The Fed: Interest rates rise again
The Federal Reserve hiked interest rates this week, for “just the third increase since officials lowered rates to near zero during the financial crisis,” said David Harrison in The Wall Street Journal. The central bank’s benchmark shortterm interest rate went up by a quarter point to a target range between 0.75 percent and 1 percent, a move that will increase borrowing costs throughout the economy. The Fed had been signaling for weeks that it intended to raise rates in order to keep the strengthening economy from overheating. Strong job growth, surging stock markets, and an uptick in inflation made this week’s decision a near certainty.
The Fed’s “era of easy money” may finally be coming to an end, said Neil Irwin in The New York Times. Until now, the central bank has been working to wind down its post-recession stimulus program “with the caution of a technician defusing a powerful bomb.” After raising interest rates above near-zero levels in December 2015, “the Fed waited a full year before doing so again” amid mixed economic data and shaky stock markets. But this week’s rate hike comes “a mere three months after the last one,” signaling that the Fed is finally getting serious about accelerating the pace of rate increases.
Economy: CEO optimism hits 3-year high
Business leaders like what they’re “hearing from President Trump and his fellow Republicans,” said Jim Puzzanghera in the Los Angeles Times. CEO optimism is the highest it’s been in three years, according to a new survey by the Business Roundtable, which is composed of the heads of about 200 of the U.S.’s largest companies. The group’s CEO Economic Outlook Index, which is based on projections for sales, capital spending, and hiring for the next six months, jumped from 74.2 to 93.3 in the first quarter. It’s the biggest increase since the third quarter of 2009.
Tech: Intel spends $15.3B on driverless car tech
“Intel has become the latest Silicon Valley giant to make a big bet on self-driving cars,” said John Reed in the Financial Times. The U.S. chipmaker announced this week that it’s acquiring Israel-based Mobileye, which builds sensors and software that help vehicles detect obstacles on the road. The $15.3 billion deal is the biggest yet for the nascent self-driving car industry. Mobileye will keep its headquarters in Israel, which is becoming a hub for firms working on self-driving cars.
Pharma: Activist Ackman gives up on Valeant
Billionaire investor William Ackman is walking away from his disastrous bet on Valeant Pharmaceuticals, which has cost his hedge fund more than $3 billion, said Svea Herbst-Bayliss in Reuters.com. In an “abrupt and unexpected move,” Ackman’s Pershing Square Capital Management sold its entire stake in Valeant this week, ending the activist investor’s quest to rescue the beleaguered drug company. Ackman’s fund became one of Valeant’s biggest investors in 2015, but the firm’s stock has lost 95 percent of its value since then amid questions from regulators about its pricing policies and accounting practices.
Real estate: Chinese to invest in Kushner tower
A firm owned by the family of Jared Kushner, President Trump’s sonin- law and adviser, “stands to receive more than $400 million from a prominent Chinese company that is investing in the Kushners’ marquee Manhattan office tower,” said David Kocieniewski and Caleb Melby in Bloomberg.com. Real estate experts say the planned $4 billion deal for 666 Fifth Ave. includes “unusually favorable” terms for Kushner Companies, notably a large cash payout for the troubled property from Anbang Insurance Group, “whose murky links to the Chinese power structure have raised national-security concerns over its U.S. investments.” A mortgage owed by the Kushners will also “be slashed to about a fifth of its current amount.”