Fed on collision course with Donald Trump over rate cuts

Today’s agenda: UK’s EV subsidies; OpenAI finds “distillation” evidence; DeepSeek’s “aha moment”; Czech central bank eyes bitcoin; and Shell’s carbon-credit dominance

Good morning. We begin with the Federal Reserve, which economists say is on a collision course with Donald Trump, as the central bank is expected to keep interest rates on hold despite the US president’s calls to reduce borrowing costs by “a lot”.

Key Fed decision: The central bank’s expected decision today is the first following Trump’s return to office, which has been marked by a flurry of executive orders as the US president seeks to impose his agenda on Washington.

Why it matters: While the market widely anticipates the Fed to keep rates on hold, Trump has made clear he wants much faster reductions. Analysts say that Fed chair Jay Powell will have to resist White House pressure if he is to retain the confidence of markets and avoid unleashing a new wave of inflation. Economists have warned that political meddling in monetary policy “can often go very badly”. Claire Jones has more from Washington.

And here’s what else we’re keeping tabs on today:

• Economic data: Italy publishes consumer and business confidence survey results.

• Monetary policy: Apart from the Fed, central banks in Canada and Brazil also announce interest rates.

• UK: Bank of England governor Andrew Bailey appears before the Treasury committee to answer questions on the latest Financial Stability Report.

• US: Senate finance committee holds hearing to consider the nomination of Robert F Kennedy Jr to be secretary of health and human services.

• Results: ASML, AkzoNobel, Corning, General Dynamics, IBM, Meta, Microsoft, Morrisons and Tesla report.

Five more top stories

1. UK ministers are drawing up plans to subsidise electric vehicle purchases by guaranteeing consumer loans, as they look at ways to drive up sales that remain below official targets. The government has opened private discussions with the automotive finance sector to make more low-interest or interest-free loans available to boost EV take-up.

2. OpenAI says it has found evidence that Chinese artificial intelligence start-up DeepSeek used the US company’s proprietary models to train its own open-source competitor, as concerns grow over a potential breach of intellectual property. The San Francisco-based ChatGPT maker told the Financial Times it had seen some evidence of “distillation”.

• DeepSeek’s ‘aha moment’: Chinese start-up DeepSeek’s breakthroughs have come from its use of “reinforcement learning” and “small language models”.

• Energy use: The DeepSeek-driven sell-off of energy and infrastructure shares has put AI’s power demands in doubt, says the International Energy Agency.

3. The head of the Czech National Bank wants to invest billions of euros of the country’s reserves into bitcoin in a move to diversify. The groundbreaking plan, if approved, could make it the first western central bank known to hold crypto assets. Read our interview with central bank governor Aleš Michl.

4. Shell dominated the $1.4bn global market for carbon credits last year as oil and gas companies scaled back their spending on clean energy and relied more heavily on offsets to reach their climate targets than any other sector. Data shows the energy group removed 14.9mn credits from global trading in 2024, more than twice as many as Eni, the next biggest user.

5. UK Prime Minister Sir Keir Starmer’s plan to agree a security and defence pact with the EU is being blocked by French and other member states’ demands over fishing rights and a youth mobility scheme, complicating his hopes of an early win in “reset” talks with Brussels.

News in-depth

UK chancellor Rachel Reeves will outline in a speech today initiatives to bolster the country’s economic potential. But the backdrop to her announcements is a decidedly gloomy one, with the economy struggling with poor productivity and lacklustre investment. Will her attempt to change the narrative work?

We’re also reading . . . 

Graphic of the day

Policymakers around the world are grappling with demographic woes. Birth rates have fallen in every continent. Two-thirds of the world’s population now lives in countries where people are having children at a rate too low to replace their population. Governments have thrown out all sorts of incentives, but despite the sweeteners, people are not having more babies.

Take a break from the news . . . 

Simalaha is a pioneering community conservancy in Zambia and the best way to explore it is on a horseback safari.