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Good morning and welcome back. In today’s newsletter:
Federal Reserve cuts rates to three-year low after fractious meeting
Zelenskyy talks Ukraine postwar plan with Bessent, Kushner and Fink
Auto industry warns on EU’s ‘Made in Europe’ proposals
Starling Bank weighs plans to buy another UK lender
We begin with the US Federal Reserve, which has cut interest rates to a three-year low after a divisive meeting that exposed deep fractures in the world’s most important central bank over whether to prioritise addressing a weakening labour market or elevated inflation.
The latest: The central bank yesterday lowered its benchmark rate by a quarter point to between 3.5 and 3.75 per cent. It marked the third reduction in borrowing costs in a row.
Policymakers noted that “downside risks to employment rose in recent months” as the jobless rate increased and hiring slowed, while also indicating that inflation remained “somewhat elevated”.
Three of the dozen voters on the Fed’s rate-setting board objected to the central bank’s quarter-point cut, the most powerful revolt since 2019.
Market reaction: Stocks and bonds both rallied following the rate cut. The S&P 500 closed 0.7 per cent higher. Meanwhile, the two-year Treasury note yield, which is sensitive to monetary policy expectations, fell 0.07 percentage points to 3.54 per cent. Read the full report.
Here’s what else we’re keeping tabs on today:
Economic data: The IEA and Opec have their monthly oil market reports.
EU: Eurozone finance ministers elect a new Eurogroup president.
UK: Bank of England governor Andrew Bailey gives evidence to the Covid-19 inquiry in London.
Switzerland: The Olympic Summit is held in Lausanne, where leaders of sports federations and other delegates discuss the future of the Games.
Five more top stories
1. Volodymyr Zelenskyy held talks yesterday with US Treasury secretary Scott Bessent, Donald Trump’s son-in-law Jared Kushner and BlackRock boss Larry Fink about Ukraine’s postwar reconstruction. Read the latest on discussions to end the conflict.
2. Carmakers have warned that “Made in Europe” proposals, which set local content levels for products to address dependencies on trading partners such as China, could cause further disruption to supply chains and slow down the transition to electric vehicles.
3. Google DeepMind will establish its first “automated science laboratory” in the UK, as it signs a partnership with the British government in a move designed to enhance the use of artificial intelligence across the country. Read more on the plans.
4. CVC has named Peter Rutland to the newly created role of president, as the European private capital firm, which manages €200bn in assets, steps up its succession planning ahead of its next big fundraising. Read more on the leadership changes.
5. Exclusive: Starling Bank is weighing plans to buy another UK lender in a move that would allow it to put its £12bn worth of customer deposits to more profitable use. The fintech was actively looking at several acquisition options, two people familiar with the discussions said.
Banking oversight: Revolut’s chief executive Nik Storonsky is demanding and disruptive but is an asset to Britain, writes John Gapper.
The Big Read
© FT montage/Getty/Shell
Shell and BP sought to transform their businesses to cut emissions. But neither effort lasted and they ended up scaling back the transition, writing off billions of dollars as units were sold off or shut. Find out what went wrong with their plans for a green revolution.
We’re also reading and listening to . . .
Chart of the day
Paramount’s bid for Warner Bros offers a rare opportunity for Gulf investors to acquire a sizeable stake in a top US media brand. Buying into Hollywood’s intellectual property is also in line with efforts to diversify the economies of Gulf states.
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Take a break from the news . . .
Columnist Jemima Kelly gets up close — sometimes a little too close — with the wildlife on safari in western Uganda.
© Sam Churchill
