Fed easing cycle begins as focus strikes to defending jobs | Invesloan.com

Good morning. Yesterday’s newsletter featured our exclusive interview with the EU’s outgoing antitrust chief (here, in case you missed it); today, we speak to her successor, who has a different view of merger rules. More below, together with the latest updates from the escalating Middle East crisis.

But first, we turn to the US Federal Reserve’s bold move to cut interest rates by half a percentage point, launching its first easing cycle since the onset of the pandemic.

Officials also signalled more reductions would follow, with projections in the so-called dot plot showing most of the central bank’s rate-setters estimated the policy rate would fall by another half-percentage point this year followed by a series of cuts in 2025 to leave rates at 3.25-3.5 per cent.

Far from sparking panic — the concern of many ahead of the meeting — yesterday’s half-point cut was taken in stride by financial markets, with major stock benchmarks and government bonds ending the day barely changed.

The decision, in many ways, marks a watershed moment for Jay Powell, capping a tumultuous period as chair of the world’s most important central bank and battling the worst bout of inflation in 40 years. With price pressures easing, here’s more on how he is focusing on the Fed’s other mission: protecting jobs.

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

• UK interest rate decision: The Bank of England is expected to keep rates on hold. Traders scaled back bets on a cut after yesterday’s data showed August inflation held steady at 2.2 per cent.

• UN Security Council: The body meets to discuss Israeli settlements in occupied Palestinian territory. Our latest visual investigation looks at how Israeli soldier-settlers have intensified locals’ fears of attacks.

• EU-China trade: Beijing’s commerce minister Wang Wentao will meet EU trade commissioner Valdis Dombrovskis in Brussels after the bloc proposed sharply higher tariffs on Chinese electric vehicles.

• Companies: Shareholders of Masimo, which recently won a patent infringement case against Apple, vote on whether to remove its chair and founder Joe Kiani from the board. Next and FedEx have results.

For more insight into what rate-setters are thinking, sign up for our Central Banks newsletter by Chris Giles if you’re a premium subscriber, or upgrade your subscription here.

Five more top stories

1. Exclusive: The EU’s incoming competition chief has promised that the bloc’s merger rules will “evolve” to help European companies build scale to take on global rivals. Teresa Ribera told the Financial Times she would take a “step by step” approach to reforms to better compete with the US and China. Read her first interview since being picked for one of the EU’s most powerful roles.

2. Two co-ordinated attacks blamed by Hizbollah on Israel have left the militant group reeling after thousands of electronic devices including pagers and walkie-talkies were detonated over two days. The successive attacks, which together killed at least 32 people and left more than 3,000 injured, have dealt a humiliating blow to the Lebanese group and raised fears of an all-out Middle East war.

• The FT View: The latest attacks were reckless acts that stoke the flames of conflict, writes the FT’s editorial board.

• Pager supply chain: The devices involved in the audacious attacks have left behind a mystery spanning three continents.

3. ING will dump clients it believes are not doing enough to reduce their climate impact, with the Dutch bank’s chief executive announcing that its largest clients had until 2026 to make sufficient progress. The move is the latest sign of divergence between European and US banks over the risks of global warming.

4. Exclusive: UK companies will be able to keep new hires on probation for up to six months under a compromise Labour plan, despite a controversial election pledge to introduce basic individual rights from day one for all workers. Jim Pickard and Delphine Strauss have more details.

5. JPMorgan Chase has tasked one of its bankers with overseeing the “wellbeing” of its junior bankers in response to concerns about working conditions for young Wall Street employees. Following the death in May of a junior banker at Bank of America, the industry long known for 100-hour work weeks is under renewed scrutiny.

The Big Read

Schizophrenia sufferers are frequently pushed to the fringes of society, haunted by the delusions and hallucinations that define the worst flare-ups of the illness, while poorly served by a choice of old and imperfect treatments. Now hope is at hand. If approved by US regulators this month, a twice-daily pill will arguably be the first truly novel treatment for the “cancer of psychiatry” in more than seven decades.

We’re also reading . . . 

• Bank of London: A short history of the once-promising fintech upstart, from its “unicorn” status to its plummet back to earth after an incident with tax authorities.

• America’s economic tools: The US should think twice before replacing sanctions with tariffs, writes Henry Farrell, professor at Johns Hopkins University.

• Northvolt: The Swedish start-up that became a symbol of Europe’s green ambitions is fighting for survival after struggling to secure funds and suffering a number of worker deaths.

• London infrastructure: For the first time in about 20 years, no major public transport projects are being constructed in the UK capital. Here’s why.

Chart of the day

A frantic hunt by chocolate manufacturers for high-grade cocoa has left a backlog of old, poor-quality beans lying in London’s warehouses, leading to a rare divergence in prices between the UK and the US.

Take a break from the news

Don’t miss the FT foreign correspondents’ guide to business dining around the world, which includes top spots to seal deals in London, Frankfurt and Madrid.

Additional contributions from Gordon Smith and Benjamin Wilhelm