Reuters World News - UPDATE: In the room with the Fed - interpreting Powell on future hikes

Episode Date: May 3, 2023

The Fed raises rates - but signals the possibility of a pause. We're in the room with Jerome Powell. Plus Senate Dems grill Supreme Court justices over ethics, Ryan Reynold’s Wrexham celebrates on a bus top and the latest on the Kenya cult.  Visit the Thomson Reuters Privacy Statement for information on our privacy and data protection practices. You may also visit megaphone.fm/adchoices to opt-out of targeted advertising Learn more about your ad choices. Visit megaphone.fm/adchoices

Today, the FOMC raised its policy interest rate by a quarter percentage point. After its 10th consecutive rate hike, Federal Reserve Chairman Jerome Powell signals the possibility of a pause. The central bank will now assess the fallout from bank failures, sticky inflation, and the ugly debt ceiling fight before any more rate increases. It's Fed Day. We look at what's next for borrowers after more than a year of interest rate increases. It's Wednesday, May 3rd. This is Reuters World News, bringing you everything you need to know from the front lines in 10 minutes. I'm Kinvenal in London. And I'm Christopher Waljasper in Chicago.

As expected, the Fed raised interest rates by a quarter of a percentage point. But Powell opened up the possibility it could be the last in this cycle. Our very own Howard Schneider was in the room in D.C. with Powell. Howard, you asked him the question on every single. everyone's mind. I was wondering, given your baseline outlook, whether you feel this current rate of 5 to 5 and a quarter percent is, in fact, sufficiently restrictive. So that's going to be an ongoing assessment. We're going to need data to accumulate on that. So what did you think of his answer? Well, listen, he was trying to accomplish two things here. One, to give a very demonstrable

message that they may be finished. And he kind of summed it up near the end, not at this question, but at the very press conference when he said, look, we're close and maybe there. Does that mean they won't raise rates in June? I think it's a big hurdle. You know, the data's going to have to go in a bad way between now and them, I think, for them to hike again. What would need to happen next month in order for that to happen? Well, honestly, a lot.

They've seen some trends that are starting to move in their favor, some easing in the labor markets, some easing in the pace of wage growth, some easing in inflation. Aspects on it have not developed yet. There's still a long way to go. But I think what they have now is sort of a compromise between going higher and waiting longer to cut rates. And I think they're airing on the side of staying where they are and maybe holding on to that terminal rate a little bit longer at the back end to let inflation evolve lower. Now, you just mentioned the possibility of rate cuts.

That hasn't been on our minds for a while now, but now suddenly that's on the horizon, right? Well, listen, I don't think it's on the fence horizon by any strides. actually the imagination. Their last projection in June doesn't have them cutting until into next year sometime. I know the markets think this is going to happen. As Powell said, this is a difference in inflation forecast. The Fed thinks inflation is going to come down pretty slowly. I think people in the markets are betting on a recession and a fast climb down in prices and that the Fed will blank once unemployment really starts to ratchet up. The thing is, the data lately have continued to sort of hold out hope for this Fed narrative that inflation can come down without steep job loss, that it can come

out through a reduction in job openings, that the steam in the labor market can be let out that way. They're still holding out hope for that. And Powell, in fact, today said he does not have a recession in his baseline forecast, even though the Fed staff does. Wow. All right. Thanks so much, Howard. Thanks. Here's what else we're watching today. Suspect is in custody. County Sheriff Greg Capers confirming an arrest after a four-day manhunt for the killer of five neighbours in Cleveland, Texas. The suspect, Francisco Oropesa, was found hiding underneath some

laundry and a house in the nearby town of Cutton Shoot. Oropesa shot his neighbors after they asked him to stop firing his semi-automatic rifle because it was keeping their baby awake. An eight-year-old boy was among the victims. A sea spy has been agreed by Israel and Palestinian armed groups in Gaza. Over the last 24 hours, there have been further exchanges between the sides, sparked by a Palestinian hunger striker dying in custody. Just days before the coronation of King Charles in London, a man has been arrested after throwing what's believed to be shotgun cartridges

through the gates of Buckingham Palace. The security alert led to a controlled explosion outside the home of the king. Florida Governor Ronda Santos has signed into law a sweeping ban on sustainable investing. The expected presidential hopeful has taken his fight against what he sees as woke capitalism to the next level, barring state officials from investing public money to promote environmental, social and governance goals. Looking for your late night talk show fix, you are going to be disappointed. Jimmy Kimmel Live, The Tonight Show with Jimmy Fallon, and other programs have all cancelled new episodes due to the writer's strike.

