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Terms and conditions apply. the new head of the Fed.
I'm honored.
The president nominated me for the position and I'll be an independent actor, if confirmed as chairman of the Federal Reserve.
He said, when my guy Kevin Warsh is in there, we'll get the interest rates that I, Donald Trump, want.
It's World Business Report from the BBC World Service.
This is Andrew Peach.
On the way more of the exchanges between Kevin Walsh and US senators and a look at what difference he might make.
Also, as President Trump extends the ceasefire with Iran, how American oil firms are benefiting from the disruption in the Middle East, and why holidays are increasingly about playing sports rather than lazing in the sun.
We'll start, though, with President Trump's pick to be the next head of the U.S.
Federal Reserve, Kevin Walsh, who's been facing intense questioning about his independence and his personal wealth.
Today, during a Senate committee hearing,
Here's one Republican Senator John Kennedy from Louisiana asking if he'd just obey the president.
Are you going to be the president's...
Human sock puppet?
Senator, absolutely not.
Are you going to be anybody's human sock puppet?
No, I'm honored.
The president nominated me for the position and I'll be an independent actor, if confirmed as chairman of the Federal Reserve.
And here's Democrat Senator Elizabeth Warren.
He has said, and I quote, anybody that disagrees with me will never be fed chairman.
And he's made clear that you are his sock puppet saying last week that interest rates will drop quote when Kevin gets in.
Yeah, I think they do.
Not when economic conditions change, we'll get lower rates.
Not when the economy needs it.
Nope.
He said, when my guy Kevin Warsh is in there, we'll get the interest rates that I, Donald Trump, want.
So independence takes courage.
Let's check out your independence and your courage.
We'll start easy.
Mr Warsh, did Donald Trump lose the 2020 election?
We try to keep politics.
If I'm confirmed out of the Federal Reserve.
I'm just asking a factual question.
I need to know, I need to measure your independence and your courage.
Senator, I believe that this body certified that election many years ago.
That's not the question I'm asking.
I'm asking, did Donald Trump lose in 2020?
Man, I'm suggesting you in 2020 the Fed made a... I'm suggesting you can't answer that.
Mr Walsh went on to deny he'd made any kind of deal to lower interest rates.
Well, our North America business correspondent, Michelle Fleury, was listening to those exchanges.
She's in New York and live with us now.
It was all quite personal, wasn't it?
Yeah, definitely some sharp questions there.
Not surprising, really.
I mean, we have listened to months and months of pressure from the president to cut interest rates.
Lots of criticism.
Even, in fact, a few hours before he made his appearance, Donald Trump said he'd be disappointed if Walsh didn't lower rates.
So I guess this idea of long cherished independence was always going to be in focus.
And how did he perform?
Well, he said he would endorse the Fed's independent, but he didn't believe that the dynamic, if you like, was at risk if elected leaders expressed their opinions.
OK.
He didn't seem rattled by the whole thing, to be fair.
There was a lot of focus on his own finances.
Tell us about that.
Yes.
So if he is confirmed, he will be the wealthiest Fed chair ever.
And so there were a lot of questions about how he would sell some of his assets if confirmed.
He has promised to divest about $100 million worth.
Take a listen to what he had to say on that.
I propose to put them in permissible assets that are as close to cash or treasury bills as I possibly can.
I haven't selected anything, but it will be as plain vanilla as possible so that there would be no appearance or reality of having any influence.
And Michelle, do we have any hints yet as to what he's going to do, assuming he gets the job?
You know, that in some ways to me was sort of some of the most fascinating stuff was, you know, he wants regime change, as are his words, if confirmed.
He wants changes in a couple of things, in how society inflation is measured and how the fed communicates its policy, for example.
We have things like the minutes, the press conferences, dot plots, and he says he finds that unhelpful.
He wants messier fed meetings, you know where.
Maybe you get a bit of a family fight instead of rehearsed scripts.
So If he's able to push that agenda through, it could be quite a radical departure from what we've seen in the past.
But a lot will depend, of course, on how much of his agenda he is able to push through.
OK, that sort of process stuff.
Do you think he's got any kind of vision for the US economy, at least, you know, that we can share?
On the economy front, he sort of didn't acknowledge that tariffs had had that much of an effect.
