13/09/2016 World Business Report

eight years and faces arrest from police. I don't know what is going

on! Sally does... LAUGHTER. Mixed messages from the Fed

send global markets We'll decipher if there will be

a rate rise in the US next week. Ford tries to overtake its rivals

with their latest driverless The fearless Michelle

Fleury went for a spin. Has you could tell, that was not

Michelle at the wheel are she will, however, be driving a prototype.

Also in the programme: We'll be looking at why China's

infrastructure spend worth billions of dollars could be doing more

confusion at the top - a fog of uncertainty has descended

over the future of the world's largest economy with those pulling

the economic leavers now in open conflict.

In the last 24 hours an influential member of the board that sets US

interest rates has suggested a rate rise might damage the economy.

Her comments directly contradict several Fed officials who have

recently suggested the economic conditions justified

considering another increase in rates this month.

Speaking in Chicago, Lael Brainard said the US central

bank should avoid moves to "tighten policy pre-emptively."

This seemed to clash with Federal Reserve Bank

of Boston President Eric Rosengren comments on Friday.

He said "a reasonable case can be made" for raising rates sooner

And if you're wondering how much words matter,

just look at the last three trading days on the Dow,

the main stock market in the US reacted swiftly to those

Two of the key reasons why: Well, raising the cost of borrowing

in the US will mean higher debt repayments for many emerging market

governments and businesses around the world, as the amount owed

And with the prospect of higher interest rates in America,

this is attractive to international investors who are hungry for better

returns on their investment capital so money will be headed to the US

and away from the rest of the world. With me to discuss this

is Jeremy Stretch, head of currency strategy at CIBC World Markets.

Good morning, Jeremy. So, next week, will they or won't they? Well, there

are many reasons why they should raise rates, we have seen that over

the course of past months and, indeed, 12 months back in December

2015 we could have had this same debate arguing about whether they

should tighten rates. Janet Yellen found a reason not to, talking about

global decisions, and I suspect we will see something similar this time

around. I think the Fed will pass this time around and we will be

rather reminiscent of 2015 looking for a December rate rise. Do you

think the US election happening early November is one reason white

-- why they might put it back? It is possible, interest rates have been

incredibly politicised over recent months, or at least that has been

the presumption of politicisation. Donald Trump has been critical of

the Federal Reserve over the last couple of months, talking about

reasons why they have been reluctant to raise rates from a political

standpoint, which I don't think is true, though there have been

accusations. I don't think the Fed would like to bring themselves into

the middle of the political debate as well as finding reasons to hold

off for now. There is even more attention on what the Fed is doing

this month because of what was said last week by Mario Draghi and also

reports that the central bank of Japan is less likely to stimulate

more, so it is these three central banks and what they are doing, it is

all in focus right now, which is why markets are so sensitive.

Absolutely, going back to the chart they showed, it is the confluence of

these central banks coming together, so while we are fixated on what the

Federal Reserve will do, we have the Bank of Japan's reviewed on the same

day, and they have been injecting enormous amount of liquidity into

the markets, in the same way the ECB have been doing. The ECB didn't

enhance the programme on Thursday. That was a little bit of a surprise.

And indeed it was not discussed, the expansion, at that time, and has

provided uncertainty, which for financial markets is a reason why

investors are looking to pull back. Away from the holding positions into

the uncertain period. As a consequence, it is causing equity

markets to be destabilised. Thank you very much indeed, Jeremy. We

shall keep a close eye on the Fed and what it does next week, but for

now we will have a break from central bank action.

US auto giant Ford says you will be able to buy from them a self-driving

The company that bought to the world the first mass produced car now

wants to be seen again as a cutting edge tech company.

But Ford has a long way to go if it's to catch up with the likes

Michelle Fleury reports from Michigan where Ford

is testing its most advanced prototype.

I am Michelle, this is Andrew. I am also Andrew. That is easy. I and

your engineer. The car will drive autonomously. He won't be doing

anything. It will drive through this campus. It is not staged, it is a

10,000 person campus with people doing what they do and drivers doing

what they do. That is the level of capability we have right now. Fortt

is keen to prove it can do what Silicon Valley can. Uber is

launching a self driving taxi service in Pittsburgh any day. It

feels like being a passenger in an ordinary car. I can't really tell

the difference. It has been pretty unremarkable except when I peer over

Gus's shoulders and notice he doesn't have his hands on the wheel.

Ford has pledged there won't be a wheel or even gas and brake pedals

in 2021. And the state of those lives is why we are still stopped

right now, so we are waiting for them to go out. Light beams and

cameras are used to read the environment around the car. So, hang

on a second, there is a truck right up there. We are slowing down, and

there is a stop sign, so we are going to stop. You promise your foot

wasn't on the break? No. I wouldn't call it a wild ride but that is not

bad when you are talking about driverless cars on the road. The

question of safety has come up again when a driver was killed recently

using Tesla's autopilot feature. The problem is the technology is moving

faster than the laws. This Republican senator is behind the

push to make Michigan the first US state where it is legal to operate a

self driving car without a human being behind the wheel. Right now

our state doesn't allow automated vehicles on the road unless they are

being tested, so we have to change that component. Then there is cyber

security component, which is a very important part of it, just due to

the fact that if your home computer is hacked into while you are sitting

at a desk, if your car is hacked into driving 70 mph, that could be

catastrophic for not only you but for everybody around you. Here in

the home of America's car industry the hope is driverless car

technology will be as big as Henry Ford's creation of the assembly

line. China's government is spending more

but is it getting value for money? The Asian powerhouse spends more

on infrastructure each year than North America and

Western Europe combined. However a report from

Oxford University says more than half of that spending is not

generating economic value. Official figures out today show

Chinese government spending has risen by close to 13% in the first

eight months of this year. However revenues have only risen

by 6% over the same period. Research done by Oxford University's

Said Business School, says infrastructure cost overruns

have equalled nine point two trillion dollars, that's

approximately one-third of China's Rico Hizon is in our Asia Business

Hub. So, is China getting

enough bang for its buck? That is right. It seems they are not

getting maximum output from their infrastructure projects. One problem

is the mainland keeps building roads, railways and other

development projects but many of them are underutilised. Traffic use

of major road projects represent two extremes. Two thirds of roads have

low use while one third are congested. This hampers economic

growth. Unless China shifts to fewer quality infrastructure investments,

it is headed for an infrastructure led national and economic crisis.

Also we should take into account that road and rail projects are

built two years quicker compared to first world western countries, which

raises the issue of cost, safety and the environment. OK, thanks a lot.

That is World Business Report. I will see you soon.

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The Women and Equalities Committee believes starting lessons