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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Russia is on the verge of a recession, its economy minister said on Thursday, the first public admission that the country’s war economy is starting to cool three years after President Vladimir Putin ordered the full-scale invasion of Ukraine. Maxim Reshetnikov said at the president’s flagship economic conference in St Petersburg that “the numbers show [the economy] is cooling off”. “But all our numbers are a rear-view mirror. Judging by business sentiment at the moment, we’re basically already on the brink of falling into a recession,” the minister said, according to Interfax.Putin has presided over a record surge in defence spending, which grew 25 per cent year on year to Rbs13.1tn ($167bn) last year and drove two consecutive years of GDP growth above 4 per cent following a contraction in 2022, the first year of the war.The Kremlin’s embrace of “military Keynesianism” has driven strong wage increases and a tight labour market, but has begun to cool off this year as demand reaches capacity.The central bank’s hawkish monetary policy amid persistent inflation of nearly 10 per cent has stifled investment, Reshetnikov argued. He said the ministry could revise its prediction of 2.5 per cent growth in August following the central bank’s future interest rate decisions. The central bank’s growth forecast is between 1 and 2 per cent.Reshetnikov’s comments reflect a long-standing dispute among policymakers over how to combat inflation as Russia’s record spending to fuel the war has generated two years of wage and price rises while driving employment to near capacity.Senior officials and businessmen have called on Elvira Nabiullina, Russia’s central bank governor, to speed up cuts to the key interest rate as companies — including even many of those benefiting the most from the Kremlin’s defence spending — struggle with high borrowing costs. The central bank cut rates by a full percentage point to 20 per cent earlier this month, citing a drop in annual inflation from double digits to 9.8 per cent in June, but has indicated it will continue to pursue its inflation target of 4 per cent. The CBR’s long-stated goal is to bring inflation below 4 per cent.Reshetnikov called on the CBR to find a balanced approach between fighting inflation and encouraging growth. “We all understand that fighting inflation is important. But we are simplifying the discussion a bit.”He added: “I’m just for showing the economy a little bit of love, just a bit, as well as believing in 4 per cent.”Nabiullina, speaking on the same panel, said Russia was “coming out of [a period of] overheating”, adding that the central bank would not revise its 4 per cent target. “The economy of demand grew, and the economy of supply lagged behind. That’s where overheating and inflation come from,” she said.Putin has backed Nabiullina’s hawkish monetary policy amid the growing chorus of discontented voices in Russia’s industrial lobby, but has indicated in recent months that he wants policymakers to strike a compromise. The Russian president told his top economic officials on Wednesday that he wanted to “ensure balanced growth of the economy and its structural changes”. More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning and welcome back. Today we’re covering: The Maga pushback against military interventionFed cuts to US growth forecastsChina’s drone pushAnd Silicon Valley’s new buzzwordSteve Bannon has joined the growing chorus of Maga voices urging President Donald Trump not to join Israel in bombing Iran, warning it would “tear the country apart”.What did Bannon say? Speaking in Washington yesterday the president’s former chief strategist said: “My mantra right now: The Israelis have to finish what they started. They started this. They should finish it.” The risk of a so-called forever war in the Middle East is worrying some Trump supporters. For them, it has echoes of the wars in Afghanistan and Iraq at the beginning of the century, which cost the lives of thousands of American military personnel and more than 1mn direct deaths in total, according to some estimates. “We can’t do this again. We’ll tear the country apart. We can’t have another Iraq.” What do Trump supporters think of the prospect of the US attacking Iran? Bannon’s intervention laid bare a fierce public battle playing out among Trump’s most ardent supporters who backed his “America first” message in last year’s election campaign. Former Fox News host Tucker Carlson, former Florida congressman Matt Gaetz and Georgia representative Marjorie Taylor Greene have been among the most vocal Trump acolytes calling on him to exercise restraint. An opinion poll published earlier this week by the Economist/YouGov showed only 19 per cent of Trump supporters backed the idea of a US strike on Iran.Meanwhile, Trump kept the world guessing yesterday as to whether he would authorise a strike on Iran by the US military. “I may do it. I may not do it,” he said on the White House lawn. More news and analysis on the war below. Latest news: Our live blog has the latest developments from reporters in the region and around the world.Market reaction: Prices to charter large oil tankers sailing through the Strait of Hormuz have more than doubled since Israel attacked Iran last week.Israel’s secret war: Hacked phones, deep-cover agents and miniaturised weapons systems were part of the covert campaign that preceded Israel’s attack