FirstFT: US raises possibility of ‘restrictive’ policy to fight inflation

The Federal Reserve may move to a “restrictive” policy stance that would better fight inflation through more aggressive interest rate increases, according to minutes of the most recent FOMC meeting held in early May.

Most US monetary policymakers agreed on the need to keep increasing the Fed’s main interest rate — currently set at a range of between 0.75 per cent and 1 per cent — by 50 basis points “at the next couple of meetings”.

This would match the Fed’s goal of “expeditiously” getting interest rates back up to a neutral setting, where it is neither boosting nor stunting the economy.

But officials worry that this could undermine the strong recovery in the jobs market. Participants “noted that a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook” — pointing to the possibility that the Fed may have to target an even higher level of interest rates, either by increasing the pace of its rate rises, lengthening its tightening cycle, or doing both.

Fed officials, including chair Jay Powell, are trying to engineer what they have described as a “soft” or “softish” landing to bring down inflation without triggering a recession, which they acknowledged was a difficult balancing act. “Several participants commented on the challenges that monetary policy faced in restoring price stability while also maintaining strong labour market conditions,” the minutes said.

Thanks for reading FirstFT Asia. Here’s the rest of the day’s news. — Sophia

The Behind the Money podcast is back! In our first episode, host Michela Tindera is wondering: is a crypto vibe shift under way? FT reporter Ethan Wu explains how the effects of Bitcoin’s price drop and the collapse of a popular stablecoin have rippled into other areas of the crypto universe and why it matters — even for people who aren’t crypto investors.

Five more stories in the news

1. China could struggle to grow its economy in second quarter Premier Li Keqiang has urged officials to help companies resume production after Covid-19 lockdowns. His comments yesterday came out of concern that the country will have difficulty reaching its annual growth target of 5.5 per cent while battling Omicron outbreaks.

2. Beijing clamps down on elite students after lockdown protests Students at two top universities, Tsinghua and Peking, have been prevented from leaving their campuses for weeks as the schools enforce harsh Covid-19 restrictions. The measures have sparked discontent and protests, as university officials urged some students to leave campus altogether.

3. Nineteen children killed in Texas school shooting US president Joe Biden made an emotional plea for the country to “stand up to the gun lobby” after a gunman killed at least 19 children and two adults in the deadliest school shooting in America for a decade. Law enforcement officers shot dead 18-year-old Salvador Ramos, who was suspected of carrying out the mass shooting at the Robb Elementary School in Uvalde, Texas.

4. North Korea fires suspected ballistic missile North Korea launched a suspected intercontinental ballistic missile and two other projectiles yesterday, according to the South Korean government, a day after Joe Biden concluded his first tour of the region as US president.

5. Pakistan seeks to renegotiate IMF loan as food prices surge Pakistani officials are in talks with the IMF to resume lending under a 2019 $6bn loan programme which has been in limbo since a dispute earlier this year with the previous government. The country, which relies on imported staples such as wheat, is already seeing its people go hungry as costs soar.

The day ahead

Results Several companies report their fiscal year results today, including Alibaba, Ted Baker and Intermediate Capital Group, plus first-quarter results from Baidu, Dell, and Macy’s.

US economy The US releases its first-quarter GDP figures and consumer spending data today.

Australia Sorry Day commemorates the forced removal of Aboriginal children from their parents

What else we’re reading

How hubris and Covid transformed Sri Lanka Until recently, Sri Lankans enjoyed some of the highest living standards in South Asia. But now the country has opened talks with the IMF over a $4bn bailout, and observers are waiting to see how China, one of the main creditors, will react.

Pfizer warns of ‘constant waves’ of Covid-19 Growing apathy about Covid-19 and politicisation of the pandemic response will cost lives as the world is hit by new waves of the virus in coming months, Pfizer’s chief executive has warned. “What worries me is the complacency,” Albert Bourla told the FT.

Is the ‘subscription economy’ going to feel the Netflix effect? The rash of businesses offering subscriptions took off in about 2011, led by TV and music streaming services and quickly followed by beauty products, clothes, organic coffee, craft beer, pet food and more. The “subscription economy” is heading into its first serious downturn, Helen Thomas writes.

Andreessen Horowitz bets on crypto ‘golden era’ with new $4.5bn fund Despite the market crash, the venture capital group has made its biggest bet yet on the future of blockchain technology. It plans to allocate about $1.5bn to seed investments while the remaining $3bn would be earmarked for venture investments.

Sombre mood descends on Davos Russia’s invasion of Ukraine, surging inflation, Chinese lockdowns and growing uncertainty about globalisation have conspired to chill the business mood at the World Economic Forum meeting in Davos. “There are three R words right now: It’s Russia, it’s recession and it’s [interest] rates,” said Citigroup chief Jane Fraser.

Cinema

The Cannes Film Festival celebrates its 75th year with Volodymyr Zelensky, Tom Cruise and Sharon Stone all putting in appearances. The FT brings you the highlights.