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Hello and welcome to World Business Report here on the BBC World Service.
We're going to take you to Pakistan's economic capital on the programme, Karachi. by flooding.
We're going to hear from businesses there and we're going to be talking a lot about the PlayStation, why its price is about to go up.
But here on World Business Report over the course of the next few days, we're going to talk a lot about the US central bank.
And the man who runs it, that of course is Jerome Powell because he will be making a very crucial speech on Friday at Jackson. hole in Wyoming.
The markets will be following that very closely.
They'll be talking about interest rate policy, which won't just affect the US. but of course the global economy.
But we're starting the programme today by talking about this once again because Donald Trump has stepped up his attacks today on America's central bank.
The president, who of course wants interest rates lowered, is now calling for the federal governor.
Lisa Cook to be removed following fraud allegations tied to her housing records.
With more on this, here's our North of America business correspondent, Michelle Fleury.
What we have here is an ally of Trump who is also America's top... housing finance watchdog has accused a Federal Reserve governor, Lisa Cook, who was appointed by Joe Biden, of potentially committing mortgage fraud.
She owns two properties. This is the allegation, which apparently she claimed was her primary residence.
And so what has happened is there's been call for the U.S.
Department of Justice to investigate. But at this point, none of these claims has been confirmed. although that hasn't stopped the president for calling her to resign.
And we were going to talk to you about the Fed minutes which were released.
But I suppose what's in them, but has that slightly...
That story has slightly taken a backseat with this newer story, controversy around the Federal Reserve.
Yeah, I mean, I think, you know, the significance here is that obviously we know Donald Trump has long criticized the chair of the Federal Reserve.
Jay Powell, in part because it's been a pressure campaign to get him to lower interest rates, which President Trump thinks will boost the economy and also would reduce the cost to the American government of servicing its debt.
And that assault, if you like, on the Federal Reserve has taken many shapes, not just insults, but also... trying to go after people within the Fed to sort of find causes for them to go.
And this seems to be a kind of expansion of that.
Now, the Trump administration has already been able to put its mark on the Fed because there was another governor who quit early, Adriana Krugler.
And so he was already able to nominate Stephen Moran to that position.
And so the fear is that loyalists will be appointed to the Fed. and that that will somehow dilute its independence.
And this is an important week, isn't it?
Because the chairman of the Federal Reserve, who's been under so much pressure, Jerome Powell, is making An important speech, isn't he?
Yes. So this is the annual symposium that takes place in Jackson Hole out west in the United States.
It's a big confab for central bankers. And all eyes, from the perspective of Wall Street at least, are on... the speech that Jay Powell is going to give... for any clues about the future direction of interest rates.
And, of course, that job has been complicated... by Donald Trump's tariffs, the sort of way that interplays with both inflation, but also the jobs picture in America. and the data has been pretty muddy of late, and so it's not entirely clear.
On the one hand, you see signs that inflation prices are picking up in some areas.
You're also starting to see weakness in the labor market.
So depending on which of those two issues the Fed chooses to prioritize will determine how they act next.
Michelle Fleury there. Let's bring in Susan Schmidt, Portfolio Manager at Exchange Capital.
Resources in Chicago. We were going to talk to Michelle about the Fed minutes, but... we got sidetracked with that other big story that was breaking.
Susan, I'm sure you've looked at those minutes that have come from the Federal Reserve.
What are they telling us? Well, no surprises with those minutes.
We're hearing exactly the messaging that the Fed has been spreading since that meeting. disagree with the consensus, saying that they felt it was time to lower interest rates and At the same time, we saw the majority of members, now we have 12 voting at any one time,
So 10 others who agreed that interest rates should stay where they are because there was a balanced risk between increasing or lowering interest rates And that would be because of inflation or unemployment.
And so working on that, they still think there's a risk to inflation. largely from tariffs that have yet to really impact the economy.
And so Chairman Powell has come out as the voice of the Fed saying that they're going to hold rates steady.
Yep. Let us see what he says later in the week.
A lot going on here. We like to try and bring you the voices of people who have held. some of these positions of power that we have been talking about.
