Trump denounces Fed's decision to raise interest rate

0:00This BBC podcast is supported by ads outside the UK.

0:31to find out more.

1:00Also on the programme, controversial claims by Earl Spencer about the King's reaction to the death of Diana Princess of Wales. As Canada is offered associate membership of the EU, what could that mean for it? Bonnie Greer, remembered by the woman who composed an opera together with her about her famous appearance on Question Time and the wax before the vinyl. I've been experiencing a very old way of recording music. Although the markets were expecting it, This evening's decision by the US Central Bank, the Federal Reserve, to raise interest rates by a quarter of 1 % is a significant moment. It's the first time the bank has raised rates in more than three years.

1:39It's also the first big call by the new chair of the Federal Reserve, Kevin Walsh, a Trump appointee who's been under pressure from the White House to cut rates. In that context, it's equally unsurprising that Mr Trump has denounced the rate hike on social media already. Well, earlier, Kevin Walsh explained the reasoning behind his decision. For more than five years, inflation has been running above target. So our predominant focus is on the price stability side of our mandate. The plain fact is that inflation is too high and has been for too long. Oh, we can speak now to our North America business correspondent, Samira Hussain.

2:20Samir, as I mentioned, this was expected, but it came amid a backdrop of pretty intense political pressure, didn't it? Remember that President Trump has long been calling for cuts to interest rates in America and was very critical of Kevin Warsh's predecessor, Fed Chair, then Fed Chair Jerome Powell, who did not cut rates. and President Trump railed against him, calling him names, both on camera and even on social media. So then there was a lot of worries about Kevin Warsh, given he was appointed by Trump, whether or not he would be in a position to take the big decisions, even if it went against the White House.

3:02Come today, we see that the Federal Reserve chair did indeed that. He made a decision that was right for the American economy and as a result is facing the wrath from the White House. Yes, and it was a unanimous decision, wasn't it? We got a sense there of his reasoning. What else did he have to say? He said basically that the United States economy is doing reasonably well, even though, or rather despite, the geopolitical development. So presumably he's talking about the war with Iran, which has really driven up inflation significantly here in the United States. And even when he was asked about his moves to increase the rate of borrowing, there were some questions that this is not ultimately going to reopen the Strait of Hormuz and bring the price of oil down.

3:55And it really demonstrated the kinds of limitations that the Federal Reserve has. Yes, it is a very powerful institution and monetary policy is very important, but it can only do so much. Samira, thank you very much. Our North America business correspondent, Samira Hussain. She mentioned the Strait of Hormuz. The blocking of that, of course, has been a key factor in the rise in fuel prices. We'll get into that in a bit. But let's stick with this decision because it comes a day before the Bank of England has to decide whether or not to raise interest rates. About the American situation, I've been speaking to Aaron Klein.

4:30He's a former Deputy Assistant Secretary for Economic Policy at the U.S. Treasury Department. and he in fact worked with Kevin Walsh during the George W. Bush administration. I spoke to him immediately after the Fed's decision, but before the reaction to it had come from the White House. I asked him whether this move to raise interest rates would help to tame inflation. To the extent the Fed is trying to calm inflation that's being driven by gas prices rising due to Trump's war in Iran, they're really just pushing on a string, not having much impact at all. I think what the Fed is responding to here is a sharp rise in longer term U.S.

5:10interest rates on 10 and 30 year Treasury notes on mortgages. And this rate hike actually may constrain longer term interest rates from going even higher than if the Fed hadn't raised short term interest rates. Can you just elaborate a bit on inflation, what you were saying there, that the cause of it is the war? So in terms of what impact this decision might have on inflation rates, what do you think? Traditional monetary policy works by the Fed raising interest rates to slow the economy, to reduce demand so that you're not bidding up prices. But when prices are being bid up as a result of Trump's tariffs and his war on Iran, changing the interest rate isn't going to impact that dynamic.

5:54Would you say, I mean, given what the Trump administration wants and what it is doing in terms of foreign policy when it comes to tariffs or the war, and given where the Federal Reserve has gone, are they basically pulling in opposite directions? What Trump wants is not what he's doing. Trump is deeply, structurally contradictory. The Federal Reserve is pursuing its mandate of price stability with full employment. Reasonable people could agree or disagree with the decision to hike today. is totally within the normal bounds. What Trump says he wants and what he actually does has been in deep conflict for decades.

6:33Inflation has risen here in the UK as well. The Bank of England will be making its latest decision on interest rates tomorrow. Well, what advice would you give it? I haven't looked at the UK's underlying economic fundamentals, so I wouldn't do that. What I would say is central banks have to deliver credibility that they're independent and that they're tackling inflation, but they also need to acknowledge their own limits. When inflation is being driven by wars, whether it's bullets flying and bombs in the Middle East or trade tariffs being tacked against other nations, the central banks can't really impact that as much as they think.

