Stephen Miran makes his presence felt on the Fed

Stephen Miran, who has joined the Fed board on leave as Chairman, Council of Economic Advisers, made his presence felt at his first FOMC meeting. He voted for a 50 bp cut in the policy rate while the others voted for a cut of 25 bp. 

Seven members of the FOMC indicate they do no expect any rate cut for the rest of the year. Another two expect  just one cut. Miran projects a drop of another 1.25 bp by the end of the year. Trump's two appointees, Michelle Bowman and Christopher Waller, voted for 25 bp cut. Waller did so despite being in contention for the Chairman's post when it falls vacant next year.

Trump's bid to get the Fed to make a steeper cut in the rate has not succeeded. Looks as though the Fed will not change tack as long as Powell is at the helm. 

What would be Trump's next move?

Brits grit their teeth over Trump's state visit

The UK laid out the red carpet for Donald Trump on his second state visit to the UK, the first one being in his first term.

It is a clear attempt by UK PM Keith Starmer to ensure the 'special relationship' endures, however much the UK may be uncomfortable with Trump's policies. The Guardian's columnist sums up the sentiments of many Brits:

No, it is not ideal. The era of shared values is ebbing fast. Keir Starmer did not need to play the state visit card so soon or so generously. He should have made Trump wait for the invitation, extracting a higher price for it, and offering hints that it might be offered in return for the right deal. But Starmer is not alone in struggling to read a president who is both unserious and utterly serious at the same time. All nations are still trying to work out how to respond.

What does UK want out of Trump now? Here goes:

Three things will matter in particular when Trump meets Starmer on Thursday for the political half of the visit: trade, the Middle East and Ukraine......On the Middle East, meanwhile, the immediate goal must be to prevent Trump exploding when Britain and others recognise Palestine next week.

So raison d’état says that pressure on Trump over Ukraine needs to come first. Russia’s threat to Europe is existential. Long term, the solution to that is in Europe’s own hands. The idea that the US should continue to be primarily responsible for Europe’s security 80 years after the second world war is now barely credible. But Starmer still needs to do whatever he can to press Trump to arm Ukraine more now.

Well, what better can you expect of a vassal state?

Trump fires Fed Governor Lisa Cook.... but markets are hardly rattled

President Trump has fired Fed Governor Lisa Cook in what is a first for an American president, the removal of a serving member of the Fed.

Analysts see Trump's move as an assault on the independence of the Fed. They say- and they have been saying this for several months now- that Trump's remarks and actions carry the risk of seriously upsetting the financial markets. 

The stock market and the bond market, they say, will not take kindly to a move that undermines the ability of the Fed to effectively battle inflation.

Well, that is the theory. 

The outcome so far is turning out to be very different. 

The markets seem quite unfazed by Trump's latest move or his earlier broadsides against Fed Chairman Jerome Powell. The media notes that the stock market reaction is "muted". The Financial Times seems seriously disappointed that the markets have not fallen off the cliff. It comments:

some analysts are concerned that investors aren’t taking Trump’s cumulative threats on the Fed’s independence seriously enough. Although bond yields jumped on Tuesday, they eased back somewhat over the course of the day.....investors also have shown signs of being lulled into a false sense of complacency.. Ultimately, more severe market ructions might be what is needed to force Trump to pull back from causing greater damage to the central bank and the US economy at large

Well, the "greater damage" just ain't happening. 

Could it be that the markets think that Trump is right? That the economy will benefit from cuts in the interest rate? That the fear of inflation getting out of control is exaggerated?

