos Steps Down From House Panels    02/01 06:11

   

   WASHINGTON (AP) -- Republican Rep. George Santos of New York announced 
Tuesday he is temporarily stepping down from his two congressional committees, 
a move that comes amid a host of ethics issues and a day after he met with 
House Speaker Kevin McCarthy.

   Santos has faced numerous calls for his resignation and is facing multiple 
investigations by prosecutors over his personal and campaign finances and lies 
about his resume and family background.

   Santos was assigned to two fairly low-profile panels, the House Committee on 
Small Business and to the House Science, Space, and Technology Committee. 
Still, his arrival has left GOP leadership frequently answering questions about 
the congressman rather than about their priorities for the coming months.

   In a prepared statement, Santos said he wanted to focus on serving his 
constituents "without distraction."

   "I want to personally thank Speaker McCarthy for meeting with me to discuss 
the matter and allowing me to take time to properly clear my name before 
returning to my committees," Santos said. "To my constituents, I remain 
committed to serving the district, and delivering results for both New York's 
Third Congressional District and for the American people."

   Before issuing the statement, Santos addressed Republican lawmakers in a 
weekly closed-door meeting they have when in Washington. Rep. Tom Cole, 
R-Okla., said the decision was well-received from the GOP conference. "I think 
it was the appropriate thing to do and I was proud of him for getting up and 
doing this," Cole said.

   McCarthy met with Santos on Monday night but did not disclose their 
conversation.

   "You'll see," McCarthy told reporters at the Capitol.

   The questions surrounding Santos go beyond his misrepresentations to voters 
to include whether his congressional campaign followed the law in its reporting 
to the Federal Election Commission. There have been lingering questions about 
irregularities in his campaign committee's financial reports and the source of 
Santos' wealth.

   If Santos' campaign is found to have knowingly and willfully made any 
"materially false, fictitious, or fraudulent statement or representation" on 
its paperwork, it could potentially face criminal charges, the FEC said in a 
letter to the campaign last week.

   Republicans described the decision by Santos to temporarily step down from 
the two House panels as voluntary. Rep. Roger Williams of Texas, the chairman 
of the House Committee on Small Business, said he was surprised.

   "The bottom line is that he's chosen to be off committees until his 
situation gets handled at a level that he's comfortable with," Williams said.

   Democrats have been highly critical of Santos as well as McCarthy for his 
efforts to oust three Democratic lawmakers from committees, while at the same 
time backing committee assignments for Santos, who has lied so thoroughly to 
his constituents about his background.

   "The hypocrisy just grabs you by the throat," said Rep. Adam Schiff, 
D-Calif. "This is a Republican speaker who is seating a human fraud, George 
Santos, on committees, a serial fabricator about every part of his existence."

   McCarthy blocked Schiff and Rep. Eric Swalwell, D-Calif., from being 
re-appointed to the House Permanent Select Committee on Intelligence, though 
they will be able to serve on other committees. He's also committed to removing 
Rep. Ilhan Omar, D-Minn., from serving on the House Committee on Foreign 
Affairs, though such a move would come to the full House for a vote, where 
undoubtedly Democrats would renew questions about the propriety of allowing 
Santos to sit on committees as their members are being removed.

   Late Tuesday, House Republicans put in motion a process toward ousting Omar 
from the Foreign Affairs Committee, once she is formally seated on the panel 
for the new Congress. A vote by Republicans on a resolution to remove Omar from 
the committee could come as soon as Wednesday.

   McCarthy has little margin for error if he chooses to pursue her expulsion 
for remarks McCarthy has described as antisemitic regarding Israel. Omar has 
apologized, and said in a CNN interview Sunday she "might have used words at 
the time that I didn't understand were trafficking in antisemitism."

   Shortly after Omar arrived in Congress in 2019, the House approved a 
resolution condemning antisemitism and other forms of bigotry -- without 
mentioning her by name -- after she made remarks that critics said accused 
Israel supporters of having dual allegiances.

   At least two Republicans had said they won't vote for Omar's removal from 
the foreign affairs panel. They said Democrats were in the wrong for removing 
Reps. Marjorie Taylor Greene, R-Ga., and Paul Gosar, R-Ariz., from their 
committees two years ago. And Republicans were making a similar mistake when it 
came to Omar.

