30/10/2025

BIZ & FINANCE THURSDAY | OCT 30, 2025

17

Fed ‘in a fog’ as it heads toward another rate cut

BERLIN: German premium carmaker Mercedes-Benz reported plunging third-quarter profit yesterday, hit by weak sales in China as well as US tariffs. Net profit at the Stuttgart-based company fell 30.8 percent to hit €1.19 billion (RM5.8 billion), beating analyst expectations of €1.09 billion in a poll by financial data firm FactSet. “Our third-quarter results are in line with our full-year guidance,” Mercedes-Benz boss Ola Kaellenius said. In July, the firm lowered its outlook for the year after US President Donald Trump’s tariff onslaught and said it expected revenue for 2025 to be “significantly below” the €146 billion it took in last year. Car exports from the European Union are subject to a tariff of 15% under an EU-US deal unveiled late July, down from 27.5% but far higher than the 2.5% in force before Trump launched his trade war in April. Mercedes-Benz – which has a plant in Tuscaloosa, Alabama – also has to grapple with US duties of 25% on imports of car parts that come from outside North America. Sales by volume in key market China meanwhile fell 27% in the third quarter, helping drag overall sales down 12%. The country – also the world’s largest car market – has become a battleground for German carmakers amid a brutal price war and fierce competition from local players like BYD. – AFP Mercedes-Benz profit plunges on China slump, tariffs Trump’s social media platform to allow betting NEW YORK: The social media network founded by US President Donald Trump, Truth Social, announced on Tuesday that it will allow users to make bets on the outcome of real-world events using the platform. Trump Media and Technology Group (TMTG) is capitalising on a form of betting that has surged in popularity, with phone-based apps that allow users to wager on topics ranging from politics and the economy, to sports and entertainment. Truth Social will add betting through a partnership with Crypto.com, allowing users to bet on “elections, interest rates and inflation rate changes, commodity prices on gold and crude oil”, or events from “all major sports leagues”, according to a statement. Federal authorities do not consider so-called “prediction markets” to be gambling, per se, and as such they are regulated by the Commodity Futures Trading Commission (CFTC) and not by state gambling authorities across the US, as lotteries and casinos typically are. To secure a wager, the user purchases a “contract” for a financial product that yields a profit if the event occurs – whether it’s the election of a candidate or the victory of a sports team. The new sector is considered so promising that earlier this month the New York Stock Exchange’s operator, Intercontinental Exchange, announced a US$2 billion investment in one of the most prominent platforms, Polymarket. Prediction apps are particularly popular among young adults, which has raised concerns about the risks of addiction and financial losses. TMTG has launched several projects, including cryptocurrency-related financial products and a video streaming platform, but generated only US$1.7 million in revenue in the first half of 2025. – AFP

concerns means “there has not been much basis for changing views” since policymakers in September indicated that quarter-percentage-point rate cuts were likely at the Oct 28-29 and Dec 9-10 meetings, wrote Steven Englander, head of North America macro strategy at Standard Chartered. The central bank will not issue any updated economic projections from its policymakers this week, placing more emphasis on Fed chairman Jerome Powell’s remarks for insight into how they perceive the economy and the likely path of monetary policy. Financial markets will be focused on the number and nature of possible dissents by Fed officials on the rate decision and policy statement, which along with the expected cut in borrowing costs may see the Fed announce an end to its balance sheet drawdown. Englander said Fed governor Stephen Miran could object for the second straight meeting in favour of a half-percentage-point rate cut, while other policymakers more concerned about the inflation trajectory may prefer no cut at all. Fed vice-chairman for supervision Michelle Bowman, who wants the central bank’s footprint in financial markets to be as small as possible, may object to stopping the balance sheet decline with the holdings still around US$6.6 trillion, Englander said. Any dissents, and Powell’s characterisation of the economy and expected future policy choices, will necessarily be conditioned on the flow of official data, which only promises to get

worse as the shutdown continues. The White House announced last week that the CPI report for October is unlikely to be published since the extensive survey work required to prepare it has been halted during the shutdown. Other major reports also are affected – the jobs report for October normally would have been published a week from this Friday and a report on overall economic output for the third quarter would have been published this week. In the event that there is a deal to reopen the government soon, the Fed would have about six weeks for any catch-up data to arrive before its final meeting of the year. Even absent some of the missing reports, Fed policymakers say they can fill in some gaps on their own, with their extensive local surveys of business executives, for example, offering a lens on hiring and firing in particular. But Fed policymakers regard official statistics on inflation as harder to replicate, leaving a key gap as they try to steer the pace of price increases back down to the central bank’s 2% target. Meanwhile, the delayed reports on GDP, consumer spending, and other aspects of the economy leave unresolved the tension policymakers have noted between reasonably solid economic activity and a slowed pace of hiring – a dichotomy officials said would likely move soon either towards continued growth and renewed hiring, or towards a more pronounced slowdown on both fronts. It may now be harder to see when that shift occurs. – Reuters