He was pressed a bit on inflation whether that had changed his thinking on inflation.
But he was kind of hard to pin down.
I mean, I think in the big picture he did talk more about the economy in terms of inflation rather than employment.
And that's notable because, of course, the Federal Reserve has a dual mandate.
It is responsible for worrying about both full employment and price stability.
Michelle, thank you.
That's Michelle Fleury, our North America business correspondent.
She's in New York.
Let's go from New York to Oklahoma.
And Courtney Shupert, economist at Macro Policy Perspective, formerly of the Federal Reserve Bank of Kansas City.
Courtney, thank you for being with us.
Leaving the theatricals aside that we've just been listening to a little bit of.
What's the state of the US economy that Kevin Walsh is going to inherit?
So the US economy has faced a number of shocks over the past year, but it has remained surprisingly resilient, though it is a bit more fragile.
Retail sales data released today confirmed that US consumer spending was strong in March 2020, fueled in part by higher tax refunds, boosted from the one big beautiful bill legislation passed last year.
Still, the US labor market has slowed considerably and is no longer the strong engine of growth.
We saw post-pandemic
We're in a low hire, low fire environment.
The unemployment rate remains low and has been relatively stable over the last six months, but real wage growth has slowed while inflation is picking up.
And that's a hit to real disposable income for US consumers.
And To listen to the president or other politicians talking about the US economy, you'd think the big question was about whether to cut rates or not.
Is that the big question in your view?
Right now, the Fed is facing stable unemployment rates, while inflation is picking up, and they need to wait and gather more information.
We've heard repeatedly from Fed speakers that they need to wait and see.
And part of that's because this conflict in Iran is, you know, eating away these higher tax refunds that consumers are getting because they're spending more on higher gas prices.
And that means the US economy is a little bit more vulnerable, particularly as there's lots of uncertainty and volatility around how long this conflict in Iran will last.
And would you expect Kevin Walsh to come in and instantly have to make big decisions?
Or is there any expected time for him to sort of get his head around and get used to the job, settle in effectively, as most of us would if we took up a new role?
Right.
So what's interesting is we heard Warsh call for regime change today, and he is directly critiquing the same policymakers that he's planning to join and trying to get around to his point of view.
And so.
He wants a new inflation framework, a new payment system, new communication.
And while there's some of those things that he can accomplish on his own, he really needs consensus to actually lower interest rates.
And it's not clear at all that he has that right now or would have it in the near term, given these inflation pressures that we're seeing in the economy.
I'm so sorry to interrupt you.
In so far as any of us can predict what President Trump might do or say do you sense that, having got his man into the job, he'll let him get on with it?
Or do you think it'll be a more public back and forth with the president on economic policy than that?
Warsh said today that he's open to public critiques of the Fed and almost welcomes that.
He praised a divergence of views and, again, those family fights, right?
He wants a messier Fed, and that's what he's suggesting from the regime change.
So I do expect continued external pressure on the Federal Reserve.
And while Warsh wants to change things, we may also see Chair Powell stay on the board as a governor.
And that could help provide some continuity given this sharp transition in leadership.
Thank you very much indeed, Courtney.
I appreciate that very much.
That's Courtney Shupert with us live from Oklahoma.
Let's go to Rochester, New York now, and George Conboy, President of Brighton Securities.
George, thank you for being with us.
What's your take on what we've heard from Kevin Walsh today?
You know, it looks like Warsh is a pretty experienced guy.
Markets don't seem to have a problem with him at all.
We had softer markets today, but it had a lot more to do with international items and oil than it did with Kevin Warsh.
Because when it comes to the economy, Trump doesn't make crazy picks.
No, he hasn't so far.
And let's face it, I don't care which president we're talking about.
Every president since Jimmy Carter's double digit interest rates wants lower rates.
They don't always get them.
But they all want them.
And the general view is lower rates tend to be good for the consumer.
Cheaper to buy a house, cheaper to buy a car.
And markets like that sort of thing.
They want you to spend.
They want you to invest.
And the lower rates are good for that.
And we've talked a few times on the programme just in the last few days about how, despite the economic challenges facing the US for all sorts of reasons, and the economic challenges facing US consumers actually the markets President Trump's favourite metric going great.
