Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is author of ‘Blood and Treasure, the Economics of Conflict from the Vikings to Ukraine’Worries over geopolitical risks have regularly featured towards the top of polls of investor concerns over the past year. In recent months, “geopolitical risk” has often been a polite euphemism for unpredictable American tariff policies, preferred by US institutions which do not want to annoy the White House too much. But now the geopolitical risk which is materialising is a more traditional one, the threat of long-running conflict in the Middle East putting global oil supplies at risk.Oil prices rose as much as 12 per cent in the immediate aftermath of Israel’s attacks on Iran’s nuclear facilities. Over the weekend, the conflict escalated further with Israel hitting, among other targets, a major oil terminal in Tehran. Iran produces around 3.3mn barrels per day of crude, of which 2mn are exported. Given global oil demand is estimated at 103.9mn bpd by the International Energy Agency and that Saudi Arabia and the UAE are reported to be capable of raising production quickly by more than 3.5mn bpd, even a severe disruption in Iranian production is probably manageable. The increase in the oil price following the first Israeli strikes reflected wider concerns that the conflict could spiral to a point where Tehran attempted to close the Strait of Hormuz to tankers or even attack the oil facilities of its neighbours.The interplay of geopolitical uncertainty, oil prices, and macroeconomics is rarely straightforward, as some useful research from the European Central Bank published in 2023 indicates. It points out Brent crude prices leapt by 5 per cent in the immediate aftermath of 9/11 terrorist attacks in New York as investors priced in the chance of war in the Middle East disrupting supplies. But they were down by 25 per cent within 14 days as fears that a slowing global economy would weaken oil demand came to the fore. In the two weeks following Russia’s invasion of Ukraine in February 2022, Brent prices rose by 30 per cent. But they were back at their pre-invasion level eight weeks later.The ECB research suggests geopolitical shocks impact the global economy through two channels. In the short term, the most important of these is usually the risk channel. As financial markets price in the chance of further disruptions to global oil supplies, it causes an increase in the cash value of holding oil contracts — known as the convenience yield — putting upward pressure on oil prices. But in the longer term, the economic activity channel comes into play. Higher geopolitical tensions tend to act as negative shock to global demand as increased uncertainty weighs on investment and consumption and potentially disrupts trade. This channel usually dampens global oil demand and prices. In other words, oil price pressures resulting from geopolitical shocks have tended to be short-lived.This has not always been the case. The oil price shocks of 1973 and 1979 were both followed by US recessions and the potential for a geopolitically driven oil price spike to capsize the global economy still tends to concern both policymakers and investors. They can perhaps take some solace from research published earlier this year by the Federal Reserve Bank of Dallas. The authors of this study adopted a novel approach, attempting to separate out oil price uncertainty from wider macroeconomic uncertainties. They found that geopolitically driven oil price risks are unlikely to generate sizeable recessionary effects. Even a large increase in the risk of a production shortfall on the scale of 1973 or 1979 would only, according to the model, lower economic output by 0.12 per cent.While high uncertainty about future oil supplies can raise crude prices in the short term, unless those risks materialise, the global macroeconomic fallout is likely to be limited. A similar impact is evident in asset prices more generally. According to the IMF’s most recent Global Financial Stability Report, geopolitical risk events since the second world war have usually been associated with a modest fall in equity prices in the short term but, in most cases, with no lasting impact. Global equity markets eventually shrugged off both Iraq’s invasion of Kuwait in 1990 and Russia’s of Ukraine in 2022. Again though 1973 stands out as an exception, with the oil embargo of that year leaving global equity markets sharply lower 12 months later.Much will, of course, dependent on how long the Israel-Iran conflict lasts and how it escalates. It should be remembered that even during the “Tanker War” of the 1980s, in which during the Iran-Iraq more than 200 oil tankers passing through Hormuz were bombed, oil prices stabilised after an initial spike. The effects of anything short of a major disruption in Middle Eastern oil output are likely to be contained. More