India's purchase of oil Russia: Peter Navarro clarifies what the gripe is

President Trump's decision to impose punitive additional tariffs of 25 per cent on Indian exports to the US has sparked outrage as well as disbelief in India. The Indian position is as follows:

• India's imports of oil from Russia (88 million tonnes) are less than those of China (109 million tonnes)
• India was encouraged by the Biden administration to buy oil from Russia so that prices in the oil market (sans Russia) did not go up 
• India is not violating any sanctions in importing oil from Russia. There is no US or NATO ban on countries importing oil from Russia, only a price cap (which was $60). 
• India has every right to procure oil from the cheapest source as that benefits the Indian economy

India has articulated these points repeatedly in recent weeks. Trump's trade advisor Peter Navarro thought it necessary to counter the Indian position through an article in FT:

Importantly, before Russia invaded Ukraine in February 2022, Russian oil made up less than 1 per cent of India’s crude imports. Since then, daily imports have soared to more than 1.5mn barrels — more than 30 per cent of India’s total.  To be clear, this surge has not been driven by domestic oil consumption needs. Rather, what really drives this trade is profiteering by India’s Big Oil lobby. Refining companies have turned India into a massive refining hub for discounted Russian crude.  The refiners buy oil at a steep discount, process it, and then export refined fuels to Europe, Africa, and Asia — all the while shielding India from sanctions scrutiny under the pretence of neutrality. 

So, the objection is that India is not using cheaper Russian oil for the benefit of Indian consumers. Instead, oil companies (mostly one private company) are using cheap Russia oil to sell refined oil in the international market at huge margins and have reaped massive profits. India's oil imports from Russia are not about benefiting the Indian economy but about enriching India's oil refiners. 

Scott Bessent has reinforced the point made by Navarro by saying that China had increased Russia's share in its oil imports from 13 per cent to just 16 per cent whereas India had increased it from 1 per cent to 42 per cent. 

This is what I would call the Indian arbitrage – buying cheap Russian oil, reselling it as product.....They’ve made $16bn in excess profits – some of the richest families in India. 

Perhaps the controversy would not have arisen if India had used cheap Russian oil to lower the price for Indian consumers through lower duties. 

Italians and the 'evil eye'

In India, we call it 'nazar'. In the west, it's the 'evil eye', envy at one's success or good fortune in life. The superstition is rife in India and, it appears, in Italy as well, going by this story.

In India, people make offerings in the temple to mitigate the effects of the 'evil eye'. In Italy, it appears they hire witches to do the job: 

While many modern Italians shrug off the idea as superstition, a number of people in both rural and suburban areas — including the town where I grew up — still call on witches to perform removals (a service also available by phone). Victims of an evil eye are supposed to feel heavy-headed and restless, as though they’ve been beset by ill fortune. They have migraines and can’t sleep. They may forget a pot on the stove or have a car accident. Babies who cry inconsolably are believed to have caught the evil eye. The most beautiful infants and their mothers are thought to be especially vulnerable. 

Nor are Indians or Italians the only ones susceptible to the belief:

Eleni, from Greece, says she had the evil eye removed “multiple times a day” by her grandmother when she was growing up. Now an astrophysicist, she admits to having maintained a belief about the ritual into her mid-twenties — long after she knew that the behaviour of oil in water depends far more on the temperature and metallicity of fluids than spells. Sina, from Tehran, tells me his mother hides money around the house if a visitor gives her family a compliment — a superstition designed to ward off the evil eye. Rasha, from Beirut, has adorned her baby’s pram with evil eye talismans. Megha tells me that her father still paints a mole on her neck or cheek if she looks nice before leaving the house — a version of the ritual in which Indian babies’ faces are smudged with henna to protect them from “nazar” or the evil eye. 

Trump- Putin Alaska meet triggers fury amongst Trump's critics

There was no deal, no announcement of ceasefire, no mention of any follow-up talks between the US and Russia. Yet President Trump gave the meeting a rating of 10 on 10 and expressed optimism about what would follow.

Why? Because the meeting helped reaffirm the long-standing personal relationshp between Trump and Putin. 

