The Notebook: Victoria Scholar on the Fed’s new move, Adidas’s Yeezy problem and Shell’s AGM showdown
Where the City’s movers and shakers get a few things off their chest. Today, it’s Interactive Investor’s Victoria Scholar.
After 10 straight hikes, is it now time for a ‘Fed skip’?
Forget the hike, pause and cut, the new word to enter the lexicon of central bank watchers is the ‘Fed skip’. US monetary policymakers are considering whether to pass on June’s rate hike and carry out another increase in July instead.
Dallas Fed president Lorie Logan : “The data in coming weeks could yet show that it is appropriate to skip a meeting.” Fed chair Jay Powell commented that decisions would be made “meeting by meeting”, adding that officials “can afford to look at the data and the evolving outlook to make careful assessments”. A pause could give Fed policymakers time to digest further economic data as well as the fallout from the recent banking sector turmoil.
Financial markets are betting on no change to the Federal funds rate in June. However, that outcome has become less certain with the odds of a hike increasing from around one-in-ten earlier this month to around one-in-three. Along with strong recent US economic data, the increased chances of a hike in June have boosted the US dollar, which has reversed some of its recent weakness to hit a two-month high. However, the greenback has still depreciated significantly since the highs in October as the Fed approaches the peak of its rate hiking cycle.
In the latest figures, US inflation dropped to 4.9 per cent, falling faster than expected to reach the lowest level since April 2021, with energy costs dropping and food price inflation slowing. The headline inflation rate peaked last summer at 9.1 per cent and has been steadily easing off since as the Fed’s aggressive stream of rate hikes starts to take effect. However, inflation is still sharply above the central bank’s two per cent target, raising questions on whether more tightening is required.
In May, the Federal Reserve raised interest rates again by 25 basis point to a range of 5.0 per cent to 5.25 per cent, the 10th consecutive rate increase since the start of the hiking cycle in March 2022. The cost of borrowing now stands at the highest level since September 2007.
Adidas’s big shoes to bill
Adidas plans to start selling trainers from its leftover Yeezy range after its tie-up with rapper Kanye West ended. The sportswear company still has £1bn worth of unsold inventory in the collection. A ‘significant amount’ of the proceeds will be donated to organisations fighting against racism and antisemitism such as the Anti-Defamation League. CEO Bjorn Gulden said: “There is no place in sport or society for hate of any kind, and we remain committed to fighting against it.”
Shell set for AGM showdown
Shell has been preparing for a contentious AGM today. The oil giant and its climate conscious investors are at loggerheads over emissions. Several shareholder groups are backing climate activist group Follow This, which is proposing stronger emissions cuts by 2023. Shell is recommending that shareholders vote against the proposals. Last year, Shell’s AGM was disrupted by protesters and activists are now ramping up efforts to push the low carbon economy to the top of the agenda.
Metal market turns rusty
The London Metal Exchange (LME) saw profits slump to the lowest level in eight years in 2022, down 27 per cent to $56.1m (£45.2m). The nickel market crisis in March hit the exchange when the metal surged by 250 per cent in just over 24 hours, causing negative reverberations across the industry and landing many traders with hefty losses on their short positions. A week’s suspension of the nickel market hurt the LME which suffered from a drop in trading volumes. It called 2022 “a challenging year”.
What I’m listening to
Three top UK journalists, Emily Maitlis, Jon Sopel and Lewis Goodall host a daily podcast, digesting and analysing the day’s news. The latest episode looks at why Matt Hancock, Donald Trump, Kwasi Kwarteng, Boris Johnson, and many other politicians refuse to simply answer journalists’ questions or apologise. The podcast tries to get to the bottom of the ‘evasiveness of Westminster’ and the ‘suffocation’ of our political media culture. However, the podcast also points out that when Nick Clegg attempted to apologise for his tuition fees U-turn in 2012, it turned into a shambolic viral internet joke.
Can I quote you on that?
Disappointed to have been singled out when using the same legal mechanismMeta’s president of global affairs Nick Clegg on Meta’s record 1.2bn (£1.04bn) fine