The Fed is unlikely to cut rates, but this week's meeting is packed with intrigue
When the Federal Open Market Committee releases its interest rate decision Wednesday afternoon, the narrative is almost certain to look a lot like the June meeting, with little changed in the statement and officials again holding off on any cuts.
However, several fascinating subplots will be in play. Consider:
Ultimately, though, the committee is likely to stand pat, putting the distractions on the side and the decision over a cut off to September.
"They're not going to get anything if they ease, other than they'll look like they're knuckling under to the president," said Bill English, the Fed's former head of monetary affairs and now a professor at the Yale School of Management. "So I think their best policy for sure is just to look at the data, make their best judgment, make their policy decision and explain it as well as they can."
Powell will have his hands full outlining the committee's position considering the likely opposition coming from Waller and Bowman.
In the run-up to the meeting, both have argued for cutting, saying essentially that with the tariff pass-through to inflation not yet apparent and a labor market "on the edge" as Waller described it in a speech less than two weeks ago, it's time for the Fed to ease.
"With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate," Waller said in the speech titled "The Case for Cutting Now."
Those comments likely will resonate with Trump, though a CNBC poll of market experts and economists showed just 14% believe Waller will get the nomination to replace Powell, whose term expires in May 2026. Leading contenders above Waller include Treasury Secretary Scott Bessent, former Governor Kevin Warsh and Kevin Hassett, the National Economic Council director.
Trump has called on Powell to resign, even threatening to fire him before backing off, and blamed the central bank leader for the FOMC's refusal to cut rates. The president has said the Fed should ease to help lower financing costs on the national debt and to unlock the housing market with its high mortgage rates.
However, Powell is just one vote on the FOMC, and no other members besides Waller and Bowman have shown an inclination to cut at this meeting. Some officials even have advocated for no cuts this year, according to minutes from the June meeting. Governor Adriana Kugler will not be present, lowering the committee vote to 11.
"The reason the Fed isn't cutting is not because of Jay Powell," former Dallas Fed President Robert Kaplan said on CNBC, using the chair's nickname. "The reason the Fed isn't coming is ... there's not a consensus around the table that it's time to cut, and there are 12 votes and he doesn't get to decide on his own."
"If there was a different Fed chair right now, I think they also would not cut in July," he added. "So I think there's more nuance here than maybe is being reflected in the public comments."
With no update on the Summary of Economic Projections or the accompanying "dot plot" of individual members' outlooks, investors will be left to pore through the statement and Powell's remarks to the press for clues on what happens next.
There's still "a strong base case" for a cut in September, but that could change depending on the data, said Julien Lafargue, chief market strategist at Barclays Private Bank and Wealth Management. The June dot plot still pointed to two cuts this year, but it also showed a strong division among officials.
"Although the Fed's decision is unlikely to surprise, this meeting should still be very interesting," Lafargue said.
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an hour ago
China rejects US demands to stop buying Russian, Iranian oil
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In seeking to restrict oil sales by Russia and Iran, a major source of revenue for both countries, the U.S. wants to reduce the funding available for their militaries, as Moscow pursues its war against Ukraine and Tehran funds militant groups across the Middle East. When Trump unveiled a sweeping plan for tariffs on dozens of countries in April, China was the only country that retaliated. It refused to give in to U.S. pressure. 'If the U.S. is bent on imposing tariffs, China will fight to the end, and this is China's consistent official stance,' said Tu Xinquan, director of the China Institute for WTO Studies at the University of International Business and Economics in Beijing. WTO is the acronym for the World Trade Organization. Negotiating tactics aside, China may also suspect that the U.S. won't follow through on its threat, questioning the importance Trump places on countering Russia, Tu said. Scott Kennedy, senior adviser and trustee chair in Chinese Business and Economics at the Center for Strategic and International Studies in Washington, said Beijing is unlikely to change its posture when it sees inconsistencies in U.S. foreign policy goals toward Russia and Iran, whereas Beijing's policy support for Moscow is consistent and clear. It's also possible that Beijing may want to use it as another negotiating tool to extract more concessions from Trump, Kennedy said. Danny Russel, a distinguished fellow at the Asia Society Policy Institute, said Beijing now sees itself as 'the one holding the cards in its struggle with Washington." He said Trump has made it clear he wants a 'headline-grabbing deal' with Xi, 'so rejecting a U.S. demand to stop buying oil from Iran or Russia is probably not seen as a deal‑breaker, even if it generates friction and a delay." Continuing to buy oil from Russia preserves Xi's 'strategic solidarity' with Russian President Vladimir Putin and significantly reduces the economic costs for China, Russel said. 