7:16So don't use a tool for a purpose it's not fit for. That was Aaron Klein, a former senior official at the US Treasury Department. Well, as we've been saying, tomorrow the Bank of England will be taking its interest rate decision against a backdrop of rising inflation here. Today, the Office for National Statistics reported inflation had risen from 2.9 % to 3.1%, the highest figure in five months, on the back of rises in the prices of petrol, diesel and airfares. Well, fuel prices are rising across the world together with tempers. There have been protests in many different countries.

8:02That's the French TV channel FR2 reporting on fishermen blockading oil depots in a pretty dramatic fashion and on petrol stations being vandalised. While in Syria...

8:22The sound of protesters blocking roads and oil trucks this morning in response to a decision by the Energy Ministry there to increase fuel prices. There have also been protests in Portugal, in Latin America, Indonesia, the Philippines, Bangladesh and Sri Lanka. Well, we can speak about that. Now to Paul Dales, who's Chief UK Economist at Capital Economics. Good evening, Paul. Good evening to you. We have seen this surge in fuel prices in the past week and building on what was already a pretty elevated price. Is this all because of the war in the Middle East or are there other factors? It's not all because of the war in the Middle East, but that is playing a large part.

9:00So you can break it down into two things, really. The first is the price of oil itself. And that's gone up because of the events in the Middle East that has reduced the supply of oil to the rest of the world. But there's also a second element, which is the cost of refined products. So none of us consume oil itself. We consume products made with oil like petrol or diesel. and those have gone up in price partly because of what's gone in the Middle East but partly due to what's gone in other parts of the world as well so for example Ukraine has managed to destroy some of the refinery plants in Russia which has reduced the supply of refined products so it's a combination of these two things have really had a double whammy effect on the petrol and diesel prices that people pay around the world.

9:54We were reporting on the programme last night about the pressure that Saudi Arabia in particular is under at the moment from different directions, the Houthis and others who've been attacking key oil pipelines. It's really sounding the alarm about its own oil exports. What could the consequence of that be? How high could that mean prices might go? Well, I mean, the consequences for Saudi Arabia itself are really big because it is an oil-exporting nation and relies very heavily on those revenues. So if those revenues aren't coming in, that's damaging its economy. In terms of what it means for the global oil price, well, it's hard to know for sure.

10:39But some calculations we've done at Capital Economics suggest that it's perfectly possible the oil price could rise to something like, 120 US dollars a barrel from current levels of 105 US dollars a barrel. But to get the really eye-watering and really painful increases of 150 dollars per barrel plus, I think you would need the situation to get much, much worse and for there to be much more constraints on the supply of oil coming out of the Middle East. And how badly exposed is the UK to all of this? The UK I would describe as being sort of in the middle of the pack when it comes to being exposed.

11:22So countries in Asia are probably the most exposed because they rely on a lot of imported oil and don't necessarily have the funds to purchase it at a higher price. America is less exposed because it's got its own energy sources. And the UK and the rest of Europe is in the middle, really. but we are an oil-imported nation so when the price of oil goes up then it costs us more to buy it and that means we have less money to spend on other items and we're seeing that with the inflation having started to rise and there's a bigger rise coming around the corner. Paul Dales, Chief UK Economist at Capital Economics, thanks very much.

12:06And coming up later... You're used to hearing me waxing lyrical so you can find out why I've come to the Royal Academy of Music to sound even more old school than usual. Don't worry, you haven't got wax in your ears. I'll be explaining what that's all about in about 20 minutes' time. Now, the brother of Diana, Princess of Wales, Earl Spencer, has claimed that the king said we'll forget her soon enough, days after Diana's death in an extract from his upcoming memoir. Buckingham Palace has pushed back against the claim saying that grief could colour memory. Well, our senior royal correspondent, Daniela Ralph, has joined me in the studio to tell us more.

12:50Well, Daniela, tell us about this book and the headline-grabbing claim. Yeah, this is another chapter of royal drama that's unfolding this evening, Jamie. Next week, Earl Spencer releases his new memoir about his sister called Swan Song. Now, it is being serialised in the Daily Mail, and we have seen the first extract of that this evening. In it, Earl Spencer recounts a row he says he had with the king when the king was Prince of Wales back in 1997 after the death of Princess Diana. He says he told the king that he didn't approve of the decision to have Princes William and Harry walking behind their mother's coffin at her funeral.

13:28He says that the king responded, showing what Earl Spencer says was his contempt for his ex-wife Diana by saying, rest assured, we'll forget her soon enough. And the palace has been pretty forthright in its response. Yeah, they have pushed back with real bite this evening. It is unusual for them to respond so forcefully. In this statement we've had from a palace spokesman, if I read it out, it'll give you a sense of just how strong it is. While we do not comment on books as a matter of principle, His Majesty is mindful that the pain of fraternal grief can cloud reason, affect judgment and colour memory in ways others do not recognise, even many years after such a loss.