Trump stood at the mid-point of a red carpet and clapped his hands at Putin walked towards him after alighting from his plane. Trump received Putin with a warm handshake and then escorted him past a guard of honour to a podium. It was roses all the way

The equation between the two Presidents has long been a source of annoyance to neocons in the US and Europe. And, seeing the way the two got along, the neocons and Trump's critics in general are furious.

The Guardian's correspondent caught the mood very well in a priceless piece of reporting, never mind that the report oozes bile:

That was the moment he knew it was true love.

Donald Trump turned to gaze at Vladimir Putin as the Russian president publicly endorsed his view that, had Trump been president instead of Joe Biden, the war in Ukraine would never have happened.

“Today President Trump was saying that if he was president back then, there would be no war, and I’m quite sure that it would indeed be so,” Putin said. “I can confirm that.”

Vladimir, you complete me, Trump might have replied. To hell with all those Democrats, democrats, wokesters, fake news reporters and factcheckers. Here is a man who speaks my authoritarian alternative facts language.

......Trump, 79, purportedly the most powerful man in the world, literally rolled out the red carpet for a Russian dictator indicted for alleged war crimes over the abduction and transfer of thousands of Ukrainian children. Putin’s troops have also been accused of indiscriminate murder, rape and torture on an appalling scale.

In more than 100 countries, the 72-year-old would have been arrested the moment he set foot on the tarmac. In America, he was treated to a spontaneous burst of applause from the waiting Trump, who gave him a long, lingering handshake and a ride in “the Beast”, the presidential limousine.

Putin could be seen cackling on the back seat, looking like the cat who got the cream. As a former KGB man, did he leave behind a bug or two?

The reaction in the US has been hostile. FT reports:

Donald Trump returned to a political backlash in Washington over his handling of Vladimir Putin after failing to follow through on his threat of “severe consequences” if the Russian president refused to agree a ceasefire in Ukraine...

Europe continues to be in denial. The European Council has released a statement that says:

Ukraine must have ironclad security guarantees to effectively defend its sovereignty and territorial integrity. We welcome President Trump’s statement that the US is prepared to give security guarantees. The coalition of the willing is ready to play an active role. No limitations should be placed on Ukraine’s armed forces or on its cooperation with third countries. Russia cannot have a veto against Ukraine’s pathway to EU and Nato.

The latest news is that Zelenskyy will meet Trump on Monday at the White House. If all goes well, Trump, Zelenskyy and Putin will meet. 

Trump-Putin Alaska summit: the remarks the media did not hear

The UK's Sun has a terrific scoop on  the Trump-Putin summit in Alaska. 

The Sun got a forensic lip reader to transcribe what Trump and Putin were telling each other at a couple of places. There was no microphone to catch these remarks for the benefit of the media. Here is the Sun's account:

Putin looked relaxed as he walked down a red carpet towards Trump - giving the US leader a thumbs-up before greeting him with a warm handshake.

Trump begins clapping as Putin approaches and the American says: “Finally,” according to Hickling (the lip reader).

Hickling then said that as the pair shook hands Trump added: “You made it, fantastic to see you and appreciated."

The pair then appear to begin talking about Ukraine and the bringing the fighting to an end with a ceasefire.

Putin responds in English, saying: “Thank you — and you."

He also makes a pledge to Trump: "I am here to help you.”

Trump replies: “I’ll help you.”

Pointing towards Trump, Putin says: “All they need is to ask.”

Trump answers simply: “Okay.”

Putin continues: “I will bring it to a rest.”

Trump responds: “I hope it does.”

Turning towards the vehicle, Hickling said Trump smiles and says: “Come on, let’s get straight into the vehicle. We need to move forward, both giving it attention. I know this is serious, it’s quite long. What a journey it is.”

Trump salutes and says: “Thank you.”

On the podium, Trump says: “Thank you. Let’s shake hands — it gives a good impression.”

Putin nods in agreement, shakes his hand, and says: “Thank you.”

The pair then shared a moment alone in Trump’s presidential limo - known as The Beast - which drove them to the summit venue.

