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Get your copy wherever books are sold. Good morning from the Financial Times.
Today is Friday, August 8th, and this is your FT News Briefing.
There might be a new face at the Federal Reserve soon, and the Bank of England had a tough time getting on the same page yesterday.
Plus, U.S. President Donald Trump says he wants to put 100% tariffs on semiconductor imports.
But there is a major carve-out. I'm Mark Filippino, and here's the news you need to start your day.
U.S. President Donald Trump nominated a new governor to the Federal Reserve yesterday.
Stephen Myron is chair of the Council of Economic Advisors.
He'll get to vote on interest rate decisions, and he's probably going to support Trump's calls for aggressive cuts.
Myron is set to take the seat that's being vacated by Adriana Kugler.
Her term was set to end in January, but she's leaving the Fed today.
Once Myron's term is up next year, Trump is expected to use that seat to nominate a replacement for Chair Jay Powell.
The president has repeatedly put pressure on Powell to cut rates more quickly, but due to sticky inflation, the Fed has continued to take a cautious approach.
The Bank of England lowered interest rates by a quarter point yesterday.
They've done that five times since last August.
But something unprecedented happened this time.
The Bank of England had to take a second vote.
That's because the Monetary Policy Committee was so split, it couldn't reach a majority verdict on the first vote.
Here to tell us more is the FT's economics commentator, Chris Giles.
Hi, Chris. Hey, Mark. So Chris, before we get into the internal politics of the BOE, I think it's important to start by outlining what is going on with the UK economy, because it's a confusing time, right?
Well, the UK economy is in a bit of a sticky situation at the moment because inflation's been rising this year and it's over 3.5% at the moment.
Up next year, Trump is expected to use that seat to nominate a replacement for Chair Jay Powell.
The president has repeatedly put pressure on Powell to cut rates more quickly, but due to sticky inflation, the Fed has continued to take a cautious approach.
The Bank of England lowered interest rates by a quarter point yesterday.
They've done that five times since last August.
But something unprecedented happened this time.
The Bank of England had to take a second vote.
That's because the Monetary Policy Committee was so split, it couldn't reach a majority verdict on the first vote.
Here to tell us more is the FT's economics commentator, Chris Giles.
Hi, Chris. Hey, Mark. So Chris, before we get into the internal politics of the BOE, I think it's important to start by outlining what is going on with the UK economy, because it's a confusing time, right?
Yeah. Well, the UK economy is in a bit of a sticky situation at the moment because inflation has been rising this year and rising globally.
So there are forces that are suggesting that rates should go up or not be cut.
And there are forces, weaknesses in the economy suggesting rates should be cut.
And it's perfectly reasonable for people to disagree how much weight they put on those two forces.
And so if a committee of wise people was entirely unanimous, saying there's obviously only one thing to do, you'd have to think it's slightly rigged.
So I think we're in a period where if you don't see split votes, I think that may suggest that a committee isn't really honestly reflecting the uncertainties that really do exist out in the real world.
Chris Giles is the FT's economics commentator.
He writes a great weekly newsletter on central banks.
We'll have a link to that in the show notes.
Thanks, Chris. Thanks, Mark. Europe's weapons factories are expanding at three times the rate of peacetime.
That's according to an FT analysis. Building activity at European arms sites has majorly picked up since Russia's full-scale invasion of Ukraine in 2022.
And the push to build more weapons has become incredibly important this year. especially since the U.S. has threatened to pull back its support from the European people favoring a cut, wanted to have a big cut, a jumbo cut of half a percentage point.
So you had four people voting to hold rates, four people voting for a quarter of a percentage point cut, and one person voting for a half percentage point cut.
And in the rules of the Bank of England's voting, that meant that you had to take a second vote, and he changed his vote to be voting for a quarter point, and so it went 5-4, a very close vote indeed.
Chris, do me a favor, lay out both arguments for me.
First, why would some members want to cut commitment?
Exactly. It seems that Apple has managed to convince Trump who, you know, if we go back a few weeks, Trump was threatening 25% tariffs on the iPhone.
If Apple didn't build the iPhone in the US, there's all sorts of reasons that that's massively impractical for Apple.
It would be a huge hit to their margins.
And so what Apple's done is it's basically thrown another $100 billion out. dollars at the problem and said that it's going to sort of double down on its commitment to US manufacturers, which are building certain components that go into the iPhone.
That seems to have been enough to convince Trump that Apple won't be building the iPhone or assembling the iPhone in the US anytime soon, but it does make a meaningful contribution to US manufacturing.
Okay, so it sounds like Apple is probably feeling pretty good about all this.
But what kind of impact will these tariffs, if they do come to fruition, and we should say that they have not yet, what kind of impact would they have on other major chip companies like NVIDIA or the Taiwan Semiconductor Manufacturing Company, TSMC?
So the knock-on effect for other chip companies is anyone who has essentially announced a major investment project in the US, whether that's NVIDIA, whether that's TSMC, whether that's South Korea's SK Hynix or Samsung, the mood around Trump's announcement seems to be relatively upbeat.
But if you haven't made a large investment in the US and you haven't convinced the administration directly that you are contributing to this broader plan to rebuild America... So judging by how close the vote was, they are less sure about that than they were three months ago.
Okay, based on what you said, I kind of have a sense of why some members of the BOE might want to keep rates steady, but what's their perspective?
The argument for keeping rates steady is that the performance on inflation has been not great in the last couple of months.
And so the four people who voted to keep rates steady said, we need to see more progress on inflation, on underlying inflation, before we can cut rates.
The manufacturing base... Even if TSMC is building fabs in Arizona at a healthy pace, it's still a Taiwanese company based in Taiwan.
There is no U.S. company that works in that space other than Intel.
And it's a really interesting sort of side plot to this whole narrative around tariffs and chips.
So Michael, I know things are a little too early to say, but what does this all mean for chip production in the U.S.?
? Chip production in the U.S. is a sort of long-term policy goal that stretches across multiple administrations, and it goes back to the CHIPS Act in 2022.
If you think of the CHIPS Act as the carrot, it was subsidies and tax breaks for companies that build here, then tariffs are the stick.
The question of whether tariffs can actually meaningfully shift perhaps the most globalized supply chains in the U.S. is worth questioning.
Tariffs are not traditionally used in this manner to rebuild a manufacturing base, and so it's really an experiment for the U.S. right now.
Michael Acton covers Apple and the semiconductor industry for the FT in San Francisco.
Thanks, Michael. Thanks. You can read more on all these stories for free when you click the links in our show notes.
This has been your daily FT News Briefing.
Check back next week for the latest business news.
The FT News Briefing is produced by Sonya Hudson.
Food price inflation, which is rising globally.
So there are forces that are suggesting that rates should go up or not be cut.
And there are forces, weaknesses in the economy suggesting rates should be cut.
And it's perfectly reasonable for people to disagree how much weight they put on those two forces.
And so if a committee of wise people was entirely unanimous saying there's obviously only one thing to do, you'd have to think it's slightly rigged.
So I think we're in a period where...