on Iran. Iran’s exiled royal: “This is the first time in all these years that we see the playing field being more even for an opportunity for change,” Reza Pahlavi tells the FT.Military manoeuvres: Bunker-busting bombs and aircraft carriers are among the US military assets being prepared for possible conflict with Iran. Here’s what else we’re keeping tabs on today:Economic data: Mexico’s national statistics agency publishes its preliminary economic growth figures for May. Interest rates: The Bank of England is expected to keep borrowing costs unchanged at 4.25 per cent. Earlier the Swiss National Bank cut its benchmark rate to zero.TikTok ban: Trump is expected to extend today’s deadline for Chinese owner ByteDance to sell its stake or face a ban.Juneteenth holiday: US markets will be closed as the country marks the end of slavery after the civil war.Five more top stories1. The Federal Reserve cut its outlook for the US economy yesterday, with policymakers split on whether they would be able to reduce interest rates at all this year as Trump’s tariffs bring risks of higher inflation. Hours before the decision, the US president called Fed chair Jay Powell “stupid” and asked whether he could “appoint myself” to the central bank.Treasury market: Foreign investors’ stockpile of US government debt fell only modestly in April despite turmoil from Trump’s trade war.Central banks: Without political consensus, hawkish central banks and budgetary rules will not bring economic stability, writes Raghuram Rajan.2. Microsoft is prepared to walk away from talks with OpenAI over the future of its multibillion-dollar alliance, as the ChatGPT maker seeks to convert itself into a for-profit company. The two sides remain unable to agree on critical issues such as the size of the software group’s future stake in the start-up. Read this exclusive story.3. The EU is pushing for a UK-style trade deal with the US that leaves some tariffs in place after next month’s deadline, further delaying retaliation against Washington. Diplomats and officials briefed on the matter say that early talk in Brussels of retaliatory levies if US President Donald Trump did not lift all measures against EU countries has diminished. 4. The US clean energy sector is facing a wave of bankruptcies as Congress weighs a spending bill that would gut clean energy tax credits that have kept the industry afloat. Since retaking Congress and the White House, Republicans have moved swiftly to dismantle Biden-era investment in renewable energy sources. 5. The family that owns the Los Angeles Lakers is closing in on a deal to sell its majority stake in the National Basketball Association team to Guggenheim Partners chief executive Mark Walter at a valuation of about $10bn, which would be the largest-ever sale of a sports team.The Big Read© FT montage/DreamstimeArtificial general intelligence has been tipped as the next big breakthrough out of Silicon Valley, with proponents from OpenAI to Google DeepMind predicting it can turbocharge the economy, cure diseases and “elevate humanity”. But is AGI a scientific goal — or just a marketing buzzword? We’re also reading . . . Chinese drones: Beijing has pushed the country to produce millions of unmanned aircraft. Now, it wants the “low-altitude economy” to become a driver of growth.Julius Baer: Stefan Bollinger, a former Goldman Sachs banker, takes on the Swiss wealth manager’s troubled legacy as its new chief executive.‘Stick-holder capitalism’: Nippon Steel’s $15bn deal for US Steel is the first big cross-border agreement under Trump’s new genre of capitalism, writes Leo Lewis.Chart of the day Universities in Asia had a strong showing in the latest QS world rankings, while the majority of UK institutions dropped down the list for a second straight year. The rankings reflect a higher education arms race.Some content could not load. Check your internet connection or browser settings.Take a break from the newsArchitects are increasingly using a house’s facade not just as a decorative flourish for those looking in, but also to raise the bar for personalised design.The facade of Brick House in Perth, by State of Kin, uses bricks salvaged from historic Federation-style homes More

This article is an on-site version of Free Lunch newsletter. Premium subscribers can sign up here to get the newsletter delivered every Thursday and Sunday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersGreetings. You will have noticed a drumroll of stories in all parts of the FT recently about investors looking for alternatives to the US dollar, ranging from money managers to central banks. It makes for a moment of truth for the EU, which has long harboured ambitions for the euro to take the dollar’s crown.Policymakers know this. In an opinion article for the FT, European Central Bank president Christine Lagarde declares that this is “Europe’s ‘global euro’ moment”. But will European leaders grasp the huge strategic opportunity that has landed in their laps? If they don’t, others — especially China — are ready to boost alternatives to both the dollar and the euro.Next week’s European Council summit will discuss the euro’s international role. So today, I address the steps the leaders need to take to make the most of this moment of truth and, in particular, the perennial question of commonly issued debt. If not now, when?Lagarde writes:For the euro to reach its full potential, Europe must strengthen three foundational pillars: geopolitical credibility, economic