Fed sets rates as Trump nears decision on who to back as chair

Hello and welcome to the working week.

Welcome to Fed Week. Fresh from his Davos exploits, US President Donald Trump is expected to announce his choice for the next chair of the US central bank in the coming days.

Trump has repeatedly clashed with current chair Jay Powell over the Fed’s refusal to drastically lower borrowing costs.

BlackRock executive Rick Rieder has emerged as a leading contender after his odds on the prediction site Polymarket surged from 6 per cent to 47 per cent on bets the US president would back a candidate with close links to Wall Street to replace Powell when his term ends in May.

The president has already ruled out the man long considered the front runner, Kevin Hassett. Whoever Trump picks, the main concern is that the commander in chief will want to be the person pulling the strings.

For the time being Powell has to get on with the day job, chairing the Federal Open Market Committee’s meeting to decide interest rates, which he will then announce on Wednesday. Rates are expected to be kept on hold given that Personal Consumption Expenditure inflation — the Fed’s preferred cost of living measure — was 2.8 per cent in November and the Fed’s Beige Book in the six weeks to January hinted at further tariff-related inflation to come. This will no doubt displease Trump given his repeated call for rate cuts. For more insights, I’d recommend the FT’s Monetary Policy Radar.

Will this be a better week for the UK Prime Minister Sir Keir Starmer? After a bruising few days with Trump, Starmer travels to Beijing in the belief that Britain can only get the trade, investment and growth it needs by co-operating with China. He’ll probably be glad to escape Westminster’s leadership challenge omnishambles. Opposition politicians are calling the China trip “kowtow” to Xi Jinping, China’s president. Talks are likely to range from trade in financial services to immigration controls that could prevent people smuggling. But Starmer, who will also make a short visit to Japan, has made it clear he wants to break away from the “ice age” in UK-China relations under previous Tory governments.

Last week’s contentious approval of China’s “mega” embassy plans for the former Royal Mint complex in London was a sign of the ending of the permafrost. Academic tie-ups are also happening, also with some controversy, such as one signed last month between Cambridge university and the Chinese government. For more on that, read the latest State of Britain newsletter.

Earnings season has built a head of steam. Among this week’s big themes is Big Tech, notably Apple, which is heading into a critical year as it steps up succession planning for chief executive Tim Cook and strikes an AI deal with Google that it hopes will transform its flagging AI roadmap. It’s in need of a boost, with shares down since the start of the year as fresh tariff risks and skyrocketing memory costs have spooked investors.

Capital expenditure at Microsoft came in stronger than expected in the last quarter which hurt its share price. Analysts are forecasting $34.3bn for this quarter with a full year estimate of $141bn, per S&P Visible Alpha. Like Oracle and Nvidia, Microsoft’s share price is down on the year to date. The linking factor is significant OpenAI exposure. Amazon, which has limited exposure, is up. More colour on Microsoft diversifying revenue streams will be helpful. Also, any signs of faltering project delivery at the company would be interesting.

Tesla has been overtaken in the race to be the world’s largest electric vehicle maker by China’s BYD, so Elon Musk’s group will no doubt be bigging up its pivot towards autonomous driving, AI and robotics when it reports figures on Wednesday.

Lloyds Banking Group reports full-year results on Thursday, the first big British lender to announce its numbers for a year in which the sector has sustained high profits despite the turbulent global economic backdrop. However, the bank’s results have been marred by its exposure to the UK’s motor finance scandal.

In contrast to the company reports, the economic data run is somewhat muted this week, although it will include the first take on fourth-quarter GDP from the EU, France and Germany and inflation figures from the US and Germany. More details below.

One more thing…

The Church of England formally appoints its first female Archbishop of Canterbury on Wednesday at a ceremony (involving lawyers as well as clerics) in St Paul’s Cathedral. Dame Sarah Mullally takes over an institution tarnished by scandal, which led to the resignation of the last AB of C Justin Welby, so her leadership will be tested and watched closely. Anglican retirement rules mean 63-year-old Mullally can serve a maximum of seven years in the role, so one question will be whether she will be a reformer or merely the caretaker.

Is this a wise move for England’s established church? Have you, as the FT recently reported about workers in the City of London, found sanctuary in places of worship? Email me at jonathan.moules@ft.com or, if you are reading this from your inbox, hit reply. And have a good week.

Key economic and company reports

Here is a more complete list of what to expect in terms of company reports and economic data this week.

