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The US weighs in on mystery flying objects, Warren Buffett makes an unusual u-turn and Federal Reserve officials amp up the possibility of m [View in browser]( [Bloomberg]( The US weighs in on mystery flying objects, Warren Buffett makes an unusual u-turn and Federal Reserve officials amp up the possibility of more rate hikes. — [Kristine Aquino]( Flying objects The US suspects that [three unidentified objects downed since last Friday]( served commercial purposes and weren’t used for spying, which may help ease anxiety over a Chinese balloon that traversed American airspace before being shot down. Signs are emerging that both countries are trying to move past the dispute, with Secretary of State Antony Blinken reportedly considering a meeting with China’s top diplomat, Wang Yi, in Germany this week. Separately, [the Pentagon scrambled fighter jets](to counter four Russian aircraft that approached but didn’t enter US or Canadian airspace, in what officials described as a routine encounter. Buffett’s u-turn [Warren Buffett slashed his holdings of Taiwan Semiconductor Manufacturing](depositary receipts by 86% last quarter, just months after disclosing a major stake. “It’s surprising that Berkshire cut its holding so much in just a quarter, which differs from its past practice of long-term investment and continuing to add shares,” said Tony Huang, vice president at Taishin Securities Investment Advisory Co. Shares of TSMC, the world’s largest chip foundry, slid as much as 4% in Taipei after the news. Rate debate [Fed officials stressed the need for further interest-rate increases]( to help tame inflation, but differed over how close they are to stopping after new data showed signs of persistent price pressures. Richmond Fed President Thomas Barkin said in a Bloomberg TV interview that “if inflation persists at levels well above our target, maybe we’ll have to do more.” Dallas Fed President Lorie Logan flagged the need to “remain prepared to continue rate increases for a longer period than previously anticipated.” Meanwhile, Philadelphia Fed President Patrick Harker said he believes policymakers will need to raise interest rates above 5% and possibly higher. Futures retreat S&P 500 futures fell 0.4% as of 5:36 a.m. in New York, and Nasdaq 100 contracts slid 0.5%. The Bloomberg Dollar Spot Index traded near the day’s highs, weighing on all Group-of-10 currencies. Treasury yields retreated across the curve, following bigger moves in UK bond markets. Oil and gold slid, and Bitcoin retreated after climbing more than 2.8% yesterday. To catch up on the trading day in the UK and Europe, check out [Markets Today](. Coming up… At 7 a.m., we’ll get data on mortgage applications, followed by the latest figures on retail sales and a gauge of manufacturing in New York due at 8:30 a.m. Forty five minutes later, we’ll get industrial and manufacturing production reports. The US will sell $36 billion of 17-week bills at 11:30 a.m., and $15 billion of 20-year bonds at 1 p.m. Earnings include AIG, Kraft Heinz, Barrick Gold, Marathon Oil and Zillow. What we’ve been reading Here’s what caught our eye over the past 24 hours: - Miami’s Star Island becomes the [priciest neighborhood in AmericaÂ]( - The maker of Zantac [kept quiet about cancer risks for 40 yearsÂ]( - [Ray Dalio says China is winning]( the trade war, but conflict is avoidable - [Brookfield defaults]( on two Los Angeles office towers - [Louis Vuitton names Pharrell Williams]( as its next menswear designer - [Barclays cuts its bonus pool](by £500 million - [The eight luxury cars]( that you can’t get in the US And finally, here’s what Joe’s interested in this morning For years and years, people had a special disdain for ZIRP. Zero interest rates were punishing savers. Zero interest rates were creating distortions in the real economy. Zero interest rates were creating bubbles. Zero interest rates were "artificial" and making a mockery of capitalism. Setting aside the merits of any of those claims for now, the ZIRP world seems long gone. After yesterday's CPI report, some Fed officials are talking about how rates might need to [go even higher than previously anticipated](. In recent weeks, talk of a 6% Fed Funds rate has picked up. But while nobody knows how far rates will ultimately go this cycle, it's worth remembering that in the last decade, policymakers never really liked low rates either. A popular term in the old days (the 2010s) was "normalization" which was an implicit statement that low nominal rates were abnormal. They tried hiking cycles. They just had problems gathering steam. Then Fed Chair Janet Yellen did one hike in 2015 and then had to pause for a while when it almost looked like the economy couldn't withstand it. Powell did some hikes, but didn't get all that far and by 2019 was back in cutting mode. Then the pandemic came and we want back to zero. The big story of 2022 wasn't just the rapid rate hikes. The big story of 2022 was how easily the economy withstood the rate hikes. This is the part that's basically caught everyone -- Team Transitory, Team Persistent, Hawk, Dove etc. -- by surprise. Regardless of your story on inflation, it was assumed by almost all that if you take rates from ~0 to ~5 in the span of a year or so that you're going to get some serious weakness in the labor market. The only debate really was whether this weakness in the labor market was a worthwhile price to pay for beating inflation. But the labor market weakness hasn't come yet, which is partly why there's so much talk about even higher rates. The question of why the economy now in 2023 is fine with 5% interest rates, when it could barely withstand 0.50% rates in 2015 is an interesting one, and something for economists to discuss with more rigor somewhere else. The aggressive fiscal expansion in 2020 probably had something to do with it. Maybe there are other factors as well. Either way, if you hold in your heart a special contempt for ZIRP and never want us to go back there, it makes sense to be a growth bull in other dimensions, pulling out the stops to boost labor, households, and private sector so that the economy doesn't buckle under modest rate hikes. (BTW, this isn't just a US thing. For years at ECB press conferences, you'd frequently hear a local German economic reporter chastising Draghi for the low rates at the same time the German government enforced tight spending discipline throughout the eurozone. Well as long as anti-growth policies are what you pursue, it's hard to fault the central banks for not passing through higher rates) Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwartÂ]( Follow Us You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. 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