resilience, and legal and institutional integrity.I will mostly address the second point below, but the first and the third are evidently important. Geopolitical credibility hinges, as Lagarde points out, on the EU’s relevance in trading networks (where it is already a global player) and military alliances (where it is . . . not quite that). On law and institutions, the point here is that the EU’s perhaps maddening legalism and democratic decision-making mean that once a commitment is made, it can be relied on — and reliability is a scarce and valuable commodity in a Trumpian world.But let’s focus on the economics. On “economic resilience”, Lagarde likewise mentions three ingredients:. . . economic strength is the backbone of any international currency. Successful issuers typically offer a trio of key features: strong growth, to attract investment; deep and liquid capital markets, to support large transactions; and an ample supply of safe assets. But Europe faces structural challenges. Its growth remains persistently low, its capital markets are still fragmented and . . . the supply of high-quality safe assets is lagging behind.She continues with the standard laundry list of policies emphasised in the recent reports of Enrico Letta and Mario Draghi, such as completing the single market, lightening regulation and unifying capital markets. But she pulls her punches on several crucial policy questions.While she mentions the ECB’s euro swap lines for select other central banks, she fails to suggest that these could be expanded to more countries or included as part of the package the EU could offer trade partners interested in closer relations. And she doesn’t mention the digital euro, despite this being the ECB’s prepared defence against stablecoins. As Barry Eichengreen explains in the New York Times, the “Genius Act” now going through Congress could wreak havoc with the dollar monetary system by promoting stablecoins as a means of exchange (dollar-pegged crypto assets) and thereby making some forms of money risky. (Do read my colleague Philip Stafford’s Big Read on the march of the stablecoins.)Some content could not load. Check your internet connection or browser settings.Most importantly, Lagarde only offers lukewarm advocacy for the provision of euro-denominated safe assets, which would have to take the form of EU-level debt backed in common by its member states, or “Eurobonds”. A full-throated call for EU leaders to issue more joint debt this is not, nor a commitment from the ECB to treat buying such debt as a reasonable policy instrument (which would make it even more attractive to investors). All she has to say on the topic is that “joint financing of public goods, like defence, could create more safe assets” (my italics).A safe asset cannot, however, be a fortunate side effect of other, perhaps elusive, policy efforts. It must be seen as a goal in itself. In a new proposal for how Eurobonds could be designed, Olivier Blanchard and Ángel Ubide set out what is at stake:Autonomy has many dimensions. The most obvious today is military autonomy, building a solid European defence system. A less obvious one, but equally important, is achieving financial autonomy, creating a European financial ecosystem that can compete with that of the United States. And a necessary condition for such a system to function is to have at its base a deep and liquid Eurobond market.Now is the time to build it . . . Creating a deep and liquid market of Eurobonds would provide investors with the alternative safe asset they are looking for. Failure to do it now would be missing an historical opportunity to reduce the cost of funding European public debt and, by extension, European private capital.There is an important recognition here that common borrowing offers much more than a source of funding (possibly a bit cheaper than that of most national governments). As Blanchard and Ubide point out, a sizeable Eurobond market, by encouraging a reallocation by global investors, would also increase the attractiveness of private investments in Europe because of the bedrock of a unified benchmark asset and a substitution into higher yield. It is the most likely way the EU and the Eurozone will reduce their current account surpluses — in other words, begin to put their own savings to work at home rather than to finance growth in other economies. Until the pandemic, Eurobonds were anathema. Even in the depths of Covid-19, common borrowing for the pandemic recovery fund required pretending that it would be a one-off. But we have arrived at a point where what Europe’s governments claim to want the most — autonomy, lower funding costs, a stronger private capital market — requires a willingness to issue common debt in permanently large amounts. The test of leadership, then, is whether the EU leaders accept this. If — or when — they decide to launch a large, permanent pan-European official bond market, the Blanchard/Ubide proposal is not a bad starting place for how to carry it out. Here is their main idea: given that Europe needs a significantly bigger bond supply to compete with a $30tn US Treasury market, “the solution must be to replace a proportion of the stock of national bonds with Eurobonds”. To be specific, they want to issue about 25 per cent worth of GDP in Eurobonds to refinance national debt of the member states — partly by purchasing such bonds from the market and partly by replacing maturing bonds. They call for specified revenue streams in national