Fed cuts rates by half point in decisive bid to defend economy
The US Federal Reserve (US Fed) lowered its benchmark interest rate by a half percentage point on Sept 18, in an aggressive start to a policy shift aimed at bolstering the US labour market.
Projections released following their two-day meeting showed a narrow majority — 10 of 19 officials — favoured lowering rates by at least an additional half-point over their two remaining 2024 meetings.
The Federal Open Market Committee (FOMC) voted 11 to 1 to lower the federal funds rate to a range of 4.75% to 5%, after holding it for more than a year at its highest level in two decades.
The decisive move highlights the growing concern among policymakers over the employment landscape.
“The committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the US Fed said in a statement, adding that officials are “strongly committed to supporting maximum employment” in addition to bringing inflation back to their goal.
See also: BOK surprises with rate cut as Trump win boosts trade risks
Policymakers pencilled in an additional percentage point of cuts in 2025, according to their median forecast. Governor Michelle Bowman dissented in favour of a smaller, quarter-point cut — the first dissent by a governor since 2005 — and the first dissent from any member of the FOMC since 2022.
In their statement, policymakers said they will consider “additional adjustments” to rates based on “incoming data, the evolving outlook and the balance of risks”.
They also noted that inflation “remains somewhat elevated” and job gains have slowed.
See also: ECB’s Schnabel sees only limited room for further rate cuts
Officials updated quarterly economic forecasts, raising their median projection for unemployment at the end of 2024 to 4.4% from 4% forecast in June. That would represent a small deterioration from the current level of 4.2%.
Powell said last month that further cooling in the labour market would be “unwelcome”.
The median forecast for inflation at the end of 2024 declined to 2.3%, while the median projection for economic growth ticked down to 2%. Policymakers still do not see inflation returning to their 2% target until 2026. Officials again raised their projection for the long-run federal funds rate to 2.9% from 2.8%.
The decision begins a new chapter for the US Fed, which started lifting borrowing costs in early 2022 to curb a pandemic-driven surge in prices. Inflation, fanned by supply-chain disruptions and a wave of demand from locked-down consumers, ultimately climbed to its highest level since 1981.
The central bank raised rates 11 times, bringing its benchmark to a two-decade high in July 2023. Since then, inflation has cooled considerably and — at 2.5% — is nearing the US Fed’s 2% target. — Bloomberg
The Edge Singapore takes home two awards at SIAS Investors’ Choice Awards 2024
The Edge Singapore bagged two awards at the Investors’ Choice Awards (ICA) 2024 on Sept 17, organised by the Securities Investors Association (Singapore), or SIAS.
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Associate editor Samantha Chiew won the Financial Journalist of the Year Award. Chiew’s cover story, “Is the Singapore telco market heading for a consolidation?” (Issue 1139, week of May 27, 2024), caught the judges’ attention, as she explored the potential for consolidation within Singapore’s telecommunications sector, particularly over StarHub CC3 ’s possible acquisition of M1.
Chiew has been covering the local telco sector for several years and her story examined various scenarios that could unfold and the potential reactions from key players like Singtel, StarHub, M1 and Simba.
Meanwhile, our cover story from June, titled “How to jump-start the stock market” (Issue 1142, week of June 17, 2024), was named Financial Story of the Year.
A collective effort by the editorial team at The Edge Singapore, the story explored ways to improve Singapore’s equities market, with input from industry veterans.
An equities market review group was announced on Aug 2, comprising 10 leaders from both the public and private sectors, tasked with improving Singapore’s equities market.
Amid the ongoing debate around the revival of the Singapore stock market, the judges commended the team for their rigorous reporting and believe this work has played an important role in inspiring a nationwide effort to revitalise the stock market.
Associate editor Felicia Tan received the award on the team’s behalf.
While this is The Edge Singapore’s fourth consecutive year snagging wins at the annual ICA, this marks the first time that the team has won two ICA awards in the same year.
Last year, a cover story by executive editor Goola Warden and assistant editor Jovi Ho won the Financial Story of the Year at ICA 2023. Published in July 2022, the cover story from Issue 1045, titled “Is your financing really green?”, explored how Singapore’s banks are guarding against greenwashing.
Bernard Tong, CEO of The Edge Singapore says: “I am very proud of my colleagues at The Edge Singapore. Their dedication and expertise consistently deliver impactful news to our readers. I would also like to extend my heartfelt gratitude to SIAS for this year’s awards, which recognises the team’s outstanding efforts in financial reporting.” — The Edge Singapore
BlackRock, Microsoft to raise US$30 bil for AI investments
BlackRock and Microsoft are teaming up on one of the largest efforts to date to bankroll the build-out of data warehouses and energy infrastructure behind the boom in artificial intelligence (AI).
