Aurelia Butler

The Federal Reserve may move to a “restrictive” policy stance that would better fight inflation through more aggressive interest rate increases, according to minutes of the most recent FOMC meeting held in early May. Most US monetary policymakers agreed on the need to keep increasing the Fed’s main interest rate — currently set at a range of between 0.75 per cent and 1 per cent — by 50 basis points “at the next couple of meetings”. This would match the Fed’s goal of “expeditiously” getting interest rates back up to a neutral setting, where it is neither boosting nor stunting the economy. But officials worry that this could undermine the strong recovery in the jobs market. Participants “noted that a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook” — pointing to the possibility that the Fed may have to target an even higher level of interest rates, either by increasing the pace of its rate rises, lengthening its tightening cycle, or doing both. Fed officials, including chair Jay Powell, are trying to engineer what they have described as a “soft” or “softish” landing to bring down inflation without triggering a recession, which they acknowledged was a difficult balancing act. “Several participants commented on the challenges that monetary policy faced in restoring price stability while also maintaining strong labour market conditions,” the minutes said.Thanks for reading FirstFT Asia. Here’s the rest of the day’s news. — SophiaThe Behind the Money podcast is back! In our first episode, host Michela Tindera is wondering: is a crypto vibe shift under way? FT reporter Ethan Wu explains how the effects of Bitcoin’s price drop and the collapse of a popular stablecoin have rippled into other areas of the crypto universe and why it matters — even for people who aren’t crypto investors. Five more stories in the news1. China could struggle to grow its economy in second quarter Premier Li Keqiang has urged officials to help companies resume production after Covid-19 lockdowns. His comments yesterday came out of concern that the country will have difficulty reaching its annual growth target of 5.5 per cent while battling Omicron outbreaks.2. Beijing clamps down on elite students after lockdown protests Students at two top universities, Tsinghua and Peking, have been prevented from leaving their campuses for weeks as the schools enforce harsh Covid-19 restrictions. The measures have sparked discontent and protests, as university officials urged some students to leave campus altogether.3. Nineteen children killed in Texas school shooting US president Joe Biden made an emotional plea for the country to “stand up to the gun lobby” after a gunman killed at least 19 children and two adults in the deadliest school shooting in America for a decade. Law enforcement officers shot dead 18-year-old Salvador Ramos, who was suspected of carrying out the mass shooting at the Robb Elementary School in Uvalde, Texas.

The archbishop of San Antonio comforts families after the shooting at an elementary school in the city of Uvalde, Texas © AP

4. North Korea fires suspected ballistic missile North Korea launched a suspected intercontinental ballistic missile and two other projectiles yesterday, according to the South Korean government, a day after Joe Biden concluded his first tour of the region as US president.5. Pakistan seeks to renegotiate IMF loan as food prices surge Pakistani officials are in talks with the IMF to resume lending under a 2019 $6bn loan programme which has been in limbo since a dispute earlier this year with the previous government. The country, which relies on imported staples such as wheat, is already seeing its people go hungry as costs soar.The day aheadResults Several companies report their fiscal year results today, including Alibaba, Ted Baker and Intermediate Capital Group, plus first-quarter results from Baidu, Dell, and Macy’s.US economy The US releases its first-quarter GDP figures and consumer spending data today.Australia Sorry Day commemorates the forced removal of Aboriginal children from their parentsWhat else we’re readingHow hubris and Covid transformed Sri Lanka Until recently, Sri Lankans enjoyed some of the highest living standards in South Asia. But now the country has opened talks with the IMF over a $4bn bailout, and observers are waiting to see how China, one of the main creditors, will react.

© FT montage; AFP/Getty Images/Dreamstime

Pfizer warns of ‘constant waves’ of Covid-19 Growing apathy about Covid-19 and politicisation of the pandemic response will cost lives as the world is hit by new waves of the virus in coming months, Pfizer’s chief executive has warned. “What worries me is the complacency,” Albert Bourla told the FT.Is the ‘subscription economy’ going to feel the Netflix effect? The rash of businesses offering subscriptions took off in about 2011, led by TV and music streaming services and quickly followed by beauty products, clothes, organic coffee, craft beer, pet food and more. The “subscription economy” is heading into its first serious downturn, Helen Thomas writes.Andreessen Horowitz bets on crypto ‘golden era’ with new $4.5bn fund Despite the market crash, the venture capital group has made its biggest bet yet on the future of blockchain technology. It plans to allocate about $1.5bn to seed investments while the remaining $3bn would be earmarked for venture investments.Sombre mood descends on Davos Russia’s invasion of Ukraine, surging inflation, Chinese lockdowns and growing uncertainty about globalisation have conspired to chill the business mood at the World Economic Forum meeting in Davos. “There are three R words right now: It’s Russia, it’s recession and it’s [interest] rates,” said Citigroup chief Jane Fraser.CinemaThe Cannes Film Festival celebrates its 75th year with Volodymyr Zelensky, Tom Cruise and Sharon Stone all putting in appearances. The FT brings you the highlights.