In 2018, the president called for the group to embrace Russia and stormed out of the summit. Now he is seeking to shrink America’s military role abroad and embarking on a more expansive trade war.When President Trump last attended a Group of 7 meeting in Canada, he was in many ways the odd man out.At that meeting, in 2018, Mr. Trump called for the alliance of Western countries to embrace Russia, antagonized allies and ultimately stormed out of the summit over a trade battle he began by imposing metals tariffs on Canada.As he returns on Sunday for the Group of 7 meeting in Alberta, those fissures have only deepened. Since retaking office, the president has sought to shrink America’s military role abroad and made threats to annex the summit’s host after embarking on a much more expansive trade war.Mr. Trump is now facing a self-imposed deadline of early July to reach trade deals. His trade adviser even promised in April that the tariffs would lead to “90 deals in 90 days.” Despite reaching framework agreements with Britain and China, the administration has shown scant progress on deals with other major trading partners.The future of the president’s favored negotiating tool is uncertain as a legal battle over his tariffs plays out in the courts. But a failure to reach accords could lead the Trump administration to once again ratchet up tariffs and send markets roiling.“I think we’ll have a few new trade deals,” Mr. Trump told reporters at the White House on Sunday as he left for the summit.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

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The US has fallen out of the top three growth markets for UK manufacturers for the first time in nearly four decades, according to an industry survey that highlights the impact of higher tariffs.In May, just 18 per cent of British manufacturers expected “positive demand conditions” in the US over the next three months, less than 56 per cent for Europe, 23 per cent for the Middle East and 20 per cent for Asia, according to a quarterly survey by manufacturers association Make UK. “This is the first time the US has not been the second-most favoured destination for export growth for UK manufacturers, behind the EU,” said Make UK, which started the survey in 1988.The figures come after official trade data showed UK exports of goods to the US falling by £2bn in April, the largest monthly decrease since records began in 1997. It follows four months of consecutive increases, suggesting businesses anticipated exports to beat incoming tariffs. Some content could not load. Check your internet connection or browser settings.Seamus Nevin, chief economist at Make UK, said: “Manufacturers are facing a gathering storm of huge uncertainty in one of their major markets.”The Make UK/BDO survey of 324 companies was carried out between April 30 and May 22. This includes the period of the announcement of a trade agreement between the UK and the US on May 9, which cut punitive tariffs on car and steel exports but left a flat 10 per cent levy that applies to most goods. Last week, officials said they were close to signing off on crucial parts of the deal that will deliver lower tariffs for British car exports to the US in return for improved access to the UK for American beef and ethanol producers.Make UK also renewed its call on the government to take “bold measures” in its forthcoming industrial strategy to bring down the high cost of energy.Manufacturing orders were less negative than in the previous quarter, according to the latest survey. The index tracking orders rose to minus 2 from minus 6 in the previous quarter. The index is based on the proportion of businesses reporting expansions or contractions. The index tracking output rose to 9 from minus 1 over the same period.Despite increased employer national insurance contributions and the national living wage, headcount expectations were marginally positive in the second quarter. However, the companies surveyed said their investment intentions for the year ahead were lower, with the difference in the proportion of businesses expecting expansion and contraction falling to 2 from 5 in the previous quarter and 10 at the end of 2024. Richard Austin, head of manufacturing at BDO, said: “This quarter’s results are a testament to the increasingly challenging landscape our British manufacturers are operating in.” He noted some “pockets of positivity”, but added that businesses “need urgent clarity and targeted investment from the government if this recovery is to continue into next quarter”.Show video info More