'Beijing simply can't afford to walk away from the oil from Russia and Iran," he said. 'It's too important a strategic energy supply, and Beijing is buying it at fire‑sale prices.' A 2024 report by the U.S. Energy Information Administration estimates that roughly 80% to 90% of the oil exported by Iran went to China. The Chinese economy benefits from the more than 1 million barrels of Iranian oil it imports per day. After the Iranian parliament floated a plan to shut down the Strait of Hormuz in June following U.S. strikes on Iran's nuclear facilities, China spoke out against closing the critical oil transit route. China also is an important customer for Russia, but is second to India in buying Russian seaborne crude oil exports. In April, Chinese imports of Russian oil rose 20% over the previous month to more than 1.3 million barrels per day, according to the KSE Institute, an analytical center at the Kyiv School of Economics. This past week, Trump said the U.S. will impose a 25% tariff on goods from India, plus an additional import tax because of India's purchasing of Russian oil. India's Foreign Ministry said Friday its relationship with Russia was 'steady and time-tested." Stephen Miller, White House deputy chief of staff and a top policy adviser, said Trump has been clear that it is 'not acceptable' for India to continue financing the Ukraine war by purchasing oil from Russia. 'People will be shocked to learn that India is basically tied with China in purchasing Russian oil,' Miller said on Fox News Channel's 'Sunday Morning Futures.' He said the U.S. needs 'to get real about dealing with the financing of this war.' Sen. Lindsey Graham, a Republican from South Carolina, is pushing for sanctions and tariffs on Russia and its financial backers. In April, he introduced a bill that would authorize the president to impose tariffs as high as 500% not only on Russia but on any country that 'knowingly' buys oil, uranium, natural gas, petroleum products or petrochemical products from Russia. "The purpose of this legislation is to break the cycle of China — a communist dictatorship — buying oil below market price from Putin's Russia, which empowers his war machine to kill innocent Ukrainian civilians,' Graham said in a June statement. The bill has 84 co-sponsors in the 100-seat Senate. A corresponding House version has been introduced, also with bipartisan support. Republicans say they stand ready to move on the sanctions legislation if Trump asks them to do so, but the bill is on hold for now.
Chicago Tribune
an hour ago
- Chicago Tribune
China pushes back at US demands to stop buying Russian and Iranian oil
WASHINGTON — U.S. and Chinese officials may be able to settle many of their differences to reach a trade deal and avert punishing tariffs, but they remain far apart on one issue: the U.S. demand that China stop purchasing oil from Iran and Russia. 'China will always ensure its energy supply in ways that serve our national interests,' China's Foreign Ministry posted on X on Wednesday following two days of trade negotiations in Stockholm, responding to the U.S. threat of a 100% tariff. 'Coercion and pressuring will not achieve anything. China will firmly defend its sovereignty, security and development interests,' the ministry said. The response is notable at a time when both Beijing and Washington are signaling optimism and goodwill about reaching a deal to keep commercial ties between the world's two largest economies stable — after climbing down from sky-high tariffs and harsh trade restrictions. It underscores China's confidence in playing hardball when dealing with the Trump administration, especially when trade is linked to its energy and foreign policies. U.S. Treasury Secretary Scott Bessent, emerging from the talks, told reporters that when it comes to Russian oil purchases, the 'Chinese take their sovereignty very seriously.' 'We don't want to impede on their sovereignty, so they would like to pay a 100% tariff,' Bessent said. On Thursday, he called the Chinese 'tough' negotiators, but said China's pushback hasn't stalled the negotiations. 'I believe that we have the makings of a deal,' Bessent told CNBC. Gabriel Wildau, managing director of the consultancy Teneo, said he doubts President Donald Trump would actually deploy the 100% tariff. 'Realizing those threats would derail all the recent progress and probably kill any chance' for Trump and Chinese President Xi Jinping to announce a trade deal if they should meet this fall, Wildau said. In seeking to restrict oil sales by Russia and Iran, a major source of revenue for both countries, the U.S. wants to reduce the funding available for their militaries, as Moscow pursues its war against Ukraine and Tehran funds militant groups across the Middle East. When Trump unveiled a sweeping plan for tariffs on dozens of countries in April, China was the only country that retaliated. It refused to give in to U.S. pressure. 'If the U.S. is bent on imposing tariffs, China will fight to the end, and this is China's consistent official stance,' said Tu Xinquan, director of the China Institute for WTO Studies at the University of International Business and Economics in Beijing. WTO is the acronym for the World Trade Organization. Negotiating tactics aside, China may also suspect that the U.S. won't follow through on its threat, questioning the importance Trump places on countering Russia, Tu said. Scott Kennedy, senior adviser and trustee chair in Chinese Business and Economics at the Center for Strategic and International Studies in Washington, said Beijing is unlikely to change its posture when it sees inconsistencies in U.S. foreign policy goals toward Russia and Iran, whereas Beijing's policy support for Moscow is consistent and clear. It's also possible that Beijing may want to use it as another negotiating tool to extract more concessions from Trump, Kennedy said. Danny Russel, a distinguished fellow at the Asia Society Policy Institute, said Beijing now sees itself as 'the one holding the cards in its struggle with Washington.' He said Trump has made it clear he wants a 'headline-grabbing deal' with Xi, 'so rejecting a U.S. demand to stop buying oil from Iran or Russia is probably not seen as a deal‑breaker, even if it generates friction and a delay.' Continuing to buy oil from Russia preserves Xi's 'strategic solidarity' with Russian President Vladimir Putin and significantly reduces the economic costs for China, Russel said. 