Finance, in brief

The Federal Reserve, the US central bank, raised its main interest rate by a quarter of a percentage point on Wednesday, to a range of 3.75% to 4%. [1][3]

It is the first rise since July 2023. Since then the Fed had cut six times, by 1.75 percentage points in all. [3][17] A month before the decision, traders had put the chance of a rise at 33%. [18]

All 12 voting officials backed the rise, although many investors had expected at least one vote against. [6] In July, three officials had voted for a rise and lost. [1]

Kevin Warsh, the Fed's chairman, said inflation is too high and has been for too long. [3][4] US prices rose 3.4% in the year to August, against the Fed's 2% goal. [9]

Officials now expect prices to rise 3.7% this year, a little more than they thought in June. They do not expect to reach 2% until 2029. [1][7]

16 of the 18 officials who gave a forecast expect at least one more rise this year, and four of them expect two. [1][2] Warsh gave no forecast, as in June. [7] He has long said such forecasts make it harder to change course. [8]

Officials expect the US economy to grow 2.3% this year and unemployment to stay at 4.1%. [7] Warsh said US jobs are holding up, so the Fed can put its attention on prices. [14]

Hours later, President Trump, who picked Warsh in January, wrote that US interest rates should be 1% or less. [4][11]

Trump said he had told Warsh to vote with the rest of the board, and repeated a threat to cut off trade with countries the US buys more from than it sells to. [4][12]

Warsh would not discuss Trump. He said the Fed's independence works both ways: it stays out of trade and tax policy, and others stay out of rates. [2][11]

The Dow Jones index of 30 big US companies fell more than 630 points, or 1.2%. [20] The two-year US government borrowing rate, which follows Fed expectations most closely, rose to 4.725%. [5]

Jeff Gundlach, a well-known US bond investor, said the Fed should have raised by half a point instead. [10]

For US households, a rise like this slowly makes credit cards, car loans and new mortgages dearer, and pays savers a little more. [9][19] One quarter point on its own changes monthly bills very little. [9]

Why it matters. The next test is whether US prices slow before the October meeting, where traders now put the chance of a second rise at about one in two. [21][22]

Goldman Sachs, one of the biggest US investment banks, now expects the US central bank to raise rates again in October. [21] Until Wednesday it had said September would be the last rise. [21] Bank of America already expects rises in October and December. [21] Traders in rate futures, contracts that bet on where the rate will be, put the chance of an October rise at about one in two. [21][22] The chance of half a point more by December rose to 38%, from 10% a week earlier. [13]

Why it matters. Each extra rise lands on US borrowers whose loans follow the US central bank's rate, such as credit cards. It also decides how far the dollar and US borrowing costs keep climbing.

Saudi Arabia raised its main rate by a quarter point to 4.50% on Wednesday, hours after the US. [23] The UAE, Oman, Qatar and Bahrain did the same. [23] Most Gulf currencies are fixed to the US dollar, so their central banks usually copy US rate moves. [23] Kuwait, whose currency is tied to a basket of currencies, kept its rate. [23] Most Gulf economies were already expected to shrink this year, after the Iran war disrupted oil shipping and tourism. [23]

Why it matters. Gulf businesses and home buyers will now pay more to borrow. That comes in a year when their economies are expected to shrink.

The Hong Kong Monetary Authority, which acts as the city's central bank, raised its base rate by a quarter point to 4.25% on Thursday. [24] Hong Kong's dollar is fixed between 7.75 and 7.85 to the US dollar, so its rates follow US rates. [24] Eddie Yue, its chief executive, said the gap with US rates will widen. [24] He said the Hong Kong dollar may slide towards the weak end of its range. [24] Hong Kong's main share index fell 0.7% on Thursday morning. [22]

Why it matters. Hong Kong's banks now decide how much of the rise to pass on to the rates they charge, the monetary authority said. [24] A decision taken in the US reached the city within a day.

The US dollar rose 0.7% against other major currencies on Wednesday, its biggest daily gain in three months. [22] It reached its strongest level since 31 July. [25] The euro fell to $1.1456, near a seven-week low. [25] Attention now turns to the Bank of Japan, which is expected to raise its rate to a 31-year high on Friday. [25] Gold rose 0.7% on Thursday to $4,293 an ounce, after a similar fall the day before. [22]

Why it matters. A stronger dollar makes oil, which is priced in dollars, dearer for countries that pay in other currencies. It also makes dollar loans harder to repay for firms and governments abroad.