Administration officials secured a deal that will give the president unusual influence over a private company, and could serve as a model for other deals.To save its takeover of U.S. Steel, Japan’s Nippon Steel agreed to an unusual arrangement, granting the White House a “golden share” that gives the government an extraordinary amount of influence over a U.S. company.New details of the agreement show that the structure would give President Trump and his successors a permanent stake in U.S. Steel, significant sway over its board and veto power over a wide array of company actions, an arrangement that could change the nature of foreign investment in the United States.The terms of the arrangement were hammered out in meetings that went late into the night on Wednesday and Thursday, according to two people familiar with the details.Representatives from Nippon Steel — which had been trying to acquire the struggling U.S. Steel since December 2023, but had been blocked by the Biden administration over national security concerns — came around to Mr. Trump’s desire to take a stake that would give the U.S. government significant control over the company’s actions.Nippon had argued that this influence should expire — perhaps after three or four years, the duration of the Trump administration. But in the meetings, which were held at the Commerce Department, Trump officials led by Commerce Secretary Howard Lutnick insisted that the golden share should last in perpetuity, the two people said.Under the terms of the national security pact, which the companies said they signed Friday, the U.S. government would retain a single share of preferred stock, called class G — as in gold. And U.S. Steel’s charter will list nearly a dozen activities the company cannot undertake without the approval of the American president or someone he designates in his stead.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

Canada’s Mark Carney will host world leaders in Kananaskis in coming days, with his plans for a unity G7 summit to unblock trade at the mercy of a new Mideast war and the temperament of Donald Trump. More than a dozen leaders are heading to the Rocky Mountain resort for a gathering on Monday under the shadow of a rapidly escalating Israel-Iran conflict that threatens further upheaval for markets.“Never before has a G7 summit confronted so many severe, interconnected crises, with so many new leaders and an unpredictable US president,” said John Kirton of the G7 Research Group at the University of Toronto.Presidents and prime ministers will attend from states spanning the global north and south. But for Carney, who wants to project credentials earned as a central banker during Brexit and the 2008 financial crisis, the summit may boil down to one goal: showing he can handle Trump. “It’s like preparing the red carpet for Godzilla,” noted a Canadian government official, who spoke on the condition of anonymity so they could speak openly.The last time Trump was in Canada for a G7 meeting was in 2018, and that ended in an argument with then-prime minister Justin Trudeau, whom the president called “very dishonest and weak”. Trump refused to sign the traditional communiqué that signals unity among the world’s most important democracies. In his current term, Trump has raised tariffs on Canada and repeatedly declared that the country should become the “51st state” of the US.  “We just want unity at the summit but we don’t know what headspace the president will be in,” said an official from the prime minister’s office.Carney, who was elected less than two months ago, has dropped the formality of the joint communiqué, preferring to “break it up into thematic statements” to avoid messy debates over language, the official said.Heading into the summit, Trump has been consumed by the outbreak of war between Israel and Iran, his deployment of US troops to Los Angeles to quell protests over his immigration crackdown, and the military parade in Washington on Saturday. He has focused little on the G7. A senior US official said Trump, who will arrive in western Canada on Sunday night, wanted to “make progress on top-level economic and security issues of shared concern”. Among them were making “America’s trade relationships fair and reciprocal, unlocking new markets for American energy exports, and positioning the US to be the world leader and international partner of choice on AI technology”, the US official said. The senior US official gave a nod to Carney by saying that Canada had “worked with G7 colleagues to craft short, action-oriented leader statements”. “We appreciate Canada’s co-operation in the planning of this summit and their choice of a great location in Canada for these important conversations,” the official said.Asked if he would challenge Trump over his assertion that Canada should become the 51st US state, UK Prime Minister Sir Keir Starmer said: “But let me be absolutely clear: Canada is an independent, sovereign country and a much-valued member of the Commonwealth.” An EU official on Saturday said the Israel-Iran conflict was “certainly going to change a bit the character of the meeting”.“From our perspective, we have been concerned about Iran’s support to Russia for a while,” they said.Part of Carney’s political calculations for the G7 has been to invite global power brokers such as India, the United Arab Emirates and Saudi Arabia’s Crown Prince Mohammed bin Salman, although the latter is not attending.