The Federal Reserve’s independence is about to be tested like never before
The time has come to ban the “revolving door” between the White House and the Federal Reserve, two academics argued last year.Doing so would be “critical to reducing the incentives for officials to act in the short-term political interests of the president”, they wrote.Eight months ago, the two writers – Dan Katz and Stephen Miran – joined the Trump administration in senior roles.On Tuesday, Miran, the chair of the US Council of Economic Advisers, walked into the Fed as a governor.Strolling through the revolving door himself, Miran pledged during his confirmation hearing to preserve the Fed’s independence, but made clear he would not resign from the White House, just take unpaid leave.
Having expressed concern last year about the Fed’s vulnerability to the short-term political interests of the president, Miran was rushed into his new seat on the central bank’s board of governors hours before its latest meeting – as Donald Trump continued to push to have another voting member removed.The president, at least, is clearer about aspirations for the Fed.“We’ll have a majority very shortly,” Trump said of the central bank’s rate-setting open market committee last month.“So that’ll be great.”As his efforts to exert greater influence and fire Lisa Cook, a governor appointed by Joe Biden, fuel concern over the Fed’s ability to operate without political interference, Trump was asked by reporters on Tuesday if he thought the central bank was independent.
“Oh, it should be,” he replied.“But I think they should listen to smart people, like me.”For a generation, presidents – no matter how smart they may be – have broadly steered clear of publicly expressing opinions for the Fed to listen to.Trump has bulldozed through this norm, calling for drastic rate cuts and attacking Fed chair Jerome Powell for not delivering them.On Wednesday, the Fed finally nudged rates in the direction Trump has been demanding, albeit not at nearly the pace he wants.
The benchmark federal funds rate was cut by 25 basis points to a range of between 4 and 4,25%, their lowest level in almost three years, and policymakers indicated more reductions would follow,There was only one dissent: Miran wanted to cut by 50 basis points,If Miran is truly independent from the White House, his first vote on interest rates as Fed governor fell somewhat conveniently in line with the president’s demands for faster, and deeper, cuts than his new colleagues have been minded to execute,Other rate-setting officials have been far more concerned about striking a delicate balance.
Of course, they want to shore up the economy – and cutting rates typically spurs activity – but they are also wary of inflation, which has held firm in recent months.The economic impact of Trump’s sweeping tariffs on foreign imports is one thing.But the uncertainty caused by months of erratic threats, declarations, pauses and vague trade pacts with certain economies has so far cast the darker shadow.“Changes to government policies continue to evolve, and their effects on the economy remain uncertain,” Powell, ever the diplomat, put it in a press conference on Wednesday.Risks around inflation are “tilted to the upside”, he added, with risks to the labor market to the downside.
Official data for August indicated that price growth is again picking up, and Fed officials have increased their expectations for inflation next year, according to projections released alongside their latest decision.But Trump, and, apparently, Miran, believe concern over higher inflation, and the risk of overheating the US economy by cutting rates too fast, is unfounded.Sign up to Headlines USGet the most important US headlines and highlights emailed direct to you every morningafter newsletter promotionThe US president, impatient for the Fed to come around to his way of thinking, is trying to change who sits around the table.Miran has secured a seat – at least until the new year.The campaign to remove Cook continues.
And Powell’s term as chair will expire next year, enabling Trump to select a new figure to lead the Fed.For now, Trump’s control over the central bank remains limited.Sure, Miran might have voted for a deeper cut, but at this week’s meeting there “wasn’t widespread support at all” for this move, Powell stressed afterwards.The Fed chair expressed confidence that discussions on rates remain unaffected by politics.Such considerations are typically left at the door, he noted, as 12 voting policymakers – out of a pool of 19 – gather at a table to make the decision.
“The only way for any voter to really move things around is to be incredibly persuasive,” said Powell,“And the only way to do that, in the context in which we work, is to make really strong arguments based on the data, and one’s understanding of the economy,That’s really all that matters,”“That’s in the DNA of the institution,” he added,“That’s not going to change.