Any reason to feel that that will change with Kevin Walsh in the job?
No, not at all.
You had some guy over there I think his name was Churchill, Winston Churchill, who said that democracy was the worst form of government that's ever been tried, except for all of the others.
And when you look at the US economy, with all the problems and all the challenges, it might be the worst economy in the whole world, until you look at all of the others.
The US economy is in good shape and the markets are too.
George, stay with me.
George is in Rochester, New York.
Now, just in the last hour, we've heard from President Trump on his social media platform, Truth Social, that he's going to extend the ceasefire with Iran, but says the blockade of Iranian ports will continue.
More than 20% of the world's oil normally goes through the Strait of Hormuz, which remains closed.
As a result of which the US oil giant Halliburton says it's seeing more oilfield action in North America.
New figures from Wood Mackenzie show the volume of crude pumping through the Texas pipeline to the Gulf Coast export terminals increasing.
It's climbed by 1.5% to a daily average of 5.25 million barrels.
Sarah Emerson is president of the ESEI Energy Group and joins us from Boston.
Sarah, thank you very much indeed for being with us.
So we've heard from Halliburton's chief exec, Jeff Miller, about the fact that the...
One consequence of the conflict with Iran is it's good for the US oil industry.
Is he right?
Oh, I think so.
Absolutely.
Prices remain high.
We'll see drilling recover.
But this is not going to happen tomorrow.
It's going to take a few months for this to happen.
We had this from President Trump a couple of days ago as well who, in one of his social media posts, was saying thanks to the guys in Iran who think they're the tough ones.
Meanwhile, all the tankers are coming to Texas and Louisiana.
Thanks very much.
Well, I think if tankers are coming here, it's to pick up crude to take elsewhere, or to take petroleum products elsewhere.
We are exporting a lot of oil.
Right.
And that's good for the US, right?
Right now it's good for everybody, because there's a shortage of crude and there's a shortage of products.
And at the moment, we have the oil to export.
Right.
And another benefit as well as that as well as it favouring US oil production, giving the US oil production a bigger slice of the market, it also means the price goes up and that benefits the US.
Sure, it benefits anyone who produces oil.
That benefits the UK and Norway as well.
But keep in mind that what Halliburton's talking about it's a service company, so it's going to bring back rigs into the shale patch and that's going to take time.
You have to get the rigs there, you have to do the drilling, you have to complete the well.
And this all takes time.
This is not something where that oil is going to suddenly be available in May or June.
This is late in the year.
What happens when the Strait of Hormuz reopens?
I know that's a process that even once it begins will take a while.
But at some point, that resets the oil market, doesn't it?
Well, with a fairly significant lag.
So we have a lot of uncertainty right now, right?
We don't know how long the ceasefire will last.
We don't know how long the blockade will last.
We don't know when negotiations will restart.
We don't know if they will bear fruit.
So we have quite a bit of time potentially to wait.
And then let's say they do open the strait.
Now you have a bunch of tankers.
They can start to head out into the market, but they're a long way from the consuming countries.
On the case of West Coast of the United States, it's eight weeks.
In the case of most of Asia, it's four to six weeks anywhere.
So it takes a long time.
How does oil from Venezuela play into this?
Oil from Venezuela has been going to the United States and India and some to Europe, but it's a very small increase.
OK.
And just one other thing I wanted to bring up with you, Sarah.
Away from the US, Ukraine's President, Vladimir Zelensky, says there's a pipeline, a Russian pipeline, that crosses Ukraine.
That's been fixed.
Now, Kiev was accused of slow walking the repairs to that.
What?
What's the significance of that pipeline and the flow of oil in that direction?
Yeah, he's talking about the Druzhba pipeline and it has been repaired and will be increasing the flow, but it's not a very significant volume.
And in the meantime, Ukraine has successfully damaged export ports up in the Baltic Sea.
So actually, Russian exports overall that are seaborne are dropping.
Sarah, thank you very much indeed.
Let's go back to George now.
Give us your take on oil prices today, because every day we ask this question, every day we get a different answer.
And every day it's a different oil market.
Today, we did dip back down below $100 a barrel on Brent crude.
We're still going to see a lot of this back and forth, prices up and down, because it doesn't look like the two most volatile actors on the world stage, which would be Donald Trump and the Ayatollahs, in whatever basements they're hiding in.