   "It's just wrong," said Rep. Ken Buck, R-Colo. "Let's stop ruining this 
place. Let's make it better."

   But McCarthy appeared to be winning over some GOP skeptics. Rep. Victoria 
Spartz, R-Ind., said previously "two wrongs do not make a right" when it comes 
to ousting Omar. She issued a statement Tuesday reversing course and stating 
she would support a removal resolution after McCarthy expressed his willingness 
to add due process provisions.

   "I think setting a precedent of allowing an appeal process for the Speaker's 
and majority-party removal decisions is particularly important to 
freedom-loving legislators who usually are on the receiving end of issues like 
this," Spartz said.

Taiwan Activates Defenses Against China02/01 06:16

   

   TAIPEI, Taiwan (AP) -- Taiwan scrambled fighter jets, put its navy on alert 
and activated missile systems in response to nearby operations by 34 Chinese 
military aircraft and nine warships that are part Beijing's strategy to 
unsettle and intimidate the self-governing island democracy.

   The large-scale Chinese deployment came as Beijing increases preparations 
for a potential blockade or military action against Taiwan that have stirred 
increasing concern among military leaders, diplomats and elected officials in 
the U.S., Taiwan's key ally.

   In a memo last month, U.S. Air Force Gen. Mike Minihan instructed officers 
to be prepared for a U.S. -China conflict over Taiwan in 2025. As head of the 
Air Mobility Command, Minihan has a keen understanding of the Chinese military 
and his personal remarks echo calls in the U.S. for heightened preparations.

   Taiwan's Defense Ministry said 20 Chinese aircraft on Tuesday crossed the 
central line in the Taiwan Strait that has long been an unofficial buffer zone 
between the sides, which separated during a civil war in 1949.

   China claims the island republic as its own territory, to be taken by force 
if necessary, while the vast majority of Taiwanese are opposed to coming under 
the control of China's authoritarian Communist Party.

   Taiwan's armed forces "monitored the situation ... to respond to these 
activities," the Defense Ministry said Wednesday.

   That announcement came as NATO Secretary-General Jens Stoltenberg warned 
that China's growing assertiveness and collaboration with Russia pose a threat 
not only to Asia but also to Europe.

   On a visit to Japan on Wednesday, Stoltenberg said China is increasingly 
investing in nuclear weapons and long-range missiles without providing 
transparency or engaging in arms control talks. Stoltenberg earlier criticized 
China for "bullying its neighbors and threatening Taiwan" and stressed the need 
for Japan and other democracies to work together with the alliance to defend 
the international order.

   "NATO needs to make sure we have friends," he said, citing escalating 
Chinese attempts to coerce neighbors and threaten Taiwan. "It is important to 
work more closely with our partners in the Indo Pacific."

   China's Foreign Ministry responded by accusing NATO of exceeding its mandate 
and having "played up China's threats."

   "China is always a force for regional and global peace and stability," 
ministry spokesperson Mao Ning said at a regular briefing.

   "I would like to stress that the Asia-Pacific is not a battlefield for the 
geopolitical contest and does not welcome the Cold War mentality and bloc 
confrontation," Mao said.

   It wasn't clear what prompted the Chinese action in Taiwan, although it came 
just ahead of a visit to Beijing by U.S. Secretary of State Antony Blinken, who 
would become the highest-ranking official to visit China since President Joe 
Biden's election in 2020.

   Beijing frequently seeks to flag Taiwan as the most serious issue in 
U.S.-China relations ahead of top-level discussions, leading then to 
discussions of other economic, trade and political issues where there is more 
room for meaningful exchanges.

   China has sent warships, bombers, fighter jets and support aircraft into 
airspace near Taiwan on a near-daily basis, hoping to wear down the island's 
limited defense resources and undercut support for pro-independence President 
Tsai Ing-wen.

   Chinese fighter jets have also confronted military aircraft from the U.S. 
and allied nations over international airspace in the South China and East 
China seas, in what Beijing has described as dangerous and threatening 
maneuvers.