budgets (such as a first claim on value added tax) to be dedicated to paying each government’s share of interest costs. In addition, Blanchard and Ubide advocate the consolidation of the existing EU-level bonds issued under different programmes and institutions (as I also proposed a few weeks ago). There are good reasons to think the new common debt would get a good price (for issuers) in the market — ie it would make it cheaper for governments to borrow. In addition, a large Eurobond market means, Blanchard and Ubide write, “that the rest of the required [financial] ecosystem, such as a deep yield curve, a futures market, and ease of repo for blue bonds, would naturally develop, leading again to lower rates”. They suggest this could have positive effects on remaining national debt and private debt too, as well as on financial integration. Creating a new market could, in other words, put a free lunch on the table (if you will forgive the metaphor).Blanchard and Ubide stay away from any discussion of the EU budget or whether new borrowing could fund new spending. That is because their priority is to rapidly build a large bond market, and at roughly 1 per cent of GDP, even a fully debt-funded EU budget would not have much to contribute to that goal for a very long time.But there is no reason why you couldn’t speed up their proposal by issuing more bonds for additional purposes than simply replacing national borrowing. (I have suggested pre-funding the EU budget for many years, for example.) This would amount to building up a debt-funded sovereign wealth fund in order to meet the world’s demand for a safe euro asset.But a sovereign wealth fund has to invest in something. Beyond national bonds, what could that be? Here are two ideas. An EU sovereign wealth fund could devote a slice of its money to invest in the equity of innovative companies in the sectors the EU wants to promote (perhaps through venture capital funds), or it could create a level of predictable demand for new securitisation structures, the rules for which are being loosened to revive the securitisation market. In both cases, the presence of public funds that are big enough to make a difference but not so big as to swamp the market could encourage more issuance and more liquidity, and thereby crowd in private investors. Either of these possibilities would require a political decision, of course, and would involve a degree of risk. But it is not a risk that is unheard of. The Bank of Japan, for example, invests in stock market and real estate funds for monetary policy purposes. All of these are drawing-table ideas. But that is where the discussion ought to be: how, rather than if. So far, however, there is little political impetus behind building a pan-EU official bond market as a policy goal. The sense of political anathema remains. But it is childish. It is rooted in a fear in each country of being on the hook for decisions made in another — whether that is paying their bills or being under their thumb. It is a fear, in short, of sharing risks. But as the pandemic showed, Europeans already share the biggest risks. The objection to risk-sharing is a political relic. Add in climate change, war and security, and it must be obvious that if Europeans don’t hang together, they will surely hang separately. If the time for Eurobonds is not now, then when?Share any thoughts and comments with me at [email protected] readables● The EU must up its game on sanctions, I write in my latest FT column. ● Why can’t the world wean itself off coal? Meanwhile, the International Energy Agency says oil demand will start declining in 2030.Some content could not load. Check your internet connection or browser settings.● How do you deal with the problem of homelessness? New economic research shows that the cheapest way is to give housing to the homeless as soon as possible.● A fascinating city-block-by-city-block study of Hiroshima after the nuclear bomb shows that the success of postwar reconstructions can hinge on self-fulfilling expectations of what will be rebuilt.● FT writers share their picks for summer reading.Recommended newsletters for youChris Giles on Central Banks — Your essential guide to money, interest rates, inflation and what central banks are thinking. Sign up hereTrade Secrets — A must-read on the changing face of international trade and globalisation. Sign up here More

The annual economic forum in St. Petersburg used to host multibillion-dollar deals and performances by global music stars. With the war in Ukraine still raging, the mood has shifted.During his early years in the Kremlin, President Vladimir V. Putin used the annual economic conference in St. Petersburg as a marquee event to showcase how Russia was becoming a magnet for Western businesses.Multibillion-dollar oil and gas deals were signed, including the agreement to build the Nord Stream 2 pipeline between Russia and Germany. Western corporate giants such as BP, Chevron, Deutsche Bank and Total sent their chief executives. In 2018, President Emmanuel Macron of France was the guest of honor. In 2011, Sting performed in front of the Winter Palace.But the event, which opened on Wednesday and will run through Saturday, now reflects a Russia fundamentally transformed by Mr. Putin’s invasion of Ukraine in 2022.The Kingdom of Bahrain was the guest of honor, and the Chinese brand Tank, not Mercedes, was selected as the official car. Instead of executives from Morgan Stanley and Citibank, a delegation of the Taliban roamed the giant exhibition center. And only second-tier Russian pop and rock stars were on show, with no international acts appearing at all.Tank, a Chinese automobile manufacturer, was chosen as the carmaker for the conference. In prior years, it was Mercedes.Dmitri Lovetsky/Associated PressThe conference’s message is that Russia will never again be so reliant on business with the West.Despite newly opened lines of communication between Mr. Putin and President Trump, major American investors once again shunned the conference. The Russia-United States session, billed as dedicated to “identifying shared interests and shaping long-term partnerships,” was open by invitation only.