The case for gradual rate cuts

Good morning. Today we’re covering:

• What’s happening on the Russia-Ukraine border

• Singapore PM warns over US-China tensions

• Should Starbucks cut spending in China?

But first, US interest rates. The Federal Reserve needs to take a gradual approach to lowering borrowing costs, one of its top officials told the Financial Times.

Recent economic data has given San Francisco Fed president Mary Daly “more confidence” that inflation is under control. It is time to consider adjusting borrowing costs from their current range of 5.25 per cent to 5.5 per cent, Daly said.

The speed with which US rates will ease from their 23-year high will be a central question on the lips of policymakers when they gather later this week at their annual retreat in Jackson Hole, Wyoming.

Here’s what I’m keeping tabs on today:

• The Democratic National Convention: More than 50,000 people are expected to attend the convention in Chicago, featuring speeches by Joe Biden, Barack Obama and Bill Clinton as well as Kamala Harris’s coronation address on Thursday.

• Thailand: Former Thai Prime Minister Thaksin Shinawatra will appear in court for a pre-trial hearing for allegedly insulting the monarchy in 2015 (The Nation).

• Japan: Machine orders data for June will be released.

• FT business book of the year: The long list for the FT and Schroders book competition will be announced.

Five more top stories

1. US-China tensions and Singapore: The “intensifying rivalry” between Washington and Beijing will have an impact on the city state’s economy and the broader region, Singapore’s prime minister Lawrence Wong warned.

2. US secretary of state visits Israel: Antony Blinken’s visit comes as Washington has intensified its diplomatic push to secure a deal for ending the war between Israel and Hamas and freeing the hostages still held in Gaza.

3. South Korea’s plan for AI textbooks: The country’s proposal to introduce artificial intelligence-powered digital textbooks in schools has provoked a backlash from parents and academics.

4. Tata shows interest in power distributors: The Indian conglomerate’s energy arm would consider expanding its distribution reach if state-owned power distribution companies are put on the block, said its chief executive.

5. Mining troubles: China’s stricken property sector has depressed demand for steel, threatening to squeeze earnings at the world’s largest mining houses.

News in-depth

Nearly two weeks after Ukrainian troops smashed through thin border defences and stormed into Russia, Moscow has still not assembled the kind of overwhelming force needed to repel Kyiv’s incursion. It has instead cobbled together units from around the country and from less active parts of the Ukrainian front. Despite Ukraine’s advances, Russia’s president Vladimir Putin appears unwilling to divert more significant resources from the eastern front, leaving him with few options. 

We’re also reading. . . 

• India’s jobs challenge: Based on current trends it could take another 75 years for India just to reach one-quarter of America’s income per capita. To change this, the country must capitalise on its labour force, writes the FT editorial board.

• Starbucks’ new CEO: There is a case for the world’s largest coffee group to cut back capital spending and slow its expansion plans in China, writes Lex’s Pan Yuk.

• Demographic change: Societies across Asia and the Pacific are aging rapidly. This development poses the challenge of how to meet increasing physical and mental healthcare needs, writes the chief economist of the Asian Development Bank Albert Park.

Chart of the day

Big Tech groups Amazon, Google and Microsoft are investing tens of billions of dollars into data centres globally in the race to develop AI. The US state of Virginia is home to the world’s largest concentration of data centres, followed by the Greater Beijing area. Together, the two regions make up for just over a fifth of the total global hyperscale data centre capacity.

Take a break from the news

Director Guan Hu comes from the “Sixth Generation” of Chinese filmmakers alongside international festival favourites Jia Zhangke and Wang Xiaoshuai. Having emerged in the early 1990s, the group is characterised by its distinct realist style and focus on people on the margins of China’s rapidly changing society. Guan’s latest film Black Dog centres on the relationship between an ex-convict Lang (Eddie Peng) and a greyhound called Xiao Xin. It won the Un Certain Regard prize at Cannes this year.

Additional contributions from Harvey Nriapia, Tee Zhuo and Benjamin Wilhelm