Business Review from the Economist

Fed signals interest rates will stick

Janet Yellen, the chairwoman of the Federal Reserve, dropped a strong hint that the central bank won't raise interest rates at its June meeting, a reversal of previous indications that it would. After figures showed that only 38,000 new jobs were created in May, Yellen said in a speech that current monetary policy is "generally appropriate" and omitted to mention that rates will rise "in the coming months," a phrase that Fed-watchers interpret as a sure sign of an impending increase.

The Bank of Korea cut its benchmark interest rate for the first time in a year, to a record low of 1.25 percent. South Korea's export-led economy is reeling from the slowdown in China. Along with the government, the central bank is pumping $9.5 billion into state-run development banks that have run up big losses from loans to the weakened shipbuilding industry.

Guy Hands, the founder of Terra Firma Capital Partners, went back to court to resume his fight with Citigroup over the advice its British arm gave to him in the calamitous buyout of EMI in 2007. Citi eventually seized control of the record label to recoup loans it had made to finance the bid. Hands claims the bank's guidance on the deal was misleading. A jury in New York sided with Citi in 2010, but that verdict was reversed on appeal. The next chapter in the case is being heard by a judge in London.

A labor tribunal in France ordered Société Générale to compensate Jérôme Kerviel, a rogue trader at the French bank, $512,000 because he was sacked without "real or serious cause." Kerviel lost the French bank about $55.8 billion through his dodgy trades and was found guilty in 2010, a conviction that was upheld on appeal. SocGen said the tribunal's decision was "incomprehensible."

China announced plans to make it easier and cheaper for businesses in the United States to invest in China using the yuan. The proposal gives America a quota of up to 250 billion yuan ($38 billion) to invest in Chinese shares and bonds. China hopes to boost foreign investment in the country after last year's stock market meltdown dented confidence.

The European Central Bank (ECB) started adding corporate bonds to the debt it is buying through its quantitative-easing program, a policy change that was announced in March. Meanwhile, the yield on German 10-year government bonds dropped to a new low of 0.035 percent and threatened to fall into negative territory.

The ECB reported that none of the seven E.U. states that are supposed eventually to adopt the euro — Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden — is on track to do so. Given the eurozone's problems, that is probably because they would rather not join at the moment.

Valeant, bogged down in federal investigations into its business practices, reported a quarterly loss of $374 million and reduced its profit forecast for the year. The drugmaker also disclosed that it is selling some of its products at a loss. Its share price, which has been hammered over the past year, fell by a further 14 percent.

Global Politics from the Economist

U.S., Chinese officials discuss steel

Cabinet officials from the U.S. and China held talks in Beijing. China agreed to cut steel output, cooperate on combating climate change and enforce sanctions on North Korea aimed at persuading it to abandon its nuclear-weapons program. Big differences remained, however, not least over China's territorial ambitions in the South China Sea.

Hundreds of lawyers in China signed a statement condemning police for allegedly attacking one of their peers in a court in the southern city of Nanning. The city's government denied the allegation but ordered the court to apologize and pay compensation.

In Hong Kong, thousands of people attended an annual vigil to commemorate the crushing of the Tiananmen Square protests in Beijing in 1989. Some student groups, which had joined previous vigils, stayed away, saying they preferred to focus on democratic reform in Hong Kong.

At least 19 people were killed in attacks on an army base, checkpoint and gun shops in Aktobe, in northwestern Kazakhstan. Islamic militants were blamed.

Saudi Arabia's government published more details of its plans to reduce the country's budget deficit and rebalance the economy away from oil. It alarmed the country's 10 million expats by suggesting it might impose an income tax on them, though it ruled out taxing its own 20 million nationals.

The U.N. said 90,000 civilians could be trapped in Fallujah, Iraq.