   A string of visits in recent months by foreign politicians to Taiwan, 
including by then-U.S. House Speaker Nancy Pelosi and numerous politicians from 
the European Union, spurred displays of military might from both sides.

   In response to Pelosi's visit in August, China staged war games surrounding 
the island and fired missiles over it into the Pacific Ocean.

   China has repeatedly threatened retaliation against countries seeking closer 
ties with Taiwan, but its attempts at intimidation have sparked a backlash in 
popular sentiment in Europe, Japan, the U.S. and other nations.

   Taiwan is set to hold presidential elections next year, in contrast to 
China's system of total control by President and party General Secretary Xi 
Jinping, who has removed term limits to effectively make him leader for life. 
China's efforts to reach out to Taiwan's pro-unification Nationalist Party have 
largely backfired.

   Although the Nationalists performed well in local elections last year, the 
party's pro-Beijing policies have failed to find resonance among voters on a 
national level.

   Taiwan has responded to China's threats by ordering more defensive weaponry 
from the U.S., leveraging its democracy and high-tech economy to strengthen 
foreign relations and revitalizing its domestic arms industry.

   Compulsory military service for men is being extended from four months to 
one year and public opinion surveys show high levels of support for increased 
defense spending to counter China's threats.

   In an interview last month, Taiwan's envoy to the U.S. said the island has 
learned important lessons from Russia's war in Ukraine that would help it deter 
any attack by China or defend itself if invaded.

   Taiwan's de facto ambassador in Washington, Bi-khim Hsiao, said there is a 
new emphasis on preparing military reservists and civilians for the kind of 
all-of-society fight that Ukrainians are waging against Russia.

   "Everything we're doing now is to prevent the pain and suffering of the 
tragedy of Ukraine from being repeated in our scenario in Taiwan," Hsiao told 
The Associated Press. "So ultimately, we seek to deter the use of military 
force. But in a worst-case scenario, we understand that we have to be better 
prepared."

GOP to Oust Rep. Omar From FA Panel    02/01 06:06

   

   WASHINGTON (AP) -- Newly empowered House Republicans are preparing to oust 
an African-born Black lawmaker, Democratic Rep. Ilhan Omar, from the Foreign 
Affairs Committee over comments she has made critical of Israel -- and as 
payback after Democrats booted far-right Republicans from panels for 
incendiary, violent remarks.

   House Speaker Kevin McCarthy has been eager to flex Republican power to 
remove the Minnesota Democrat after he blocked two other Democrats, Rep. Adam 
Schiff and Rep. Eric Swalwell, from rejoining the House Intelligence Committee 
once the GOP took control of the chamber in the new Congress.

   Votes could come as soon as Wednesday on the resolution against Omar, a 
Somali immigrant and Muslim lawmaker who has apologized for comments she has 
said she came to understand were viewed as antisemitic.

   "This is about vengeance. This is about spite. This is about politics," said 
Rep. James McGovern of Massachusetts, the top Democrat on the Rules Committee, 
as Republicans called a hurried meeting late Tuesday to consider the resolution.

   McGovern argued that Democrats had removed Rep. Marjorie Taylor Greene, 
R-Ga., and Rep. Paul Gosar, R-Ariz., for remarks that were far more extreme and 
violent against fellow lawmakers than those Omar had made and apologized for.

   The resolution against Omar was proposed by Rep. Max Miller, R-Ohio, a 
former official in the Trump administration. It says that "Omar's comments have 
brought dishonor to the House of Representatives" and she should be removed 
from the Foreign Affairs Committee.

   McCarthy has strained to ensure he has enough support from his Republican 
ranks to oust Omar. Republicans command a slim majority and several GOP 
lawmakers have been reluctant to engage in tit-for-tat retribution against 
colleagues.

   But GOP leaders moved ahead late Tuesday with the resolution against Omar 
after several holdouts signaled their support.

   The action against Omar pushed ahead after embattled Republican Rep. George 
Santos announced earlier Tuesday he would be stepping aside from his own 
committee assignments as the House Ethics Committee investigates his actions. 
The New York Republican has acknowledged embellishments about his education, 
work experience and other aspects of his personal and professional life.

   Several Republicans have been wary of taking action against Omar while they 
are also having to answer for the many questions emerging about Santos.