It doesn't look like either of them are coming to an agreement tomorrow.
And if that's the case, you can expect more up and down.
But don't forget for US economy and US oil companies.
We put out about 25 percent of the world's natural gas and maybe 25 or 20 percent of the oil.
So that's a big influx into the U.S. economy.
Not necessarily spread equally, but investors generally like it.
And the latest chapter in all of this is the ceasefire is extended.
Do you expect the oil price to come down off the back of that?
Or can we just not tell?
Well, if it holds based on today's news, sure.
But we seem to be getting different news every single day.
However, based on the most recent news, that's bullish for oil prices to come down.
And lower prices, that's a better input for most industries.
So that's a plus for markets as well.
We'll be right back.
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This is World Business Report from the BBC World Service with Andrew Peach.
We're going to turn to Europe's largest economy now.
Germany's closely watched ZEU index of economic sentiment has fallen more sharply than expected this month, dropping deep into negative territory as firms grow increasingly uneasy about the fallout from the conflict.
My colleague, Liana Byrne, has been talking to Karsten Breski, chief economist at for Germany at the ING Bank, and asked how exposed Germany is.
Germany is extremely exposed to energy prices, exposed to everything going on currently in the Strait of Hormuz.
And it ties into this drop in business sentiment we saw already a month ago with other more prominent leading indicators, as hopes for this recovery that we had at the start of the year are clearly going up in thin air currently.
And what industries are most exposed?
Well, Germany has quite some energy intensive industries.
Think of the chemical industry.
Think of the pharmaceutical industry.
So these are key sectors that are clearly exposed to higher energy prices.
Add to that that German industry in general is clearly also depending on international supply chains.
And if we were to see now, for example, Asian industry being reduced due to the lack of physical oil, this could be another big bummer for German industry.
Some of those industries were struggling already.
I was thinking about the automotive industry.
That's just going to be another nail in the coffin.
Germany seems to have also really bad luck, because there were clear signs of a rebound in the making on the back of more fiscal spending.
And even the automotive industry seemed to be going through this, bottoming out with a bit of hope for some kind of recovery in 2026.
And with this energy price shock, the risk is high that this recovery will simply not come this year.
On a more positive note, the fiscal spending is still coming.
And we're really talking about more than 200 billion euro that the German government intends to put into the defence and infrastructure sector this year.
So this is enormous.
I'm still mildly optimistic that we will see a bit of growth coming in Germany.
That's Carsten Breski from the ING Bank.
Let's talk a bit more about retail sales George, because Courtney Shupert in Oklahoma was mentioning this a few minutes ago.
Let's delve in a bit more detail, though.
What news have we had today?
So retail sales were up.
I think it was the biggest jump in about three years.
A lot of that, Andrew, had to do with higher oil prices.
Let's face it.
One of the things that people buy is gas they put in their car, paying for their utilities, and that's all affected by higher energy.
So they're spending more.
But if you peel that veneer off and you say well gee, the consumer is spending more.
The consumer seems to be, and markets seem to evaluate it as such, in a healthy place,
If they can afford to spend more.
Wages have risen.
Overall, corporate profits are looking pretty good for the quarter.
So the higher consumer spending number, while largely oil driven, even the core numbers without oil, were good.
So the US economy remains healthy and the consumer seems to believe it stays that way.
Lots of focus on airlines at the moment because of pressures on jet fuel costs, among other things.
News from United today.
Yeah, kind of a surprise, because what you would expect from a company like United would be higher oil prices, lower profits.
After all, that's a huge component of their expense.
But United, like some of their competitors, has done a good job of raising prices and having consumers accept those increases, accept higher fees for baggage.
People may not like that, but they haven't slowed down their idea of a trip to see the Eiffel Tower or Big Ben or whatever it might be.
So United came in with a beat and very good estimates, even though they're spending more on jet fuel.
It's a good story.
Now let's talk about travelling elsewhere in the world to do something like run a marathon or take part in some other big sporting event.
Millions of holidaymakers are opting for sport-focused breaks over lounging around in the sunshine.
Daniel Rosny has been to Lanzarote, one of the Spanish Canary Islands, to find out a bit more about this sector's rapid growth.
