Economy · June 16, 2022

FirstFT: The Fed tightens monetary policy to the highest degree in decades

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The Federal Reserve raised the key rate by 0.75 percentage points and said another adjustment of this magnitude would be possible at its next meeting, as part of an aggressive plan to tighten monetary policy in the coming months to cope. to the highest US inflation of the last 40 years.

Following its two-day policy meeting, the Federal Open Market Committee yesterday raised the rate to a target range of 1.50% to 1.75%, noting in a statement that “anticipates continuing increases in the target range will be adequate “.

The decision marked a sharp turn from the central bank’s previously telegraphed plans for a second consecutive 0.50 percentage point rate hike, which had been explicitly flagged by policymakers prior to the start of a previously planned “blackout” period. of the meeting during which their public communications are limited.

Esther George, president of the central bank’s Kansas City branch, was the only dissenter and instead supported joining the Fed’s previous leadership.

The rise comes after two alarming reports released Friday showed an unexpectedly large rise in consumer prices in May and a worrying rise in inflation expectations, suggesting Americans are increasingly concerned about the economic outlook.

Wall Street stocks fluctuated throughout the afternoon, but stabilized on the upside as investors focused on President Jay Powell’s claim that such large rate hikes would not become common.

Performance line chart as of June 15, 2022 (%) showing a rise in US equities as Powell says jumbo rate hikes will not be common

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1. The ECB plans a new bond purchase plan The European Central Bank has tried to address fears that the eurozone is on the brink of another debt crisis, saying it would speed up work on a policy tool to counter rising borrowing costs in the region’s weaker economies of the eurozone.

2. Bitcoin collapses The cryptocurrency industry’s “bloodbath” got worse as the world’s most popular digital asset hit new lows for the year. Bitcoin dropped below $ 20,000 for the first time since July last year while ether, the token linked to the Ethereum blockchain, dropped to nearly $ 1,000.

3. Rishi Sunak urged to save £ 57 billion by withholding BoE interest on reserves The UK Chancellor would save billions of pounds for taxpayers over the next three years if he prevented the Bank of England from paying interest on money held by commercial banks at the central bank, according to a report seen by the Financial Times.

4. Angola seizes a stake in a diamond miner The southern African nation took majority control of Catoca, one of the largest gem companies in the world, in a move that marks the decline of Chinese investor influence in Angola.

Miners brandish axes in a diamond mine in Angola

Catoca, which owns the fourth largest diamond mine in the world, is owned by the Russian Alrosa, which has been targeted by US sanctions, and the Angolan state-owned diamond company Endiama © ROPI

5. The UK undertakes to continue expulsion from Rwanda Interior Minister Priti Patel promised to continue with plans to send asylum seekers to Rwanda, possibly before a judicial review, the day after the European Court of Human Rights ruled the first deportations to Rwanda. policy area. Here’s what FirstFT Europe / Africa readers have to say:

“If someone is deported to Rwanda after all legal avenues have been exhausted, removal should be followed by independent and impartial post-return monitoring” – Jari Pirjola in Helsinki, Finland

“The plan for Rwanda is immoral, but it doesn’t make economic sense either. It is ridiculously expensive. It will not solve human trafficking ”- Sarah-Jane Field in London, UK

The day ahead

EU leaders visit Kiev The leaders of France, Germany and Italy ⁠ should visit the Ukrainian capital as a sign of defiance of the Russian invasion. All 27 EU member states will decide next week whether to grant Ukraine candidate status to become a member of the bloc.

economic developments The euro zone publishes wage data for the first quarter. The Bank of England’s Monetary Policy Committee announces its interest rate decision in the face of rising inflation, as does Switzerland. Italy publishes the main producers index data for May.

company news Ferrari holds Capital Market Day in Maranello, Italy, with CEO Benedetto Vigna expected to unveil the company’s long-term strategy as it adjusts to growing demand for electric vehicles. Companies reporting the results include Halfords, a UK auto service company, and US software specialist Adobe Systems, while apparel retailer Boohoo has a first-quarter commercial update.

What else are we reading

How French politics puts personality before the party The legislative elections that ended Sunday were dominated by three personalities: the liberal internationalist and incumbent president Emmanuel Macron, the far-right leader Marine Le Pen and the far-left politician Jean-Luc Mélenchon. What does this mean for stability in France?

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Boots is a cautionary tale of the acquisition boom In early January, Cat Rutter Pooley wrote an article claiming Boots was a more or less created asset for private equity. “Guys, was I wrong,” she now writes, adding that the UK pharmacy chain is a symbol of how difficult business is to do in today’s markets.

Because we trust scammers From Enron to Wirecard, elaborate scams can go unnoticed long after the warning signs appear. Left in the ashes, however, is a much bigger question that haunts all the victims of such financial fraud: How the hell did they get away with it for so long?

Inside kind parenting Parents today widely believe that physical punishments such as spanking do little to change a child’s bad behavior and should be avoided, in part because young children struggle to control their impulses as their prefrontal cortices are not fully developed. This is why the movement is stressing some parents.

Why are so many of us facing the “Great Overwhelm”? Glasto is back; the holidays are back abroad; to breathe the delicate air of the London Underground without a mask is back. Doesn’t all this freedom make you feel elated? Apparently not, with over 30% of adults reporting high levels of anxiety. Jemima Kelly looks what is driving this. Is Covid-19 still significantly impacting your well-being? Let us know by by voting in our poll.

Join the FT in partnership with Seismic at Strategies For Dealing With The Great Resignation on June 30, when we will discuss the challenges and opportunities presented by Great Resignation, with a focus on training and coaching successful sales teams. Register today free.

Music

With a collection of hits entitled Finally, love is enough On the verge of being released, is Madonna finally ready to face pop mortality 40 years after her breakout on the music scene?

Madonna on her Blond Ambition tour in 1990

Madonna on her Blond Ambition tour in 1990 © Getty Images

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