Economists expect Fed to hold rates at 22-year high until next July

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Leading economists are expecting the Federal Reserve to preserve the 22-year high in US interest rates until at least July 2024, according to the latest poll by the Financial Times.

While most of those surveyed, between December 1 and December 4, thought the rate-raising phase was now over, almost two-thirds of the respondents said the central bank would begin to cut its benchmark rate only by the third quarter of next year.

Three-quarters of those polled also expect that when the cuts come, the federal funds rate will be cut by only half a percentage point or less in 2024 from its current position of 5.25 per cent to 5.5 per cent.

Meanwhile, US job openings data has provided more evidence that the central bank’s efforts to damp demand are working as openings fell to their lowest level in more than two years in October.

Businesses advertised 8.7mn job vacancies in October, down from 9.6mn in September, according to the labour department’s Job Openings and Labor Turnover Survey released yesterday. It is the lowest level of openings since March 2021.

Advocacy groups are raising concerns that many lower-income consumers will struggle to pay their bills in the new year as the number of Americans choosing “buy now, pay later” (BNPL) payment methods for their holiday shopping surges.

Usage of the system, in which payments are typically made in interest-free instalments, have hit an all-time high this holiday season. BNPL accounted for $10.1bn of online spending since the start of November, up 17 per cent from the same period of 2022, according to Adobe Analytics.

Meanwhile, US household savings have fallen to below levels recorded before they were boosted by the government stimulus during the Covid-19 pandemic and consumer sentiment has sunk to a six-month low.

US cigarette sales have also taken a hit with British American Tobacco announcing a £25bn one-off impairment charge on the value of its acquired cigarette brands.

BAT, which makes Dunhill and Lucky Strike cigarettes, said competition from illicitly sold disposable vapes and smokers switching to cheaper cigarette brands or quitting altogether had dragged down US combustible sales.

Shares in the London-listed group dropped 7.5 per cent in early morning trading after the announcement was made, slashing BAT’s market capitalisation to £51.2bn.

Need to know: UK and Europe economy

The Bank of England’s financial stability watchdog said today that private credit and leveraged lending markets remained vulnerable to “sharp revaluations” as the war in the Middle East adds to geopolitical risks.

G7 nations will ban imports of Russian diamonds from January 1 under an agreement aimed at restricting one of the few leading Russian exports still untouched by western sanctions imposed in response to the Ukraine war.

Tui, Europe’s largest tour operator, which has a dual listing in London and Frankfurt, is considering delisting from the London Stock Exchange. More than three-quarters of Tui’s shares are now held in Germany, according to Tui’s chief financial officer Mathias Kiep.

UK investors have returned to equities for the first time in six months as asset managers look to reorientate their portfolios to account for brighter sentiment on inflation and interest rates.

British shoppers appear to be cutting their purchases in the run-up to Christmas as growth in UK retail sales was lower than inflation last month, according to the British Retail Consortium. The value of retail sales rose by an annual rate of 2.7 per cent in November, well below the 12-month average of 4.1 per cent.

Germany’s hopes of playing a significant role in the global semiconductor industry are under threat as the country’s budget crisis could affect plans to hand out billions of euros in government subsidies to chip companies.

Need to know: Global economy

Apple wants batteries for its latest generation of iPhones to be made in India as part of the US company’s efforts to diversify its global supply chain and advance manufacturing out of China.

EU leaders will stress their rising concerns about Chinese industrial overcapacity when they confront President Xi Jinping for a summit in Beijing on Thursday amid signs China is pumping more funding into manufacturing.

Last night, Venezuela’s President Nicolás Maduro ordered state companies to exploit oil deposits and mines in the sparsely populated Essequibo region run by Guyana. In response, Guyana’s President Irfaan Ali said today that he would report the matter to the UN Security Council and the International Court of Justice.

Shipowners have demanded more military protection on maritime routes in the Middle East after attacks by Iran-backed rebels in the Red Sea sparked fears of disruptions to global trade.

Need to know: Business

Danish drugmaker Novo Nordisk’s breakthrough weight-loss and diabetes drugs have helped it become Europe’s largest drugmaker. Now, it wants to go a step advance and stop people gaining weight in the first place.

The return of wealthy tourists, especially from China, and a weak yen has helped Japan escape the luxury downturn. For LVMH, the world’s largest luxury group, Japan is the fastest-growing region among its 75 brands, recording 31 per cent growth in the first nine months of the year.

Airbus chief executive Guillaume Faury has said that the group “might need some uphold” from European governments for a new, multibillion-dollar commercial aircraft programme to substitute its A320 family of jets.

Denmark’s largest union 3F announced yesterday that it had joined Scandinavia in the latest escalation in tensions over workers’ rights against US electric-car maker Tesla.

The World of Work

This week on Working IT, the FT’s Isabel Berwick speaks to some of this year’s most prominent business-book authors, including Amy Edmondson, Ed Conway and Mustafa Suleyman.

Right Kind of Wrong by Harvard Business School professor Edmondson becomes the first management book to win the Financial Times and Schroders Business Book of the Year in the prize’s 19-year history.

Should you switch non-profit work for the corporate world? Jonathan Black answers a reader’s question on how to make the advance towards higher pay in the private sector when your professional contacts are all in the charity sector.

Some good news

New research from the Wellcome Sanger set up and others reveals that human fingers and toes do not grow outward but rather they form from within a larger foundational bud. This could help explain, diagnose and treat congenital limb syndromes.