So earlier I spoke to Donald Cohen, the former vice chairman of the Federal Reserve.
Yeah, I think this is an attempt to get another appointee on the Federal Reserve Board who will do what he wants. wants them to do.
I have no knowledge at all of what Lisa Cook might or might not have done in a previous life, but obviously this is just another aspect of pressure.
We've seen this with the building business and other things.
So they're trying to pressure the existing governors so they get more appointments.
We've had the Federal Reserve Minutes being released on Wednesday.
Are they showing a Federal Reserve that's more divided than ever before, do you think?
Yes, there is a division of views. It's clear from the fact that there were two dissents at the last meeting, two governors who wanted to cut interest rates and didn't want to wait to see how the data were coming in.
So, yeah, but look, it's a difficult situation.
The labor market is slowing or has slowed on the most recent revised data.
Output is growing below potential, but at the same time, inflation has remained high.
And so there's not much relief on the inflation side.
So it's quite natural, I think, there would be a diversity of views. on the FOMC.
And Jay Powell at his press conference said they'd had a very good conversation around the university.
This was the first time, wasn't it, that multiple governors voted against a rate decision in more than 30 years?
Does that show the president is right in expressing some of the concerns that he is expressing at the moment?
Well, I don't agree with the president's recommendation that they lower interest rates by three percentage points. right away, that's for sure.
Do you think they should lower interest rates, maybe by half a percentage point?
From what I know right now, I'd be more cautious than that.
So I think because inflation is coming in a little to the high side, because back in late 2024 and early 2025, we were debating whether Inflation had gotten stuck at two and a half and wasn't going down to two. because the inflation is being pushed up by tariffs.
Now, I totally agree with the analysis that that's a price that should be a price level increase. but it's built on top of a situation that inflation was already running above target.
I think interest rates are most likely going to go down, but how much and how fast, I don't know.
You've been a vice chair of the Federal Reserve.
Have you ever seen the sort of pressure being put on the Federal Reserve that we're seeing at the moment?
I think there's certain qualities to this pressure that are different.
It's not unusual for presidents to want lower interest rates.
And some presidents, Lyndon Johnson and Richard Nixon, resorted to very severe pressure, physical pressure, uh, Nixon lied about Arthur Burns to put pressure on him to lower rates.
There was pressure from Ronald Reagan and George H.W.
Bush also. In that case, Paul Volcker and Alan And Greenspan resisted that pressure.
But the president and his party are facing elections.
They want the economy to be thriving. They want to push on that accelerator.
So that's not usual. But I do think the vehemence... of this pressure, certainly in public and the looking for pressure points anywhere they can find it.
This is not just on the chair. It's looking at every member of the Federal Reserve Board.
So it's taken it to a new level. A lot of people will be looking very closely at what Jerome Powell says later this week when he's at Jackson Hole.
You're going to be there as well. expect him to say?
He's going to have to acknowledge that the economy has been running a little soft and labour market's been soft. but who also, I expect, make the point that part of the softness in the labor market reflects a decline in supply as well as demand.
And I think he'll, I expect him to leave the door open for a September rate cut but not to announce something ahead of time.
He'll want to see the additional data. He'll want to have a discussion with his committee members.
The former chair of the Federal Reserve there, Donald Cole.
Let's bring Susan Schmidt quickly back in here. going to talk a lot about Jackson Hole on this programme this week.
That may confuse some of our listeners. Just give them a sense of why it's so important.
So Jackson Hole happens once a year in Jackson Hole, Wyoming.
It's a meeting of economists, and that's where they talk about policy, how various economists view the global economy, but particularly the U.S. economy faring.
And that's a big news item for economists, as you might imagine.
So we hear from Chairman Powell, whoever's the sitting chair of the Federal Reserve at that time.
And everyone keys in to see if there's any change or any indication of what the Fed is going to do or how they're approaching interest rate policy at that time.
Yeah, we're going to have a lot more conversations about that over the course of our programmes here on the BBC World Service. business programmes at least over the next few days.
Let us take you to South Asia now. Because the authorities in Pakistan's commercial capital, Karachi, have declared an emergency and a public holiday after monsoon rains paralysed.