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Normally, the towering green crane in the Everport Terminal at the Port of Los Angeles would be busy unloading hulking container ships. Longshoremen below would flit around in “bomb carts” used to ferry containers from the ship. Big rigs would carry off imported furniture, car parts and clothing to other parts of the country.But on a recent Thursday morning, the 300-foot crane sat idle, a casualty of the tariffs that President Trump has imposed to curb foreign trade. Almost a fifth of the 99 boats that Gene Seroka, the port’s chief executive, had expected to arrive in May were canceled.“It’s a very quiet day,” Mr. Seroka said. “This is the impact that the tariffs have had.”Listen to our reporter’s commentaryAna Swanson visited the Port of Los Angeles last month and found it to be unusually quiet. The job posting board showed 40 percent fewer positions than normal. And the port was running at 70 percent of normal capacity, according to its chief executive.The Port of Los Angeles, along with a nearby facility in Long Beach, makes up a shipping complex that stretches across nearly 75 miles of Southern California shoreline. The ports are a bellwether for trade and the U.S. economy. Together, they move an astonishing 40 percent of the goods that come into the United States via containers. They also account for 30 percent of what the country exports.As Mr. Trump’s chaotic and aggressive tariff strategy has seesawed this year, activity here has, too. That has threatened the livelihood of the roughly 100,000 workers at the port complex and complicated life for the hundreds of thousands of companies that bring goods through the port each year. The trends at the port hint at the pain that will ripple through the broader economy in the coming months, as fewer and higher-priced goods travel from ports and warehouses to American stores and consumers.The ports experienced a surge of activity this year when shippers rushed to bring in goods ahead of tariffs that reached their highest levels in a century. That rush has faded, and trade has become more sluggish. With higher tariffs set to snap back within weeks, both importers and port workers remain cautious, unsure of what their futures will hold.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The EU is pushing for a UK-style trade deal with the US that would leave some tariffs in place after next month’s deadline for negotiations, further delaying retaliation against Washington.Michael Clauss, Europe adviser to German Chancellor Friedrich Merz, told a FT Live event on Thursday that instead of reaching a full trade agreement by July 9, he expected an arrangement “a little bit along the model of the US-UK [agreement]”.The European Commission, which is leading the talks with Washington, first wanted to see “if there is a landing zone” on Trump’s 10 per cent “reciprocal tariffs” before then moving on to duties on specific sectors, Clauss said at the event in Berlin.Diplomats and officials briefed on the matter say that early talk in Brussels of retaliation if US President Donald Trump did not lift all duties against EU countries has diminished as governments in the bloc fear the economic consequences and the risk of European internal disagreement on countermeasures.Some countries, led by France, want to hit back in kind in that scenario, but others, including Italy and Hungary, want to keep talking with Washington, spooked by Trump’s threat to impose 200 per cent tariffs on wine and whiskey when the EU proposed targeting bourbon in April.The 27-member EU, which is far bigger than the UK, had been holding out for a better deal than the one negotiated by Sir Keir Starmer’s government in London. But a 10 per cent reciprocal duty, combined with lower tariff quotas in areas such as steel and cars, would find grudging acceptance among some EU countries, diplomats said.“I think it’s doable,” said Clauss of a UK-style agreement. “But is it going to happen? I think it’s too early to say.”Trump has threatened that without a deal by July 9, reciprocal tariffs would rise to 50 per cent.Talks would then continue to get reduced rate quotas for sensitive products such as steel and cars. Further negotiations would also cover sectors such as semiconductors and pharmaceuticals, where Trump has threatened to impose levies.EU trade commissioner Maroš Šefčovič is handling the sectoral tariffs with Howard Lutnick, the US commerce secretary, and other areas with US trade representative Jamieson Greer.   