This is an audio transcript of FT News Briefing podcast episode: Fed raises rates, but next steps uncertain
Jess Smith
Good morning from the Financial Times. Today is Thursday, July 28, and this is your FT News alert.
[MUSIC PLAYING]
The Fed delivered another historic rate hike and Wall Street stock prices soared higher. Rising gas prices in Europe are adding to recession fears. And the Twitter takeover saga is wearing down employees. I’m Jess Smith, for Marc Filippino, and here’s the news you need to start your day.
[MUSIC FADES]
The Federal Reserve yesterday redoubled efforts to fight inflation. It raised its key policy rate by three-quarters of a percentage point for the second month in a row. But Fed Chairman Jay Powell also signaled that tightening could be eased, and US stock markets rallied. Here’s the FT’s Kolby Smith’s reaction to the markets.
Colby Smith
Well, it was a little confusing because in very few parts of Powell’s press conference did we hear any real capitulation about the Fed’s commitment to raising interest rates and curbing inflation. But there were some odd signal moments in the press conference that I think the markets really picked up on, especially when Chairman Powell said that future interest rate hikes may start to slow. But that being said, he was quite clear that if larger-than-usual hikes are necessary and warranted by the data, the Fed would not hesitate to do so.
Jess Smith
Colby, why did the Fed still raise rates so aggressively yesterday when we are already seeing signs that the economy is cooling?
Colby Smith
Well, a cooling economy is almost exactly what the Fed wants to see as it steps up its fight against inflation. So the Fed is not expected to consider any of the activity data, you know, even in the second half of 2022 when we start to see some of those inflation numbers roll in, because right now they’re very tightly focused. . to ensure that inflation falls from here. And Chairman Powell admitted yesterday that they probably need to see an economic slowdown and they probably need to see a cooling of the labor market in order to achieve their goal.
Jess Smith
What else stood out to you about Jay Powell’s comments?
Colby Smith
One thing worth noting was the way in which Chairman Powell spoke about the September meeting. Now, in previous policy meetings, the Fed has been really clear about what it’s going to do at its next meeting to make sure there’s no volatility around that outcome. And Powell, you know, didn’t give the same guidance. He said we could see another increase of 75 basis points. We can see something even bigger. And he wasn’t very specific about where the policy was going, at least during that time frame. Economists have seen this as a significant departure, at least the beginnings of a forward trend. And it will be interesting to see if the Fed sticks to this approach during the second half of the year.
Jess Smith
Colby Smith is the FT’s US economics editor.
[MUSIC PLAYING]
The drama of Elon Musk’s busy plan to buy Twitter is taking a toll on employees at the social media company. Twitter is now suing Musk to try to force him to honor the deal after Musk said he wanted out. Now the two sides are fighting over the start date of the trial. Meanwhile, the FT’s tech reporter Cristina Criddle spoke to frustrated employees on Twitter.
Cristina Criddle
There have been quite a few exits. They’ve also cut a lot of jobs at Twitter. So it’s like internal employees have given up on leadership and are getting messages in some kind of private message group, one person said, instead of internal systems, because they’re so fed up and they’re saying they’re being asked about their goals at the end of the year, but they have no idea how the company will be at the end of the year.
Jess Smith
How is this affecting the company’s business, especially the advertising business?
Cristina Criddle
Advertising is a big part of Twitter’s business. It’s what makes them money. But some people we spoke to said advertisers are also pulling away from Twitter. So doing less advertising, I mean, that’s against a general backdrop of ad spending falling because of the macroeconomic climate. But one person I spoke to said he had seen a 14 percent drop in the number of creative ads on Twitter since Musk said the deal was on hold.
Jess Smith
Cristina, is the frustration among Twitter employees from what you can tell?
Cristina Criddle
I guess it depends on which employees you are. Some employees are big fans of Elon Musk and hope this passes. But I think it’s the volatility and uncertainty that’s really affecting morale. Some people like Musk, some people don’t. But not knowing what is going on either way is what is causing this kind of unstable feeling among the employees.
Jess Smith
This is FT technology reporter Cristina Criddle.
[MUSIC PLAYING]
Russia continues to cut its gas supplies to Europe. And European gas prices are rising. Yesterday, they jumped up to 13 percent higher, and this is now increasing the risk of recession in Europe. Here’s the FT’s Martin Arnold on how European governments are responding.
Martin Arnold
Well, they’re doing as much as they can and they’re doing a lot of different things. So every government is trying to provide as many alternative sources of gas supply as possible. And they are also working to reduce gas consumption as much as they can. And now, this week is a proposal from the European Union, which will apply to countries to reduce their gas consumption by 15 percent, which will free up some of the gas supplies that will be used to fill capacity. of storage before winter heating. season, which is absolutely crucial, because that’s when gas usage really increases as everyone has to heat their homes in the cold winter.
Jess Smith
Martin, does it make sense that these measures will be enough?
Martin Arnold
All this will not be enough if Russia completely cuts off gas supplies, because Europe has made itself so dependent on Russia in recent years that there simply aren’t enough alternative supplies available, because most of the gas has to come through pipelines, and you can’t build pipelines quickly overnight. So really the fear is that Russia will weaponize the gas supply, cutting it off completely before winter hits. And this will force Europe to start rationalizing gas supplies, especially for heavy industrial uses.
Jess Smith
What do these rising energy prices mean for the risk of recession in Europe?
Martin Arnold
Well, we’ll learn a bit more about that on Friday when we also get the latest GDP figures for the eurozone and we also get the inflation figures. Eurozone GDP figures are expected to show that growth is stagnant at best, perhaps slightly positive. But the problem is that economists expect things to get even worse in the second half of this year as inflation takes its toll on consumer spending and demand. And also the fear of disruption of Russian gas supply is really starting to bite in the industry and in terms of confidence in general.
Jess Smith
Martin Arnold is the FT’s Frankfurt bureau chief.
[MUSIC PLAYING]
Inflation is in the news a lot for obvious reasons. But before we go, we have a story about falling avocado prices in Australia. It turns out that so many Australian farmers planted avocado trees. Now there is a surplus of fruit. They were seen as fancy, but avocado prices have dropped to about a dollar each. The Australian avocado trade group is now looking for new overseas markets that can take the surplus from this “avo-lanche”, as it is called. One grower told the FT he has no regrets about adding to the surplus. He says everything tastes better with guacamole.
[MUSIC PLAYING]
You can read more about all these stories at FT.com. This has been your daily FT News briefing. Be sure to check back tomorrow for the latest business news.
This transcript is automatically generated. If by chance there is an error, please send the details for a correction to: [email protected]. We will do our best to make the change as soon as possible.