   No vote has been set on the resolution against Omar, but it could come as 
soon as Wednesday, aides said. Republicans said they are waiting for Democrats 
to formally nominate Omar to the Foreign Affairs Committee, on which she served 
in the last Congress. Once the committee roster is approved by the whole House, 
the Republicans would move to strip her of the seat.

   With his slim majority, McCarthy acknowledged at the start of the week that 
member absences were having an impact on his ability to schedule the vote.

   Omar told CNN in an interview Sunday that the move against her is 
"politically motivated."

   "It's motivated by the fact that many of these members don't believe a 
Muslim, a refugee, an African should even be in Congress, let alone have the 
opportunity to serve on the Foreign Affairs Committee," she said.

Russia Focuses on Eastern Ukraine      02/01 06:10

   

   KYIV, Ukraine (AP) -- Russia is mustering its military might in the Luhansk 
region of Ukraine, local officials said Wednesday, in what Kyiv suspects is 
preparation for an offensive in the eastern area in coming weeks as the 
anniversary of Moscow's invasion approaches.

   The Kremlin's forces are expelling local residents from their homes near the 
Russian-held parts of the front line so that they can't provide information 
about Russian troop deployments to Ukrainian artillery, Luhansk Gov. Serhii 
Haidai said.

   "There is an active transfer of (Russian troops) to the region and they are 
definitely preparing for something on the eastern front in February," Haidai 
said.

   Military analysts anticipate a new push soon by Moscow's forces, with the 
Institute for the Study of War saying in an assessment late Tuesday that "an 
imminent Russian offensive in the coming months is the most likely course of 
action."

   A new offensive might also coincide with the invasion anniversary on Feb. 24.

   The General Staff of the Armed Forces of Ukraine reported Wednesday that 
Russia is also concentrating its efforts in neighboring Donetsk province, 
especially in its bid to capture the key city of Bakhmut.

   Donetsk and Luhansk provinces make up the Donbas, an industrial region 
bordering Russia that President Vladimir Putin identified as a goal from the 
war's outset and where Moscow-backed separatists have fought Ukrainian 
authorities since 2014.

   The regional governor of Donetsk, Pavlo Kyrylenko, posted images of the 
aftermath of the shelling in Bakhmut, showing huge black holes in residential 
buildings in the embattled city.

   He said that Russia is "actively deploying new military personnel to the 
region."

   Donetsk was one of four provinces that Russia illegally annexed in the fall, 
but it controls only about half of it. To take the remaining half, Russian 
forces have no choice but to go through Bakhmut, which offers the only approach 
to bigger Ukrainian-held cities.

   Russian forces have been trying for months to capture Bakhmut. 
Moscow-installed authorities in Donetsk claimed Russian troops are "closing the 
ring" around the city.

   Russian shelling of Bakhmut, where most residents have fled and others spend 
much of their time in cellars, killed at least five civilians and wounded 10 
others on Tuesday, Ukraine's presidential office said Wednesday.

   Ukraine is keen to secure more Western military aid as it tries to fend off 
the much larger Russian forces. It has already won pledges of tanks and now 
wants more.

   Mykhailo Podolyak, an adviser to Ukrainian President Volodymyr Zelenskyy, 
tweeted Wednesday that talks are underway on securing longer-range missiles and 
fighter jets from Ukraine's allies.

   Asked to comment on media reports about a new package of U.S. military 
assistance to Ukraine expected to be announced soon, Kremlin spokesman Dmitry 
Peskov described it as "a direct path to inciting tensions and taking the 
escalation to a new level."

   "It will require additional efforts on our part, but it won't change the 
course of events," he said in a conference call with reporters.

   The Western allies are trying to broaden their coalition in support of 
Ukraine.

   NATO Secretary-General Jens Stoltenberg said Wednesday in Tokyo that he 
sought stronger cooperation and more "friends" for the alliance in the 
Indo-Pacific region.

Stocks See Best Levels Since Summer    02/01 16:00

   Wall Street climbed Wednesday to its best level since the summer following 
the latest hike to interest rates by the Federal Reserve, which said it's 
finally seeing improvements in inflation.

