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Al Arabiya
8 minutes ago
- Al Arabiya
Federal reserve likely to stand pat on rates this week, deepening the gulf between powell and trump
The Federal Reserve is expected to leave its short-term interest rate unchanged on Wednesday for the fifth straight meeting – a move that will likely underscore the deep divide between how Chair Jerome Powell and his chief critic President Donald Trump see the economy. The Fed itself, to be sure, is increasingly divided over its next steps, and many economists expect that two members of the Fed's governing board – both appointed by Trump – could dissent on Wednesday in favor of cutting rates. If so, that would be the first time two governors vote against the chair since 1993. Even so, the gap between the views of the Fed's interest-rate setting committee, chaired by Powell, and the White House is unusually large. In several areas, Trump's views sharply contrast with that of the Fed's leadership, setting up likely clashes for years to come, even after Powell's term as chair ends in May 2026. For example, Trump says that because the US economy is doing well, the Fed should cut rates as if the US is a blue-chip company that should pay less to borrow than a risky start-up. But Fed officials – and nearly all economists – see it the other way: A solid economy means rates should be relatively high to prevent overheating and a burst of inflation. 'I'd argue that our interest rates are higher because our economy's doing fairly well, not in spite of it,' said Gennadiy Goldberg, head of US rates strategy at TD Securities. Trump argues that the Fed in general, and Powell in particular, are costing US taxpayers hundreds of billions of dollars in interest payments by not reducing borrowing costs. Yet Fed officials don't think it's their job to reduce rates the government pays on Treasury notes and bonds. Most economists worry that if they did, they would risk failing at one of the key jobs Congress gave them: fighting inflation. 'It's using monetary policy to ease pressure on fiscal policymakers, and that way points to higher inflation and bigger problems down the road,' said William English, an economist at the Yale School of Management and former senior Fed staffer. If financial markets see that the Fed is focused on keeping borrowing costs low to help the government – rather than focusing on its congressionally-mandated goals of stable prices and maximum employment – Wall Street investors, worried about future inflation, will likely demand higher interest rates to hold Treasury bonds, economists say, pushing up borrowing costs across the economy. For his part, Trump says there is no inflation, and so the Fed should reduce its short-term rate, currently at about 4.3 percent, which was ramped up in 2022 and 2023 to fight rising prices. The Fed's rate often – but not always – influences longer-term borrowing costs for mortgages, car loans, and credit cards. Inflation has fallen sharply, and as a result, Fed officials have signaled they will cut rates by as much as a half-percentage point this year. Yet it has picked up a bit in the last two months, and many of those policymakers, including Powell, still want to make sure that tariffs aren't going to lift inflation much higher before they make a move. Inflation accelerated to 2.7 percent in June from 2.4 percent in May, the government said earlier this month, above the Fed's 2 percent target. Core prices, which exclude the volatile food and energy categories, rose to 2.9 percent from 2.8 percent. Last week, Trump and several White House officials ramped up their attacks on Powell over rates. They also criticized the ballooning costs of the Fed's renovation of two of its buildings, raising questions over whether the president was looking to fire Powell for cause rather than policy differences. Trump and Powell engaged in an extraordinary on-camera confrontation over the cost of the project during Trump's visit to the building site last Thursday. On Monday, Trump was more restrained in his comments on the Fed during a joint appearance in London with British Prime Minister Keir Starmer. 'I'm not going to say anything bad,' Trump said. 'We're doing so well even without the rate cut.' But he added, 'A smart person would cut.' Some economists expect that the Fed will reduce its key rate by a quarter-point in September rather than July and say that the two-month delay will make little difference to the economy. Yet beyond just the timing of the first cut, there is still a huge gulf between what Trump wants and what the Fed will even consider doing: Fed officials in June penciled in just two reductions this year and two in 2026. They forecast that their key rate will still be 3.6 percent at the end of next year. Trump is pushing them to cut it to just 1 percent. 'That's not going to happen with anything like the current people on the committee,' English said. Wall Street investors also expect relatively few cuts: Two this year and two in 2026, according to futures pricing tracked by CME's Fedwatch. According to the Fed's projections, just two officials in June supported three cuts this year, likely Trump's appointments from his first term: governors Christopher Waller and Michelle Bowman. Waller gave a speech earlier this month supporting a rate reduction in July, but for a very different reason than Trump: He is worried the economy is faltering. 'The economy is still growing, but its momentum has slowed significantly, and the risks of rising unemployment have increased,' Waller said. Waller has also emphasized that tariffs will create just a one-time bump in prices but won't lead to ongoing inflation. Yet most Fed officials see the job market as relatively healthy – with unemployment at a low 4.1 percent – and that, as a result, they can take time to make sure that's how everything plays out. 'Continued overall solid economic conditions enable the Fed to take the time to carefully assess the wide range of incoming data,' said Susan Collins, president of the Boston Federal Reserve. 'Thus, in my view, an actively patient approach to monetary policy remains appropriate at this time.'