The City. Norrin Shams is a journalist based in Karachi.
Pakistan Logicity and Economic Hub. This is where I'm based in Karachi and we have seen severe rain that flooded our and blocked major arteries.
So many areas have seen power failures, which is still not restored properly at the moment. which has been like 24 hours after the rain.
At least eight people have died in flooding that has caused houses to collapse and brought down power lines.
The main underpasses are flooded and areas are gridlocked.
This local resident wasn't able to get to work.
There is so much water on this road that my entire motorcycle was submerged.
I tried very hard to get out, but I couldn't find any way to do so.
I can't understand how this water will ever drain out.
Abid Oman Karachi is the founder of Pakistan's air quality initiative.
He's been explaining to the BBC why the flooding has been so severe.
These are natural, regular monsoon rains.
But what has happened in Karachi in particular that we've been through a drought over the last 20, 25 years where we've had very subdued monsoon rains.
And in this time period, the natural drains that existed would channel the water out of the city and into the sea.
I mean, it's a city right by the sea. drains have been blocked either by urban development or by trash.
We want to give you a sense of how this is affecting businesses in Pakistan's So, a short while ago, I spoke to Abdul Basit, the managing director of a restaurant called Danwai, which is based in Karachi.
It is definitely having an impact on the business, but moreover, it's having an impact on the lives of the people.
Because businesses thrive on customers and when the customers are too scared to step out, The idea of being stuck in traffic or, you know, the cars falling into a pothole or maybe even electrocution.
So the restaurants are empty. What about staffing even?
Can your staff get to the restaurant? Some of them live nearby.
That would be approximately 30% of the entire staff that we have.
They made it to the restaurant. And because of them only, we were able to cater to the few people who turned up, most of them who needed help.
We opened our doors to everyone. We said if you needed shelter, you needed to dry out, you needed Wi-Fi, charging, maybe a complimentary cup of tea.
People did actually turn up to the restaurant to get some shelter.
And it was only that 30% of the staff that lived nearby, very kind individuals. who kept her name high.
And because of that, we were able to do that.
But yes, you're right. Most of the staff is not able to even make it to the restaurant.
At a time like this I'm sure you're closely monitoring the weather forecast to see how long these rains are going to last.
Do you have any idea? How long this may continue for.
This current spell is going to last at least until the evening of Friday.
And then we have another spell coming up. from the 2nd of September.
So it is not something, you know, that we are really prepared to handle administratively as a city. and the business that we have.
It is difficult, isn't it, for cities like Karachi to cope with the amount of rain that you are having. before, do you think enough has been done to be prepared for these sorts of events?
I will be very candid with you. I'm one of those lucky people who have traveled extensively all over the world.
And whenever catastrophes like this come, no sort of system can actually stand up to them.
But, you know, in the aftermath, The services and the utilities and the district governments, they really need to step up.
That happens in New York, that happens in Paris, that even happens in Seoul, but unfortunately, Karachi is a little neglected.
You are, I believe, quite a new business. aren't you?
And there are a lot of challenges around for businesses in the world.
This just adds to the problems that you face, doesn't it?
We started about like seven months ago. It's our eighth month now.
We were thriving. We were doing very good.
And this national calamity came along. It really disrupted our motion.
But we have to just dust our hands, pick ourselves up and continue.
That's not easy, though, is it? If you're going to have...
Weeks without customers, it's difficult for business to keep going in that environment.
It is indeed very, very difficult. And I was just talking to our friend earlier.
We have been a little lucky in that regard that we haven't had actual damage to our building or our premises. because we are a very new restaurant.
We built up from scratch. And understanding the dynamics, we took care of a lot of things.
Like we had submersible pumps on site. to pump out the water if it started accumulating in the alleys.
We had roof treatments. But I've had other business owners from the same market, good friends of mine whose stores have been inundated.
All of the rations have been damaged. And their businesses have really suffered.
And for those business owners, what happens?
