Good morning from the financial times. Today is Thursday September 17th. This is your Etsy news briefing.
The Federal Reserve is signaling rock-bottom rates for the next three years and Donald Trump is pushing for more physical stimulus plus snowflake had a big first day on the public market, but some investors are considering the cloud computing company is overvalued.
Mark Filipino, and here's the news you need to start your day.
Race will remain highly accommodative until the economy is far along in its recovery and that that should be very powerful statement and supporting economic activity. That was Federal Reserve chairman G polyester the FED indicated that it would not raise interest rates until at least the end of 2023. That means the US Central bank's main rate could stay close to zero for nearly three years with me now is our US market report at Colby Smith Kobe. Why is the Fed indicating that it will keep interest rates for solo for so long to buy the coronavirus crisis. We haven't seen in history really such a massive drop in economic activity so quickly and so it's something that's has required and will continue to refine, you know, unprecedented support from Central Bankers. So I think in a large part, this is you know, the FED acknowledging the fact that this is an economic contraction unlike anything that was ever seen and so it's
The level of support is going to provide it has recently had a bit of a rethink about the way in which is about inflation. So last month's chair Powell came out and said the fat is going to tolerate higher rates of inflation and that was a really critical breakthrough. I think for monetary policy because the FED has a long targeted is 2% inflation rate, and now they're saying that they want to buy the average 2% inflation over time. And so what that means is that they'll be more hesitant to raise interest rates than they have been in the past and perhaps we'll let you cannot make expansions run longer than they otherwise would have so I think that's why we have forecast going out as far as they do you offer for interest rate increases and and they're still even some
Kind of questions at the sidewall. You can get there by 2023 Kobe. What else? Can I use raise fed meeting more needs to be done on the physical friend. So Congress they have passed multiple release packages to help protect the US economy against further economic damage, but unfortunately the most recent talks. I really stalled care Powell was pretty explicit as other fed officials have been as well. Recently that the said can't do this alone installation is not going to average 2% over time, and the number covery will proceed more slowly if spending from Congress doesn't come quickly and doesn't come in a largemouth bass size. So again, he was he was really kind of consistent in his message that the FED need some help here spent fuel pressure to do more if Congress and the White House fail to pass another stimulus package.
I think they'll definitely be more sensitive to the need for additional support and in that type of reality here. But ultimately what we have seen is financial assets have done really really well, and we seen, you know, pretty strong rebound and recovery and Equity markets. Really since them are closed during kind of the worst of the financial Kenneth caused by the coronavirus outbreak. There have been some concerns about financial stability. But again, no seal secondary to the broader economic issue that Americans are dealing with at the moment that I do think that the state is going to kind of remains quite sensitive to whether or not Congress is doing what the FED thinks it needs to be doing, which is, you know, providing more relief for American Colby Smith is our us markets reporter than Kobe. Thank you.
Add mr. Powell isn't the only one looking for a physical boost President Trump nuts members of his own party to improve their stimulus proposal Republicans and Democrats in Congress have been deadlocked for months over the size of the countries next to me less package the Democrats Pick 3 trillion dollars back in May Republicans respond with their own package worth about five hundred billion dollars. But yesterday Trump tweeted same quote gopher much higher numbers for publicans. It all comes back to the USA. Anyway, the president in White House Chief of Staff Mark Meadows have signal their restarting negotiations with Democrats and are increasingly optimistic about finding a compromise.
And snowflake made a splash yesterday during its stock market debut shares in the cloud computing company doubled in value on Wednesday that gave the company of market capitalization of more than 70 billion dollar whale about the 12 billion dollars. It was valued at in February Iles Krupa's back on the show to talk about snowflake high miles good to be back for you a snowflake is part of its the largest initial public offering for us software company and it's also the largest IPO of the year in the u.s. Why is there so much excitement here? So snowflakes product is what we call a data warehouse with basically allows big companies to manage and analyze multiple data sources and their version runs entirely on remote Cloud systems, like Amazon web services. The reason investors loves company is because of its mass of Revenue gross more than 120% year-over-year and its ability to keep customers signed up.
But snowflake also was opportunistic in that it caught on to a huge wave of demand for tech companies that can help manage the shift to remote working during the pandemic according to one index card companies have gained 60% this year, which is more than double the NASDAQ. I mean a lot of people betting that this work from home trend is going to continue in a lot of that is driving the optimism behind the company, but are there any concerns that snowflake is overvalued? Yes, there are plenty of snowflake only made a bit over 260 million dollars of revenues and its most recent fiscal year and it's worth noting the company's still heavily loss-making and even when you look at the company's projected revenues, it is still very richly valued compared to other Cloud business is the other problem is that has big competitors and Amazon Google Microsoft and Oracle. We've all been devoting major resources to copy and snowflakes best features. Some analysts are predicting that class service companies will increase
Be competing on price going forward which could cause more problems for snowflake. It will be interesting to see how snowflake addresses that on its first earnings. Call Miles Krupa is our Venture Capital correspondent. Thanks miles. Thanks Mark.
Before we go the European division of Starbucks syrup 175 million dollars in dividends to its us parent company last year. That's despite recording a 99% fall in pre-tax profit the division spent more on developing takeaway and drive-thru services.
You can read more on all of these stories at ft.com.
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