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WASHINGTON (Reuters) – The U.S. budget deficit will shrink dramatically to $1.036 trillion for fiscal 2022 from $2.775 trillion last year as a strong recovery prompts a surge in revenues and lower outlays, but slowing growth will start to reverse the trend, the Congressional Budget Office said on Wednesday. Releasing new economic and baseline budget forecasts, the CBO said its now expects the fiscal 2022 deficit to be $118 billion lower than an estimate made last July. The government’s fiscal year starts Oct. 1 and runs through Sept. 30.The non-partisan fiscal referee agency forecast U.S. real GDP growth at a solid 3.1% for calendar 2022, driven by strong consumer spending, down from a sharp 5.5% rebound in 2021.But CBO said that U.S. economic momentum would slow as the Federal Reserve hikes interest rates to control inflation, and forecast 2.2% growth for 2023 and 1.5% for 2024.The CBO forecasts that inflation would remain elevated during 2022, in line with the strongest pace in 40 years, with the consumer price index increasing at 6.1% and the personal consumption expenditures index increasing at 4.0%, due to continued supply constraints in the face of high demand and a tight labor market.Slowing economic growth also means that reductions in the deficit will reverse, CBO said.While it projected that the fiscal 2023 deficit will shrink slightly to $984 billion, deficits will rise in subsequent years, averaging about $1.6 trillion annually between 2023 and 2032.The deficit for the fiscal 2022-2031 decade has increased by about $2.4 trillion since the July forecast, to about $14.5 trillion, largely due to legislative changes that boost spending, including the $1.2 trillion Infrastructure Investment and Jobs Act, and fiscal 2022 appropriations.The CBO’s deficit projections do not include the supplemental $40 billion aid package for Ukraine, which was passed last week after the agency locked its budget and economic assumptions for the latest forecasts. It will be included in a subsequent budget review. The increases in future deficits are also driven by forecasts of higher interest expenses on the federal debt, which rise to $1.2 trillion, or 3.3% of GDP by 2032 from $399 billion, or 1.6% of GDP, in fiscal 2022, according to the CBO projections.CBO Director Philip Swagel told reporters that the projections are a sign that the “flow burden” from interest payments “is rising pretty steadily and meaningfully over the 10 year budget window.”The agency predicts that U.S. public debt will increase from 98% of GDP this year with an average interest rate of 1.9% to 110% of GDP by 2032 with an average rate of 3.1%. More

DAVOS, Switzerland (Reuters) – Years of under-investment in mining of metals essential to energy transition, supply shocks and high energy prices will continue to drive commodity prices higher, Eurasian Resources Group (ERG) Chief Executive Benedikt Sobotka said on Wednesday.Combined with COVID-related logistical issues and demand for transparency on sustainability these factors have brought together “all the ingredients for a perfect storm in commodity markets,” he told the Reuters Global Markets Forum in Davos.Sobotka said that a commodity super cycle has now begun and will carry on for the next 30 years, predicting a 20% rise in copper prices by the end of 2022.Luxembourg-based, privately-held ERG is a global supplier of copper and cobalt. It also supplies alumina and iron ore and is the only producer of high-grade aluminium in Kazakhstan.Sobotka believes a fossil fuel resurgence is temporary, and the transition to a lower carbon economy “cannot be stopped,” which will require a projected $50 trillion in the next three decades.”Anything between $200-$300 billion in investment per year will be required for the mining industry to satisfy demand for the energy transition,” he said, with much of this invested into the mining of copper, nickel, cobalt and other metals.In an environment of high prices and supply chain pressures, Sobotka expects companies and countries to stockpile strategic raw materials, including oil, copper, cobalt and other metals.”If you get small supply disruptions, you are going to see big swings in prices,” Sobotka said, adding that he expected to see an impact in the second half of 2022.Major end-users such as the automotive industry are already trying to strike long-term off-take agreements to buy metals such as lithium and cobalt at current market prices, he said.”It tells you how difficult it is to get your hands on material long term – and particularly material that is clean from an ESG (environmental, social and governance) point of view,” he added.(This interview was conducted in the Reuters Global Markets Forum. Join GMF on Refinitiv Messenger: )(The story refiles to fix spelling of name in first and third paragraph.) More

Malpass told an event hosted by the U.S. Chamber of Commerce that Germany’s economy, the world’s fourth largest, has already slowed substantially due to higher energy prices, and said reduced production of fertilizer could worsen conditions elsewhere”As we look at the global GDP … it’s hard right now to see how we avoid a recession,” Malpass said. He gave no specific forecast.He said the economies of Ukraine and Russia were both expected to see a significant contraction, while Europe, China and the United States were seeing slower growth.Developing countries were being hit even harder given shortfalls of fertilizer and food stocks and energy supplies, he said.”The idea of energy prices doubling is enough to trigger a recession by itself,” he said.In China, he said the relatively sharp slowdown in growth was based on the COVID-19 pandemic, inflation and the pre-existing real estate crisis the country had been facing.The World Bank last month had already cut its global growth forecast for 2022 by nearly a full percentage point, to 3.2% from 4.1%, due to the impacts from Russia’s invasion of Ukraine.Malpass gave no details on when a global recession could begin. More