Connect with us

Published

on

US interest rates have been slashed for the first time in more than four years – by more than many expected – amid fears the world’s largest economy is flagging.

The US central bank, the Federal Reserve, brought interest rates down by 0.5 percentage points to 4.75% to 5%.

Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.

Read more: What next for interest rates?

Bringing down inflation to 2% is a primary goal of the Fed and it has used interest rates to draw money out of the economy by making borrowing more costly since 2022, when the Ukraine/Russia price shock hit.

Follow Sky News on WhatsApp
Follow Sky News on WhatsApp

Keep up with all the latest news from the UK and around the world by following Sky News

Tap here

Recent figures show the Fed is not far from its inflation target – with the main measure hitting 2.5% in August, the lowest rate in three years.

But signs of a weakening economy emerged last month as data on job creation led to recession fears.

More on Interest Rates

The Fed signalled in its statement that while it was confident on both the inflation and growth outlooks, a slowdown in the pace of hiring was a cause for concern.

Only one member of its rate-setting committee dissented on the 0.5 percentage point reduction. Financial market participants had been split on whether it would go for the 0.25 option instead.

US stocks rallied in the wake of the decision, with the Dow Jones Industrial Average and broader S&P 500 both up by more than 0.5% from flat positions moments before the rate decision was revealed.

Please use Chrome browser for a more accessible video player

Trump criticises Harris on economy

The dollar was trading a cent lower versus sterling at $1.32.

Some market analysts said the Fed’s move showed Fed chair Jay Powell and his fellow policymakers had been too slow to react to the employment slowdown.

He told reporters: “We’re going to be making decisions meeting by meeting, based on the incoming data and the evolving outlook, the balance of risks… it’s a process of recalibrating our policy stance away from where we had it a year ago, when inflation was high and unemployment low, to a place that’s more appropriate given where we are now and where we expect to be.

Federal Reserve Chairman Jerome Powell Pic: AP
Image:
Federal Reserve Chairman Jerome Powell Pic: AP

“That process will time time”, he added, saying there would be no “rush”.

Michael Sheehan, fund manager of fixed income at EdenTree Investment Management, said: “Kicking off this cutting cycle with a 50 basis point reduction will undoubtedly vindicate those who had argued that the Fed had fallen behind the curve.

“Any doubts that this cutting cycle would be any less dramatic than previous ones have been firmly laid to rest.

“We expect this larger cut of 50 basis points to boost risk assets in the short term. The key for markets, and indeed the Federal Reserve, will be how far the softening of the labour market has to run.

“Powell will be hoping that taking aggressive action early will go some way to curtailing a substantial weakening and achieve the elusive soft landing.”

What about the UK?

It comes as the UK central bank the Bank of England meets on Thursday to make its own interest rate decision.

While the Bank will focus on UK economic data – and on Wednesday afternoon was expected by markets to hold rates – it could be influenced by US decision-making.

Lower interest rates tend to weaken currencies, so a big cut from the Fed could be good news for the pound.

While being able to buy more dollars is good news for people holidaying in the US and paying for imports like oil, it’s bad news for exporters who get less for their goods as a result and have a less competitive product.

Lower exports can slow inflation, meaning the Bank could be more likely to cut.

Continue Reading

US

Donald Trump announces 30% tariff on imports from EU

Published

on

By

Donald Trump announces 30% tariff on imports from EU

Donald Trump has announced he will impose a 30% tariff on imports from the European Union from 1 August.

The tariffs could make everything from French cheese and Italian leather goods to German electronics and Spanish pharmaceuticals more expensive in the US.

Mr Trump has also imposed a 30% tariff on goods from Mexico, according to a post from his Truth Social account.

Announcing the moves in separate letters on the account, the president said the US trade deficit was a national security threat.

In his letter to the EU, he wrote: “We have had years to discuss our trading relationship with The European Union, and we have concluded we must move away from these long-term, large, and persistent, trade Deficits, engendered by your tariff, and non-Tariff, policies, and trade barriers.

“Our relationship has been, unfortunately, far from reciprocal.”