   NEW YORK (AP) -- Wall Street climbed Wednesday to its best level since the 
summer following the latest hike to interest rates by the Federal Reserve, 
which said it's finally seeing improvements in inflation.

   The S&P 500 rallied back from an early 1% loss to rise 1% after Fed Chair 
Jerome Powell said the economy is on the path toward getting inflation lower. 
The Dow Jones Industrial Average erased a drop of 500 points to rise 6, while 
the Nasdaq composite jumped 2%.

   As expected, the Fed raised its benchmark interest rate by 0.25 percentage 
points to its highest level since late 2007. It's the smallest such increase in 
the Fed's blizzard of rate hikes since March.

   What's more important for markets is where interest rates are heading next.

   Much of Wall Street is hoping that cooling inflation since the summertime 
means the Fed may raise rates just a bit more, before taking a pause and then 
possibly cutting rates toward the end of the year. Rate cuts can ease pressure 
on the economy and juice investment prices.

   The Fed's Powell did reiterate Wednesday that "ongoing increases" in 
interest rates will be needed to bring inflation down to the Fed's target 
level. And he said it was still way too early to declare victory over inflation.

   But he also said, "We can now say, I think for the first time, that the 
disinflationary process has started." That got Wall Street thinking about a 
future with no more rate increases.

   "He had the opportunity to use his voice to tamp down market expectations, 
and he didn't do it," said Katie Nixon, chief investment officer at Northern 
Trust Wealth Management. "Anyone that had taken a bet that the Fed was going to 
come out hard on financial positions lost that bet."

   Higher interest rates try to snuff out inflation by slowing the economy and 
dragging on prices for stocks and other investments. The Fed has already pulled 
its key overnight rate to its highest level since 2007, at a range of 4.50% to 
4.75%, up from virtually zero early last year.

   At stake is the economy, which many investors see likely heading down one of 
two paths: either a relatively short and shallow recession or a much deeper and 
more painful one. Building hopes for the former helped stocks rally through 
January to a strong start of the year.

   Powell indicated he's on the more optimistic side.

   "My base case is that the economy can return to 2% inflation without a 
really significant downturn or really big increase in unemployment," he said.

   He also said he did not foresee any rate cuts this year.

   Others in the market are not as optimistic. A third pathway for the economy 
is also possible, said Rich Weiss, senior vice president at American Century 
Investments: one that happened during the 1970s where inflation reignited after 
the Federal Reserve let up on interest rates too soon.

   "We're headed into a recession one way or the other, whether the Fed eases 
up on the brakes or not," Weiss said. "So you might as well kill inflation 
while you're doing it. I think it's nonsensical to think the Fed is going to 
magically take their foot off at exactly the right time and slide into a short 
and shallow downturn and the stock market will come through unscathed."

   One area influencing expectations for the Fed is the job market, which has 
remained resilient. While strength there helps workers, a worry is that it 
could lead to too-high gains in wages that give inflation more fuel.

   Reports on Wednesday gave a mixed picture on hiring. Private payrolls rose 
by 106,000 in January, according to ADP. That's a slowdown from a month earlier 
and was below economists' expectations.

   But a separate report from the U.S. government indicated more strength. It 
said the number of job openings increased to 11 million in December, better 
than expected.

   Treasury yields fell as Powell spoke, an indication of expectations for an 
easier Fed.

   The two-year yield, which tends to track expectations for the Fed, fell to 
4.11% from 4.21% late Tuesday. The 10-year yield, which helps set rates for 
mortgages and other important loans, fell to 3.42% from 3.51% late Tuesday.

   A lackluster earnings reporting season also continues on Wall Street, with 
more mixed profit reports arriving from big U.S. companies.

   Electronic Arts tumbled 9.3% after it gave forecasts for upcoming results 
that fell short of Wall Street's expectations.

   On the winning side was Advanced Micro Devices, which rose 12.6% even though 
its profit tumbled 98% in the fourth quarter from a year earlier. Its results 
were better than analysts expected.

   All told, the S&P 500 rose 42.61 to 4,119.21, its highest close since 
August. The Dow gained 6.92, or less than 0.1%, to 34,092.96, and the Nasdaq 
jumped 231.77 to 11,816.32.