FirstFT: Central bankers pledge to ‘stay the course’

Investors have been put on notice that central bankers on both sides of the Atlantic will “stay the course” to cool down their economies and tame high inflation.

European Central Bank president Christine Lagarde warned that further big rate rises lay ahead in comments later echoed by a top official at the US Federal Reserve.

“We shall stay the course until . . . we can return inflation to 2 per cent in a timely manner,” the ECB president said in a panel discussion at the World Economic Forum, adding financial markets should “revise their position” that the bank would soon slow down its rate rises in response to signs that eurozone inflation has peaked.

Lael Brainard, the vice-chair of the Fed, signalled that the US central bank also had more to do to get inflation closer to its 2 per cent target, despite signs that consumer spending is starting to ebb, the labour market is cooling and price pressures have eased.

“Inflation is high, and it will take time and resolve to get it back down to 2 per cent. We are determined to stay the course,” Brainard said at an event hosted by the University of Chicago.

• New inflation norm: Four is the new two for investors, as many do not see a return to the pre-2019 pattern of ultra-low inflation and near zero rates, writes Gillian Tett.

• Playing it safe: Despite rate rises, funds are avoiding volatile US government debt markets and instead pouring trillions a day into an ultra-safe Federal Reserve reverse repo facility.

• Wall Street chiefs differ: JPMorgan’s Jamie Dimon and Morgan Stanley’s James Gorman are at odds on the persistence of US price pressures and how the Fed should respond.

Are interest rates close to their peak? Let me know what you think at [email protected] — Tee

Five more stories in the news

1. Netflix co-founder steps down Reed Hastings is stepping down as chief executive of the company he co-founded 25 years ago, in a shake-up at one of Hollywood’s most powerful studios. Hastings, who launched Netflix in 1997 as a DVD-by-mail service, wrote in a blog post that he had been increasingly delegating management in recent years.

2. UBS on hiring hunt The Swiss lender is planning to pick off disgruntled dealmakers from investment banking boutiques as it looks to bolster its capabilities in mergers and acquisitions. The moves come as Wall Street rivals cut thousands of jobs, reversing years of strong hiring.

3. UK consumer confidence drops British consumer confidence fell this month after improving in the last quarter of 2022, as inflation and high energy bills continued to erode household incomes. GfK’s monthly consumer confidence index, a measure of how people view their personal finances and wider economic prospects, slipped to minus 45, down three points from last month.

4. Japan’s inflation rises at record pace Japan’s core inflation rate rose to a new 41-year high of 4 per cent last month on the back of a weaker yen and heavy exposure to the increasing cost of imported commodities. The reading adds to mounting market pressure on the Bank of Japan to abandon its yield curve control policy which has helped maintain ultra-low rates.

5. Davos updates China’s vice-premier Liu He told corporate executives that the world’s second-largest economy was back, while business leaders praised Joe Biden’s $369bn green package. Ikea executive Jesper Brodin said Brexit had caused “chaos”, as UK business secretary Grant Shapps admitted leaving Europe had caused “challenges” but said there were benefits.

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The day ahead

Economic data Germany publishes its producer price index for December, and the UK has retail sales figures for the same month.

Pro-life protest in US Anti-abortion protesters march on Washington for the first time since Roe vs Wade was overturned.

US Supreme Court takes on internet The court will consider whether to hear two cases today that could end immunity for groups such as Google and Twitter for content posted on their sites.

Corporate results British merchant bank Close Brothers, offshore drilling company Schlumberger and US asset manager State Street report.

What else we are reading

Britishvolt’s spectacular failure The UK battery start-up never made any revenues, limped between emergency funding rounds and tried to replenish a cash pile being devoured by its wage bill. After creditors blocked a last-ditch rescue deal this week, management finally called time on the business. How did Britain’s best chance of producing a domestic champion for the electric-car era fail?

Opinion: Putin is losing the energy war After weaponising gas supplies, Russian president Vladimir Putin is now on the back foot as prices plummet while Europe remains well-stocked for this time of year, writes David Sheppard. But Europe cannot be complacent and should accelerate commitments to clean energy alternatives.

Opinion: A defence of democratic capitalism The marriage of liberal economics and democracy has brought immense benefits to the world but faces its toughest test in decades, writes Martin Wolf. Success will depend in large part on the wisdom and probity of elites.

Kenyan killing exposes LGBT+ Africans’ struggle The murder of Kenyan activist Edwin Chiloba has exposed the struggle of LGBT+ people on a continent where homosexuality remains taboo and gay sex is illegal. While several human rights organisations have commended Kenya “for the swift investigations into the brutal murder”, they have also called on authorities to “replicate this determination and enthusiasm and act to close other pending cases”.

Covid kept off China’s death certificates With China’s hospitals and crematoria struggling to handle surging demand after the reversal of zero-Covid, analysts are surprised that official death tolls are not higher. One possible reason: Chinese officials are keeping “Covid-19” off the death certificates of many people who die with the virus.

Take a break from the news

After eight years with little industry recognition, Robert Wun, the Hong Kong-born designer, will make his catwalk debut on fashion’s grandest stage next week.