In his letter to Mexico, Mr Trump said he did not think the country had done enough to stop the US from turning into a “narco-trafficking playground”.

The president of the European Commission, Ursula von der Leyen, said today that the EU could adopt “proportionate countermeasures” if the US proceeds with imposing the 30% tariff.

Ms von der Leyen, who heads the EU’s executive arm, said in a statement that the bloc remained ready “to continue working towards an agreement by Aug 1”.

“Few economies in the world match the European Union’s level of openness and adherence to fair trading practices,” she continued.

“We will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required.”

Ms von der Leyen has also said imposing tariffs on EU exports would “disrupt essential transatlantic supply chains”.

Meanwhile, Dutch Prime Minister Dick Schoof said on the X social media platform that Mr Trump’s announcement was “very concerning and not the way forward”.

He added: “The European Commission can count on our full support. As the EU we must remain united and resolute in pursuing an outcome with the United States that is mutually beneficial.”

Mexico’s economy ministry said a bilateral working group aims to reach an alternative to the 30% US tariffs before they are due to take effect.

The country was informed by the US that it would receive a letter about the tariffs, the ministry’s statement said, adding that Mexico was negotiating.

Read more US news:
Trump plans to hit Canada with 35% tariff
More than 160 missing after Texas floods
Robot performs realistic surgery

Please use Chrome browser for a more accessible video player

How ‘liberation day’ unfolded

Trump’s tariff threats and delays

On his so-called “liberation day” in April, Mr Trump unleashed “reciprocal tariffs” on many of America’s trade partners.

The US president said he was targeting countries with which America has a trade imbalance.

However, since then he’s backed down in a spiralling tit-for-tat tariff face-off with China, and struck a deal with the UK.

The US imposed a 20% tariff on imported goods from the EU in April but it was later paused and the bloc has since been paying a baseline tariff of 10% on goods it exports to the US.

In May, while the US and EU where holding trade negotiations, Mr Trump threated to impose a 50% tariff on the bloc as talks didn’t progress as he would have liked.

However, he later announced he was delaying the imposition of that tariff while negotiations over a trade deal took place.

As of earlier this week, the EU’s executive commission, which handles trade issues for the bloc’s 27-member nations, said its leaders were still hoping to strike a trade deal with the Trump administration.

Without one, the EU said it was prepared to retaliate with tariffs on hundreds of American products, ranging from beef and auto parts to beer and Boeing airplanes.

Continue Reading

US

Donald Trump plans to hit Canada with new tariff – while warning of blanket hike for other countries

Published

on

By

Donald Trump plans to hit Canada with new tariff - while warning of blanket hike for other countries

Donald Trump has said he plans to hit Canada with a 35% tariff on imported goods, as he warned of a blanket 15 or 20% hike for most other countries.

In a letter to Canadian Prime Minister Mark Carney, the US president wrote: “I must mention that the flow of Fentanyl is hardly the only challenge we have with Canada, which has many Tariff, and Non-Tariff, Policies and Trade Barriers.”

Mr Trump’s tariffs were allegedly an effort to get Canada to crack down on fentanyl smuggling, and the US president has expressed frustration with Canada’s trade deficit with the US.

In a statement Mr Carney said: “Throughout the current trade negotiations with the United States, the Canadian government has steadfastly defended our workers and businesses. We will continue to do so as we work towards the revised deadline of August 1.”

He added: “Canada has made vital progress to stop the scourge of fentanyl in North America. We are committed to continuing to work with the United States to save lives and protect communities in both our countries.”

Mr Trump has sent a series of tariff letters to 23 countries so far, including one putting a 50% tariff on Brazil in part for the ongoing trial of its former president Jair Bolsonaro for trying to stay in office after he lost the election in 2022.

Mr Trump was similarly indicted for his efforts to overturn his election loss in 2020.

The higher rates would go into effect on 1 August.

Shortly after Mr Trump unveiled his “Liberation Day” tariffs on 2 April, there was a huge sell-off on the financial markets. The US president later announced a 90-day negotiating period, during which a 10% baseline tariff would be charged on most imported goods.