'Beijing simply can't afford to walk away from the oil from Russia and Iran,' he said. 'It's too important a strategic energy supply, and Beijing is buying it at fire‑sale prices.' A 2024 report by the U.S. Energy Information Administration estimates that roughly 80% to 90% of the oil exported by Iran went to China. The Chinese economy benefits from the more than 1 million barrels of Iranian oil it imports per day. After the Iranian parliament floated a plan to shut down the Strait of Hormuz in June following U.S. strikes on Iran's nuclear facilities, China spoke out against closing the critical oil transit route. China also is an important customer for Russia, but is second to India in buying Russian seaborne crude oil exports. In April, Chinese imports of Russian oil rose 20% over the previous month to more than 1.3 million barrels per day, according to the KSE Institute, an analytical center at the Kyiv School of Economics. This past week, Trump said the U.S. will impose a 25% tariff on goods from India, plus an additional import tax because of India's purchasing of Russian oil. India's Foreign Ministry said Friday its relationship with Russia was 'steady and time-tested.' Stephen Miller, White House deputy chief of staff and a top policy adviser, said Trump has been clear that it is 'not acceptable' for India to continue financing the Ukraine war by purchasing oil from Russia. 'People will be shocked to learn that India is basically tied with China in purchasing Russian oil,' Miller said on Fox News Channel's 'Sunday Morning Futures.' He said the U.S. needs 'to get real about dealing with the financing of this war.' Sen. Lindsey Graham, a Republican from South Carolina, is pushing for sanctions and tariffs on Russia and its financial backers. In April, he introduced a bill that would authorize the president to impose tariffs as high as 500% not only on Russia but on any country that 'knowingly' buys oil, uranium, natural gas, petroleum products or petrochemical products from Russia. 'The purpose of this legislation is to break the cycle of China — a communist dictatorship — buying oil below market price from Putin's Russia, which empowers his war machine to kill innocent Ukrainian civilians,' Graham said in a June statement. The bill has 84 co-sponsors in the 100-seat Senate. A corresponding House version has been introduced, also with bipartisan support. Republicans say they stand ready to move on the sanctions legislation if Trump asks them to do so, but the bill is on hold for now.
CNBC
2 hours ago
- CNBC
Asia-Pacific stocks set to slip as investors weigh tariffs, OPEC+ output hike
Asia-Pacific markets are poised to open lower Monday as investors assess the latest Trump administration's new round of tariffs and jobs data report, which dragged Wall Street lower and fueled bets on a Fed rate cut next month. Investors will also be watching oil prices after OPEC+ concluded a slew of major output hikes. Good morning from Singapore. Investors are continuing to assess the U.S.'s latest tariffs which have now raised concerns over mounting inflation levels and an economic slowdown. They will also be keeping a watch on oil prices after OPEC+ agreed to raise production to 547,000 barrels per day in September. Japan's benchmark Nikkei 225 was set to open lower, with the futures contract in Chicago at 39,965, while its counterpart in Osaka last traded at 39,900, against the index's Monday close of 40,799.60. Futures for Hong Kong's Hang Seng index stood at 24,282 pointing to a weaker open compared with the HSI's last close of 24,507.81. Australia's S&P/ASX 200 was set to start the day lower with futures tied to the benchmark at 8,587, compared with its last close of 8,662. — Amala Balakrishner Oil prices slipped on Friday, weighed down by a stronger U.S. dollar and the possibility that OPEC+ will further increase its crude oil output. Dado Ruvic | Reuters OPEC+ agreed on Sunday to raise oil production by 547,000 barrels per day for September, the latest in a series of accelerated output hikes to regain market share, as concerns mount over potential supply disruptions linked to Russia. OPEC+ cited a healthy economy and low stocks as reasons behind its decision. "Given fairly strong oil prices at around $70, it does give OPEC+ some confidence about market fundamentals," said Amrita Sen, co-founder of Energy Aspects, adding that the market structure was also indicating tight stocks. In early Asian trade on Monday, Brent crude futures fell 43 cents, or 0.62%, to $69.24 a barrel by 2218 GMT, while U.S. West Texas Intermediate crude was at $66.94 a barrel, down 39 cents, or 0.58%, after both contracts closed about $2 a barrel lower on Friday. Read more here. — Reuters Stocks closed lower on Friday, after a weaker-than-expected jobs report worried investors that the economy is meaningfully slowing down. The S&P 500 slipped 1.6% to close 6,238.01, while the Nasdaq Composite pulled back 2.24% 20,650.13. The Dow Jones Industrial Average fell 542.40 points, or 1.23%, to finish the session 43,588.58. — Brian Evans