Here we go.
I'm here training with my amateur swim team from London.
It's a week-long, almost boot camp style itinerary of swim training a day.
There are three Olympic-sized swimming pools, tennis courts, a 400-metre running track and cycling routes that offer stunning views of villages, vineyards and even volcanoes.
Broadly speaking, the industry is already worth hundreds of billions of US dollars per year globally.
Michael Muller, who's from Denmark, is the sports director here.
The first years during the 80s.
This was an economical disaster and nobody could see the idea of going on an active holiday.
Everybody was searching for sangria and the party in spain.
Then, up through the 90s, it slowly turned around and, and since it's just been growing, my name is giovanni manfredi.
I am from genoa in italy.
I'm matthew walcher.
I'm 32.
I'm from toronto canada, So I was very skeptical because this is not really my type of holidays, but I have been incredibly surprised.
Is that a new thing for you, traveling for sport?
I've been all over.
So last year we were in Argentina, we were in Lyon, Brussels.
Do they have anything like this in Canada?
Not that I'm aware of.
That's what I want to look up after I leave here is what other options are like this.
Seeing the growth potential, countries worldwide are now moving to capitalise, recognising that travellers who come to participate in things like marathons can be high-value visitors.
My name is Siabule Lanyigana.
I'm an associate professor at the University of Johannesburg and at the School of Tourism and Hospitality.
The Durban Comrades Marathon is one of the most famous marathons in the world.
The Cape Town Cycle Tour.
There's a lot of these events that are really popular.
It's a growing field.
I probably could argue that it's the fastest growing sector in tourism in the African space, because a lot more people are paying attention to it.
It's also important for different economies because it brings about economic impacts.
It brings about infrastructural development that could assist in the longer-term development plans of these places.
As some nations look to improve their offer in this field, other global chains are seeing how the industry is going and are adjusting their facilities.
We can jump on a call with Mark Weinstein, who is the Chief Marketing Officer at Hilton.
We do have hotels that are putting paddle in place.
We do have hotels that now are building quite large fitness facilities and allow the use of basketball courts or tennis courts.
You know, in some ways, that's always been there in the luxury segment.
It's now available at all of our brands.
These changes at hotels are just one chapter of a much bigger story.
One country that's long understood this is New Zealand, famous for its active and adventure tourism.
My name is Susan Hoagy-McKenzie.
I'm an associate professor in the Department of Tourism at the University of Otago School of Business.
I don't think it's a flash in the pan.
There's been a shift in terms of travel and tourism as leisure and something that we do for a week at a time that's separate from everyday life, to just get away.
The other thing that's driving that is the ability to work much more flexibly.
So with this leisure term, or work and leisure where we combine, it is probably driving those changes.
Back on the poolside.
My week of swim camp is over and I've discovered muscles I didn't even know I had.
And I've also learned that I'm part of a global trend.
It's a difficult sector to pin down with a single value.
Estimates from research companies and sporting bodies vary, but they all agree on one thing.
The growth is rapid.
That report from Daniel Rosny.
If you'd like to hear more of that, search for Business Daily wherever you get your podcasts from.
Daniel's found he's part of a global trend, George.
I think we as a family are as well, you know, because last year our holiday was in Portugal.
We spent the whole time playing paddle and golf.
Because we've got teenagers to entertain.
It works really well from that point of view as well getting something active, something to do.
What about you?
Sure.
Well, we'll play tennis when we're in Umbria.
Two months of the year, and all the courts are red clay, so you do your laundry every day.
And I suppose there's a health benefit to all this as well, isn't there?
Rather than sort of lounging around and eating and drinking.
We're enjoying the sunshine, but doing something more productive, more active.
Well, when you're on vacation, sometimes there's a little more eating, a little more drinking, and that good Italian or Portuguese food, Spanish food, that paella, may mean it's a great idea to get out and walk run play, paddle or tennis.
So it might just be a fight to keep yourself at even.
George, thank you.
George Conboy from Brighton Securities in Rochester, New York.
Thanks very much indeed for being with us today.
Don't forget to subscribe wherever you get your podcasts and you'll also get the daily edition of World Business Express.
From me, Andrew Peach, and the team, thank you for being with us.