“The invitation of India’s Modi and MBS shows a significant shift in Canada’s global outlook under Carney,” said Carlo Dade, from the Calgary-based Canada West Foundation.As part of these preparations, Carney last week announced Canada’s plan to reach Nato’s defence spending obligation of 2 per cent of GDP by the end of the financial year in preparation for the G7 and a Nato summit at the end of the month. Defence spending has angered Trump, who wants Nato members to spend 5 per cent of GDP on defence.Ukraine’s President Volodymyr Zelenskyy, who has a fraught relationship with Trump, will be seeking assurances from the US president regarding a sanctions package that will slap 500 per cent tariffs on any country buying energy from Russia. Ukraine “remains a difficult discussion with the US” but “G7 partners are moving forward with additional pressure on Russia”, the EU official said.Kyiv has been pushing for western allies to increase economic sanctions against Russia in a bid to get Moscow to the negotiating table, even as Russian forces remain on the offensive. Trump’s response to the EU-led push for a lowering of the G7-agreed Russian oil price cap, and how the US president treats Zelenskyy, will be closely followed as part of the summit’s choreography, a European official said.The G7, held in the idyllic tourist location of the Rocky Mountains, will also be the first opportunity for the US, Mexico and Canada to meet to discuss their USMCA trade pact that is set for review next year but has been undermined since Trump launched wide-ranging tariffs on both of America’s trading partners.“There’s rumblings of a sit-down but nothing confirmed,” said an official in the prime minister’s office. “But this is not going to be a miracle meeting, it is just about face time.”It will also be the first G7 for Starmer, Germany’s Friedrich Merz, Japan’s Shigeru Ishiba and Carney. But a host of world leaders, including those from Australia, Brazil and South Korea, will also attend. South Africa’s President Cyril Ramaphosa is set to meet Trump only three weeks after a tense Oval Office meeting in which the US president made false accusations about a “genocide” of white farmers in the country.Indian Prime Minister Narendra Modi’s attendance is also viewed as part of Carney’s global play to improve relations after Canadian officials last year accused India of involvement in the 2023 murder of Canadian Sikh separatist Hardeep Singh Nijjar. A small contingent of Khalistan supporters is scheduled to protest against Modi’s appearance at the G7.“This is all about pragmatism and practicality and less finger-waving as we saw before with Trudeau; Canada can’t afford to do that any more,” said Canada West Foundation’s Dade. Additional reporting by David Sheppard More

This article is an on-site version of our The Week Ahead newsletter. Subscribers can sign up here to get the newsletter delivered every Sunday. Explore all of our newsletters hereHello and welcome to the working week.The gathering of most of the world’s most powerful nations for the G7 summit in Kananaskis, Alberta, was supposed to focus on international trade and pushing US President Donald Trump’s administration to continue supporting Ukraine. Israel and Iran have disrupted that agenda, but it has perhaps heightened the importance of this gathering amid the Canadian pine forests.Trump holds the most sway over Israel, with Washington the country’s biggest financial donor. Other leaders such as Canada’s Mark Carney and the UK’s Sir Keir Starmer are likely to urge caution, though their own relationship with Israel has frayed in recent weeks over the Netanyahu government’s continued refusal to allow in additional aid to Gaza. For more on what to expect over the coming days, read this.Over in Europe, ministers in Brussels are expected to set out legal measures to end the import of the last vestiges of Russian fossil fuels into the EU. Since Moscow’s full-scale invasion of Ukraine, EU countries have paid more than €200bn to Russia for fuel. Coal and oil imports have had sanctions imposed on them and gas should be phased out by 2027. The announcement, however, is unlikely to include plans to wean the bloc off a smaller but far more tricky reliance: Russian nuclear technology.Corporate and economic data is undergoing a summer lull this week, but the central bankers will be busy with a triple run of rich economy rate announcements. The monetary policy committees at the Bank of Japan, US Federal Reserve and the Bank of England vote on whether to move their base rates on Tuesday, Wednesday and Thursday respectively.The Fed is expected to hold borrowing costs at between 4.25 per cent and 4.5 per cent, in anticipation of further rises in inflation due to Trump’s tariffs feeding into consumer and producers prices — despite these being yet to appear in the data. Markets are pricing in two US rate cuts by the end of the year, with the first arriving in September or October.For the UK and Japan, the monetary policy decisions will come amid inflation updates. The Bank of Japan will make its rate decision ahead of the official inflation update on Friday. The core inflation rate climbed at its fastest rate in more than two years in April, and the expectation is that prices will rise more than expected this time, possibly prompting discussions about raising interest rates if global trade tensions ease. However, the BoJ’s benchmark rate is likely