Brazil's central bank cut its main rate, the Selic, from 14% to 13.75% on Wednesday, the same day the US raised. [26][28] It has cut a quarter point at each meeting since March. [26] Earlier that day, a central bank index showed Brazil's economy shrank 0.2% in July. [27] That was the second monthly fall in a row, after a 0.9% drop in June. [27] Once rising prices are counted, Brazil's interest rates are still among the highest in the world. [27]

Why it matters. Brazilian families and firms pay some of the steepest borrowing costs among big economies, and the economy has shrunk two months running. [26][27] The next decision comes in early November, days after a close presidential run-off vote. [26]

UK consumer prices rose 3.1% in the year to August, the fastest since March. [31] Petrol and diesel cost 23% more than a year earlier. [29] Prices without food and energy rose 2.6%, the same for a fourth month. [31] The Bank of England decides on Thursday and is expected to hold its rate at 3.75%. [30] Investors put the chance of a rise in November at about 80%. [30]

Why it matters. The UK buys much of its energy abroad, so the war-driven fuel rise feeds its prices quickly. [29] Europe's central bank raised rates last week and the US on Wednesday, so a hold would leave the UK apart from both. [29]

Brent crude, the global oil price, fell 2.7% on Wednesday to $105.83 a barrel, and fell again on Thursday morning to about $104.80. [37][32][33] US Energy Secretary Chris Wright said damage to Saudi Arabia's East-West pipeline was temporary and it would restart within days. [37] Bloomberg reported the Saudis want it running at half its size within days. [34] Saudi Arabia is also loading oil onto tankers off Oman's Sohar port instead. [32] Independent analysts said satellite pictures show damage that could last weeks. [37]

Why it matters. The pipeline carries up to 7 million barrels a day and became Saudi Arabia's main export route after Iran blocked most shipping through the Strait of Hormuz. [32][35][38] Brent is still about 20% higher than a month ago. [36]

Orlen, Poland's oil refining company, bought 16 extra shiploads of crude to cover a gap left by Saudi Arabia. [39] Saudi Aramco, which has supplied about 40% of Orlen's oil since 2022, cancelled some late-September cargoes to European buyers. [39] The new oil comes from Norway, Britain, Algeria, Kazakhstan, Azerbaijan and the Americas. [39] Reuters estimates the cost at close to $1.5 billion, with physical oil near $130 a barrel. [39] Orlen asked for more offers on Wednesday. [39]

Why it matters. It shows the Saudi pipeline outage reaching European fuel supply, not only Asian buyers. Refiners that cannot find replacement barrels this quickly pay more or run short.

Petrobras, Brazil's state-controlled oil company, is selling diesel 3.89 reais a litre below the price of importing it, a record gap. [40] It has held prices down to curb inflation before October's election, in which President Lula is running again. [40] Independent importers are now delaying purchases because they would sell at a loss. [40] Farmers in Rio Grande do Sul, a southern farm state, report delayed diesel deliveries as summer planting begins. [40] The fuel regulator says deliveries are normal. [40]

Why it matters. Farmers need diesel for tractors during the few weeks of planting. Brazil's own diesel output has already reached its limit, so fewer imports leave less fuel to go round. [40]

American Airlines said the latest rise in jet fuel adds about $1 billion to its costs for October to December. [41] Its finance chief said fuel is about $1 a gallon above July's plan, and each cent adds about $10 million a quarter. [41] United Airlines said some flights planned for December will no longer run. [41] Both said demand is still strong, and American expects revenue to rise 16% to 19% this quarter. [41]

Why it matters. Fewer flights and higher fares are how airlines pass the fuel bill to travellers. United said long-lasting high fuel could put more pressure on weaker carriers. [41]

J.B. Hunt, a big US trucking and delivery company, said profit for July to September will be 5% to 10% lower than the quarter before. [42] Analysts had expected a 12% rise. [43] Its finance chief blamed about $25 million of hiring and training costs, plus at least $10 million from record diesel prices. [42] The shares fell more than 10% on Wednesday. [42][44] They had nearly doubled over the past year. [42]

Why it matters. Trucking costs feed into the price of almost everything sold in shops. An index of US transport shares fell 2% to its lowest since 1 June. [15]

US retail sales, a measure of what shops, websites and restaurants sell, rose 1.2% in August, the most since March. [45] Sales without cars, petrol and building materials rose 1.4%, the most since September 2024. [45] Part of the rise came from higher petrol prices. [45] A separate report showed prices of goods brought into the US rose 7.0% in a year, the fastest since August 2022. [45] Economists said the two reports made the case for Wednesday's rate rise. [45]

Why it matters. Strong spending tells the US central bank that higher rates are not yet slowing the economy. Rising import prices, pushed partly by AI equipment, point to faster price rises ahead. [45]

US household wealth rose $12.8 trillion in April to June, to a record $196 trillion, US central bank figures show. [46] $10.7 trillion of the rise came from shares. [46] The richest 10% of households own more than 87% of all shares. [46] US pay grew 3.1% in the year to August, the slowest in four years and less than prices rose. [46] Fund managers surveyed by Bank of America now name a fast rise in bond rates as the biggest risk to shares. [47]

Why it matters. Spending by better-off households is holding the US economy up while pay falls behind prices. So a big fall in shares could hit shops and jobs harder than past falls did. [46]

