FirstFT: Fed to hold interest rates higher for longer, economists say

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Good morning. We start the week from economists warning that the Federal Reserve will be forced to keep interest rates higher for longer than markets and central bankers anticipate.

A new FT-Chicago Booth poll found that two-thirds of those surveyed believe the Fed will make two or fewer interest rate cuts this year as it struggles to complete the “last mile” of its battle with inflation. The most popular response for the timing of the first cut was split between July and September.

That is a later start than expected in financial markets, where traders expect three cuts this year, with the first quarter-point reduction from the current 23-year high of 5.25 to 5.5 per cent coming in June or July. Read more of the economists’ predictions ahead of this Wednesday’s rate decision.

More monetary policy news: The Bank of Japan is expected to formally abandon its policy of capping yields on Japanese government bonds at the end of its two-day interest rate-setting meeting which begins today. It may also lift interest rates, ending an eight-year experiment with negative rates.

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

• Conferences: Nvidia chief Jensen Huang gives the keynote speech at the chipmaker’s annual developer conference in Silicon Valley. CERAWeek, the global energy conference sponsored by S&P Global, begins today in Houston, with guest speakers including the chair and chief executive of ExxonMobil Darren Woods.

• Autonomy trial: Mike Lynch, once one of the UK’s most successful tech entrepreneurs, is set to go on trial today in San Francisco over what US prosecutors have called “the largest fraud in the history” of Silicon Valley.

• Canada’s housing crisis: A National Housing Conference will be held in Ottawa where real estate companies, lobby groups and officials from the government will discuss solutions for solving Canada’s housing crisis. It comes as the Canadian Real Estate Association publishes home sales data for February.

Five more top stories

1. Israel Defense Forces raided Gaza’s largest hospital overnight, triggering gun battles around the medical complex where thousands of people have taken refuge as Israeli forces seek to prevent Hamas fighters regrouping in the besieged strip’s north. The IDF said it was conducting a “precise operation in the area of the Shifa hospital” to thwart Hamas activity in the compound. Here’s the latest on the military operation.

2. Vladimir Putin is cruising to victory in Russia’s presidential election, cementing his rule for another six years amid his invasion of Ukraine and brutal suppression of dissent. Preliminary results showed the Russian president on track to be re-elected with a record 87 per cent of the vote and record turnout of 77.5 per cent, according to the Russian electoral commission.

3. Private equity is accelerating its pursuit of consultancies, talent agencies and accounting firms as it targets professional partnerships in one of the buyout industry’s last unconquered territories. Grant Thornton and Baker Tilly have agreed to sell majority stakes to private equity in the past six weeks, and bankers and executives expect more deals to come.

4. Brazil’s industry ministry has launched a number of investigations into the alleged dumping of industrial products by China as Latin America’s largest economy reels from a wave of cheap imported goods. The Brazilian measures come at a time when the world is bracing itself for a flood of exports from China as the world’s second-largest economy struggles with excess capacity amid a property sector slowdown and weak domestic demand. Read more on Brazil’s at least half a dozen probes.

5. European banks must brace themselves for rising insolvencies, greater geopolitical risks and upheaval in energy-intensive industries, the eurozone’s new chief banking supervisor has warned. Claudia Buch, who became chair of the European Central Bank’s supervisory arm in January, said an increase in the benchmark interest rate to a record high of 4 per cent “still has to filter its way through the financial system”. Read more from her interview with the Financial Times.

• Suspended accounts scheme: Banks are clashing with the UK government over plans that would allow banks to transfer trapped funds to the government to finance its efforts to crack down on economic crime.

The Big Read

Hindu litigants are mounting court challenges to allow them to worship at sites where India’s Muslim dynasties razed temples and built mosques. But for many of the country’s roughly 200mn Muslims, the wrangling over shared religious spaces is an intrusion on their rights by a government they see as promoting Hinduism above other religions. How the dispute plays out will shape religious discourse, social equanimity and the direction of secular democracy in the world’s most populous country.

We’re also reading . . .

• America (still) has no industrial policy: Subsidies, tariffs and good intentions don’t add up to what is needed, argues Rana Foroohar.

• UBS-Credit Suisse anniversary: A year on from UBS’s rescue of Credit Suisse, the merger’s success is becoming increasingly dependent on the performance of the Swiss bank’s wealth business.

• ‘Loud quitting’: Videos of young workers resigning or being made redundant are going viral on social media sites such as TikTok as they wage a campaign for workplace transparency.

Chart of the day

Oceans have marked 365 straight days of record-breaking global sea surface temperatures, fuelling concerns that climate change could push marine ecosystems beyond a tipping point. Amplified by the cyclical El Niño weather phenomenon that warms the Pacific Ocean, this exceptional heat has bleak implications.

Take a break from the news

The first ships of Chinese immigrants arrived in what is now Vancouver in 1858, on the heels of British Columbia’s gold rush. Now, the Canadian city’s Chinatown is a flourishing destination to learn about Chinese heritage and culture. FT Globetrotter goes for a deep — and delicious — dive into the past and present of a storied neighbourhood.

Additional contributions from Camille De Guzman and Benjamin Wilhelm