to be held at 0.5 per cent this time.Bank of England Monetary Policy Committee members, who split three ways last month when the majority voted to cut the benchmark rate to 4.25 per cent, have made it clear that they see a slowdown in wage growth as the key to further monetary loosening. But perhaps not now. Despite the recent rise in the unemployment rate the MPC is almost certain to hold off on any change this time. If you want more comment and data on inflation and interest rate movements, the FT has a handy tracker.The corporate news run is limited, partly because of the US financial markets being closed for Juneteenth on Thursday. TikTok is likely to get another reprieve from the threatened US ban from Thursday — Trump said as much in an interview with NBC. More details on the rest of the announcements below.One more thing . . . This Sunday we have a date with time. On June 22 1675, King Charles II issued a warrant authorising the construction of “a small observatory within our royal park at Greenwich”. Three hundred and fifty years later I think we can all agree that this British infrastructure project, designed by Sir Christopher Wren no less, was one of the monarchy’s better ideas. If you haven’t had a chance to visit, the FT’s Globetrotter section will take you on a virtual tour of Britain’s original time machine.What do you plan to do with the passing hours this week? Email me at [email protected] or, if you are reading this from your inbox, hit reply, and have a good week.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayCompetition Appeal Tribunal hearing expected for the case of Blur drummer Dave Rowntree, who is leading a class action law suit against the Performing Right Society for allegedly misallocating hundreds of millions of pounds in music royalties for songwritersTjeerd Jegen becomes B&M European Value Retail chief executive.Opec Monthly Oil Market ReportChina: May retail sales, industrial output and house price index dataUK: Rightmove June house price indexTuesdayFT Women in Business Summit (online). Register here.IEA Oil Market ReportJapan: interest rate decisionUS: May industrial production figuresResults: Ashtead Q4, Capita pre-close trading update, Jabil Q3, John Wiley Q4, Kenedix Office Investment Q4, La-Z-Boy Q4, Lennar Q2, RWS Holdings HYWednesdayDavid Bailey, executive director, prudential policy, at the Bank of England speaks at Risk.net Live Europe on ‘Innovation and growth: the PRA’s approach to competitiveness’Brazil: interest rate decisionEU: May harmonised indices of consumer prices (HICP) inflation rate dataGermany: Q1 producer price index (PPI) inflation rate dataUK: May consumer price index (CPI) and PPI inflation rate dataUS: interest rate decisionResults: AO World FY, GMS Q4, Korn Ferry Q4, Speedy Hire FYThursday30th anniversary of London’s Alternative Investment Market (Aim) for smaller, growing companiesAustralia: May labour force dataUK: interest rate decisionUS: Juneteenth National Independence Day. Financial markets closedResults: Cordiant Digital Infrastructure FY, NCC HY, Syncona FY, Urban Logistics Reit FY, Whitbread Q1 trading update, XPS Pensions FYFridayChina: interest rate announcementEU: European Central Bank Economic BulletinGermany: May PPI of industrial products inflation rate dataJapan: May CPI inflation rate dataSouth Korea: May PPI inflation rate data (AM local time)UK: May public sector finances data. Also, May retail sales figures for Great Britain and UK tax receiptsUS: Conference Board May leading indicators reportResults: Accenture Q3, Berkeley FY, CarMax Q1, Darden Restaurants Q4, Kroger Q1World eventsFinally, here is a rundown of other events and milestones this week. MondayCanada: G7 Summit continues in Kananaskis, Alberta, concluding tomorrowDenmark: International Conference on the Science of Science and Innovation begins in Copenhagen, discussing the dynamics of scientific research. The event, involving experts from business and academia, runs until Wednesday.UK: King Charles attends a service at Windsor Castle for National Garter Day, celebrating the Order of the Garter, founded in 1348 by Edward IIITuesdayPhilippines: Circular Economy Forum 2025, a two-day event at the Asian Development Bank in Manila to discuss reducing plastic pollution.UK: Royal Ascot horse-race meeting begins. The event was founded by Queen Anne in 1711, with the first four-day June meeting taking place in 1768. Also, in London, the 257th Royal Academy of Arts Summer Exhibition begins, running until August 17WednesdayRussia: Vladimir Putin will welcome attendees to the three-day 28th St Petersburg International Economic Forum, boasting participants from 137 countries and provincesUK: 33rd Raindance Film Festival, the annual celebration of independent cinema, begins in London. The festival closes on June 27 with the international premiere of The Academy, starring Maja BonsThursdayUK: Chatham House’s 10th London conference, a flagship event involving speakers from government, business and the media to discuss global governance in a world without rulesUS: TikTok ban is (again) due