 They were then next seen when they posed for photos in front of the press to record the historic moment.

But the photocall descended into chaos when the journalists started shouting at Trump and the tyrant - who doesn't face that sort of opposition in Russia.

Hickling said that Trump noticed Putin wasn't happy with a question or remark made.

The American leans in to his aide, according to the lipreader, and whispers: “I'm uncomfortable, we need to move them quickly.”

Putin then makes a face after being on the receiving end of the aggressive questioning.

Hickling said the Russian tells a reporter: “You is ignorant.” 

Then, as he cups his hands to his mouth to shout above the chaos, he says again: “You are ignorant.”

The chemistry, as anybody can see, was pretty good. No wonder Trump gave the meeting at 10 on 10.

Why is Alaska the venue for the Trump-Putin Summit this week?

Putin has an ICC arrest warrant against himself. That obliges signatories to the ICC to arrest Putin if he is in their jurisdiction. Alaska is the US territory but the US is not a signatory to the ICC (nor is Russia). So the US is not under any legal obligation to arrest Putin although nothing prevents it from doing so.

But that can't be the whole explanation for the choice of Alaska. Putin does not attend the UNGA meetings in New York, presumably for fear of arrest. One reason given for the choce of Alaska is that it is within easy reach of Russia. At the narrowest point, it is a mere two miles away from Russian territory. At the likely venue for the summit, the distance is 88 kms. Russian subs with special forces will be prowling in the vicinity, ready to swing into action if required. In other words, Alaska is fairly safe for Putin.

The Guardian has a story that suggests mutual inconvenience is a factor in the choice of Alaska. The flying time for Putin is nine hours, for Trump it is eight hours. It is also a considerable distance away from Ukraine and its European allies. Further, Putin can fly directly from Russia into Alaska without having to overfly countries that are members of the ICC. 

Some suggest there is a symbolic significance to Putin's wanting to meet up in Alaska. Alaska was sold by Russia to the US for around $7 million in 1867. Which means that territories can jolly well exchange hands. And that would apply to Ukrainian territory currently under Russian control. 

How Pakistan upstaged India in forging ties with Trump

India's foreign policy establishment is in shock. In a matter of months, Indo-US ties have soured and Pak- US ties have soared. It is not clear how this has happened. 

First, the deterioration in Indo-US ties.

For Mr Trump, the aggravations from India's side are many. India is not willing to make certain concessions on trade, such as allowing entry of American agricultural and dairy products, so a trade deal has proved elusive over several months. India has refused to accept Mr Trump's line that it was he who mediated a ceasefire between India and Pakistan after the skirmish last May. Mr Trump, we are told, is deeply miffed on that account. 

Then there is the business of oil purchases from Russia. Mr Trump and his colleagues say India along with China is financing the Russian war machine. But the point is that the sanctions on Russian oil apply only to the US and the EU. Other nations are not barred from buying Russian oil, they are subject to the price cap of $60. Very recently,  a new formula has been applied which causes the cap to fall to around $47. The US was okay with India's purchase of oil from Russia because it kept global oil prices from shooting up. Mr Trump's turnaround is extraordinary, to say the least.

The Economist notes:

This (a tariff of 50 per cent on Indian exports to the US) marks a striking change from Mr Trump’s first term, when the American president and Indian prime minister filled stadiums from Texas to Gujarat in celebration of a blossoming bond between the two countries. India clinched deals for defence equipment and tech usually reserved for NATO allies and some exemptions from sanctions on its dealings with Russia. A mutual disquiet about China’s rise lent the relationship urgency. As a result, India welcomed Mr Trump’s comeback. According to a poll in 2024 by the European Council on Foreign Relations, a think-tank, 84% of Indians believed Mr Trump was good news for their own country—the highest among all 24 countries polled.