Monday

• Australia: financial markets closed for Australia Day

• India: Republic Day. Financial markets closed

• Results: WR Berkley Q4/FY, Costain trading update, Nitto Denko Q3, Ryanair Q3

Tuesday

• Japan: December services producer price index (PPI) inflation rate data

• UK: British Retail Consortium’s Shop Price Monitor

• US: November State Job Openings and Labor Turnover data, plus The Conference Board consumer confidence index

• Results: American Airlines Q4/FY, Boeing Q4, Brown & Brown Q4, Cranswick Q3 trading statement, Dr Martens Q3 trading update, Energean January trading and operating update, Evoke FY post-close trading update, F5 Q1, General Motors Q4/FY, Kimberly-Clark Q4, Logitech Q3, LVMH FY, Mitie Q3 trading update, NextEra Energy Q4/FY, Northrop Grumman Q4, Nucor Q4, Paragon Banking Q1 trading update, Qorvo Q3, Roper Technologies Q4, RTX Q4, Sage Q1 trading update, Sandvik Q4, Seagate Technology Q2, SThree FY, Synchrony Financial Q4, Sysco Q2, Texas Instruments Q4/FY, Union Pacific Q4, UnitedHealth Q4/FY, UPS Q4

Wednesday

• Australia: December consumer price index (CPI) inflation rate data

• Canada: interest rate announcement

• Japan: minutes of the December rate-setting meeting

• UK: Bank of England December capital issuance figures

• US: interest rate announcement

• Results: Amphenol Q4, Ampol Q4 trading update, ASML Q4/FY, AT&T Q4, Corning Q4, Danaher Q4, Fresnillo Q4 production report, General Dynamics Q4, GE Vernova Q4, Grupo Financiero Banorte Q4, Hargreaves Services HY, IBM Q4, KPN Q4/FY, Lennox Q4, Levi Strauss Q4, Marston’s Q1 trading update, Meta Q4/FY, Microsoft Q2, Packaging Corp of America Q4, PayPoint Q3 trading update, Pets at Home Q3 trading update, PPG Industries Q4, ServiceNow Q4, Starbucks Q1, Tesla Q4, Textron Q4

Thursday

• John O’Reilly retires as chief executive of Rank. Richard Harris becomes interim CEO tomorrow

• Australia: December labour market statistics, in detail

• US: revised Q3 productivity and costs data

• Results: ABB Q4/FY, Antofagasta Q4 production report, AO Smith Q4, Apple Q1, Blackstone Q4/FY, Caterpillar Q4/FY, Comcast Q4, Crest Nicholson FY, Deutsche Bank FY, Dow Q4, easyJet Q1, Fevertree Drinks FY pre-close trading update, Fujitsu Q3, Glencore FY production report, Henry Boot trading update, Hilton Food Group trading update, Hitachi Q3, H&M FY, Honeywell Q4, Hyundai Q4, ING Groep Q4, International Paper Q4/FY, Lloyds Banking Group FY, Lockheed Martin Q4/FY, Luceco FY trading update, Marsh & McLennan Q4, Mastercard Q4/FY, Nasdaq Q4, Nokia Q4/FY, Norfolk Southern Q4, Rank HY, ResMed Q2, Roche FY, Royal Caribbean Q4, Saga trading update, Samsung Electronics Q4, Sandisk Q2, Sanofi Q4/FY, SAP Q4/FY, Sherwin-Williams Q4/FY, Southwest Airlines Q4, St James’s Place FY new business announcement, STMicroelectronics Q4/FY, Stryker Q4/FY, Telia FY, United Rentals Q4/FY, Valero Energy Q4, Visa Q1, Waste Management Q4, Wizz Air Q3

Friday

• Australia: December PPI inflation rate data

• EU: preliminary Q4 GDP estimate and December unemployment data

• France: preliminary Q4 GDP estimate

• Germany: December/Q4 labour market statistics, plus first Q4 GDP estimate and preliminary January CPI and harmonised index of consumer prices (HICP) inflation rate data

• UK: Bank of England December money and credit figures

• US: December PPI inflation rate data

• Results: Airtel Africa 9M/Q3, American Express Q4, Aon Q4, Canadian National Railway Q4/FY, Chevron Q4, Church & Dwight FY, Colgate-Palmolive Q4/FY, Eastman Chemical Q4/FY, Electrolux FY, ExxonMobil Q4, Franklin Resources Q1, Hartford Insurance Q4, Imperial Oil Q4, James Halstead HY trading update, Nomura Q3, Verizon Communications Q4

World events

Monday

• Germany: Chancellor Friedrich Merz to speak at the North Sea Summit in Hamburg, aimed at improving cross-border co-operation on generating offshore wind and hydrogen energy from the region to supply European countries

• India: 77th Republic Day Parade celebrations, attended by among others European Council President António Costa and European Commission president Ursula von der Leyen, ahead of an EU-India Summit tomorrow to discuss trade, security and defence

• UK: 100th anniversary of John Logie Baird, the Scottish inventor of the television set, giving the first formal demonstration of his “televisor” to 40 members of the Royal Institution in London

Tuesday

• International Holocaust Remembrance Day

• Bulletin of the Atomic Scientists announces the recent decision of its BAS Science and Security Board and its Board of Sponsors on whether or not the time of the “Doomsday Clock” will change. The result will be streamed on YouTube

• UK: Up Helly Aa, a celebration of Shetland history, including a torchlit procession and burning of a replica Viking longship, marks the end of the Yule season

• US: President Donald Trump to speak on the economy and energy in Iowa on the day the US formally withdraws from the Paris Climate Agreement for a second time following an executive order issued by Trump last January