Skit show Saturday Night Live also shut down indefinitely. How low can the court go? Democratic Senator Dick Durbin kicked off a Senate panel probing Supreme Court ethics. After revelations that Conservative Justice, Clarence Thomas, accepted luxury trips from a wealthy Republican donor without disclosing them. The highest court in the land should not have the lowest ethical standards. That reality is driving a crisis in public confidence in the Supreme Court. The news outlet pro-Republica first detailed ties between Justice Thomas and donor Harlan Crow.

Thomas says under federal rules, he isn't required to report the travel. Supreme Court justices aren't required, like other federal judges, to follow a code of conduct. Senator Durbin says if the court won't regulate itself, he'll introduce legislation to do so. But Republicans, like ranking member Lindsay Graham, says Democrats are being sore losers for decisions they don't like, like the end of Roe v. Wade. This is an unseemly effort by the Democratic left to destroy the legitimacy of the Roberts Court. Chief Justice John Roberts declined an invitation to testify. none of the nine justices were at the hearing. Actor Ryan Reynolds was not at the Met Gala this year.

Instead, he was atop a double-decker bus with co-owner and fellow actor Rob McElhaney celebrating Wrexham Football Club's promotion to the English Football League. The Welsh team's been out of the league for 15 years. But since being taken over by Reynolds and McElhany in 2020, Rexham have climbed the ranks and become a club with global appeal, gaining international interest and new fans across the world. Now, a warning, this next story includes descriptions of death that some listeners may find distressing.

A Kenyan cult leader, accused of ordering his followers to starve themselves to death, has appeared in court in Melindi. More than 100 bodies have been found in mass graves with signs of starvation. 400 people are still missing. Authorities say the dead were members of a church led by Paul McKenzie. He's not commented publicly on the accusations and prosecutors have yet to issue any charges. Reuters Duncan Mariri went to Melendi when the bodies were being unearthed. Hi, Duncan.

Hi, Kim. So you were on the ground in Melindi. What was the situation like when you were there? Melinda is this charming holiday resort town along the Kenyan coastline, which is quite popular with foreign tourists. But now you have a shadow hanging over the town. The local mortuary is full, and even the Kenya Red Cross has had to bring in a makeshift mok to sort of store some of the bodies that are being dug up in the nearby forest,

which is about an hour and a half drive from the town. And then you have relatives coming in every day, streaming into the mortuary to try and identify their loved ones. They're carrying old pictures and other things to identify them. We also know that a lot of the bodies that have been found have been children. They have. There's a theory that has been put forward that McKenzie had set out a plan whereby they were going to starve themselves to death in faces. And the fans' face involved the children. We're also getting reports again from relatives of victims and also from the investigators who work in the case in Malindi. It seems like McKenzie was ordering the mothers of these children to suffocate them if the starvation, if the fasting to death wasn't doing his job quickly enough. What sort of role do churches play in Kenyan society? Is that now being looked at?

The Constitution has very clear principles around the fact that Kenya is a secular state, so it doesn't interfere in church matters. But over the last one or two weeks, we've seen both leaders in Nairobi in other places around the country, who are saying now that there needs to be a rethink here. How did it take so long for this starvation cult as it eventually became to come to light? Did people not know this was already going on? They're all theories. Obviously, his followers were quite secretive and he had sort of indoctrinated them.

But he also met relatives or victims who, one one was telling us, he made nearly 10 reports to the local police, but no action was taken. We've asked police about these. They haven't commented on this. But we know the minister and the government are trying to sort of move past that conversation and saying, you know, they'll make sure this won't happen again. That hasn't prevented the lot of questions and all of anger among ordinary Kenyans asking the same question. How did we get here? How do so many people tell themselves to death without anyone knowing?

Thank you, Duncan. That's it for this edition of Reuters World News. We'll be back later with that Fed decision. To get our daily shows and new weekend editions in your podcast feed, make sure you follow or subscribe to Reuters World News.