Blinken visits Dominican Republic as talks with president focus on economy and Haiti's crisis

SANTO DOMINGO, Dominican Republic (AP) — The U.S. secretary of state and the leader of the Dominican Republic held private talks Friday on a range of issues, from human rights, economic prosperity and regional security. However, the crisis in violence-wrecked Haiti dominated the discussions.

U.S. Secretary of State Antony Blinken arrived in the Dominican Republic for a one-day visit after landing in neighboring Haiti on Thursday to support a U.N.-backed mission led by Kenya to fight rampaging gangs there.

Blinken said he spoke with Dominican President Luis Abinader about the latter's concerns regarding Haiti, which shares the island of Hispaniola with the Dominican Republic.

Abinader told reporters that his administration is concerned over the apparent lack of resources for the mission and the thousands of inmates who escaped after gangs raided Haiti’s two biggest prisons earlier this year as part of a coordinated attack.

Haiti’s crisis has caused a surge in migrants trying to enter the Dominican Republic, Abinader said, adding that they’re overwhelming schools and hospitals.

Abinader’s administration has been criticized in recent years for its treatment of Haitian migrants and those born in the Dominican Republic to Haitian parents. The government has largely closed the airspace to Haiti and is building a wall along the border between the two countries.

Blinken said the United States has seen some improvement in Haiti after the arrival of nearly 400 Kenyan police in recent months to crack down on gangs that control 80% of the capital of Port-au-Prince.

“The foundation for progress in Haiti has to be security,” Blinken said. “This has to be something that the authorities, the state and ultimately the Haitian people control, not the gangs.”

Both Blinken and Abinader said they are pushing to normalize relations between the Dominican Republic and its neighbor.

“We have a strong interest in trying to help Haiti succeed,” Blinken said.

Blinken noted that the Dominican Republic has the largest economy in the Caribbean and one of the fastest growing in Latin America. In a boost to that growth, Blinken announced the first phase of a $3 million supply-chain investment via USAID to improve workforce training and build industrial parks in the Caribbean country.

On Thursday, Blinken announced an additional $45 million in humanitarian assistance for Haiti and said he supported creating a U.N. peacekeeping operation as a way to secure funding and resources for fighting the gangs and restoring security to Haiti.

Blinken is expected to return to the U.S. late Friday.

U.S. Secretary of State Antony Blinken waves before boarding his plane at the end of his one-day visit to Haiti at the Toussaint Louverture International Airport in Port-au-Prince, Haiti, Thursday, Sept. 5, 2024. (Roberto Schmidt/Pool photo via AP)

The plane that carried U.S. Secretary of State Antony Blinken arrives at Toussaint Louverture International Airport in Port-au-Prince, Haiti, Thursday, Sept. 5, 2024. (AP Photo/Odelyn Joseph)

U.S. Secretary of State Antony Blinken, in sunglasses, speaks with Commander of the Multinational Security Support Mission Commander Godfrey Otunge in Port-au-Prince, Haiti, Thursday, Sept. 5, 2024. (Roberto Schmidt/Pool photo via AP)

Kenyan members of the Multinational Security Support Mission (MSS) stand at attention as they await the arrival of U.S. Secretary of State Antony Blinken in Port-au-Prince, Haiti, Thursday, Sept. 5, 2024. (Roberto Schmidt/Pool photo via AP)

A Haitian national police officer sits inside an armored vehicle donated by the U.S. government as he awaits the arrival of U.S. Secretary of State Antony Blinken, in Port-au-Prince, Haiti, Thursday, Sept. 5, 2024. (Roberto Schmidt/Pool photo via AP)

U.S. Secretary of State Antony Blinken gives a press conference at the end of his one-day visit to Haiti at the Toussaint Louverture International Airport in Port-au-Prince, Haiti, Thursday, Sept. 5, 2024. (Roberto Schmidt/Pool photo via AP)

U.S. Secretary of State Antony Blinken, right, and Haitian Transitional Presidential Council Coordinator Edgard Leblanc Fils speak to the press at the U.S. Chief of Mission Residence in Port-au-Prince, Haiti, Thursday, Sept. 5, 2024. (Roberto Schmidt/Pool photo via AP)

People walk down a street covered with trash in downtown Port-au-Prince, Haiti, Thursday, Sept. 5, 2024. (AP Photo/Odelyn Joseph)

U.S. Secretary of State Antony Blinken gives a press conference at the end of his one-day visit to Haiti at the Toussaint Louverture International Airport in Port-au-Prince, Haiti, Thursday, Sept. 5, 2024. (Roberto Schmidt/Pool photo via AP)

Police officers patrol a street near the airport in Port-au-Prince, Haiti, Thursday, Sept. 5, 2024. (AP Photo/Odelyn Joseph)

U.S. Secretary of State Antony Blinken, left, and Dominican Republic President Luis Abinader shake hands after giving a joint news conference at the National Palace in Santo Domingo, Sept. 6, 2024. (Roberto Schmidt/Pool photo via AP)

U.S. Secretary of State Antony Blinken speaks with students at the English language Dominico Americano School in Santo Domingo, Dominican Republic, Friday, Sept. 6, 2024. (Roberto Schmidt/Pool photo via AP)

U.S. Secretary of State Antony Blinken, left, and Dominican Republic President Luis Abinader hold a joint news conference at the National Palace in Santo Domingo, Sept. 6, 2024. (Roberto Schmidt/Pool photo via AP)

WASHINGTON (AP) — American consumers and home buyers, business people and political leaders have been waiting for months for what the Federal Reserve is poised to announce this week: That it's cutting its key interest rate from a two-decade peak.

