MAGGIE PAGANO: All eyes on the Fed’s next move as US inflation falls for the second month in a row
Investors cheered some brighter news from across the Atlantic.
Inflation in the US came down for the second month in a row, sending stock markets jumping around the world on hopes that the Federal Reserve’s recent steep rises in interest rates can now start to ease up.
The November inflation figures showed the Consumer Price Index coming in at 7.1 per cent, nicely below expectations of 7.3 per cent, and down from an annual gain of 7.7 per cent.
Hawk: Federal Reserve chairman Jerome Powell may still want to go the whole hog and put rates up by another 75 basis points
While the rate is still well above the Federal Reserve’s 2 per cent target, this latest figure was the lowest level since November 2021.
It was good enough news to send global stock markets into a spin with US stocks rocketing higher and the ten-year Treasury yield falling below 3.5 per cent.
The inflation slowdown puts even more pressure on Jay Powell and the Federal Reserve when they meet today to decide on where interest rates go next.
The hawkish Powell – who has said he prefers not to rely too much on recent data – may still want to go the whole hog and put rates up by another 75 basis points.
But this time he may find more opposition from other members of the Open Market Committee who are less hawkish, preferring a more cautious approach towards rate increases to allow a softer landing.
They argue that jacking up rates too steeply again will tip an already delicate economy into recession, triggering an even deeper downturn worldwide.
There are several conflicting signs. While prices are slowing, the US housing market is still rising and the labour market is cooling.
Which is why Powell has a fine line to tread between overdoing the rises to dampen the fire or lighting a bigger fire.
This suggests it is more likely the Fed will opt for a half-percentage point hike, which is less than previous ones.
Where the Fed chooses to go will influence the Bank of England (BofE) and the European Central Bank, which are both meeting tomorrow to deliberate on interest rates If they have done their homework, they too should have more clues to where prices have been moving in the past few weeks.
And if inflation here is seen to be slowing – which global trends such as shipping rates tend to suggest – the sensible move would be to play for time rather than play catch-up with the US. The BofE should be cheered that sterling rose to $1.24 on the news, the highest level since Boris Johnson was PM.
The US authorities don’t hang about. It is only a few weeks since the spectacular collapse of Sam Bankman-Fried’s FTX $32billion crypto empire and the Securities and Exchange Commission (SEC) has already charged him with defrauding equity investors out of $1.8billion. Nor do they mince their words.
The SEC’s chief rottweiler, Gary Gensler, went straight for the jugular: ‘We allege that Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.’
The indictment also claims SBF made ‘undisclosed venture investments, lavish real estate purchases and large political donations’. And they were whoppers.
Transparency group OpenSecrets estimates that SBF and other FTX executives gave up to $70million to political campaigns over the last 18 months – making them the third biggest donor in the latest electoral cycle. SBF was one of the single biggest donors to the Democrats.
No wonder the regulators are also looking into the influence of crypto tycoons on political campaigning, the suggestion being they were piling pressure on politicians to make regulations easier.
The role of SBF’s parents, lecturers at Stanford University, is also being investigated.
The timing of the charges is curious. SBF was due to testify before the House Financial Services Committee yesterday about FTX’s collapse.
Conveniently for some, maybe, he can’t talk publicly about what went on at FTX. Until now, SBF has admitted he messed up managing FTX but denied committing fraud.
It is the most extraordinary story – how a 30-year-old who was hailed as crypto’s answer to Warren Buffett is turning out to be more of a Bernie Madoff.
On the prowl
Animal spirits are alive and kicking at Sosandar. The Cheshire-based online fashion business launched only a few years ago by Ali Hall and Julie Lavington has swung strongly into the black.
With record sales, they are on target for £2million profits next year. You can see why the former glossy magazine publishers are roaring ahead.
They have a feel for what women want in such hard times – lots and lots of sequins, glitter, leather and, of course, animal print.