”Time will tell.“We’re strongly committed to maintaining our independence,” Powell told reporters.“And beyond that, I really don’t have anything to share.”That strong commitment faces an extraordinary test.“They have to make their own choice,” Trump said of the Fed earlier this week.
“But they should listen.”
Bank of England governor says UK ‘not out of the woods’ on inflation, after leaving interest rates on hold – as it happened
The Bank governor, Andrew Bailey, has warned that the UK is ‘not out of the woods’ in the cost of living squeeze.Announcing today’s decision to leave interest rates on hold, Bailey said:“Although we expect inflation to return to our 2% target, we’re not out of the woods yet so any future cuts will need to be made gradually and carefully.”Food prices have been a key factor pushing up inflation, and there are forecasts that food inflation will rise towards 5.5% by the end of the year.Time to wrap up…The Bank of England has left interest rates on hold at 4% and will slow the pace of its “quantitative tightening” programme in the year ahead to avoid distorting jittery government bond markets
Novo Nordisk shares climb after positive results for anti-obesity pill
The value of the drugmaker Novo Nordisk jumped by about £9bn on Thursday after research showed that taking its new anti-obesity pill can result in almost as much weight loss as its Wegovy jab.The Danish company is racing against its US rival Eli Lilly to get a tablet treatment to market. Shares in Novo Nordisk climbed by more than 6% on hopes that it can claw back market share lost to Eli Lilly and cheaper generic versions of GLP-1 drugs.The shares had fallen by nearly 60% in the past year as sales slowed and Novo issued several profit warnings, prompting its new chief executive, Mike Doustdar, to plan 9,000 layoffs.Novo said on Thursday that a once-daily pill version of Wegovy helped people achieve “significant weight” loss in a clinical trial, with close to one in three participants losing 20% or more weight
Meta announces first Ray-Ban smart glasses with in-built augmented reality display
Meta has announced three new pairs of AI smart glasses, including the first Ray-Bans with a built-in screen for augmented reality.The Meta Ray-Ban Display will be the first smart glasses with a heads-up display from a mainstream brand since the ill-fated Google Glass. They use a classic Wayfarer-like styling to avoid looking too obviously like wearable technology, while still having a camera, speakers and microphone.A small, bright and crisp colour display is projected on to the inside of the right lens, which appears to float just below the wearer’s eye line, and can show anything from text and images to live video calls. The display appears when interacting with the glasses, but isn’t visible from the outside
Google DeepMind claims ‘historic’ AI breakthrough in problem solving
Google DeepMind claims it has made a “historic” artificial intelligence breakthrough akin to the Deep Blue computer defeating Garry Kasparov at chess in 1997 and an AI beating a human Go champion in 2016.A version of the company’s Gemini 2.5 AI model solved a complex real-world problem that stumped human computer programmers to become the first AI model to win a gold medal at an international programming competition held earlier this month in Azerbaijan.In a performance that the tech company called a “profound leap in abstract problem-solving”, it took less than half an hour to work out how to weigh up an infinite number of possibilities in order to send a liquid through a network of ducts to a set of interconnected reservoirs. The goal was to distribute it as quickly as possible
Nottinghamshire stun Surrey, Somerset v Hampshire, and more: county cricket, day four – live
I’m going to write up now for the paper but do chat on BTL.There are four matches in play:In Division TwoGloucestershire are 11-1, and need 147 to beat Northants at Bristol.You’d expect handshakes at Old Trafford soon, where Middlesex are 86 behind but still have seven wickets left. This will, I think, send Glamorgan up.In Division OneDurham need 24 more runs for maximum batting points against Worcestershire
Salt’s fine form adds flavour to question of who opens for England at T20 World Cup | Taha Hashim
Phil Salt’s opening remarks in his post-match press conference were a slight surprise. He had just hit 89 to win England’s series opener against Ireland, following on from his unbeaten 141 last Friday. But his mind was still on the missed opportunity inbetween. “I was quite disappointed at Trent Bridge to not get out there and have a chance to win a series against South Africa,” he said.Rain ruined that decider on Sunday, denying a man who had found form – three consecutive single-figure scores preceded his hundred – and wanted more
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