Fed holds rates citing ‘so much uncertainty’

Good morning. Here's what happened overnight and what you need to know today.

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1.

Fed wait: The Fed held rates steady at 4.25–4.50% on Wednesday, warning that economic uncertainty had “increased further” since March, and that risks of both higher inflation and rising unemployment had grown. The decision followed a first-quarter GDP contraction tied to Trump’s tariffs, which intensified with April’s “Liberation Day” hikes and are now expected to push core inflation higher. Markets are pricing in potential rate cuts from July, but Fed Chairman Jerome Powell signalled the Fed would likely hold until the impact of tariffs is clearer. “The appropriate thing to do is to wait and see how things evolve. There's so much uncertainty. If you talk to businesses or market participants or forecasters, everyone is just waiting to see how developments play out,” Powell said. “Then we will be able to make a better assessment of what the appropriate path for monetary policy is.” Amid renewed pressure on the Fed from President Trump to cut rates, including personal attacks, Powell said it had not affected “either our job or the way we do it.” (US Fed)(Bloomberg)(Reuters)(Capital Brief)

2.

Apple’s options: Apple is “actively looking at” revamping the Safari browser to focus on AI-powered search engines, senior vice president of services Eddy Cue said during the US Justice Department’s lawsuit against Alphabet. Cue said AI providers including OpenAI, Perplexity AI, Anthropic, DeepSeek and Grok “will eventually replace standard search engines like Google” and that Apple will “bring those options to Safari,” though “they probably won’t be the default.” He attributed the first-ever decline in Safari searches last month to users turning to AI. Google is currently the default search engine in Safari under an estimated USD20 ($31) billion-a-year deal, which Cue said “still has the most favorable financial terms.” He said Apple held a “bake-off” between OpenAI and Google’s Gemini before choosing ChatGPT, and that Apple’s deal with Microsoft’s Bing is now year-to-year. Alphabet shares fell as much as 9.5% and Apple’s dropped up to 2.6% following the remarks. (Bloomberg)(Reuters)

3.

Acts of War: Pakistan’s Prime Minister Shehbaz Sharif addressed the nation following India’s missile strikes, saying India “will have to suffer the consequences” of its “cowardly” attack and authorising “corresponding” retaliation. Pakistan’s military said 31 people were killed and 57 injured in the strikes on Pakistan and Pakistan-administered Kashmir. Nations around the world have called for restraint from the two nuclear-armed neighbours, after India fired missiles into the region which it said targeted “terrorist infrastructure” early Wednesday morning. Pakistan said it shot down five Indian aircraft in response, but this has not been confirmed by Delhi. “Perhaps they thought we would retreat – but they overlooked the fact that this is a nation built on courage,” Sharif added. India’s attacks were in response to an April militant attack in Indian-administered Kashmir that killed at least 26 people, mostly tourists. India’s prime minister, Narendra Modi, cancelled plans to visit Europe after the strikes. Shares in Chinese defence stocks jumped amid speculation that China manufacturers will sell more military equipment to Pakistan. (Capital Brief)(Sharif X)(The Times)(FT)

4.

Poison punishment: China has imposed levies on an Indian insecticide, in what state media interpreted as an apparent move to punish countries trying to cut deals with the US at China’s expense. A social media account linked to China’s state broadcaster said: “This retaliation against India is to tell India to stop insisting on its wrongdoing.” In April India signalled its openness to achieving “early mutual wins” in US trade talks. The US and China are set to hold talks on Saturday in Geneva, a first step toward resolving an escalating trade war between the world’s two biggest economies. Treasury Secretary Scott Bessent and Jamieson Greer will meet China's representative He Lifeng. Speaking to Fox News, Bessent stressed the talks are preliminary. Meanwhile, the EU is planning to impose tariffs on Boeing aircraft should trade talks with the US stall. The bloc will set out countermeasures against US tariffs on Thursday. (Weixin)(WSJ)(Bloomberg)(US Treasury)(FT)(Reuters)

5.

Shrinking sector: Uber missed quarterly revenue estimates as growth in its ride-hailing unit slowed to its weakest level since the pandemic, casting a shadow over the company’s positive outlook. The company said gross bookings, measuring customers’ total spend across all business units, for the three months ending June would come in between USD45.8 billion ($70.8 billion) and USD47.3 billion, compared with the USD45.8 billion estimated by analysts. Operating income and revenue also came in below expectations, with the latter notching USD11.5 billion, a 14% increase year-on-year. On the back of Uber’s Tuesday announcement to buy an 85% stake in Turkish delivery platform Trendyol for USD700 million, Uber rival GoTo reportedly plans to buy Indonesian player Grab in Q2 this year. The industry is seeing rapid consolidation, with DoorDash also snapping up Deliveroo and SevenRooms this week, and Prosus acquired Just Eat in February. (Capital Brief)(Uber)(Reuters)

6.

Green shock: Sky News and the ABC have projected that Greens leader Adam Bandt will lose his seat of Melbourne, with Labor's Sarah Witty set to win after Bandt suffered a 4.4% drop in his primary vote. The Australian Electoral Commission shows that Witty holds a 2,235-vote lead in the seat of Melbourne, with Bandt suffering an 8.9% swing against him. The Greens said that Bandt will not concede and that while One Nation and Liberal preferences to Labor could see him defeated the count must proceed. Deputy leader Mehreen Faruqi said the seat is still in play: "Over the last few days seats have been called, they've been un-called. Positions and decisions have flipped.” Faruqi was referencing the battle over tightly held Melbourne seats of Goldstein and Kooyong which saw representatives backtrack election night celebrations as postal votes slowly put early results into doubt. Opposition leader Peter Dutton also lost his seat in Labor’s landslide election victory. (Capital Brief)(ABC)(Sky)(AEC)

7.

Age limits: The eSafety Commissioner is preparing to hear from executives, experts and the broader community on world-first social media age restrictions that have become a key battleground for some of the world’s largest tech companies. In an email sent Monday to tech executives and other stakeholders seen by Capital Brief, the Office of the Commissioner called for expressions of interest and outlined plans to launch a public consultation process on 5 June. The consultation will focus on how Labor’s proposed social media age rules will be implemented. “eSafety will formulate written guidelines to determine what reasonable steps industry must take to prevent children under the age of 16 years from having accounts on services that will be considered ‘age-restricted social media platforms’ under the … Act (as determined by the Minister),” reads the email. It adds that eSafety will be responsible for monitoring, assessing, and enforcing industry’s compliance with this requirement. (Capital Brief)

8.

Long game: The US and Israel have discussed the possibility of the US leading a post-war administration in Gaza, according to sources cited by Reuters. The preliminary consultations have focused on a transitional government helmed by a US official to oversee the territory until it has been demilitarised and stabilised, including a viable Palestinian administration. There would not be a fixed timeline, with sources comparing the possible plan to that of the US presence Washington established in Iraq in 2003. The report said other countries would be invited to take part in the authority in Gaza, and that the administration would draw on Palestinian technocrats excluding Hamas and the Palestinian Authority. Trump on Tuesday said that the US would stop strikes on Houthi forces in Yemen after the militant group agreed to stop attacking US warships and commercial vessels in the Red Sea. The truce does not pertain to ongoing Houthi attacks on Israel. (Reuters)(WSJ)