Federal Reserve slows pace of rate rises

This is an audio transcript of the FT News Briefing podcast episode: ‘Federal Reserve slows pace of rate rises’

Marc Filippino
Good morning from the Financial Times. Today is Thursday, February 2nd, and this is your FT News Briefing.

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The Federal Reserve announced a smaller rise in interest rates yesterday. We’ll talk about what the Fed is signalling for the future. Adani build on a massive stock sale. Another blow for the Indian conglomerate. Plus, the FT’s Cristina Criddle has the lowdown on a new app from the founders of Instagram, and it’s not about photos. I’m Marc Filippino and here’s the news you need to start your day. 

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The Fed raised its benchmark interest rate yesterday by 25 basis points, but it was a downshift for the Fed after a string of bigger increases.

Jay Powell
With today’s action, we have raised interest rates by four and a half percentage points over the past year.

Marc Filippino
To help translate the latest signals from the central bank, I’m joined now by the FT’s Colby Smith. Hey, Colby.

Colby Smith
Hi, Marc.

Marc Filippino
OK, so I want to play this clip of Fed chair Jay Powell from yesterday’s press conference after the meeting. He was responding to a question about why the Fed had raised rates again, even though the last few inflation reports have been a lot better.

Jay Powell
And we’re talking about a couple of more rate hikes to get to that level we think is appropriately restrictive. And why do we think that’s probably necessary? We think because inflation is still running very hot. We’re, of course, taking into account long and variable lags, and we’re thinking about that.

Marc Filippino
And later in the press conference, he basically ruled out cutting interest rates later this year. What’s your takeaway from all this?

Colby Smith
Yeah, so the key kind of phrase in the statement and then of course, in the press conference was the fact that, you know, the Fed is committing to ongoing interest rate increases. But I think what he’s trying to say here is, you know, they are going to take in the data as it comes in. They are data-dependent first and foremost. But just given their outlook and their expectations for price pressures, they are of the view that, you know, they can’t necessarily pause at the March meeting. So it was it was an important moment for Powell to say, you know, there were encouraging signs here. But I think his overarching message was, you know, we’re not yet done here. It’s a much more difficult situation. If they actually prematurely ease and inflation gets out of control.

Marc Filippino
Colby Smith is the FT’s US economics editor. Thanks, Colby.

Colby Smith
Thank you.

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Marc Filippino
The Adani Group’s flagship company has called off a $2.5bn stock sale. The Adani Group is one of India’s most powerful conglomerates and it stopped the stock sale a week after the New York investment firm Hindenburg Research released a damaging report. It accused the Adani Group of stock manipulation and accounting fraud. Adani Enterprises is now refunding investors the money they pay for shares in the recent equity fundraiser. Here’s the FT’s Ortenca Aliaj.

Ortenca Aliaj
Well, we’re still trying to figure out the sort of nitty gritty of it. Our understanding is that Adani had asked investors to put up about half of the funds now, and the rest would then be called on in one or two years’ time. So effectively, they’re returning about $1.24bn-$1.25bn. So the investors who pledged money or gave money will be receiving that money back. So this was supposed to be a fund that would come in, would help them pay down some debt and would also help them start these ambitions of creating a green sort of energy empire in India. But now that the share sale has been pulled, we don’t really know what the company will do next. Perhaps it has enough money to continue for a while longer and will come back to the market when things calm down a bit. Or it sort of just licking its wounds and is going to figure out what it will do next.

Marc Filippino
So this is bad for Adani, right? I mean, after Hindenburg put out this report, Adani had a $90bn sell-off. The founder, Gautam Adani, his personal wealth took an enormous hit. But what does this moment mean for Hindenburg?

Ortenca Aliaj
Aside from them having a monetary sort of interest in this, the bigger thing is this is a huge, at this moment for Hindenburg, right? This is like a tiny, tiny company that up until two years ago was pretty much unheard of. And it tackled predominantly Spac companies really like Nikola, like DraftKings. And now it’s gone after one of the richest people in the world and accused him of fraud. And it’s actually having an impact. So, yeah, it’s a pretty big win for them at the moment. What happens next we’ll have to see.

Marc Filippino
Ortenca Aliaj is the FT’s mergers and acquisition correspondent.

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The two guys who founded Instagram and sold it to Facebook have launched a new app. This time it’s all about text, no photos. They’re using artificial intelligence to create a news feed that they say avoids the echo chamber of social media. To find out more, I’m joined by the FT’s Cristina Criddle. Hi, Cristina.

Cristina Criddle
Hi.

Marc Filippino
OK, so this company is called Artifact. And from the sound of it, they’re taking a very different approach than the one that they took when they made their fortune at Instagram. What’s the thinking here?

Cristina Criddle
Yes, this is deliberately a move away from social networks in total. They believe that social is part of the problem and spreading misinformation. You aren’t necessarily getting things from trusted sources and you tend to be seeing stuff that you already agree with. Additionally, a lot of this app is powered by AI and at the moment AI is much more powerful if it’s trained on text. And so that’s another reason why they turn to text first of all.

Marc Filippino
So how would Artifact compete with other social media sites?

Cristina Criddle
So Kevin Systrom, who’s the co-founder, he told me that he saw the app as a potential rival to Twitter in terms of being able to find your news and articles about specialist interest and things like that on there. But what’s different is that it is designed to only show you things from trusted sources and occasionally dip in something that may be you might not agree with, or that you have not indicated that you’re interested in before. It also all of these sources are very highly vetted at the company. So they go through like a media bias check and also a fake news check, too.

Marc Filippino
So I’m curious, have you tried it Cristina? I mean, what’s the user experience supposed to be like?

Cristina Criddle
So to me, it looks like a typical news app. I mean, I’ve been playing with it now for, you know, most of the day. It is really compelling and interesting and it is showing me articles that I’m interested in, as well as kind of niche things, which I am interested in but I didn’t really search for, things like cooking. And it’s fun. It’s a good way to consume news and articles. I think it’s a very different offering to Twitter and this kind of echo chamber where people are ranting and raving about things.

Marc Filippino
OK, so do you see Artifact appealing to users? I mean, is this going to be a game-changer?

Cristina Criddle
I am a bit sceptical. I really do think that they can design a nice product and from what I’ve seen of the app so far, it is really nice to use and I’m enjoying using it. But I’m a news junkie already. And actually the idea that loads of different people are going to adopt this in addition to all of the other apps they have, all of the other news consumption they have at a time when people’s reading of the news is down overall. I’m still quite sceptical as to whether it can take off.

Marc Filippino
Cristina Criddle is the FT’s technology reporter. Thanks, Cristina.

Cristina Criddle
Thank you.

Marc Filippino
Before we go, we have a bit of closure for banks that once had Archegos Capital Management as their brokerage client. You might recall the name and the saga. But if you don’t, here’s the FT’s Tabby Kinder with a reminder.

Tabby Kinder
The story in March 2021, when this family office collapsed, it was huge. These are some of the biggest losses we’ve seen in the global banking sector since the global financial crisis.

Marc Filippino
Banks that acted as brokers for Archegos lost a collective $10bn when the private family office collapsed. The banks spent the last year negotiating with Archegos and its restructuring advisers. And now it looks like the banks will get 5-20 cents back on the dollar. A Credit Suisse executive said anything above 1 per cent back would be amazing.

Tabby Kinder
For the banks, I think they want an end to this saga. They’ve all had big operational and risk reckonings. Their losses are wildly known now, and any recovery is icing on . . . a minor nice icing on the cake at the right at the end of this for the banks.

Marc Filippino
Tabby Kinder is the FT’s West Coast financial editor.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news. 

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