Trump trade war: US central bank cuts growth outlook
The US central bank has slashed its expectations for economic growth this year as it eyes challenges on several fronts amid Donald Trump’s escalating trade war.
The Federal Reserve announced, as was widely expected, that it would keep its main interest rate at its current target range level of 4.25%-4.5% following the latest meeting of its Federal Open Markets Committee.
The statement that accompanied that decision showed slightly elevated expectations for inflation but also a forecast that the annual rate of economic growth this year had been cut from 2.1% to 1.7%.
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The reduction partly reflected weaker consumer spending, the Fed said, adding that could be partly explained by the threat of rising prices due to the tariff agenda.
The central bank admitted rising uncertainty over its dual mandate which covers employment as well as inflation.
At a news conference to accompany the decision, Fed chair Jay Powell said: “The economy is strong overall”, adding that labour market conditions were “solid”.
But on the question of rising goods inflation he said: “A good part of it is coming from tariffs”, adding that it was too soon to split non-tariff and tariff-related inflation in the data.
Fed chair Jay Powell takes reporters’ questions. File pic: Federal Reserve
The core message was that it was too early to predict the impact overall.
Policymakers said risks had increased, with a near unanimous sentiment in saying the outlook for the year was muddled but it stopped short of directly blaming the protectionist policies being pursed by the Trump White House.
The Fed revealed its hand less than 24 hours before the Bank of England was expected to follow suit by also holding off on any fresh rate cut amid risks of surging prices due to the growing trade war uncertainty.
The Fed meeting took place against a backdrop of mounting concern among financial markets and economists that the trade war could lead the world’s largest economy into recession.
Stock market values are well down on where they started the year, with the broad-based S&P 500 losing $4trn in the space of less than a month at one stage as the tariff threats intensified.
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The dollar remains around five cents down against both the pound and euro while US government borrowing costs also remain elevated.
Stocks rebounded somewhat on the Fed’s update as it signalled no immediate pressure for a policy shift, with the statement signalling that two rate cuts remained on the cards over the remainder of 2025.
But US economists are particularly worried about the trade war involving the country’s nearest neighbours Mexico and Canada – yet to get into full swing as had been threatened due to several suspensions by the Trump administration.
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The main domestic concern is that tit-for-tat tariffs will hammer cross-border supply chains and wider trade, leaving US businesses drowning under a mountain of red tape and higher costs, the latter being widely tipped to be passed on down supply chains and ultimately hitting consumers.
Trade war hostilities between the three are set to ramp up from 2 April – a day after the EU retaliates to US steel and aluminium tariffs with duties being applied to US goods worth €26bn.
Mr Trump has already threatened to respond with 200% tariffs on EU alcohol imports including wine and spirits.
The first-ever Capture case has been delayed at the Court of Appeal as the Post Office asks for an extension to respond, Sky News has learned.
Pat Owen, a former sub postmistress who has since passed away, was convicted of stealing in 1998 based on evidence from computer software.
The system, known as Capture, was used in up to 2,500 branches in the 1990s, before the infamous Horizon system was introduced.
Hundreds of sub-postmasters were wrongfully convicted between 1999 and 2015 as part of the Horizon scandal.
Earlier this year, Sky News unearthed a 1998 report showing the Capture software was also faulty.
That report, commissioned by the solicitors acting for Mrs Owen in 1998, was served on the Post Office and may never have been seen by the jury in her case.
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‘All we want is her name cleared’
Ms Owen was given a suspended prison sentence and fought to clear her name subsequently – but died in 2003.
Her case was referred by the Criminal Cases Review Commission (CCRC) to the Court of Appeal in October.
The Post Office had until 5 December to respond to papers put forward by Mrs Owen’s defence team but they have now asked for an extension until 30 January.
Ms Owen’s daughter, Juliet Shardlow, described the family’s suffering at the lengthening wait.
“I need to emphasise the profound impact the ongoing delay is having on our family,” she said.
“The continuous uncertainty only compounds our heartache, stress, and anxiety.
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“It has become the last thing I think about before I go to sleep and the first thing when I wake up.
“We have waited 27 years for justice, and this additional wait feels never-ending.”
Ms Owen’s case is the first time a conviction based on Capture has reached the Court of Appeal since the scandal was exposed.
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Lawyers have said that if Ms Owen is exonerated posthumously, it may “speed up” the handling of others.
CCRC chair Dame Vera Baird also told Sky News in the summer it could be a “touchstone case” for other victims.
The CCRC is also continuing to investigate around 30 other “pre-Horizon” convictions.
A Post Office spokesperson said: “We have sought an extension of time to fully consider and respond to the CCRC’s Statement of Reasons in Ms Owen’s case.
“We deeply regret the impact our request for further time will have on Ms Owen’s family.
“We have a duty to carefully consider the evidence presented in the Statement of Reasons submitted by the CCRC and do everything we can to fully assist the Court when it considers this conviction.”
Meanwhile, the first-ever redress scheme for victims of the Post Office Capture IT scandal was launched this autumn.
The Capture Redress Scheme will provide payments of up to £300,000, and more in “exceptional” cases, to former postmasters who suffered financial losses.
OpenAI has signed its first major licensing deal to bring well-known characters to life on its Sora video generation tool.
The company said the agreement with Walt Disney was part of a push to ensure the rights of creators in the generative artificial intelligence (AI) space amid growing concerns over copyright, fakes and misinformation.
It forms part of a $1bn Disney investment in OpenAI, that will see the entertainment firm roll out ChatGPT to its staff and grow its AI capabilities.
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The initial three-year licensing deal will allow Sora users to generate and share videos based on more than 200 Disney, Marvel, Pixar and Star Wars characters.
These include Mickey Mouse, Cinderella and Luke Skywalker.
Sora allows people to quickly create realistic clips based merely on text prompts.
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Disney and OpenAI said they were committed to responsible use of AI amid the backlash from critics who have pointed to widespread misuse of generative AI in the social media space – a practice known as AI slop.
Some have depicted fake messages from celebrities and even used the dead.
OpenAI CEO Sam Altman said: “This agreement shows how AI companies and creative leaders can work together responsibly to promote innovation that benefits society, respect the importance of creativity, and help works reach vast new audiences.
His counterpart at Disney, Bob Iger, added that the partnership would “extend the reach of our storytelling through generative AI, while respecting and protecting creators and their works”.
As part of the deal, some user-generated Sora videos will be made available on the Disney+ streaming service.
Dan Coatsworth, head of markets at AJ Bell, said of the tie-up: “It’s a win-win situation for Disney and OpenAI. Disney gets to deploy its beloved brands in the world of AI while keeping control of the intellectual property.
“Fans can use Disney characters to make videos and take social media content to another level. That could drive significant traffic to OpenAI’s Sora social media platform, turning a relatively unknown entity into a household name in a flash.
“As part owner of the business, Disney will be able to use the equity stake in OpenAI to ensure its characters are used in a controlled environment.
“It’s a significant step forward for the concept of fan fiction”, he concluded.
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