Arab News
38 minutes ago
- Arab News
Pakistan, Kyrgyzstan sign multiple MoUs to deepen cooperation, enhance trade to $100 million
ISLAMABAD: Pakistan and Kyrgyzstan have signed multiple protocols and memorandums of understanding to deepen their economic and technical cooperation and take the bilateral trade volume to $100 million, Pakistan's Press Information Department said on Monday. The statement came after the 5th session of the Pakistan-Kyrgyzstan Inter-Governmental Commission (IGC) on Trade, Economic, Scientific and Technical Cooperation in Islamabad. The meeting marked a significant advancement in the bilateral relationship between the Islamic Republic of Pakistan and the Kyrgyz Republic, reflecting a shared commitment to expand cooperation in diverse sectors of mutual interest. Both sides held in-depth discussions at the session, co-chaired by Pakistan's Energy Minister Awais Leghari and Kyrgyz Cabinet of Ministers' deputy chairman Edil Baisalov, and reviewed progress made since their last meeting, with a renewed focus on strengthening economic and technical collaboration. During the talks, Leghari said the Pakistan-Kyrgyzstan bilateral trade volume had declined from $11.2 million in 2022-23 to $5.18 million in 2024-25, stressing the need to revitalize trade engagement between the two countries. 'The two sides reaffirmed their resolve to boost bilateral trade, setting a target to raise trade volume to USD 100 million,' the PID said in a statement. 'They agreed to work on diversification of exports and imports, revive the Pakistan-Kyrgyz Joint Business Council, and organize business forums, trade fairs, and B2B (business-to-business) exchanges.' The development comes at a time when Pakistan, faced with an economic slowdown, is trying to leverage its strategic geopolitical position to enhance its role as a pivotal trade and transit hub connecting landlocked Central Asia with the rest of the world, with a flurry of visits, investment talks and economic activity taking place between officials from Pakistan and the Central Asian nations in recent months. Both sides signed a number of MoUs to deepen their cooperation in key sectors. An agreement was signed between the Kyrgyz National Investments Agency and the Board of Investment of Pakistan to foster investment cooperation, while another MoU, signed between the Pakistan Halal Authority (PHA) and Kyrgyzstan's Center for Development of Halal Industry, focused on Halal trade cooperation, according to the PID. In the energy and environment domain, the Kyrgyz side proposed joint participation in a power transmission line project connecting Kyrgyzstan, China and northern Pakistan. Both countries agreed to explore electricity imports, collaboration in renewable energy, mining, hydrocarbons, and technical partnerships between institutions like the Hydrocarbon Development Institute of Pakistan and the Kyrgyz State Technical University. 'Discussions also focused on enhancing regional connectivity through logistics and transportation. Both sides agreed to deepen cooperation in postal services, cargo and rail transport, and civil aviation,' the PID said. 'Both countries underscored the importance of strengthening financial cooperation. The central banks of both countries agreed to collaborate on the development of Islamic banking and financial instruments, including training programs through Pakistan's National Institute of Banking and Finance.' The discussions also featured education and scientific collaboration. 'The parties agreed to promote joint training programs, academic exchanges, and institutional linkages,' the PID said. 'Pakistan reiterated its support to Kyrgyz students under the Pakistan Technical Assistance Program (PTAP). Both sides also agreed to explore labor cooperation and establish a Joint Working Group to discuss its modalities.'