to come into force, with its owner, Chinese internet company ByteDance, required to either shut the app down or sell itFridayFrance: Paris Air Show opens to the public, running until SundayLuxembourg: Economic and Financial Affairs Council meets to discuss expansion of the euro area and the EU’s response to the Ukraine conflict among other itemsSaturdaySummer solstice commemorations, in which crowds gather at sites such as Stonehenge in the British county of Wiltshire to witness sunriseUK: London Climate Action Week kicks off with a series of events in the British capital. The event is now in its seventh yearSunday350th anniversary of King Charles II ordering the building of the Royal Observatory on a hill in London’s Greenwich ParkUK: Windrush Day, marking the anniversary of the arrival in 1948 of HMT Empire Windrush, one of the first ships to carry West Indian migrants to Britain during the postwar periodRecommended newsletters for youInside Politics — What you need to know in UK politics. Sign up hereWhite House Watch — What Trump’s second term means for Washington, business and the world. Sign up here More

Unlock the White House Watch newsletter for freeYour guide to what Trump’s second term means for Washington, business and the worldFor years international policymakers have pushed to make it cheaper for migrants to send remittances home. As with so many of Donald Trump’s interventions, the US president has turned that logic on its head: he wants to make it more expensive. Contained in the 1,000-plus pages of the “big, beautiful bill” going through Congress is a mean-spirited measure to tax money sent abroad by non-US citizens, including visa holders and permanent residents. The average fee to transfer $200 abroad is 6.4 per cent, according to the Migration Data Portal. The US levy would push that to nearly 10 per cent, making the US — the world’s top source of remittance flows with annual transfers of at least $80bn — the most expensive G7 country from which to transfer money. Claudia Sheinbaum, president of Mexico, which receives remittances worth 4 per cent of GDP, has called the levy a tax on the poor. Countries in Central America, including Nicaragua, Guatemala and Honduras, which rely on remittances for as much as a quarter of GDP, are likely to be far harder hit. Coming on top of savage cuts to aid and the threat of punitive tariffs against some of the world’s poorest countries, such as Lesotho and Madagascar, the proposed levy on remittances is a further blow to countries in desperate need of capital. Trump’s remittance tax, of course, is not a design flaw, but part of a deliberate strategy to flush out immigrants, legal or otherwise. Americans sending money abroad will have to prove they are citizens to avoid the levy. That could plausibly deter some illegal migration to the US. More likely, remittances will be pushed into crypto and stablecoins or through underground hawala “trust” networks, making flows harder to monitor by tax and law-enforcement authorities. The proposed levy is part of a broader Trump strategy to weaponise the tax system against perceived foes, whether groups such immigrants or, institutions such as Harvard University.Senators ought to oppose a punitive tax on hardworking people who send part of their wages home, especially at a time of tax giveaways for the rich. Countless studies have shown that such flows improve health and education outcomes in recipient countries. In 2024, remittances hit $685bn, dwarfing aid flows of $212bn that year, a gap that will only widen with cuts to overseas aid. Such flows have proved resilient to global shocks such as the 2008 financial crisis and the Covid pandemic. In the 10 years to 2024, according to the World Bank, remittances rose 57 per cent while FDI fell 41 per cent. In 2019, they overtook foreign direct investment to developing countries for the first time. From the perspective of recipient countries, remittances then are a vital source of finance. The most remittance-dependent countries include Tajikistan, at 45 per cent of GDP, and Lebanon, at 27 per cent. Liberia receives about $800mn in remittances a year, nearly the same as its entire budget. Faced with swingeing debt repayments and an exorbitant cost of commercial capital, many developing countries have come to rely on these transfers. That does not make remittances a viable development strategy. Developing economies should do everything to create the conditions for sustainable investment, the only long-term route out of poverty. Sending the best and brightest abroad can only take an economy so far. Still, the reality is that, in an environment of shrinking access to capital, remittances are a global safety valve. Trump’s levy is part of a much bigger squeeze on capital flows to the poorest countries. Little good is likely to come of it. More

