FirstFT: Powell expects Fed to make three rate cuts this year

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Good morning.

The Federal Reserve’s rate-setters still expect to make about three quarter-point rate cuts this year, its chair Jay Powell said in an interview that aired last night.

Powell told CBS’s 60 Minutes show that “almost all” of the members of the Federal Open Market Committee think the US central bank will cut rates from their current 23-year high of 5.25 to 5.5 per cent at some point over the course of 2024.

Before Friday’s non-farm payrolls report, which one economist called “stunning”, many investors had been expecting six interest rate cuts this year.

The Fed chair said in the interview, recorded before the latest jobs numbers were released, that the labour market was still “very, very strong”, helping the US economy to avoid recession.

“The kind of pain that I was worried about and so many others were, we haven’t had that,” he added.

US government bonds extended Friday’s losses today as investors bet interest rates would stay higher for longer to keep a lid on inflation. Read more excerpts from last night’s interview.

With their battle against inflation in the home straight, what’s next for rate-setters? Sign up for our Central Banks premium newsletter by Chris Giles, or upgrade your subscription here.

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

• Markets: The S&P 500 will be in focus today after the US equity index closed at a record high on Friday following strong results from Meta and Amazon.

• Results: Caterpillar, Estée Lauder, McDonald’s and Tyson Foods report earnings.

• Monetary policy: Federal Reserve Bank of Chicago President Austan Goolsbee and Atlanta Fed president Raphael Bostic will speak in public today. Bank of Canada governor Tiff Macklem gives a speech and then a news conference.

• Blinken returns to the Middle East: The US secretary of state visits the region again this week, in a trip that will include stops in Israel, Egypt, Qatar, Saudi Arabia and the West Bank.

Five more top stories

1. Exclusive: Iran used two of the UK’s biggest banks to covertly move money around the world as part of a vast sanctions-evasion scheme backed by Tehran’s intelligence services. Lloyds and Santander UK provided accounts to British front companies secretly owned by a sanctioned Iranian petrochemicals company based near Buckingham Palace, according to documents seen by the Financial Times. Here’s how the scheme worked.

• US-Iran tensions: The US has warned that it will keep targeting Iranian-aligned militants after it carried out two of its biggest waves of strikes since the Israel-Hamas war triggered hostilities across the Middle East.

2. Taylor Swift made history last night by winning music’s most coveted prize, album of the year, for a fourth time — becoming the first artist to do so since the Grammy Awards were created in the 1950s and leaping ahead of legends such as Frank Sinatra. Swift, whose sales made up an estimated 2 per cent of the entire US music business last year, is bigger than the entire genre of jazz or classical music. Read more on the music industry’s biggest night of the year.

3. A compromise bill that would renew US aid to Ukraine and tighten immigration rules at the southern border with Mexico could be voted on by US Senators as early as this week. Chuck Schumer, leader of the Democratic majority in the upper chamber of Congress, released the text of the compromise legislation yesterday after weeks of fraught negotiations. Read more on what is a big test for President Joe Biden.

4. A mining start-up backed by Bill Gates and Jeff Bezos said it had discovered a vast copper deposit in Zambia. Copper is vital as the west moves to decarbonise its economies and is used in everything from cars to power transmission systems. KoBold Metals said the Mingomba site in the northern Copperbelt province in Zambia would become one of the world’s top three high-grade copper mines. KoBold used artificial intelligence to make the discovery.

5. President Nayib Bukele, the authoritarian leader of El Salvador, claimed victory yesterday in the country’s presidential election and said his party had won almost all seats in congress before the official results were declared. In a post on social media site X on Sunday, Bukele said his “numbers” showed he had won the presidential election with more than 85 per cent of the vote and that his Nuevas Ideas party had at least 58 of the 60 seats in congress. The result makes Bukele probably the first Salvadorean president re-elected since the 1930s.

The Big Read

A year on, many people in Turkey’s shattered earthquake zone still live in temporary shelters despite President Recep Tayyip Erdoğan’s pledge to “heal the wounds” within 12 months. Our reporter Adam Samson visits Antakya, capital of Hatay province, where residents say despite outward signs of progress, they face problems accessing clean water and other basic needs. Read his report.

We’re also reading . . . 

• Delaware vs Musk: The billionaire’s threat to move Tesla’s legal home has revived debate over the dominance of the small, mid-Atlantic state and its courts over corporate America.

• Private equity: The industry has evolved in the past three decades and cannot be caricatured homogenously as short-termist, debt-addicted asset-strippers, writes Patrick Jenkins.

• Antitrust: Rana Foroohar highlights fundamental differences between US and European policy in dealing with the concentration of corporate power.

Chart of the day

Countries across South America are experiencing drought conditions and the spread of wildfires, as the continent grapples with a double whammy of high temperatures and low rainfall. Data from Nasa shows two-thirds of South America has much drier soil conditions than usual. Chile’s president declared a state of emergency yesterday.

Take a break from the news

American composer Steve Reich has been influencing the course of modern music for nearly six decades. He sat down for Lunch with the FT and discussed forging “minimalism” in 1960s downtown New York — and why Stravinsky has been a life-long obsession.

Additional reporting by Tee Zhuo and Benjamin Wilhelm