US Federal Reserve cuts interest rates by half a percentage point

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00:00The U.S. Federal Reserve cutting interest rates for the first time in more than four years,

00:03a major shift after spending the past two years fighting inflation.

00:06Tell us more.

00:07The U.S. Central Bank lowered its benchmark rate by half a percentage point,

00:11a significant amount.

00:13The last time the Fed cut interest rates was back in March of 2020,

00:16as it tried to shore up the economy during COVID.

00:19But as the economy went into overdrive post-pandemic

00:22and the labor market faced a shortage,

00:24it rapidly raised rates to a 20-year high and kept it there for over a year.

00:29The Fed also now signaled more cuts to come

00:32and that the rate could come down to 3.5% by the end of next year.

00:36While inflation has come down significantly from its 2022 peak of 9.1%,

00:40the job market has been showing signs of slowing.

00:43Let's take a listen to the Fed's Chairman.

00:48As inflation has declined and the labor market has cooled,

00:51the upside risks to inflation have diminished

00:53and the downside risks to employment have increased.

00:57We now see the risks to achieving our employment and inflation goals

01:01as roughly in balance.

01:03And we are attentive to the risks to both sides of our dual mandate.

01:07We know that reducing policy restraint too quickly

01:09could hinder progress on inflation.

01:12At the same time, reducing restraint too slowly

01:15could unduly weaken economic activity and employment.

01:19The last few years have been challenging for businesses around the world.

01:22So what's keeping corporate bosses awake at night these days?

01:25Yuka.

01:26Well, Mark, from geopolitical tensions to climate change

01:29to the race to get on top of artificial intelligence,

01:32there are many issues surrounding the business world

01:34that leaders need to respond and adapt to.

01:37Accounting giant KPMG has just released its annual survey of top CEOs

01:42with more than 1,300 corporate leaders sharing their views.

01:46It's the 10th edition and compared to when the survey started,

01:49CEO confidence in the global economy's growth prospects for the next three years

01:53has declined significantly,

01:55with 72% saying they're confident compared with 93% back in 2015.

02:01Now to discuss more, let's bring in Regina Meyer,

02:03Global Head of Clients and Markets at KPMG International.

02:07Thank you for joining us, Regina.

02:10Thank you for having me.

02:11Now, these are tough times for corporate leaders.

02:14What's keeping them awake at night the most?

02:18Well, one of the things we found in the 10-year retrospective

02:21is that CEOs are really focused on the long-term sustainability

02:25of their companies against the backdrop of ever-growing uncertainty

02:29and volatility, as you well pointed out.

02:31Interestingly, this year, supply chain and operational risks

02:36edged out geopolitical risk as top of mind for CEOs.

02:40But when you think about it, supply chain operability

02:43and running your business are manifestations of the challenges

02:46that corporations have when they confront geopolitical risk.

02:50So how are they going to shore up the companies

02:52and focus on that long-term sustainability?

02:55They're betting big on AI and on talent.

02:58Now, you mentioned AI.

02:59Now, businesses are clearly in a race to embrace AI.

03:03The technology has become mainstream, we can say,

03:06but brought with it some worries as well.

03:08We know that chat GPT can hallucinate and some workers worry

03:12that AI can replace them in their workplaces.

03:15What's the view on this among big companies?

03:18Well, we say 64% of our CEO respondents say they're going to bet big

03:22and it's a top investment priority,

03:24but they also recognize that they don't necessarily have the skills

03:27in the workforce to be able to take advantage of the technology

03:30as well as manage against the risks,

03:32with only 38% believing that they have the capabilities

03:36to take advantage of the technology today.

03:39So they're also investing in talent,

03:41with 80% saying that they will invest in long-term skill development

03:46and in lifelong learning,

03:48because we need humans as the co-pilot for AI,

03:51for AI to be successful.

03:53So there's clearly, there's some work to be done

03:56on brushing up those skills to cope and work with AI among workers.

04:01Now, speaking of workers and jobs,

04:04your survey also shows a significant increase in the number of CEOs

04:08expecting a full return to office in the next three years

04:11compared to last year.

04:13Amazon recently announced an end to remote working.

04:16Why is this necessary?

04:18Hasn't the world of work evolved since COVID

04:21to embrace the hybrid form of working?

04:24Well, definitely we've embraced the hybrid form of working,

04:27but what CEOs are realizing is talent and access to talent

04:31is a fundamental competitive differentiator

04:34and you can't really grow your talent when you only are working remote.

04:37So we did see in the survey a big 20 plus percent jump

04:41in CEOs that are going to require more face-to-face time in the offices.

04:45That doesn't mean five days a week necessarily,

04:48but that's a big jump from last year's 62 percent.

04:51But it is because you can't inculcate culture,

04:53you can't build the skills that you need,

04:55you can't leverage the technologies

04:57without some form of face-to-face gathering.

04:59That's why we see more of an emphasis on return to work in this year's survey.

05:04Are the bosses also seeing wage growth going forward?

05:08Absolutely. I think we're finally seeing wage growth

05:11that's keeping pace or even ahead of inflation

05:14in some of the latest results that I was looking at this morning.

05:18And then we're also focusing on things that are important for society.

05:21So ESG was another topic that showed up in the survey.

05:24In 2015, it wasn't even a top risk.

05:27In 2024, it's at the top table of risks.

05:30And 66 percent of CEOs say they don't believe that their narrative

05:35will necessarily stand up to external scrutiny

05:37to know how hard it is to continue to drive that.

05:40But 76 percent said that they would divest of a profitable business

05:45if it had reputational risk.

05:46So I think those are some of the other things that are coming from society at large

05:50that are finding its way into the corporate boardroom.

05:53Yeah, I mean, as you just mentioned, sustainability, of course, is another top agenda.

05:57And as you said, many big companies are under pressure to do more to tackle,

06:01you know, social issues as well as climate change and move away from fossil fuels.

06:06But there's also a huge profit at stake.

06:08Has the attitude of corporate leaders towards environmental issues

06:12changed significantly over the past decade or so?

06:16For sure, in terms of the last decade, we have seen a big change.

06:19As I said, it wasn't even a top risk in 2015, and now it's definitely a big concern.

06:24The challenge is how to get there.

06:26And I think that's also why supply chain and operational risks show up as top risks,

06:30because how one actually decarbonizes the entire supply chain

06:35is incredibly tricky.

06:37And that requires lots of different changes in fuel mixes, transport modes, supplier ecosystems.

06:43And that's where you're seeing the complexity of how do you respond to climate challenges

06:48in a way that retains earnings and grows opportunity for your shareholders and your people,

06:55but is also responsive to the needs of the environment

06:58and to the external regulators that are watching more and more closely

07:02what these companies are delivering.

07:03So it's a whole tricky set of factors that they're balancing.

07:07Tricky set of factors, indeed.

07:10Regina Meyer from KPMG, thank you so much for joining us on France 24.

07:16And that's it for business.

07:17Absolutely fascinating.

07:19Yuka, thank you very much indeed.

07:20Great to see you there with the business.

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