Ready, Fed, Go!

**Sarah Rogers** (0:01)
The new head of the US Central Bank, Kevin Warsh, gets his first big test. It's World Business Express from the BBC World Service. I'm Sarah Rogers. We also hear from the bikers smuggling millions of liters of illegal Iranian fuel into Pakistan. And some of Japan's biggest ice cream makers are investigated over alleged price fixing.
But first, a big day for the man at the head of the bank of the world's biggest economy. The Federal Reserve will set the latest interest rate in its first meeting under new chair, Kevin Warsh. He was Donald Trump's pick, and the president has long been calling for a cut in the cost of borrowing. But let's just rewind a bit. Warsh was confirmed last month amid some controversy.

**Elizabeth Warren** (0:51)
He has cooked up a ridiculous scheme. Install sock puppets at the Federal Reserve Board who are willing to artificially juice the economy.

**Sarah Rogers** (1:03)
Well, that from Democratic Senator Elizabeth Warren. Now, Kevin Warsh said that wasn't the case, and maintain the Fed would keep its independence, and he wanted a good old family fight.

**Kevin Warsh** (1:13)
Interest rates need to be forward looking, need to be based on better data. I tend to favor messier meetings than some, where people don't show up with rehearsed scripts, but we can have a good family fight.
If the central bank has that good family fight, I think that they're going to make better decisions.

**Sarah Rogers** (1:30)
Well, the benchmark interest rate in the United States is three and three quarter percent, but the backdrop to all this is rising inflation. It jumped to just over four percent in May, and US consumers and businesses are feeling it.

**SPEAKER_4** (1:43)
Tomatoes are nuts. What used to be, you know, half of what we used to pay is now like $90 for a case of tomatoes.

**SPEAKER_5** (1:51)
Astronomical, you can't get anything for under $100. Just for some like lettuce, some juices, some things for a party, a watermound, $10 for a watermound.

**SPEAKER_4** (2:00)
You can only charge so much. The general public may not be able to afford dining out. So we have to work very hard to maintain our costs.

**Sarah Rogers** (2:08)
So higher inflation usually leads to higher interest rates, but that's not what's widely expected today, as our BBC New York Business correspondent, Michelle Fleury, explains.

**Michelle Fleury** (2:17)
Traders don't expect interest rates in America to go up or down at this meeting, despite inflation being above target. And that's because officials typically tend to discount rising prices fueled by volatile energy prices. They tend to sort of want to see how it develops and how it feeds into the broader economy. So where does this leave us? Well, it means that the main focus is Kevin Warsh himself. It is his first appearance since he was picked by Donald Trump to lead the Fed. And we know the president has long wanted lower interest rates. And so there has been a real question about the independence at the central bank. Would he preserve that or not? And I was speaking to a former central bank governor who said he thought he would be a consensus figure. So will he seek to build consensus or will he be a more radical figure? All eyes are waiting, watching to see what he says and what he does later today.

**Sarah Rogers** (3:10)
Well, listening to Michelle Fleury, investment director at AJ Bell, Russ Mould. Russ, so the promise of a US R&P deal is taking some of the pressure off. Does that mean it's going to be the decision after this one that's the one to watch?

**Russ Mould** (3:22)
It's possible, Sarah. If you look at financial markets right now, they're putting a 0% chance on a rate cut today and by December and by next June. So at the moment, financial markets are still looking for one or two interest rate increases from Mr. Warsh and his colleagues over the next 12 months because of that high inflation figure and the Fed's other mandate, unemployment, is still quite low.

**Sarah Rogers** (3:44)
And tomorrow, the UK will announce its interest rate decision. Surprisingly, though, inflation figures today holding at 2.8%, which was unexpected.

**Russ Mould** (3:52)
It was, it's given the Bank of England some breathing space. We've had interest rate increases from the European Central Bank and the Bank of Japan in the past week, but the UK inflation rate staying the same at a 2.8% year-on-year increase does help the Bank of England. I think all attention will therefore be on the vote because there's no change expected in British interest rates tomorrow. At the last meeting, only one member of the nine person committee voted for an interest rate increase. Any change in that might give us a view for the future. But again, just like in America, no interest rate cuts expected for the next 12 months. Maybe one or two increases instead.