The S&P 500, an index of 500 big US companies, now costs 19.1 times the profit its companies are expected to make next year. [48] Last October it cost 22.9 times, the highest since 2000. [48] Profits grew faster than share prices, so the measure fell without a big drop in prices. [48] The index is still up 12.8% since that peak. [48] Shares now offer the smallest extra return over US government bonds since 2002. [49]

Why it matters. When a safe government bond pays 5%, investors ask more of riskier shares. Shares now make up a record 48% of what US households hold in savings and investments. [47]

Apollo, a big US investment firm, warned on Wednesday about the debt of the cloud giants that build AI data centres. [50] The price of insurance against those firms failing to repay has risen about 0.6 points above the same insurance on banks. [50] Last October the two cost the same. [50] Alphabet, Amazon and Meta are each expected to spend about $26 billion to $30 billion more cash than they take in. [50] Microsoft is expected to take in $33.4 billion more than it spends. [50]

Why it matters. These companies borrow heavily to build data centres, and insuring their debt now costs more. One technology analyst said their profit margins are improving and it is too soon to worry. [50]

May Mobility, a driverless ride-hailing technology company, agreed to list on the Nasdaq exchange through a $1.4 billion deal. [51] It will merge with ACP Holdings Acquisition, a shell company that raised money on the stock market in order to buy a private firm. [51] The deal could raise up to $337 million. [51] May Mobility says it has given more than 550,000 paid driverless rides in the US and Japan. [51]

Why it matters. Listings through shell companies are coming back after years of few deals. [51] May Mobility has raised about $445 million from private investors since 2017. [51]

Cohere, a Canadian AI company, and Aleph Alpha, once called Germany's AI champion, confirmed their merger on Wednesday. [53] The combined firm keeps the Cohere name, with headquarters in Toronto and Berlin. [53] The deal was valued at about $20 billion when first disclosed in April. [53] Schwarz Group, which owns the supermarket chain Lidl, is investing 500 million euros and will supply computing power. [53] Cohere reports $240 million a year in recurring revenue. [53]

Why it matters. Cohere sells AI that runs inside a customer's own computers and follows local rules, which governments and big firms are asking for. [53] The deal still needs approval from regulators. [53]

Unilever, the owner of Knorr and Hellmann's, has a $65 billion agreement with McCormick, a US spice maker. [54] It is the biggest food industry deal since Kraft and Heinz merged in 2015. [54] The IUF, a global federation of food workers' unions, asked Unilever for a two-year job guarantee for its workers everywhere. [54] It says Unilever will discuss that only in Europe, and wants other regions to bargain locally. [54]

Why it matters. Emerging markets made 53% of Unilever's food sales last year, while Europe made 30%. [54] So most of the food business sits outside the region where Unilever is offering the guarantee talks.

Sword, a health company that uses AI alongside human clinicians, agreed to buy Headspace, the mental health app. [52] Headspace says it has reached 100 million people in 200 countries and regions. [52] More than 20,000 employers offer it to their staff. [52] Sword says it has treated over one million people with its AI care service. [52] Neither company said how much Sword is paying. [52]

Why it matters. Employers and health insurers such as Cigna and Kaiser Permanente already pay for Headspace for their members. [52] The deal puts that brand inside a company that sells AI-led care.

SK Hynix, a South Korean maker of memory chips, is in talks with Intel, the US chipmaker, to make memory chips on US soil for the first time, Reuters reported. [15] Three people familiar with the talks were the source. [15] Shares of both companies rose more than 2.5% before trading opened on Wednesday. [44] SK Hynix said no decision has been made on any partnership. [44]

Why it matters. AI data centres need memory chips in huge numbers. A deal would put some of that supply in US factories for the first time. [15]

Generac, a US maker of backup power generators, rose more than 30% in trading after the market closed on Wednesday. [20] It will supply Amazon with backup generators for its data centres. [20] As part of the deal, Amazon received rights to buy up to $340 million of Generac shares. [20]

Why it matters. Data centres need backup power, so money spent on AI now reaches makers of ordinary electrical equipment. [20]

Dollarama, a Canadian discount store chain, said sales rose 17.6% to $2.02 billion in its latest quarter. [55] Sales at Canadian stores open at least a year rose 5.4%, helped by more shoppers and bigger baskets. [55] It raised its forecast for store sales and new store openings. [55] Its Australian business still weighs on profit. [55] The shares rose 3.5% before trading opened. [55]

Why it matters. Dollarama keeps gaining from demand for low-priced essentials while household budgets are under pressure. [55]

LuxExperience, which owns the luxury fashion websites Mytheresa, Net-a-Porter and Yoox, lost more than analysts expected in its last quarter. [56] But sales of $664 million beat forecasts, and the shares rose 17% before trading opened. [56] It bought the struggling Net-a-Porter group less than 15 months ago. [56] Its yearly earnings before interest, tax and write-downs turned slightly positive, and it has no bank debt. [56]

Why it matters. Yoox, one of its three websites, still loses money, so the rescue is not finished. [56] It expects sales to grow by mid to high single digits next year. [56]