Does insurance cover flooding in Pakistan for businesses who are losing stock? losing money unfortunately in Pakistan the insurance market and the insurance companies are really uh relatively new and not new in the sense of their age, of the kind of covers that they provide.
We do not have a AAA agency in Pakistan.
We have reinsurance companies in Pakistan.
We do not have insurance companies in Pakistan.
Insurance really does not cover a lot in Pakistan.
Well, listen, it's been really insightful talking to you.
Good luck. I hope the weather improves. I hope you manage to get some customers in.
Just paint a picture of what What it's like is if you look out of the window at the moment, what sort of scenes do you see?
Is it still raining heavily? Do you see water on the streets?
Yes, the water is on the streets. I'm just sitting in my drawing.
And if I look out of the window, because again, I live in a better area.
But still, like a couple of inches of water is visible to me.
There is light drizzle going on into my area.
But what I've heard and spoken to people, raining heavily in other areas.
Abdul Basit there in Karachi, his business, his restaurant, suffering because of those rains.
Susan Schmidt still with us. Susan, I know this is a business programme, but...
The fact that we increasingly talk about the impact of weather on economies shows us how the world is changing.
It does, and it justifies, I think, investors' concern over environmental impact and will that be tagged back to companies. who might be responsible for it, for irresponsible emissions, et cetera.
That's a big focus, particularly for European investors. see how changing weather is impacting business.
And we hear a lot now from management teams who 20 years ago really weren't discussing this topic, but are now talking about strategy, future thinking, what they need to do and how they need to secure their businesses or supply lines.
Yep. And I'm sure when Susan's analysing lots of different factors, the weather is increasingly becoming part of them.
You are with World Business Report from the BBC World Service let us talk now about the gaming industry because Not good news for Sony PlayStation fans as the company's just announced a price hike.
Its popular PlayStation 5 console price... is increasing by around 10%.
Chris String is editor-in-chief and co-founder at thegamebusiness.com.
He joins us from the Games Conference in Cologne in Germany, which we're also going to talk to him about.
But Chris, this increase in the price of the Sony PlayStation by about 10%, did that come as a surprise and why is the price increasing?
No, actually, it was widely expected. PlayStation's biggest competitor, Xbox, increased the price of their hardware by $100. in the US back in May and its lower end model at $80.
And the Nintendo Switch, the original Nintendo Switch, not the new one, also increased in price between 30 and $50. at the beginning of August, and now PlayStation has moved as well.
This is mostly due to the tariffs that were imposed by the US on China.
These companies were trying to resist raising the prices at all.
PlayStation had a stockpile of PS5 consoles And so they were working their way through those before having to make any price moves.
But they've now made those moves. So although it is disappointing, it's really unusual.
This PS5 is five years old. Normally you see prices go down. as it reaches more mainstream consumers, more family audiences at this stage.
But in fact, the price is now higher than it was when it launched.
You were there at this big games conference.
I'm sure lots of people are talking about this price hike.
What are they saying? Well, I mean, there is a concern about the console market.
So the video game console market, PC market, where PC games are doing very well, mobile games are doing very well.
But the console games sector is having a bit of a tough time.
It's shrinking in terms of the number of users that it has.
It's still making more money. And it's a genuine concern around what the future holds for these devices. just launched a new machine which launched very well back in June but that's quite a high price and there are concerns about what that might that that might be due at Christmas and The holiday season, when that tends to do typically well, will it continue to perform as well as it has done?
So that's the big concern. But that's been a concern, I'll be honest, for a little while.
It's been heading in this direction and price rises isn't helping that situation.
No, it doesn't anyway. Stay with us. Bring Susan Schmidt back in here.
It's interesting to hear that console market is suffering a little bit.
Obviously, they've got markets on the phones increasing.
Because, you know, the gaming industry is a huge part of the entertainment business now.
It is a huge part of the entertainment business.
And importantly, it's a part that's growing. customers increase in their interest in gaming.
We've seen them be a very sticky customer and And this is yet another area where we have yet to see the price impact of tariffs fully flow through to that consumer. indications are it's increasing that share of wallet.
Those consumers don't seem to be walking away from gaming.
They're still very committed. They're just having to pay more now for that equipment.
