Federal Reserve slows pace of inflation rate hikes again but warns of more action ahead
The US central bank has slowed the pace of interest rate hikes further but indicated more rises are likely despite official figures suggesting price pressures have peaked in the world’s largest economy.
The Federal Reserve revealed its verdict hours before counterparts in the UK and Europe made their next moves in the battle against inflation – with both the Bank of England and European Central Bank set to raise borrowing costs further.
The Fed, as it’s known, raised its target interest rate by a quarter of a percentage point – as financial markets expected – following an aggressive set of increases last year to tame decades-high inflation.
It was lifted to a range between 4.50% to 4.75%.
The statement from the Fed confirmed that policymakers planned to maintain an iron grip on inflation risks through further hikes.
“The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time,” it read.
Fed chairman Jay Powell later told a news conference that history told him it would be dangerous to take the foot off the gas “prematurely”.
His language was seen as hawkish in the face of the smallest rise in the target rate since last March though markets, which were initially spooked, took some comfort when Mr Powell confirmed its next moves would be determined by the data.
He also confirmed Fed expectations that the US economy would grow this year.
March 2022 was when the Fed made its first move against surging US inflation as post-pandemic price rises were exacerbated around the world by the war in Ukraine.
The Fed had imposed four consecutive hikes of 0.75 percentage points prior to its last meeting in December, when the pace was reduced to a half percentage point rise.
It was at that point, before Christmas, when inflationary pressures were truly seen by policymakers as easing from the four-decade highs seen earlier in 2022 because so-called core inflation had slowed.
Global wheat costs were among those to surge after Russia’s invasion of Ukraine
The cost of things such as oil, gas and many other commodities – outside of central bank control – went through the roof.
These increases later became ingrained in prices across Western economies as costs were passed down supply chains, pressuring central banks to cool economic activity and discourage wage increases that could inflame the inflation problem.
While economists believe inflation has also peaked in the UK and across Europe, the continent’s exposure to the loss of Russian energy flows has inflation more stubborn.
The Bank of England’s next rate decision is revealed at midday on Thursday
The Bank of England is widely expected to lift its rate from 3.5% to 4% on Thursday as a result.
The European Central Bank, which sets the rate path for the 20 countries which use the euro, is expected to impose the same hike in its main deposit rate.
The pound and euro both lost around a third of a cent as the dollar strengthened in the immediate aftermath of the Fed’s decision but both later recovered.
Oil prices, however, were down by 3% as the prospect of more rate tightening was seen as damaging for demand. Brent crude was trading at $83 a barrel.
Richard Carter, head of fixed interest research at Quilter Cheviot, said of the quarter point rate rise: “Investors should not confuse this as the end of the rate hiking cycle, instead a pause for breath as the Federal Reserve looks to continue to fight inflation, while also assessing if further hikes are the way to go.
“The economy has been fairly resilient and the consumer remains in okay shape. Recession could be avoided as a result, but this means we need to prepare for the Fed to continue raising rates for as long as inflation remains elevated.
“The last thing it wants to do is take its foot off the gas too early and stoke a new inflationary cycle,” he wrote.
Business
‘Absolutely gutted’: £16,500 Glastonbury packages won’t be fulfilled after company goes bust
Glastonbury ticket holders have been left thousands of pounds out of pocket after a luxury glamping company went bust.
Festival-goers who booked their tickets and accommodation with Yurtel have been told the company can no longer fulfil its orders and has ceased trading with immediate effect.
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Some had spent more than £16,500 through Yurtel, with hospitality packages starting at £10,000.
In an email, Yurtel said it was unable to provide customers with any refunds, advising them to go through a third party to claim back the money once the liquidation process had started.
To add insult to injury, customers found out that Yurtel had failed to purchase the tickets for the 25 -29 June festival that they thought had been booked as part of their packages.
In a letter to customers, Yurtel’s founder Mickey Luke said: “I am deeply sorry that you have received this devastating news and am writing to apologise.
“Yurtel is a hospitality business who pride themselves on looking after our customers, delivering a unique product and striving to create a better client experience year on year. Due to a culmination of factors over the past years, we have failed to be able to continue to do so and are heartbroken.”
The Money blog has contacted Yurtel to see if the business has anything to add.
Several people have also reported that they were unable to pay by credit card at the time of booking, with the company instead asking for a bank transfer.
This means they are unable to use chargeback to get a refund. You can read more about that here…
Pic: PA
‘I feel really ripped off’
One of those customers was Lydia, who told Money she was “absolutely gutted” after spending thousands.
This year’s festival was “really important” to her as she was forced to miss out last year despite having tickets due to a health issue that left her needing an operation.
“We tried to get Glastonbury tickets through the normal kind of route and couldn’t get them,” the accountant said.
