US Fed holds rates but two governors dissent, favour cut

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

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1.

Fed call: The US Federal Reserve left its benchmark interest rate unchanged at 4.25%-4.5%, as expected, and downgraded its assessment of the US economy, saying that “growth of economic activity moderated in the first half of the year.” Inflation was described as “somewhat elevated” and labour market conditions as “solid.” Governors Christopher Waller and Michelle Bowman dissented, preferring a quarter-point rate cut. That was the first time since 1993 that two Fed governors have opposed a decision. Speaking to reporters, Chair Jerome Powell said Waller and Bowman will issue “some kind of a thing” laying out the reasons for their dissenting votes in coming days. Powell said the labour market “looks solid” and inflation remains above target. The decision comes amid intense pressure from President Trump, who has repeatedly called for steep rate cuts. On Wednesday, Trump said “I hear they’re going to do it in September. Not today. For what reason? Nobody knows.” Markets are pricing in about a 60% chance of a rate cut in September. (Capital Brief)(US Fed)(Reuters)(Bloomberg)

2.

Russian link: Donald Trump said the United States will impose a 25% tariff on Indian imports starting 1 August, along with an additional penalty over India’s purchases of Russian military equipment and energy. In a social media post, Trump said India’s tariffs were “far too high” and accused it of maintaining “the most strenuous and obnoxious” non-monetary trade barriers. Trump later told reporters the countries were still negotiating the additional penalty, adding “it’s also BRICS”. It follows several months of trade negotiations that failed to resolve market access issues, particularly in agriculture and dairy. Indian officials have resisted opening their market to imports of wheat, corn, rice and genetically modified soybeans, citing risks to farmers. The unspecified penalty follows Trump’s threat of secondary tariffs on countries buying Russian goods if Russia does not agree to a ceasefire in Ukraine by 8 August. Trump also delayed a planned 50% tariff on Brazilian exports by a week and carved out major exceptions including orange juice and aircraft parts. (Capital Brief)(Donald Trump)(Reuters)(Bloomberg)(AP)

3.

Tariff bets: US copper prices collapsed by more than 19%, the largest intraday fall on record, after President Donald Trump excluded the most widely imported form of copper from new 50% tariffs. According to a White House fact sheet published Wednesday (Thursday AEST), tariffs on semi-finished copper products and copper-intensive derivative products like copper pipes, rods, sheets, and electrical components will start 1 August. The proclamation excludes copper scrap, ores, concentrates, mattes, cathodes and anodes. The order also requires that 25% of high-quality scrap produced in the US be sold within the country and says the levies would not stack with those on cars. The US relies on imports for a large proportion of its refined copper, due to limited domestic refining capacity. With only two copper smelters, operated by Freeport-McMoRan and Rio Tinto, the US has historically exported copper scrap and concentrates to countries like China for processing. Shares in Freeport-McMoRan dropped more than 8%, while Rio Tinto ADRs were 4.8% lower. (Capital Brief)(Bloomberg)(White House)

4.

Market watch: Wall Street’s hopes for imminent rate cuts were dashed as the Fed held interest rates steady and Chair Jerome Powell said the majority of the FOMC thinks modestly restrictive policy is still appropriate and decisions on future cuts will depend on incoming data. Stocks and bonds fell, with the S&P 500 down 0.12% even as traders increased bets on a September cut. Bloomberg’s Magnificent 7 index also declined ahead of Big Tech earnings from Meta and Microsoft after the close. Following Alphabet and Amazon, the focus is expected to be on how much they plan to dish out to keep up in the AI arms race. Harley-Davidson shares soared after announcing a USD1.25 billion cash infusion from a new loan partnership with KKR and Pimco, even as sales continued to decline under pressure from tariffs and weak demand. (Reuters)(Bloomberg)

5.

Canva sheets: Canva's annualised revenue now sits at USD3.3 billion, up 50% from the USD2.2 billion it reported in May last year, according to co-founder Cliff Obrecht. Speaking at the Google Cloud Summit in Sydney, Obrecht said Canva has 240 million people designing on its platform each month and, importantly, over 26 million paying customers. The company’s enterprise business is more than doubling year on year, following the launch of Canva Code, Canva AI and Canva Sheets. Canva has also acquired Leonardo.Ai and MagicBrief. In mid-June, it reported USD3 billion in ARR and 25 million paying customers, meaning both metrics have grown 10% in just six weeks, Capital Brief reported. Canva remains profitable and was valued at USD37 billion last month ahead of a secondary share sale. Canva’s peer Figma reported USD749 million in its IPO filing. (Capital Brief)

6.

Import mask: US economic growth rebounded at a 3% annualised rate in the second quarter, exceeding expectations and reversing a 0.5% contraction in the first, the Commerce Department said. But while the headline figure appeared strong, underlying demand was weak, with falling imports accounting for most of the gain. Economists said volatile trade figures, not robust domestic activity, drove the improvement. Consumer spending rose 1.4%, the softest back-to-back growth since the pandemic. Business investment slowed and residential investment fell 4.6%. The Fed’s preferred measure of underlying inflation rose 2.5%, down from 3.5% in the first quarter. Final sales to private domestic purchasers rose 1.2%, the slowest since late 2022. The data follows President Trump’s April tariffs announcement, subsequent delays, and ongoing trade negotiations, fuelling policy uncertainty. ING’s James Knightley said strong headline growth masked cooler domestic demand. Trump welcomed the result and renewed pressure on the Fed to cut rates, though officials are expected to keep them steady. (Capital Brief)(BEA)(Bloomberg)(Reuters)

7.

Crypto push: A group charged by President Donald Trump with recommending policies on crypto markets released a report urging federal regulators to use their authority to provide more clear rules on digital asset trading and ease the adoption of new financial products. According to a Bloomberg report citing a White House fact sheet, the report calls on Congress to pass the Digital Asset Market Clarity Act to eliminate gaps in oversight by giving the CFTC authority to oversee spot markets for non-security digital assets. It also recommends safe harbors, clearer guidance on permissible bank activities, and updated rules on tax treatment, capital requirements and money laundering. The report follows Trump’s signing of the first congressional bill to regulate stablecoins and his order to create a Strategic Bitcoin Reserve. Meanwhile, JPMorgan Chase has partnered with Coinbase to allow customers to fund their wallets using Chase credit cards and buy cryptocurrency on the exchange. (Bloomberg)(Capital Brief)(Coinbase)

8.

Russian ripples: Tsunami alerts remain in effect across South America and parts of the Pacific after a powerful 8.8 magnitude earthquake struck off Russia’s Kamchatka Peninsula. New Zealand’s emergency agency urged people to stay away from beaches as strong and unpredictable surges reached the coast. Evacuations were ordered in Chile, Colombia and Ecuador, while waves also hit French Polynesia and the Galapagos Islands. Japan and the US have lifted or downgraded earlier tsunami warnings. Russia reported no casualties. Hawaii recorded the highest tsunami wave at 5.7 feet, with over 100 aftershocks following the quake. (CNN)(AP)