But despite Mr Modi’s outwardly friendly reception at the White House in February, one journalist briefed on the visit describes Indian diplomats as “stunned” by the “lack of respect” America’s president showed India’s prime minister behind closed doors.

Now for the improvement in Pak-US ties. FT has a detailed story on how it turned its relationship with the US around:

The newfound US admiration for Pakistan is partly the fruit of a charm offensive concocted by Pakistan’s senior generals, leveraging counterterrorism co-operation, outreach to business people close to Trump and deals covering energy, critical minerals and cryptocurrencies — all accompanied by a cascade of flattery for the White House.

 ....Pakistan’s turnaround was helped early on by what the US saw as an important arrest. In March Asim Malik, the head of Pakistan’s Inter-Services Intelligence spy agency, delivered a high-value Isis-K operative who the US said was behind a 2021 bombing in Kabul that killed more than 180 people, including 13 US soldiers. His capture earned Pakistan Trump’s praise in his March State of the Union address, when the US president also lambasted India over high tariffs.

......World Liberty Financial, a Trump-backed cryptocurrency venture, signed a letter of intent with Pakistan’s crypto council in April, when its co-founders visited Pakistan. Zach Witkoff, the son of US special envoy Steve Witkoff, said during the trip that Pakistan had “trillions of dollars” of mineral wealth ripe for tokenisation.

....Islamabad also gave credit to Trump for brokering the truce with New Delhi — to the point of nominating the US president for the Nobel Peace Prize. Trading his khakis for a suit and tie this weekend, Munir again heaped praise on the US president when speaking to a group of Pakistani-Americans in Tampa.

Pakistan's stars are clearly on the ascendant.  At least in the immediate future, India has its task cut out in dealing with Mr Trump and the US.

Trump-Putin meet in Alaska: quote of the day

 FT columnist Gideon Rachman has a terrific line on the likely fate of Ukrainian President Zelenskyy at Alaska in his article today:

If you are not at the table, you're on the menu

What Europeans and Ukraine would like is an immediate cease-fire followed by negotiations on territory and other matters. That' a no-no for Putin. Russia has the upper hand in the conflict at the moment although gains in territory are slow in coming. Putin rightly views a cease-fire as an opportunity for Ukraine to recoup and renew the war at its convenience.

Putin has time and again made clear what his expectations are:

• Ukraine to recognise the four areas in the Donbas region over which Russia has substantial control today
• Ukraine to give up aspirations to join NATO 
• "De-nazification" and "de-militarisation" of Ukraine, which seems to mean regime change and a limited size of the military

Reflecting the current thinking in parts of the European establishment, Rachman contends that Ukraine would most likely have to  have make territorial concessions and eschew its goal of becoming a member of NATO:

Kyiv’s position that no territory can be ceded is principled — but also unrealistic as things currently stand. The critical distinction is between de facto and de jure concessions of territory. A legal recognition of Russia’s forcible annexation of Ukrainian territory is rightly unacceptable to Ukraine, the EU and the UK. But a de facto recognition of Russian occupation of some territory as a brutal reality — in the context of a broader peace deal — may be necessary. The Soviet Union’s annexation of the Baltic states after 1940 was never legally recognised by the US and most European countries. But it was a fact of life, until, eventually, the Baltic states regained their independence.

......Ukraine clearly cannot accept any military limits that might damage the country’s ability to defend itself. But if Kyiv is allowed to push on with its drive for EU membership then the question of Nato might be taken off the table for a while — particularly given that the political reality is that Nato membership for Ukraine seems unrealistic in the foreseeable future.

So, Ukraine gives up two out of the four territories claimed by Russia and stays out of NATO. Will that be enough for Putin? Putin has to give Trump a win and Trump would count a cessation of hostilities as one. What about US sanctions on Russia and NATO's push eastwards? Those are important goals for Putin. 

The meeting is happening because Russia found the proposals conveyed by Steve Witkoff acceptable. It is possible to optimistic about the outcome at Alaska.