She ended up booking with Yurtel in November, sending over all the funds a month later.
“It’s super expensive. It was really, really important to us. Last year was gutting with the surgery and the whole situation around that was very traumatic, so it was a very special thing to then get the opportunity to go this year. It’s really gutting,” she said.
“I feel really ripped off and I’m really disappointed in the festival, to be honest. I think that response is just pretty rubbish.”
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Yurtel did not pay for festival tickets, Glastonbury says
Glastonbury said Yurtel was one of a small number of campsites local to the festival site – Worthy Farm – with limited access to purchase hospitality tickets for their guests in certain circumstances.
But, it had not paid for any tickets for the 2025 festival before going into liquidation, and so no tickets were secured for its guests, it added. Every year, Glastonbury’s website says that ticketing firm See Tickets is the only official source for buying tickets for the festival.
“As such we have no records of their bookings and are unable to take any responsibility for the services and the facilities they offer,” the festival said.
“Anyone who has paid Yurtel for a package including Glastonbury 2025 tickets will need to pursue any potential recompense available from them via the liquidation process as outlined in their communication to you.
“We are not able to incur the cost or responsibility of their loss or replacement.”
Instead, the festival has urged Yurtel customers to contact Yurtel@btguk.com to confirm their consent for personal data and details of their party to be shared with Glastonbury.
“We will then be able to provide details of alternative potential sources for those customers to purchase tickets and accommodation for this year’s festival,” the festival added.
‘Only option’ on offer is ‘pretty weak’
Lydia said she agreed for her details to be passed on to Glastonbury, and the festival has told her the only option is to pay for the tickets again from another provider.
“They are not giving us the opportunity to buy the tickets at face value. We would then have to go again and spend another stupidly unreasonable amount of money to be able to go. It’s pretty disappointing,” she added.
“It’s pretty weak that the only option they’re giving people who’ve already lost out on huge amounts of money is to go and spend huge amounts more money.”
It’s left her feeling like she won’t go to the festival this year – and she’s not hopeful about getting her money back.
She said: “To be honest, I just don’t think I can afford it.
“It’s already so much money wasted, and I’m not at all optimistic we’ll get anything back.”
Business
Federal judges rule Trump tariffs can stay in place for now – as president rages at trade court’s ‘country threatening decision’
A federal appeals court has ruled that Donald Trump’s sweeping international tariffs can remain in place for now, a day after three judges ruled the president exceeded his authority.
The Court of Appeals for the Federal Circuit (CAFC) has allowed the president to temporarily continue collecting tariffs under emergency legislation while it considers the government’s appeal.
It comes after the Court of International Trade blocked the additional taxes on foreign-made goods after its three-judge panel ruled that the Constitution gives Congress the power to levy taxes and tariffs – not the president.
The judges also ruled Mr Trump exceeded his authority by invoking the 1977 International Emergency Economic Powers Act.
The CAFC said the lower trade court and the Trump administration must respond by 5 June and 9 June, respectively.
Trump calls trade court ‘backroom hustlers’
Posting on Truth Social, Mr Trump said the trade court’s ruling was a “horrible, Country threatening decision,” and said he hopes the Supreme Court would reverse it “QUICKLY and DECISIVELY”.
After calling into question the appointment of the three judges, and suggesting the ruling was based on “purely a hatred of ‘TRUMP’,” he added: “Backroom ‘hustlers’ must not be allowed to destroy our Nation!
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Trump asked about ‘taco trade’
“The horrific decision stated that I would have to get the approval of Congress for these Tariffs. In other words, hundreds of politicians would sit around D.C. for weeks, and even months, trying to come to a conclusion as to what to charge other Countries that are treating us unfairly.
“If allowed to stand, this would completely destroy Presidential Power — The Presidency would never be the same!”
The US president unveiled the controversial measures on “Liberation Day” in April, which included a 10% tariff on UK imports and caused aggressive sell-offs in the stock market.
Mr Trump argued he invoked the decades-old law to collect international tariffs because it was a “national emergency”.
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From April: ‘This is Liberation Day’
Tariffs ‘direct threat’ to business – Schwab
The trade court ruling marked the latest legal challenge to the tariffs, and related to a case brought on behalf of five small businesses that import goods from other countries.
Jeffrey Schwab, senior counsel for the Liberty Justice Center – a nonprofit representing the five firms – said the appeal court would ultimately agree that the tariffs posed “a direct threat to the very survival of these businesses”.
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US treasury secretary Scott Bessent also told Fox News on Thursday that the initial ruling had not interfered with trade deal negotiations with partners.
He said that countries “are coming to us in good faith” and “we’ve seen no change in their attitude in the past 48 hours,” before saying he would meet with a Japanese delegation in Washington on Friday.
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