FirstFT: Economists see US Fed remaining hawkish until at least July

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The US Federal Reserve will hold off on interest rate cuts until at least July 2024 and deliver less relief than financial markets expect, according to leading academic economists polled by the Financial Times.

While most economists surveyed thought the rate-raising phase of the US central bank’s historic monetary tightening campaign was now over, almost two-thirds of respondents thought the Fed would only begin to cut its benchmark rate by the third quarter of next year or later.

Three-quarters of the economists, polled between December 1 and December 4, also expect the Fed to lower the rate from its current 22-year high of 5.25-5.5 per cent by just half a percentage point or less next year.

That is a much later and smaller move than Wall Street expects. Interest rate futures contracts suggest that the Fed will begin to cut as early as March and will lower the federal funds rate to about 4 per cent by the end of 2024. Here’s more of the predictions in the latest FT-Booth survey.

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

• Congress: The chief executives of the biggest banks in the US will testify before Congress in a Senate hearing on the oversight of Wall Street firms. Jamie Dimon has once again hit out at proposed new banking regulation ahead of the hearing.

• Monetary policy: The Bank of Canada announces its latest interest rate decision. The past 20 months has seen the central bank rapidly increase its policy rate from 0.25 per cent in March 2022 to the current 5 per cent.

• Economic data: ADP, the payroll processing company, will release its November employment report today ahead of the government’s labour market report on Friday. We also get an update on the US trade deficit.

• Results: Brown Froman, Campbell Soup, online pet retailer Chewy and video game chain GameStop report results.

• Putin in the Middle East: The Russian president is expected to visit Saudi Arabia and the United Arab Emirates today. It is Putin’s first trip to the region since Russia’s full-scale invasion on Ukraine.

• Republican debate: With less than six weeks to go until the Republican primaries officially begin in Iowa, the party’s presidential candidates will take to the debate stage in Alabama. Former US president Donald Trump, the frontrunner, will once again skip the primetime event.

The FT is seeking entries for its annual list of Africa’s fastest-growing companies. The third instalment of the ranking will be published in early June 2024. Apply here to be considered.

Five more top stories

1. ByteDance is tapping a cash pile of more than $50bn accumulated from its popular short-video apps, TikTok and the Chinese version Douyin, to buy back up to $5bn worth of shares from investors. The Chinese social media company, backed by General Atlantic and SoftBank, aims to purchase shares from investors at an approximate $260bn valuation, according to three people familiar with the matter. Read more on this developing story.

• Musk’s AI start up seeks $1bn: The billionaire is asking investors to put a minimum $2mn into xAI as he seeks to raise $1bn to compete in the fast-growing field of generative AI.

• Apple shifts production to India: The batteries for the forthcoming iPhone 16 are to be made in India as part of the US tech giant’s efforts to diversify its global supply chain and move manufacturing out of China.

2. Joe Biden told Democratic donors last night that he might have decided not to seek re-election if Donald Trump were not running for the White House. The president’s comments were made against a backdrop of low approval ratings and concerns among some Democrats about his age and ability to win another four years in the White House. Here’s more of what Biden said at the Massachusetts fundraiser.

3. Venezuela’s socialist President Nicolás Maduro ordered state companies to exploit oil deposits and mines in territory run by neighbouring Guyana in a bellicose speech last night on state television. The comments have raised fears in Guyana that Venezuela might use force to seize the remote territory of Essequibo, a remote but oil-rich area. Read more about Maduro’s speech, including plans for the creation of a special military force.

4. British American Tobacco has booked a £25bn impairment charge on the value of some of its US cigarette brands, including Dunhill and Lucky Strike. The London-listed company blamed a slowing US economy for the reassessment of the value of some of its brands. This is the latest sign of BAT’s inability to transition from traditional cigarettes to vapes and other products.

5. Wells Fargo is setting aside as much as $1bn for “unanticipated” severance costs in the fourth quarter of this year. Chief executive Charlie Scharf announced the job reduction expense at an industry conference yesterday but did not say how many positions would be eliminated. The bank spent $186mn on severance in the third quarter, eliminating 7,000 positions, suggesting tens of thousands of additional job cuts.

The Big Read

As targets to cut national emissions by 2030 loom larger, importing carbon credits at scale has become increasingly attractive. While it could channel money towards poorer countries in Africa with smaller carbon footprints and higher financing needs, analysts and activists — concerned about revenue-sharing, land rights and the potential impact on the host countries’ ability to hit their climate targets — warn that state-to-state carbon trading is already being exploited in developing countries.

We’re also reading and listening to . . . 

Graphic of the day

The damage wrought by Israel’s relentless bombardment of Gaza — triggered by Hamas’s assault on October 7 against the Jewish state — has been catastrophic. The modern western weaponry used, from satellite-guided “bunker-busting” bombs to pinpoint-accurate laser-guided missiles, has eroded Hamas’s military capabilities and, according to the Israel Defense Forces, killed more than 5,000 of the group’s estimated 30,000 fighters.

Take a break from the news

The Metropolitan Museum of Art’s reinstallation of its European painting galleries is an almost gratuitous statement of global superiority, writes Ariella Budick, and is the latest in a series of innovations by the museum. The refurbishment covers 45 galleries with 700 paintings and five centuries — from Giotto to Rembrandt and Goya.

Additional contributions from Grace Ramos and Benjamin Wilhelm