The US is no longer pressing demands that the EU must abolish value added tax but is still seeking the end of national digital services taxes, according to a senior official involved in the talks. It also wants the EU to remove other “non-tariff barriers” such as quotas for locally made television programmes and bans on some US foods, such as chlorine-washed chicken. But diplomats noted that the UK successfully resisted US pressure to scrap its digital tax, VAT, and accept American food and product safety standards.London did drop tariffs on US beef and ethanol. The EU is offering to buy more liquefied natural gas and weaponry to reduce the €198bn annual trade surplus it has in goods with the US.If there is no deal, the European Commission, which runs trade policy, must get the approval of a weighted majority of member states to retaliate. Officials said they were wary of reacting without strong support, as they needed to show unity to force the US to compromise.All members except Hungary backed a package of tariffs of up to 50 per cent on €21bn of US imports in April, but it was postponed until July 14 to allow time for talks. The move was in response only to Trump’s 25 per cent tariffs on steel and aluminium, which have since been raised to 50 per cent. The commission is preparing a second package of tariffs on €95bn of US imports, and is also considering measures against US services.  These could include levies on US digital companies and limiting access to public procurement contracts for American companies.  Officials fear activating even the small first package would prompt Trump to escalate, as he did in May when he threatened to impose 50 per cent reciprocal duties.“But do we need to shoot back to get some credibility?” asked one member state official. Another said the bloc could not tolerate the economic damage done to the car and steel industries by Trump’s sectoral tariffs beyond July without a response.   “To do nothing is just not politically viable,” said a third, adding that citizens and businesses would demand retaliation.  Officials have already told member states that it was highly unlikely that the US would drop all tariffs, as the Financial Times previously reported. A European commission spokesperson said: “Reports of the EU offering US tariffs of 10 per cent across all our exports are speculative and not based on current discussions.“We are fully and deeply engaged in negotiations — a negotiated, mutually beneficial solution remains our preferred outcome,” the spokesperson added. USTR declined to comment. The US commerce department did not respond to requests for comment.Additional reporting by Aime Williams in Washington More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldThe Federal Reserve cut its outlook for the US economy on Wednesday, with policymakers split on whether they would be able to reduce interest rates at all this year as Donald Trump’s tariffs bring risks of higher inflation.Fed officials on Wednesday cut their forecasts for economic growth and boosted their outlook for inflation as Trump’s levies on America’s trading partners ricochet across the world’s largest economy. The Federal Open Market Committee held rates steady for the fourth meeting in a row at a range of 4.25-4.5 per cent, despite the US president calling earlier on Wednesday for chair Jay Powell to slash borrowing costs by at least 2 percentage points. Just hours before the decision Trump called the Fed chair “stupid” and asked whether he could “appoint myself” to the central bank.Powell said at the press conference following the Fed’s rate decision that “for the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance”.But he cautioned that “our job is to make sure that a one-time increase in inflation doesn’t turn into an inflation problem”.Some content could not load. Check your internet connection or browser settings.Projections released on Wednesday showed growth in the world’s largest economy would register 1.4 per cent for 2025 — substantially weaker than last year, with unemployment rising from its current level of 4.2 per cent to 4.5 per cent and personal consumption expenditures inflation increasing from an April figure of 2.1 per cent to 3 per cent. In March, the median expectation among US rate-setters was for the economy to expand by 1.7 per cent, unemployment to rise to 4.4 per cent and personal consumption expenditures inflation to hit 2.7 per cent.The Fed’s “dot plot” of monetary policy estimates still showed a median forecast that the central bank would make two quarter-point rate cuts this year. But officials are becoming more divided, with an increasing number now ruling out any reductions in borrowing costs for the remainder of 2025. There were still 10 members expecting two or more quarter point cuts this year. But seven now forecast no rate cuts and two are expecting one cut. Paul Ashworth, chief North America economist at Capital Economics, noted that there were “two very distinct camps developing within the FOMC”, with some policymakers pencilling in lower borrowing costs as they fret about growth and unemployment and others anticipating no reductions this year as they focus on inflation risks.Recent inflation data have been tame, but many economists expect price growth to increase in the coming months as companies pass on the costs of tariffs. Business surveys have also pointed to high levels of uncertainty among company executives over demand across the economy and their own costs.Some content could not load. Check your internet connection or browser settings.US markets were muted following the Fed decision, with the S&P 500 equities gauge little changed. The two-year Treasury yield, which is sensitive to rate expectations, slipped 0.01 percentage point to 3.94 per cent. More