US bond markets should be in revolt. Fed independence matters | Nils Pratley
Well said, Jerome Powell,The chair of the US Federal Reserve responded to news of a subpoena from the US Department of Justice with a statement that was extraordinary, necessary and stark,A criminal investigation into the Fed, and him personally, over the renovation of the central bank’s headquarters is an attempt to bully officials into setting policy according to the president’s whims, said Powell,“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation,” he said,It definitely needed to be spelled out.
It is one thing for Donald Trump to whine and hurl insults – Powell has previously been called a “stubborn mule” for not cutting interest rates faster – or even fantasise in public about firing him.But it is a different order of seriousness if the DoJ is involved, even if Trump denied knowledge of its investigation.On day one, financial markets took a ho-hum view of a scene that could come from a banana republic.The dollar weakened, but only slightly, and US treasuries suffered modest selling pressure.The sanguine reaction probably flows from a few factors.
First, this affair could fizzle out.An overspend on the refurbishment of a public building hardly seems like the stuff of criminal charges.Second, Powell’s term ends in May.Third, a whole Fed committee sets rates so, if Powell’s current colleagues prize their independence as he does, Trump can’t impose his will overnight even if he picks a tame poodle as the next chair.Fourth, the Fed is in cutting mode on rates currently anyway, so the policy quarrel is about pace rather than a more fundamental “up or down” question.
Yet Powell is plainly right to sound the alarm because it is not hard to imagine how tensions could escalate, especially if the next debate on rates is more basic.This is a perilous moment for the US to mess with the principle that rate-setters under an independent system should be free of political pressure – and be seen to be so.The US is running an enormous fiscal deficit, and the data on unemployment and prices is giving mixed signals.While the headline growth numbers are still decent, momentum is slowing.One can also question how much work is being done by the boom in spending on AI, which is vulnerable (possibly) if returns on capital don’t match the promoters’ hype.
Complicating matters further, the medium-term effect on inflation of Trump’s tariff policies will only start to become clearer this year.Owners of US assets and US bonds, you can be sure, would want the country’s central bank to anchor inflation expectations firmly.“A combination of hot inflation and more bets on the Fed’s loss of independence would feed real rate concerns that could cause major dollar depreciation,” say ING’s currency analysts.You bet.The dollar fell last year on a trade-weighted basis.
Any flight from US assets would only increase, via the bond markets, long-term borrowing costs for US businesses and consumers.Therein lies the self-defeating aspect of wrecking confidence in US monetary policymaking, as wiser heads in the Republican party understood on Monday.Does Trump himself recognise how undermining the Fed would backfire on him, and the US? For now, markets seem to cling to the idea that he does – and that he will push things only so far.That assumption, though, remains untested and smacks of complacency given that the administration’s war on the Fed has been running for a year.A pre-emptive revolt in US bond markets would be useful at this point.
Coal power generation falls in China and India for first time since 1970s
Coal power generation fell in China and India for the first time since the 1970s last year, in a “historic” moment that could bring a decline in global emissions, according to analysis.The simultaneous fall in coal-powered electricity in the world’s biggest coal-consuming countries had not happened since 1973, according to analysts at the Centre for Research on Energy and Clean Air, and was driven by a record roll-out of clean energy projects.The research, commissioned by the climate news website Carbon Brief, found that electricity generated by coal plants fell by 1.6% in China and by 3% in India last year, after the boom in clean energy across both countries was more than enough to meet their rising demand for energy.“The drop in coal power and record increase in clean energy in China and India marks a historic moment,” according to the report, which could be “a sign of things to come”
Why is Trump’s justice department investigating Fed chair Jerome Powell?
The US Department of Justice has opened a criminal investigation into the Federal Reserve chair, Jerome Powell, as Donald Trump’s White House escalates its campaign against the central bank’s independence.In a video posted on Sunday, a typically reticent Powell took the extraordinary step of denouncing the investigation as punishment for not setting interest rates in accordance with the US president’s wishes.This is just the latest development in a long string of White House attacks against the Fed. Here’s what we know about what’s going on.As chair of the Fed, Powell has been the public face of the central bank since 2018
Malaysia blocks Elon Musk’s Grok AI over fake, sexualised images
Malaysia has become the second country to temporarily block access to Elon Musk’s Grok after a global outcry over the AI tool and its ability to produce fake, sexualised images.Malaysia said it would restrict access to Grok until effective safeguards were implemented, a day after similar action was taken by Indonesia.Several governments and regulators have taken action over Grok’s image tool, which is embedded in the X social media site and has provoked outrage as it allows users to manipulate images of women and children to remove their clothing and put them in sexual positions.The Musk-led company that developed Grok, xAI, said last week the ability to generate and edit images would be “limited to paying subscribers” on X. Such users have provided personal details to the company and can be identified if the function is misused
UK threatens action against X over sexualised AI images of women and children
Elon Musk’s X “is not doing enough to keep its customers safe online”, a minister has said, as the UK government prepares to outline possible action against the platform over the mass production of sexualised images of woman and children.Peter Kyle, the business secretary, said the government would fully support any action taken by Ofcom, the media regulator, against X – including the possibility that the platform could be blocked in the UK.Kyle said Ofcom had received information it had requested from X as part of a fast-tracked investigation into the use of platform’s built-in AI tool, Grok, to generate large numbers of manipulated images of people, often depicting them in minimal clothing or sexualised poses.The technology secretary, Liz Kendall, who said on Friday that she expected action from Ofcom within days, is due to give a statement to the Commons on Monday afternoon.Kyle told Sky News: “Let me be really clear about X: X is not doing enough to keep its customers safe online
Mark Allen advances in Masters despite battle with food poisoning
Mark Allen shrugged off a bout of food poisoning to beat Mark Williams 6-2, winning five successive frames, and book a Masters quarter-final with Judd Trump or Ding Junhui, who play on Wednesday.Speaking to the BBC, Allen, the 2018 champion, said: “I prepare properly for these events, but I couldn’t prepare for this at all as I’ve been lying in bed all week with food poisoning. I just thought: ‘Go out there and give my best.’ I wouldn’t have had much left if it had got much closer.”Zhao Xintong stepped up his quest to complete snooker’s triple crown after breezing into the quarter-finals
Swiss resort Crans-Montana, scene of fatal bar fire, will be an Olympic venue in 2038
The Swiss ski resort of Crans-Montana, which was the scene of a fatal bar fire on New Year’s Day, is set to host the Alpine ski races at the 2038 Olympics.Less than a fortnight after the blaze at Le Constellation that killed 40 and injured 116 other people, officials for the bid have said that the municipality is a key site in their proposals for the Games in 12 years’ time.Switzerland has been granted privileged status by the International Olympic Committee, which means no other country will be allowed to bid while it finalises its proposal. Barring an unexpected development, therefore, it will host the 2038 Games.On Monday organisers confirmed that Crans-Montana would stage events as part of its plan to host competitions across the country in 12 years’ time in order to avoid taxpayer spending on construction
Post your questions for R&B star Jill Scott
Mindy Meng Wang on the ‘disorienting’ experience of her father’s funeral – and the Chinese cyber-opera it inspired
Hawaii: A Kingdom Crossing Oceans review – a feather-filled thriller full of gods, gourds and ghosts
Three board members and board chair resign from Adelaide festival as Randa Abdel-Fattah sends legal notice
Adelaide festival did not dump Jewish columnist from 2024 program despite request from Randa Abdel-Fattah and others
Eddie Izzard: ‘I once ran 90km in just under 12 hours. That was a tough day’