It's likely to be just the first in a series of rate cuts that should make borrowing more affordable now that the Fed has deemed high inflation to be all but defeated.

Consider Kelly Mardis, who owns Marcel Painting in Tempe, Arizona. About a quarter of Mardis' business comes from real estate agents who are prepping homes for sale or from new home buyers. Customer queries, he recalls, quickly dropped almost as soon as the Fed started jacking up interest rates in March 2022 — and then kept raising rates through July 2023.

As the housing market contracted, Mardis had to lay off about half his staff of 30. It was the worst dry spell he had experienced in 14 years.

After the Fed begins cutting rates on Wednesday, Mardis envisions brighter times ahead. Typically, a succession of Fed rate cuts leads over time to lower borrowing costs for things like mortgages, auto loans, credit cards and business loans.

“I'm 100% sure it would make a difference,” Mardis said. “I'm looking forward to it.”

At the same time, plenty of uncertainty still surrounds this week's Fed meeting.

How much will the policymakers decide to reduce their benchmark rate, now at 5.3%? By a traditional quarter-point or by an unusually large half-point?

Will they keep loosening credit at their subsequent meetings in November and December and into 2025? Will lower borrowing costs take effect in time to bolster an economy that is still growing at a solid pace but is clearly showing cracks?

Chair Jerome Powell emphasized in a speech last month in Jackson Hole, Wyoming, that the Fed is prepared to cut rates to support the job market and achieve a notoriously difficult “soft landing.” That is when the central bank manages to curb inflation without tipping the economy into a steep recession and causing unemployment to surge.

It's not entirely clear that the Fed can pull it off.

One hopeful sign is that as Powell and other Fed officials have signaled that rate cuts are coming, many interest rates have already fallen in anticipation. The average 30-year mortgage rate dropped to 6.2% last week — the lowest level in about 18 months and down from a peak of nearly 7.8%, according to the mortgage giant Freddie Mac. Other rates, like the yield on the five-year Treasury note, which influences auto loan rates, have also tumbled.

“That really does help lower those borrowing costs across the board," said Kathy Bostjancic, chief economist at Nationwide Financial. “That helps to give nice relief to consumers.”

Businesses can now borrow at lower rates than they've been able to for the past year or so, potentially boosting their investment spending.

“The question is if it's helping quickly enough ... to actually deliver the soft landing that everyone's been hoping for," said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities.

Many economists would like to see the Fed announce a half-point rate cut this week, in part because they think the officials should have begun cutting rates at their previous meeting in July. Wall Street traders on Friday signaled their expectation that the Fed will carry out at least two half-point cuts by year's end, according to futures prices.

Yet Goldberg suggested that there would be downsides to implementing a half-point rate cut this week. It might signal to the markets that the Fed's policymakers are more worried about the economy than they actually are.

“Markets could assume that something is wrong and the Fed sees something quite terrible on the horizon,” Goldberg said.

It could also raise expectations for additional half-point cuts that the Fed might not deliver.

In the long run, more important than Wednesday's Fed action is the pace of rate cuts through next year and the ultimate end point. If Fed officials conclude that inflation is essentially defeated and they no longer need to slow the economy, that would suggest that their key rate should be at a more “neutral” setting, which could be as low as 3%. That would require a series of further rate cuts.

Many economists think the economy needs much lower rates. Diane Swonk, chief economist at KPMG, notes that hiring has averaged just 116,000 a month for the past three months, a level equivalent to the sluggish job growth coming out of the 2008-2009 Great Recession. The unemployment rate has risen by nearly a full percentage point to 4.2%.

“There is a fragility out there when you are not hiring at a very strong pace," Swonk said. “This is still a much weaker labor market then we thought we had.”

Still, Fed rate cuts may provide a crucial boost to the economy just when it's needed.

Michele Raneri, head of U.S. research at TransUnion, a credit monitoring company, noted that lower rates typically lead consumers to refinance high interest-rate debt — principally credit card borrowing — into lower-cost personal loans. Doing so would ease their financial burdens.

And once mortgage rates fall below 6%, Raneri said, more homeowners will likely be willing to sell, rather than holding on to their house out of reluctance to swap a low mortgage rate for a much higher one. More home sales would help relieve the supply crunch that's made it hard for younger people to buy a first home.

“That starts to break up this logjam that we’ve been in where there’s a low inventory of houses,” Raneri said. “We need some people to start moving to start that churn.”

Other small businesses are seeing signs that the churn is picking up. Brittany Hart, who owns a software consulting firm in Phoenix that works with mortgage brokers, wealth managers and banks, is noticing more interest from potential clients in adopting new software to boost efficiency. That is because they expect the housing market to pick up.

Hart has started looking for three new employees to help handle the expected business, to add to the roughly 20 employees she has now.

“This is the first leading indicator that we are getting back to that normal activity in the housing market," she said.

FILE - A screen displays a news conference with Federal Reserve Chairman Jerome Powell on the floor at the New York Stock Exchange in New York, May 1, 2024. (AP Photo/Seth Wenig, File)

FILE - Federal Reserve Chair Jerome Powell speaks during a news conference at the Federal Reserve in Washington, May 1, 2024. (AP Photo/Susan Walsh, File)