The companies, along with the United Arab Emirates’ MGX investment vehicle, will seek US$30 billion ($38.9 billion) of private equity capital over time for the strategy, which will then leverage the money to as much as US$100 billion in potential investments, the companies announced on Sept 17.
“The need to build out data centres globally is multi-trillions of dollars to finance,” BlackRock CEO Larry Fink said in an interview, adding that the Global AI Infrastructure Investment Partnership has been months in the making. “This is just a great example of the capital markets building out infrastructure and building out the opportunities and new technologies.”
The infrastructure investments — including energy projects — will be mostly in the US, with a portion of the funds to be deployed in US partner countries, the companies said in a statement.
The plan includes bringing on additional investors, and pensions and insurers are eager for such long-term infrastructure investments, Fink said. “We don’t believe it will be a difficult task [to raise the money],” he said. The group includes Bayo Ogunlesi’s Global Infrastructure Partners, the money manager BlackRock is acquiring for about US$12.5 billion; Abu Dhabi’s MGX, which was created this year specifically to invest in AI; and Nvidia, the chipmaker that will support the coalition with its expertise in AI data centres and factories.
“The investment opportunity is real and the investment need is even greater,” Brad Smith, vice chairman and president of Microsoft, said in the interview, adding that AI “is the next general-purpose technology that will fuel growth across every sector of the economy both in the US and abroad”.
The firms have already discussed the plans with US lawmakers and regulators, Smith said.
Microsoft has invested US$13 billion in AI research lab OpenAI and is overhauling its entire product line around AI features. The software company is dramatically expanding its own spending on data centres and computing infrastructure to deliver these services and has said its ability to serve AI customers is being constrained by not having enough chips and data centre capacity.
Microsoft has also been in talks with OpenAI co-founder and CEO Sam Altman, who is developing his own plans for groups of investors and tech companies to collaborate on ways to dramatically expand computing infrastructure for AI products. The Financial Times reported on the partnership earlier. — Bloomberg
Family offices in Asia Pacific record the highest shift towards public equity: Citi report
There have been significant portfolio shifts from cash to risk assets this year among family offices (FOs), with 68% of those in Asia Pacific increasing their allocations into public equity, the highest percentage compared to other regions.
According to Citi’s Global Family Office Survey 2024, FOs in Asia Pacific have “led the way” in deploying more to public equity.
The report — which surveyed 338 FOs globally, with 21% of respondents hailing from the Asia Pacific region — found that nearly 40% decreased their weighting in cash, compared to 30% in North America.
Meanwhile, 48% of FOs in the region had a positive outlook for global developed equities and private equity (PE) funds.
The report also showed that FOs had interest in a wide range of activities across mergers and acquisitions (M&A), including strategic acquisitions (20%), joint ventures (23%), mergers (14%) and divestitures (9%).
Direct investing activity was the highest in Asia Pacific, with 69% of respondents reporting increased and significantly increased activity. The results also showed that 49% of FOs in this region had a positive outlook for direct PE.
FOs across the region are leading in best practices. The results showed that 75% of respondents separate the FO from their family business and 51% have a leadership succession plan.
Furthermore, 74% of the respondents said they are well or very well prepared for leadership transitions.
The main challenges identified for FOs in Asia Pacific were costs (45%) and regulatory compliance (48%).
According to the report, this may be because the FO industry is relatively new and growing rapidly in the region. Furthermore, US-China relations were a top concern for Asia Pacific (52%).
Looking ahead, the report found that 63% of respondents from Asia Pacific expect their portfolio to increase by 10% or more in the coming year, the highest relative to other regions. — Cherlyn Yeoh
SingPost clarifies reports on potential sale of its Australian business
Singapore Post (SingPost) has issued a clarification on articles regarding a potential sale of its Australian business, as reported in the Australian press.
The group had announced on June 21 that SingPost appointed Merrill Lynch Markets Australia as financial adviser to formulate optionalities for the group’s Australia business specifically.
In a Sept 18 bourse filing, the group says that the review by Merrill Lynch Markets Australia is still “ongoing to determine the most appropriate range of optionalities” for the group’s business in Australia.
The group adds that there is currently no certainty of any transaction. Further announcements are expected to follow subject to material developments. — Ashley Lo
