The Fed passes on a pause

This is an audio transcript of the FT News Briefing podcast episode: ‘The Fed passes on a pause’

Marc Filippino
Hi, guys. We’re going to get to today’s briefing in just a second. But first, I want to tell you about FT Edit. It’s an app for your iPhone and iPad that gives you access to eight of the FT’s best stories handpicked every weekday. The app’s editors serve up a perfect mix of politics, business and global news from our award-winning journalists, plus opinion pieces from our top columnists. The best part: you can try FT Edit today completely free for 30 days with no obligation. Just head to the show notes for the link.

Good morning from the Financial Times. Today is Thursday, March 23rd, and this is your FT News Briefing.

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The Federal Reserve is taking a less aggressive approach to fighting inflation, and the FT’s 2023 MBA rankings are out. We’ll tell you who tops the list. I’m Marc Filippino. And here’s the news you need to start your day.

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The Federal Reserve raised interest rates by a quarter of a percentage point yesterday. Central bankers did consider pausing rate hikes because of the turmoil in the banking sector. Here’s the FT’s US economics editor, Colby Smith.

Colby Smith
So I think the keyword from all of this is uncertainty. We heard Powell say this again and again. And essentially the point is that we know the banking crisis and the credit crunch that’s going to come from lending standards, tightening up a little bit is going to weigh on growth. It’s going to maybe cool inflation, but we just don’t know how significant of an impact we’ll see. And Powell kept kind of going back to this point again and again when he was asked about the trajectory for monetary policy, because if we’re getting, you know, a sharper slowdown in growth, that might well mean the Fed does not have to do as much as once feared.

Marc Filippino
Is the banking crisis making the Fed’s job easier?

Colby Smith
So there’s an aspect of that. And I think the thing to remember here is there’s this common refrain that, you know, the Fed raises interest rates until something breaks. And Silicon Valley Bank is really kind of the first example of this. You know, the Fed didn’t set out to raise interest rates and cause a banking crisis, but it’s a byproduct of it squeezing the economy to a certain extent and raising borrowing costs significantly. Now, Powell talked about SVB as being an outlier. It was, you know, really a failure of management, not necessarily indicative of broader weakness across the banking system. But nonetheless, that obviously has sparked a bit of panic and caused, you know, midsized lenders to really kind of pull back in their activity. It really does seem like the Fed is closer to being done here than we expected, even just a couple of weeks ago.

Marc Filippino
OK, Colby. So yesterday, Jay Powell talked about the US banking system. You were at that press conference. Here’s what he had to say.

Jay Powell
Our banking system is sound and resilient with strong capital and liquidity. We will continue to closely monitor conditions in the banking system.

Marc Filippino
Now, Colby, I bring this up because US bank stocks were down yesterday. There’s also the uncertainty around First Republic. And you know, just to be honest, there’s still a lot that, that’s yet to be seen. How come Powell was so confident in his statement about banks?

Colby Smith
I think he’s confident because they have the tools in place to address any problems that come up. We saw that these past two weekends where government authorities were able to respond really quickly and really forcefully to stem any contagion. They have the tools available. They have the willingness as well internally to kind of step in as needed. And that’s all it really takes to make sure that a situation like this doesn’t, you know, totally get out of hand.

Marc Filippino
Colby Smith is the FT’s US economics editor. Thanks, Colby.

Colby Smith
Thanks, Marc.

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Marc Filippino
The FT has released its latest ranking for global business schools. And we’ll get to the top-ranked MBA programmes in just a little bit. But first, I want to introduce you to a guy who was very interested in a list like this one. Nicholas Bilcheck grew up in a suburb of Connecticut about an hour and a half from New York City. He studied electrical engineering as an undergraduate, and then he worked a few years as an electrical and management consultant. Over time, he found that consulting wasn’t for him.

Nicholas Bilcheck
I want to make a difference at the company through the company, whether that means I’m working for these smaller, clean tech start-ups or I’m taking part in more of an entrepreneurship through acquisition role. And it was through that I decided I really needed kind of the MBA business background in order to work at those companies.

Marc Filippino
So Nicholas looked at business schools that had a focus on clean tech and entrepreneurship, but he had other criteria too.

Nicholas Bilcheck
I love New York City and want to stay in the New England New York area. Then I took a look at company placement of alumni and things like data and ranking information, of course, was very important.

Marc Filippino
When Nicholas was looking at schools, he consulted the FT’s annual 2023 MBA rankings. The FT’s Andrew Jack is in charge of compiling the list, which had some pretty big changes this year. He joins me now. Hi, Andrew.

Andrew Jack
Hi.

Marc Filippino
So, Andrew, does Nicholas’s story tell you something about what students are looking for when it comes to business schools these days?

Andrew Jack
Yes, I think there is definitely both. On the one hand, a desire for further study by students having an experience as Nicholas had, a couple of different deployments, to then say, “What might I want to do next in my career and how best to get to it?” On the other hand, as he was saying, there’s a more recent appetite for issues around sustainability, for social purpose and also for entrepreneurship. A lot of students increasingly talking about going into start-ups rather than perhaps going back into a large existing corporate.

Marc Filippino
So this year, Andrew, the FT changed some of the ways it ranks MBA programmes. What were some of those changes?

Andrew Jack
Yes, so we’ve always tried to capture a wide range of different factors. So this year we reduced the weighting that we give to the salaries earned by alumni. We’ve tried to track the social mobility factor by looking at return on investment. So saying essentially, you know, if you come from perhaps a lower income background, you know, as long as you went to a school that meant afterwards you could substantially elevate your salary and therefore pay off any debt or go into the sorts of careers you might be interested in. The other key area that we’ve changed is this increasing focus on sustainability, to say essentially what part of your core courses cover ESG topics. This year what we’ve added is a metric for business schools that do a recent and publicly available carbon audit. So they’re actually tracking their own use. That’s an important thing to credit. So that’s, those are the areas for now, and we’re certainly reflecting on others going forwards that we might incorporate.

Marc Filippino
OK, Andrew. So let’s go to the results. For listeners who want to see the whole list, we’ll have a link to that in the show notes. But coming in at number one is Columbia, which going back to our guy Nicholas is one of his top choices. Andrew, why did Columbia get number one?

Andrew Jack
Well, I mean, a bunch of different factors that it performed well on. One, which undoubtedly was the salary levels of graduates. So three years out, they had a weighted average salary of $226,000. But they also performed well in a number of other factors, not least sustainability, incidentally. But what I would say is that, you know, this is only a snapshot starting point, a sort of aggregated view. And what we encourage students, faculty, employers, whoever is using the rankings to do, is to go to our rankings site and then split out. So if you’re interested in physical location, in salary, in the assessment of by alumni, in the carbon footprint or sustainability issues in the gender diversity — you can home in on those. You can download it all in a spreadsheet and reprioritise based on your own interests.

Marc Filippino
Andrew Jack is the FT’s global education editor. Thanks, Andrew.

Andrew Jack
Thanks very much.

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Marc Filippino
Before we go, we would be remiss if we didn’t bring you yesterday’s UK inflation report. It showed the annual rate of consumer price inflation rose to nearly ten and a half per cent in February. That’s the highest inflation rate of any of the G7 countries, and it puts pressure on the Bank of England to raise interest rates when officials meet today.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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