14:10It is carefully worded, it is robust, and the fact that the Palace have even released that at all this evening shows just how angry they are at Earl Spencer's claims. And this book is going to put the focus on what was an incredibly painful time for the royal family. Yes, it will. I mean, this is just the first extract. We're going to have several days of this before the actual publication of the book on Tuesday. It's an incredibly difficult, traumatic time for all involved in the royal family, for the king, for his sons, William and Harry. It's been a difficult few months for the royal family.

14:40Tomorrow, we will see Prince Harry out on public duty as well for the first time since his return to the UK. they are constantly, Buckingham Palace, having to deal with these dramas and deciding whether to respond to them. But my sense this evening is that there is real anger and fury about this book. Daniela, thank you very much. Our senior royal correspondent, Daniela Ralph, there. Now, a second blue carpet of the week is being rolled out or has been rolled out tonight. You may remember we reported from the first one at the Emmys on Monday. Well, tonight's is rather more metaphorical because rolling out the blue carpet is how Everton fan Andy Burnham described his invitation to his Canadian counterpart and fellow Toffees fan, Mark Carney, to watch Everton play Wolves in the League Cup tonight.

15:22They'll be quite happy. A 1-0 win for Everton. The two prime ministers spoke to the cameras shortly before kick-off at the Hill Dickinson Stadium. It's just so good for me to think that I will have somebody to talk to and commiserate about Everton at a G7 meeting, which is a really wonderful thought. You are so welcome to Liverpool and obviously to your beloved club, the new home of Everton Football Club. Nothing to commiserate about there with the 1-0 win. Well, Mr Karnier spent the first part of the day in Strasbourg, hearing the President of the European Commission, Ursula von der Leyen, backing a proposal for Canada to become an associate member of the EU.

16:05Well, this new closeness to Europe by Canada seems to be a mirror image of its estrangement from its neighbour, the United States. Those two countries currently locked in a trade war, although the bad blood has been there pretty much from the start of the second Trump term. Here is the US president speaking in March of last year. To be honest with you, Canada only works as a state. We don't need anything they have. As a state, it would be one of the great states anyway. This would be the most incredible country visually. If you look at a map, they drew an artificial line right through it between Canada and the US.

16:40It's just a straight artificial line. Somebody did it a long time ago, many, many decades ago, and it makes no sense. It's so perfect as a great and cherished state. Well, Roland Paris was a senior advisor on global affairs to Mr Carney's predecessor as Canada's Prime Minister, Justin Trudeau. He's now Professor of International Affairs at the University of Ottawa and asked him what he thought associate membership of the EU meant for Canada. It doesn't exist as a category within the EU. And in fact, Mark Carney hasn't talked about Canada becoming an associate member or member of the EU. He's talked about a unique partnership or a unique alliance.

17:26And I think what really matters more than the labels is that both of these leaders are expressing a very strong desire to strengthen the partnership between Canada and Europe across a whole range of sectors. They've talked about critical minerals and energy, defence industrial supply chains, Canada joined the Security Action for Europe investment scheme, AI, quantum computing, digital infrastructure and the like. Canada has, and you don't need me to tell you this, has been trying to get the Comprehensive Economic and Trade Agreement with the EU ratified. There's still 10 EU member states holding out 10 years after it was signed.

18:09So what can come from this that hasn't come from the trade deal? Well, that trade deal, you're right, 10 haven't ratified it. It is provisionally implemented, so it's active, that trade deal. This is why I think the labels are a lot less important, because in practice, Canada and the EU have been advancing cooperation in a number of different sectors. And that's not new. That's accelerated over the last year and a half. But, you know, the EU and Canada will be meeting again formally next month in Canada, and they're expected to announce a new digital trade agreement. And so I think that these are these incremental steps.

18:52Associate membership is a grand label, but I think whatever it ends up being, it will be a collection of agreements rather than membership in any institutional sense. Can this offset the damage being done to the Canadian economy by its trade war with America? It's certainly part of the strategy for doing so. Mark Carney has made it very clear, and he seems to have the support of an overwhelming percentage of the Canadian public, that dealing with this challenge from the United States is not just a Trump issue. It's a recognition that the world has changed, that America has changed. Can it compensate for the damage?

19:35I think Mark Carney sees the opportunity to put the Canadian economy on a somewhat different foundation, recognizing that, of course, the U.S. will continue to be Canada's principal trade partner. The U.K., Europe, Canada, we're not going to turn away from the United States, but I think that all of our countries are realizing that we need to reduce our exposure to the kinds of tariffs and other threats that we've experienced. That was Roland Paris, Advisor on Global Affairs, to Canada's former Prime Minister, Justin Trudeau.