The US Federal Reserve appears likely to keep interest rates steady when it meets next week, despite pressure from President Donald Trump for a cut, leaving investors to focus on what chair Jay Powell says about the strength of world’s biggest economy.The Fed is set to meet on Tuesday and Wednesday, and investors are pricing in almost no chance of a reduction in rates from their current 4.25-4.5 per cent range. Markets expect two cuts by the end of this year, with September likely to be the earliest that rates resume their downward path. Investors are betting that Powell will continue not to be swayed by pressure from Trump, who on Thursday repeated his call for a full percentage point cut in rates, calling the Fed chair a “numbskull” and saying he “may have to force something”.Powell was likely to “strike a tone of cautious patience” at the chair’s customary post-meeting press conference, said Gregory Daco, chief economist at EY-Parthenon.“He will offer little in the way of forward guidance and instead underscore the high degree of uncertainty facing households and businesses,” Daco said.The Fed’s June meeting follows a smaller than expected increase in US inflation, with the consumer price index rising 2.4 per cent in May, compared with an expected 2.5 per cent increase. Core inflation, which excludes changes in food and energy prices, was static at 2.8 per cent, defying predictions of a slight increase.Goldman Sachs, which does not expect a Fed rate cut until December, recently bumped up its estimates for this year’s GDP growth from 1 per cent to 1.25 per cent. Signals from inflation and trade policy uncertainty indices have pointed to a “somewhat smaller effect of tariffs on the economy”, Goldman analyst David Mericle wrote.The bank also put the chance of a recession in 12 months’ time at 30 per cent, down from 35 per cent, “in light of the slightly higher baseline and the lack of any signs of major downside risks emerging so far”, Mericle added. Will SchmittWhen will the BoE next be able to cut interest rates?With few in the market expecting an interest rate cut by the Bank of England next week, investors will be scouring the minutes and statement accompanying the decision on Thursday for clues as to how policymakers view recent weak economic data and a surge in the oil price.Markets expect the BoE to continue its pattern, established last summer, of cutting and then pausing, and are placing only a roughly 10 per cent probability on a quarter-point cut to 4 per cent. Since May’s meeting, the data has largely been weaker. The economy recorded its sharpest contraction since 2023 in April, while wage growth slowed in the three months to that month. Unemployment has edged higher, and business surveys, including purchasing managers’ indices and the BoE’s Decision Maker Panel, point to waning price pressures.Inflation came in at a higher than expected 3.5 per cent rate in April, but later the Office for National Statistics said it overstated the pace of price growth by 0.1 percentage points due to an error. Fresh inflation figures for May will be published on Wednesday, with markets expecting a fall to 3.4 per cent.While expecting interest rates to remain on hold, Edward Allenby, economist at Oxford Economics, said any reference to a growing confidence that slack was emerging in the economy would be “a tacit indication that an August cut is the baseline view for a majority of committee members”.The surge in global oil prices as Israel launched air strikes against Iran complicates the outlook for inflation and is likely to deepen the divisions seen at the last meeting among the members of the Monetary Policy Committee, say analysts.For June’s meeting, many economists expect seven MPC members to vote for rates to remain on hold, while Swati Dhingra and Alan Taylor are expected to back a cut, amid subdued domestic demand and a drag from higher US tariffs. Valentina RomeiWill the SNB take interest rates into negative territory?Traders are taking it as a given that the Swiss National Bank will cut its main interest rate from 0.25 per cent to at least zero on Thursday. The focus instead will be on whether or not it goes for a bumper half-point cut and takes rates into negative territory for the first time since 2022. There is a roughly 30 per cent chance of that happening, according to traders’ swaps market bets.The stakes are high. Swiss inflation turned negative in May for the first time in four years, and US President Donald Trump’s trade war has lit a fire under the franc, a haven in times of stress, weighing further on consumer prices.Analysts think the central bank is more likely to use interest rate cuts than currency interventions that could provoke Trump’s ire and make a trade deal more difficult. However, the prospect of negative rates, after the previous eight-year experiment, is also not popular with rate-setters. Capital Economics expects a half-point rate cut, pointing to weak underlying inflation pressures, the franc’s appreciation and the potential for tariffs and a trade deal to weigh on demand.“Just as the SNB was concerned about second-round effects during the recent period of high inflation, we think policymakers will be worried about the risk of deflation becoming entrenched,” said Adrian Prettejohn, the research house’s Europe economist. Ian Smith More