Al Arabiya
an hour ago
- Al Arabiya
Asian shares mostly slip as focus shifts to US talks with China
Asian shares mostly declined Tuesday as some of the euphoria fizzled out over a tariff deal with Japan as proposed by President Donald Trump, which was followed by a similar deal with the European Union. Japan's benchmark Nikkei 225 slipped nearly 0.7 percent to 40725.23. Australia's S&P/ASX 200 lost 0.3 percent to 8670.50. South Korea's Kospi was little changed after reversing earlier losses, edging less than 0.1 percent higher to 3212.59. Hong Kong's Hang Seng dropped 1.1 percent to 25276.36, while the Shanghai Composite shed 0.3 percent to 3586.93. Analysts said markets were watching for the latest from Trump, which are now focused on the talks with China. US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng were meeting in Sweden. Bessent has said the negotiations will likely lead to an extension of current tariff levels. There was no significant new information after the first day of talks. Aside from addressing economic imbalances, tariffs are also now well entrenched in the geo-political arena, Tan Boon Heng of the Asia & Oceania Treasury Department at Mizuho Bank said in a commentary. Last week Trump announced a trade framework placing a 15 percent tax on goods imported from Japan, a level far lower than the earlier 25 percent rate that the president had indicated. Trump also said Japan would invest 550 billion into the US and open up to US autos and rice. Details are still unclear, but the accord set off some momentary relief. US stock indexes drifted through a quiet Monday after the United States agreed to tax cars and other products coming from the European Union at a 15 percent rate, lower than Trump had threatened. Many details of the trade deal are still to be worked out, and Wall Street is heading into a week full of potential flashpoints that could shake markets, including an interest rate decision Wednesday by the Federal Reserve. The widespread expectation on Wall Street is that Fed officials will wait until September to resume cutting interest rates, though a couple of Trump's appointees could dissent in the vote. The Fed has been on hold with interest rates this year since cutting them several times at the end of 2024. On Wall Street, the S&P 500 was nearly flat, edging up by less than 0.1 percent to 6389.77 and setting an all-time high for a sixth straight day. The Dow Jones Industrial Average dipped 0.1 percent to 44837.56, while the Nasdaq composite added 0.3 percent to its own record closing at 21178.58. Tesla rose 3 percent after its CEO Elon Musk said it had signed a deal with Samsung Electronics that could be worth more than 16.5 billion to provide computer chips for the electric-vehicle company. Samsung's stock in South Korea jumped 6.8 percent. Other companies in the chip and artificial-intelligence industries were strong, continuing their run from last week after Alphabet said it was increasing its spending on AI chips and other investments to 85 billion this year. Chip company Advanced Micro Devices rose 4.3 percent, and server-maker Super Micro Computer climbed 10.2 percent. But an 8.3 percent drop for Revvity helped to keep the market in check. The company in the life sciences and diagnostics businesses reported a stronger profit for the latest quarter than Wall Street expected, but its forecast for full year profit disappointed analysts. Companies are broadly under pressure to deliver solid growth in profits following big jumps in their stock prices the last few months. Much of the gain was due to hopes that Trump would walk back some of his stiff proposed tariffs, and critics say the US stock market looks expensive unless companies will produce bigger profits. Hundreds of US companies are lined up to report how much profit they made during the spring, with nearly a third of the businesses in the S&P 500 index scheduled to deliver updates. In energy trading, benchmark US crude inched up 1 cent to 66.72 a barrel. Brent crude, the international standard, added 6 cents to 70.10 a barrel. In currency trading, the US dollar rose to 148.56 Japanse yen from 148.54 yen. The euro cost 1.1600 up from 1.1593.
