FirstFT: Federal Reserve signals that rates will remain higher for longer

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Good morning. The US Federal Reserve has signalled that interest rates are likely to remain higher for longer, as it wrestles with persistent inflation across the world’s biggest economy.

The US central bank left rates unchanged yesterday and said there had been “a lack of further progress” towards its 2 per cent inflation goal in recent months — an addition to its statement that in effect delays rate cuts until the second half of this year at the earliest.

“It is likely to take longer for us to gain confidence that we are on a sustainable path down to 2 per cent inflation,” Fed chair Jay Powell said during a news conference.

But the Fed also indicated that it was not yet considering new rate rises to counter the recent uptick in inflation, saying that the risks to meeting its joint goals of full employment and subdued price pressures had “moved towards better balance over the past year”.

“I think it’s unlikely that the next policy rate move will be a hike,” Powell said. Here’s more on the Fed’s latest statement.

Here’s what else I’m keeping tabs on today:

• Economic data: South Korea releases its monthly consumer price index, Hong Kong reports advance first-quarter GDP, and S&P Global publishes its manufacturing PMI for India, South Korea, Taiwan, Indonesia and other countries in the region.

• Japan: The Bank of Japan releases its latest monetary policy meeting minutes.

• Meetings: Japanese Prime Minister Fumio Kishida meets French President Emmanuel Macron France in Paris, where Japan is chairing the OECD ministerial council meeting. And the Asian Development Bank’s annual meeting begins in Tbilisi, Georgia.

• Results: Apple, Shell, Moderna and Universal Music Group are among the companies reporting.

Five more top stories

1. The US has imposed sanctions on more than 300 Russian and international entities, including some in China and Turkey, for providing support to Russia’s military as it wages war in Ukraine. The Chinese targets include groups that allegedly supplied Russia with drones, weapons and ammunition, in addition to chips, sensors and other military-related technology.

2. Japan Tobacco’s chief executive has said the company will keep its lucrative Russian business to satisfy investors after reshaping its supply chains to comply with sanctions. The cigarette maker is routing some business through Turkey and has moved key personnel to Hong Kong as ties with Russia have come under pressure in the wake of the invasion of Ukraine, Masamichi Terabatake told the FT.

3. Rightwing US congresswoman Marjorie Taylor Greene has said she will try to oust House Speaker Mike Johnson next week, escalating a civil war within the Republican party that has flared up again after Congress approved a sweeping aid package for Ukraine. Johnson is expected to survive the vote because Democrats in the House of Representatives have pledged to support him after he defied his party over the Ukraine bill.

• More US news: The University of California, Los Angeles cancelled classes yesterday after a violent night-time attack by counter-protesters on an encampment set up by pro-Palestinian student demonstrators. 

4. Yemen’s Iranian-backed Houthis are threatening merchant ships hundreds of miles out in the Indian Ocean after striking a container vessel well beyond the Red Sea last week, maritime officials and experts have warned. Here’s how the drone strike on the MSC Orion could impact shipping in the Indian Ocean.

5. Brazilian aerospace and defence group Embraer is studying options for a new passenger aircraft that could put it in direct competition with industry heavyweights Airbus and Boeing. Embraer is studying plans for a narrow-body aircraft or a long-range business jet, people familiar with the situation confirmed. 

The Big Read

Pressure on China to find a new growth model is becoming acute, as its trading partners protest against what they argue is a flood of underpriced exports from the world’s second-largest economy. Both inside and outside China, there is a strongly held view among many economists that the country could secure a further period of robust growth if it were able to boost consumption by its own citizens. But Chinese President Xi Jinping seems resistant to deeper economic reform. Today’s Big Read explores why.

We’re also reading . . . 

• Understanding Modi’s India: As the country goes to the polls, a series of new books seek to shed light on the country since Narendra Modi first took office in 2014.

• OpenAI’s Sora: The FT asked executives in advertising, animation and real estate to test videos generated by Sora against other artificial intelligence models. Here are the results.

• HSBC: The unexpected exit of chief executive Noel Quinn has left employees “blindsided” and set off speculation about his decision to give up the top job at Europe’s largest bank.

Chart of the day

Warren Buffett’s deputies are trailing both their mentor and the market, according to an FT analysis that examined the performance of the two men set to take over Berkshire Hathaway’s $354bn stock portfolio. Will Ted Weschler and Todd Combs be able to fill the big shoes left by the legendary investor when he eventually steps down?

Take a break from the news

In a rare interview, Matthieu Blazy reflects on his time at Bottega Veneta, the Italian fashion house that has come to define quiet luxury. The creative director still eschews loud branding and lets the considerable craft of his clothes and accessories do the talking.

Additional contributions by Tee Zhuo and Gordon Smith