WASHINGTON: The Federal Reserve is expected to cut interest rates by a quarter of a percentage point today as policymakers steer the US economy based on limited data that has nevertheless kept concerns about the strength of the job market top of mind. Economists polled by Reuters were nearly unanimous in expecting the US central bank to reduce its benchmark policy rate to the 3.75%-4.00% range when its latest two-day meeting concludes. But it is a decision at least partly based on inertia, not the firm grounding in data Fed officials like to say they use in setting monetary policy. A federal government shutdown, now in its 29th day, means the US central bank did not receive the official employment report covering the month of September, a key input to its policy discussion when officials are focused on the strength of hiring and the evolution of the labour force under President Donald Trump’s tightened immigration policies. Through August, the last month for which the Bureau of Labour Statistics published a jobs report before the shutdown began on Oct 1, the unemployment rate had been rising slowly, up from 4.0% in January, when Trump began his second term in the White House, to 4.3%. But the pace of hiring had fallen dramatically, with a decline in the number of foreign-born people looking for work helping temper what might have otherwise been a much larger increase in the jobless rate. While Fed officials feel the job market remained roughly balanced between the demand for and supply of workers, they were also concerned that businesses might begin to cut hiring even further or resort to layoffs given concerns about underlying economic growth - a risk highlighted by both recent layoff announcements at Amazon.com and an uptick in state unemployment claims. State employment agencies are still collecting and publishing weekly data on applications for unemployment benefits, providing one barometer for the health of the labour market. A final report on inflation in September, released last week on orders from the White House because it figured into the calculation of Social Security benefit increases, showed the Consumer Price Index rose at a slower-than-expected pace last month as tepid housing inflation offset increases in the costs of gas and imported goods now subject to tariffs. The combination of relatively positive inflation news and ongoing job market o Decision based on partial data due to govt shutdown

Powell walks away at the end of a press conference in Washington. – REUTERSPIC

Microsoft holds 27% of OpenAI in revamped partnership SAN FRANCISCO: Microsoft and OpenAI announced ib Tuesday a sweeping overhaul of their landmark artificial intelligence (AI) partnership, giving both companies greater independence while maintaining their close collaboration. both OpenAI’s models and products are extended through 2032. questions as to whether its deal with Microsoft was still tenable.

The partnership began in 2019 when Microsoft invested US$1 billion in what was then a small AI research organisation founded in 2015 by tech luminaries including Elon Musk. Microsoft deepened its commitment in 2021 with additional funding, and again in January 2023 with a reported US$10 billion investment following the explosive popularity of OpenAI’s ChatGPT chatbot, which launched in November 2022. The partnership transformed both firms. OpenAI evolved from a research lab into one of the world’s most valuable startups, while Microsoft initially gained a commanding position in the AI race, integrating OpenAI’s technology – rebranded as Copilot – across its product lineup. – AFP

“As we enter the next phase of this partnership, we’ve signed a new definitive agreement that builds on our foundation, strengthens our partnership, and sets the stage for long-term success for both organisations,” the companies said in a joint statement. Regulators have signed off on the arrangement, according to the companies. Microsoft has been a key investor in the ChatGPT-maker as OpenAI became the major player in the spending frenzy around generative AI, the technology that Silicon Valley believes will soon take over important aspects of everyday life. But OpenAI, under the leadership of CEO Sam Altman, has increasingly looked to expand its partnerships with other companies, raising

Microsoft will hold approximately 27% of the restructured OpenAI, an investment valued at roughly US$135 billion, as the ChatGPT maker transitions to a public benefit corporation structure, according to a blog post on the OpenAI website. OpenAI has also committed to purchasing US$250 billion in Azure cloud services from the tech giant, though Microsoft no longer holds first refusal rights as OpenAI’s compute provider. In the deal, Microsoft’s intellectual rights for