Wednesday, January 31
US MONETARY POLICY
Federal Reserve meets for last interest rate decision on Yellen’s watch
The Fed will today decide whether to hike interest rates for the first time this year in Janet Yellen’s final act as chair.
Ms Yellen’s departure is expected to be uneventful; America’s central bank is unlikely to adjust interest rates, which were hiked only last month to 1.5%. Instead, rates are expected to be increased at the next meeting in March when Yellen’s successor, Jerome Powell, takes the reins.
With a booming stock market, unemployment at a 17-year low and the economy currently enjoying its third-longest expansion in US history, Powell inherits the chair at a time of smooth sailing. As such, his immediate conundrum will be whether to hike interest rates three times this year, as planned by Yellen, or signal an increased rate of monetary policy tightening.
Rapid tightening would spook investors, negatively impacting the stock market and displeasing President Trump. Powell is, therefore, expected to lean towards sticking with Yellen’s planned three rate hikes in 2018. If inflation accelerates, however, Powell’s hand may be forced into quicker interest rate hikes.
CHINA-UK TRADE
Theresa May on first trip to China amid crucial trade talks
Britain’s prime minister will touch down in Beijing today to begin a three-day visit—Ms May’s first to the Middle Kingdom—amid high hopes of a free trade deal.
China-UK bilateral trade hit $83 billion in 2016, up almost 9% on the previous year. Chinese investment has been bullish since the Brexit vote and by 2020, China is expected to become one of Britain’s largest investors on the back of buying into businesses, real estate and infrastructure—up from the current $20.8 billion in 2017, which itself is more than double the 2016 figure of $9.2 billion.
However, London may have to wait in line for a free trade deal. Ms May has delayed approval for a Chinese-funded nuclear plant which has ruffled Beijing’s feathers. While France and Germany have also tightened scrutiny on Chinese investments, Beijing wishes to court both EU giants as partners for President Xi Jinping’s signature Belt Road Initiative as the European market is more lucrative. Unlike Downing Street, France’s Emmanuel Macron has conditionally backed the Belt and Road Initiative. Regardless, the Chinese market is significant for Ms May’s post-Brexit Britain—especially for financial services—so she is likely to tell Beijing that the UK is still open for Chinese business.
SOCIAL MEDIA INDUSTRY
Facebook to report on fourth-quarter earnings
Facebook will release its earnings for the fourth quarter of 2017 today, continuing a busy week for Wall Street that will see tech giants Apple, Alphabet and Amazon also publish figures.
Facebook’s earnings are expected to be typically huge, with the social media titan estimated to have earned $12.5 billion in revenue in the three months to December—a 42% increase from the same period in 2016.
Despite the impressive figures, Facebook’s earnings may have been even higher if not for the continued prevalence of fake news on the platform, as well as its inadvertent role in alleged Russian meddling in the US election. In November, Facebook revealed the existence of some 60 million fake accounts—more than double the previous estimate. Fake accounts act as a form of modern propaganda—they’re used to shape public opinion by sharing links to articles with misleading information.
To remedy the problem, Facebook is expected to make changes to the News Feed that will discriminate against material from news sources and businesses in favour of content from friends and family. It is a smart move by the tech giant to avoid costly federal regulation of what’s advertised on the platform.