Yep, they certainly are. Now, Chris, he's in Cologne where the biggest names in video games are showing us what they've got.
Our gods have forsaken us for fear of the coming darkness.
Who's the man behind the mask? I'm Batman.
The days fly by when you love what you do.
There you go. You heard Lord of the Fallen 2, the Lego film, Batman Legends of the Dark Knight and PBKK, all due for release in the coming year.
So, Chris, lots to be excited about. about even if console prices are going up.
Yeah, it's a big show. Everyone's here. We're expecting something like 350,000 people, consumers hitting Gamescom.
It's the business day today. And it's a very exciting industry.
Next year, the big one is actually Grand Theft Auto 6.
It's expected to be the biggest entertainment launch.
I mean, it's almost definitely going to be the biggest entertainment launch in history.
So, yeah, there's a lot of things to be excited about.
And the games industry is sort of coming down from the pandemic still.
During COVID, everyone was locked indoors.
They played a lot of games. and the result of um and the result of there's a lot of investment being made in the video games actually over investment actually and as a result we've actually seen quite a lot of layoffs and cuts across the industry over the last couple of years as the industry sort of, you know, right sizes itself after that.
We're still going through that phase. So oddly, there's a lot of exciting games, but the industry is in a bit of a dark spot.
Well, Chris, thank you for bringing us the latest on that and I'm sure...
We will return to you as we see what happens with those consoles and the impact those price rises have on already struggling.
Sales, right. Let's end in Europe, because last year in Denmark, a deal was agreed that will see the country introduce the world's first tax on greenhouse gas emissions.
From agriculture, bluntly attacks on birken cows and sheep, which emit methane as part of their digestive process.
The Danish government says it'll mean the biggest changes to the Danish landscape in more than 100 years.
Lexi O'Connor has been finding out what farmers in Denmark think of the idea.
We start a crop early in the morning, three o'clock in the morning, in the milking parlour.
In Denmark, farmers know big changes are ahead.
My name is Thomas Holmøller Søgaard. I run the farm Taastup Jersey together with my wife, Kristina, and our three kids.
This is a family-run organic farm. I asked Thomas how he feels about climate change.
Does he feel the responsibility? Of course I'm thinking about it.
You know, we see the change. The winter isn't that cold anymore.
And also when it starts to rain, it will rain more.
Let me take you back to last summer. Elsewhere in Europe, farmers were protesting.
But in Denmark, farming unions were sitting around the table negotiating with the government and green groups, thrashing out the details of a deal that will revolutionise Danish agriculture. transform the country's landscape and introduce the world's first ever tax on greenhouse gas emissions from animals.
You know, we've been running this farm for one and a half year.
And then the politicians started talking about attacks.
It was really bad news. It was a bad day.
We talked for a while about how Thomas feels about the deal.
He is on board, he says, but he does have some worries.
The tax is only on Danish products. So if you buy a liter of Danish milk, there will be a tax.
But if you buy a liter of German milk, there are no tax on that.
And that's really not fair. I put some of these concerns to the Danish Agriculture Minister, Jakob Jensen.
Well, this is actually something they can avoid by introducing new technologies and we also support them financially with national funding, EU funding as well. to give them some tools actually to avoid paying the tax and that is the whole idea that it's not a goal itself for us to get a revenue from the farmers from paying the taxation.
But it is a goal that they should change the way they produce the food.
Thomas thinks he's in a better position than many other farmers.
As an organic farmer he was already thinking about a lot of these issues.
It will be difficult to do all the things they want, but of course we will try.
But it's better to know that this is what we are doing.
And now... Now I can plan my farm the next 10, 15, 20 years after this.
It's better for me that we take everything in one and then I can make some long-term strategies.
Lexi O'Connor with that report there. Susan Schmidt, last thoughts from you, farming facing many challenges.
Facing many challenges and again, showing the importance of the environment is taking in forefront of investors' minds.
And government minds, we've gone from car emissions to cow emissions now effectively with this.
So clearly a topic that's going to keep going.
Yep, certainly will. That's it for this edition of World Business Report.