👉 Follow Trump100 on your podcast app 👈

But in an interview with Sky News’s partner network NBC News, Mr Trump said he plans to impose higher blanket tariffs on most US trade partners.

“We’re just going to say all of the remaining countries are going to pay, whether it’s 20% or 15%. We’ll work that out now,” he said.

He added: “I think the tariffs have been very well-received. The stock market hit a new high today.”

The US and UK signed a trade deal in June, with the US president calling it “a fair deal for both” and saying it will “produce a lot of jobs, a lot of income”.

Sir Keir Starmer said the document “implements” the deal to cut tariffs on cars and aerospace, adding: “So this is a very good day for both of our countries – a real sign of strength.”

Read more:
Trump fires tariff threats at more nations as EU ‘ready’
Palestinian activist detained by ICE suing Trump administration

The US president also teased a “major statement” he will make on Russia over its war with Ukraine.

“I’m disappointed in Russia, but we’ll see what happens over the next couple of weeks,” he said.

“I think I’ll have a major statement to make on Russia on Monday.”

Follow The World
Follow The World

Listen to The World with Richard Engel and Yalda Hakim every Wednesday

Tap to follow

It comes as Russia’s deputy foreign minister, Sergei Ryabkov, said a new round of talks between Moscow and Washington on bilateral problems could take place before the end of the summer.

Continue Reading

US

Palestinian activist detained by ICE suing Trump administration for $20m

Published

on

By

Palestinian activist detained by ICE suing Trump administration for m

A Palestinian activist who was detained for over three months in a US immigration jail after protesting against Israel is suing Donald Trump’s administration for $20m (£15m) in damages.

Lawyers for Mahmoud Khalil have filed a claim against the administration alleging he was falsely imprisoned, maliciously prosecuted and smeared as an antisemite as the government sought to deport him over his role in campus protests.

The 30-year-old graduate student at Columbia University told Sky News’s lead world presenter Yalda Hakim being detained by ICE agents in March “felt like kidnapping”.

He described “plain-clothed agents and unmarked cars” taking him “from one place to another, expecting you just to follow orders and shackled all the time”, which he said was “really scary”.

Please use Chrome browser for a more accessible video player

Mahmoud Khalil reunites with family after release

Mr Khalil said he was not presented with an arrest warrant and wasn’t told where he was being taken.

He said the detention centre he was taken to was “as far from humane as it could be” and “a place where you have no rights whatsoever”.

“You share a dorm with over 70 men with no privacy, with lights on all the time, with really terrible food. You’re basically being dehumanised at every opportunity. It’s a black hole,” he added.

Mr Khalil said he would also accept an official apology from the Trump administration.

The Trump administration celebrated Mr Khalil’s arrest, promising to deport him and others whose protests against Israel it declared were “pro-terrorist, antisemitic, anti-American activity”.

Mr Khalil said after around 36 hours in captivity he was allowed to speak to his wife, who was pregnant at the time.

“These were very scary hours, I did not know what was happening on the outside. I did not know that my wife was safe,” he said.

Read more from Sky News:
Starmer and Macron agree ‘one in, one out’ migrants return deal
Officers who confronted ‘coward’ killer win bravery award

‘Absolutely absurd allegations’

Mr Khalil said administration officials had made “absolutely absurd allegations” by saying he as involved in antisemitic activities and supporting Hamas.

“They are weaponising antisemitism, weaponising anti-terrorism in order to stifle speech,” he said. “What I was engaged in is simply opposing a genocide, opposing war crimes, opposing Columbia University’s complicity in the war on Gaza.”

A State Department spokesperson said its actions toward Mr Khalil were fully supported by the law.

Follow The World
Follow The World

Listen to The World with Richard Engel and Yalda Hakim every Wednesday

Tap to follow

Asked about missing the birth of his son while he was in prison, Mr Khalil said: “I don’t think there’s any word that can describe the agony and the sadness that I went through, to be deprived from such a divine moment, from a moment that my wife and I had always dreamed about.”

Meanwhile, the deportation case against Mr Khalil is continuing to wind its way through the immigration court system.

Continue Reading

Trending