20:35The British-American playwright, novelist and commentator Bonnie Greer has died at the age of 77. She was a prominent figure in British cultural life for many years, one of the most prominent black female critics to appear on our screens. Though perhaps her most notable appearance was on the BBC's Question Time panel in 2009, when she sat next to the British National Party leader Nick Griffin. The decision to invite the far-right leader onto the programme created a huge stir. This was the moment that she challenged Mr Griffin's claims about Britain's indigenous, his word, history. We can all lay our stories out and talk about how we see Britain.

21:14We know what Britain is, but this doesn't really matter to Nick. Not really, Nick, not really. What matters to Nick is his own vision of this country, which is these little tiny potted bits of history. For instance, on his site, he starts his history largely in 700 A.D. Where's the rest of British history? Where's the Romans? There's a reason the Romans aren't there, because they were a multicultural society. Anybody could be a Roman citizen. And there were armies here of Africans and Asians and Europeans. And when Rome left, those people were left behind. Now, what happened to them? You think they're hooked up with your indigenous Ice Age Britons?

21:58Well, OK. Well, two years later, Bonnie Greer turned her Question Time appearance into an opera called Yes. It took its title from the reply she gave the show's producer when asked whether she would appear on it. She wrote the libretto. The music was written by Errolyn Wallen, the Belize-born British composer who was appointed Master of the King's Music in 2024. And earlier, she told me more about working on the opera with Bonnie Greer. One day, the telephone rings. The voice on the other end says, Hi, this is question time. I'm ringing to see if you're available for our next broadcast. You know, the one with just a few people, close people, and silence.

22:45We don't know where we'll be yet, but we should know in the next two weeks. I said, yes. The first time I probably met Bonnie, I think, was when I was asked to work with her on the opera Yes. During the process of that work, we spent quite a lot of time together and I got to know her well. She's a fantastic company and so witty. I don't think she'd ever written an opera, the libretto for an opera before. and I think she was kind of amazed to see how it grew and translated from her words via music to the stage.

23:26What was remarkable was it is showing all the viewpoints from extreme racism to complete tolerance and in a way the opera is the mosaic of all the different voices, all the different nationalities of people who live in the United Kingdom. So it was, in some ways, it was a joyful work. But in speaking with her, appearing on Question Time, you know, it was a nerve-wracking experience for her. She didn't show it, though. No, she didn't. As the opera was done, as the last performance was done, she said to me that on the way to Question Time, she actually had to stop for A &E because she thought she was having a heart attack.

24:04But it was actually an anxiety attack. But that's Bonnie. She's very in control. to such mental acuity and so witty and a great spokesman. She was able to go to the heart of things when she was critiquing work, both her own and others. And she was always a joy to listen to with that beautiful, mellifluous, measured voice of hers. Honestly, I was so shocked to hear this news. How did she take, and this might be a bit sensitive for you as well, How did she take the critique of the opera, though? Because there was a lot, wasn't there? Yes. And one of the reviewers gave us a one-star review. And Bonnie was so despondent.

24:48I said, you've got to wear that as a badge in pride. Because it was from a critic who was sort of incensed that the very subject matter that we were dealing with immigration and it was a contemporary opera dealing with, you know, now. And I remember that review. and he said, you know, there's so many operas already been written about immigration, which of course there haven't been. You talked about the different viewpoints. She was someone who really believed in free speech, wasn't she? Yes, yes, she did. I think she, Bonnie had lived a very interesting time. She'd come through the civil rights era.

25:25She had seen so much, you know, from living, growing up in America and then coming over here. She could see parallels with things, but she was very, yeah, I think she loved people. She was full of love and light. She was someone obviously fascinated by the first black president, Barack Obama, from her hometown of Chicago. I think I remember speaking to her about it at one point. And she wrote a book about him and his music, didn't she? I mean, that was that was a big moment for her, wasn't it? It's Obama music. And, you know, I certainly growing up in England, I never thought we would see the day you would have a black president.

26:01You know, I haven't spoken to Bonnie recently. I'm still referring to her in the present tense. But, you know, I feel we are living through the backlash to that momentous historical day. But Bonnie was, you know, a philosopher. She believed that if there was love and we kept our brains in order somehow and didn't all get brainwashed, we could work together for a better world.

26:28Yes. And that was the master of the King's music, Errolin Wallen, remembering Bonnie Greer, who she worked with on Bonnie's opera, Yes. Now, a verdict today at a court in The Hague. Mr Tachi, in the name of the people of Kosovo, and for the reasons set out in the judgment and summarised above, the panel finds you, Hashem Tachi, guilty of count three, illegal or arbitrary arrest and detention as a war crime.