Pakistan downs Indian jets; Fed holds rates steady

Happy Thursday and welcome to your morning wrap of the key business and political headlines from around the world.

First up this morning, the BBC is reporting that Pakistan has shot down five Indian jets after India fired missiles on Pakistan and Pakistani Kashmir in retaliation for last month’s terrorist attack by Islamist militants that killed 25 in Pahalgam.

Pakistan Prime Minister Shehbaz Sharif said this was "a reply from our side to them”. India has not confirmed the downing of the jets.

It comes after India said it launched missile strikes overnight on what it called “terrorist infrastructure sites” in Pakistan and Pakistan-administered Kashmir.

"The targets we had set were destroyed with exactness according to a well-planned strategy," India's Defence Minister, Rajnath Singh, was quoted by Reuters as saying. "We have shown sensitivity by ensuring that no civilian population was affected in the slightest."

But Islamabad said none of the locations were militant camps. Pakistan’s military said 31 people were killed and 57 injured by the attack. Al Jazeera reports the attack prompted a television address by Sharif, who said India will “suffer the consequences”.

Reuters reports it is the worst clash in more than two decades between the two countries.

Shehbaz Sharif.

Turning to the United States, where the Federal Reserve has held interest rates steady for the third meeting in a row, with officials highlighting growing concerns that President Donald Trump’s tariffs will trigger a fresh burst of inflation and weaken the jobs market.

“Uncertainty about the economic outlook has increased further,” the policymaking Federal Open Market Committee said. The federal funds target remains at a range between 4.25% and 4.5%.

Cornell University professor Eswar Prasad told the Financial Times: “The Fed has shifted from engineering a soft landing to keeping the economy from nosediving even as Trump tries to commandeer the steering wheel.”

Fed chair Jerome Powell has faced repeated attacks from Trump, who has called on the Fed to cut borrowing costs. Wall Street’s main indices were steady in late trading.

In Rome, black smoke is rising from the chimney of the Sistine Chapel, signifying that the 133 voting cardinals have not selected a new pope.

The new pope will need to receive two-thirds of the vote.

Some 30,000 people gathered in St Peter’s Square to see whether a new pope was chosen in the first round of voting, Italian police told CNN.

A pope has not been chosen in the first round in centuries.

St Peter's Square.

To the Middle East, where the Associated Press reports that Israeli strikes across Gaza have killed at least 92 people including women, children and two journalists.

The Israeli military has made no comment on the strikes.

It comes as Israel Prime Minister Benjamin Netanyahu said there is “doubt” about the survival of three hostages previously believed alive in Gaza. The recent attacks follow Israel’s plan to intensify its operations in the Palestinian enclave, which would include seizing Gaza, holding on to captured territories and forcibly displacing Palestinians to the south.

In business news, CNBC reports that demand for used cars in the United States just jumped to its highest level in 18 months as consumers turned to the secondary market amid fears of price hikes due to auto tariffs.

Cox Automotive’s Manheim Used Vehicle Value Index, which tracks prices of used vehicles sold at its US wholesale auctions, increased 4.9% last month compared with a year earlier.

It also marked a 2.7% increase from March. The rise is significant compared with the historically typical monthly index moves of 0.2%.

“We expected to see strong price appreciation in response to the tariffs, and that’s exactly what came,” Cox Automotive senior director of economic and industry insights Jeremy Robb said.