Latest news with #SummaryofEconomicProjections
Mint
14 hours ago
- Business
- Mint
Powell speaks in Europe as Trump piles pressure on Fed
Jerome Powell will try to project stability without worsening the fight over Federal Reserve independence at a gathering sometimes referred to as the European equivalent of the central bank's Jackson Hole economic conference. The Fed chair will speak Tuesday morning at the European Central Bank's Forum on Central Banking in Sintra, Portugal, as the White House steps up plans to replace him and fractures inside the Fed become harder to ignore. Treasury Secretary Scott Bessent told Bloomberg on Monday that there are already people at the Federal Reserve who could take over for Powell when his term ends in May. He also said that the administration might fill a key Fed board seat that opens in January with someone who could later take over as chair. President Donald Trump made clear in a Fox News interview over the weekend that successor will be expected to cut interest rates aggressively. Shortly after Bessent's remarks, Trump took to social media to escalate his attacks on Powell and the Fed board, accusing them of costing the country 'trillions of dollars" by keeping rates too high. Trump said the full board 'should be ashamed of themselves." The strategy reflects a push by the administration to steer monetary policy ahead of Powell's 2026 exit. Markets are already reacting: The dollar and bond yields have both fallen. At the same time, divisions are widening within the central bank. Two Trump-appointed officials, Gov. Christopher Waller and Vice Chair for Supervision Michelle Bowman, have called for rate cuts as soon as July, citing softer inflation and early signs of weakness in the job market. Other officials, including Powell, are urging patience, warning that tariff-driven price pressures, geopolitical issues, and other Federal policy complicate the path to easing. Officials held rates at 4.25%-4.50% at the Fed's June meeting and signaled that there could still be two rate cuts later this year. But the Summary of Economic Projections showed a growing divergence—eight officials foresaw two cuts this year while seven policymakers predicted there would be none. That fragmentation is playing out against a fragile economy. Thursday's jobs report for June could complicate the picture both for those policymakers who favor cutting rates, and for those who see a need to hold them steady. Economists expect payroll growth to slow and the unemployment rate to edge higher, signs that a cooling of the labor market is under way. A stronger-than-expected report could give Fed officials cover to hold rates steady for longer, while a weak result may fuel calls for earlier cuts, both from inside the Fed and the White House. Those pressures will be front and center when Powell joins ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, Bank of Japan Governor Kazuo Ueda, and Bank of Korea President Chang Yong Rhee for a policy panel at Sintra. It is scheduled to start as the stock market opens at 9:30 a.m. Eastern. Write to Nicole Goodkind at
Business Insider
3 days ago
- Business
- Business Insider
Markets are gearing up for rate cuts. Morgan Stanley thinks investors will be disappointed.
Economists at Morgan Stanley think investors are about to be disappointed in the outcomes of the next two Federal Reserve meetings. The bank said in a note on Friday that, despite a recent push from President Donald Trump and recent dovish talk from central bankers, the July and September FOMC meetings will result in no change to borrowing costs. The Fed's cautious approach this year has sparked backlash from President Trump, who has said he believes interest rates need to be cut "by at least 2-3 points." But since the last meeting, other top Fed officials have come out in support of rate cuts in July, with markets cheering the dovish talk. But Morgan Stanley says don't count on it. Their thesis centers around two key points. First, they expect that the economic data released in the short term will remain consistent with the "wait and see approach" displayed by Powell. While the Fed chairman has reaffirmed a need to further assess the impact of tariffs, he has also recently raised concerns regarding the reliability of economic data. "We expect firmer inflation prints showing more signs of a tariff push over the summer," the analysts note, adding that they also expect the coming employment report to be "relatively solid," both of which are factors unlikely to push the Fed toward rate cuts. They also highlight that despite the recent push from Fed governors Christopher Waller and Michelle Bowman, the pro-rate-cut camp is relatively small. "The Summary of Economic Projections (SEP) published last week revealed that there are seven policymakers who expect no cuts this year," the report states. "In fact, the overall tone of Fed speakers this week was much more aligned with Chair Powell's." San Francisco Fed president Mary Daly and New York Fed president John Williams are examples of Fed officials who have taken a more hawkish approach to interest rates. Both have expressed sentiments similar to Powell's. Morgan Stanley added that both Waller and Bowman's statements raised the probability of rate cuts to 20% in July and 60%-90% in September. The higher odds were cheered by markets during the week, with more dovish forecasts helping propel the S&P 500 to a new all-time high. While Morgan Stanley's analysts note uncertainty remains high and that their predictions could be wrong, they maintain that firmer inflation prints will be coming later in the summer and will likely peak in July or August. They add that their forecast is aligned with Powell's expectations, which include tariffs pushing prices higher in the coming months.
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Business Standard
20-06-2025
- Business
- Business Standard
Fed must prepare to act swiftly if economic data starts going sideways
The most powerful institution in global finance is as completely and utterly confused as the rest of us. At its policy decision Wednesday, the Federal Reserve's rate-setting committee held rates at 4.25 per cent-4.5 per cent, but Chair Jerome Powell and his colleagues essentially acknowledged that they had no idea what would come next. They couldn't precisely project where President Donald Trump's tariff rates would end up, much less how they would impact consumer inflation and the labor market. Nor could they confidently handicap jarring changes to immigration and fiscal policies and the evolving war between Israel and Iran. The big risk, of course, is that the uncertainty and indecision will make the Fed late to arrest a potential increase in unemployment. In the Summary of Economic Projections, the median member of the Federal Open Market Committee penciled in two rate cuts this year. But that 'base case' constitutes a massive oversimplification of the outlook, and some investors may be underestimating just how fat the tails are in the distribution of potential outcomes, even over just the next three or four months. Of the 19 respondents, 14 policymakers thought the risks to their inflation forecasts were weighted to the upside — the same number that thought as much about the risks to their unemployment projections. In a nutshell, they don't pretend to know what's coming, but Chair Powell thinks we may find out relatively soon. Here's Powell at his post-decision press conference (emphasis mine): We feel like we're going to learn a great deal more over the summer on tariffs. We hadn't expected them to show up much by now, and they haven't. And we will see the extent to which they do over coming months. And I think that's going to inform our thinking for one thing. In addition, we'll see how the labor market progresses. Given all of the uncertainty, Powell is right to stay in wait-and-see mode, but he can't linger there too long once the data breaks. Meanwhile, those of us on the sidelines should prepare for the policy outlook to shift quite quickly, potentially as soon as the Fed's Sept. 16-17 meeting. Maybe we really will get two rate cuts this year, but it's also perfectly plausible that we'll get 150 basis points worth — or none. It's a great environment for high-stakes gamblers — but not so much for American households. As Powell alluded to, it's largely trade policy that has put us all in this bind. In recent months, the disinflationary trends in housing and non-housing services have the core personal consumption expenditures deflator — the Fed's preferred inflation gauge — up around 2.6 per cent in May from a year earlier (this based on a Bloomberg Economics' estimate from the consumer and producer price data). That's not at all terrible, and it would probably be poised to converge on the Fed's 2 per cent target if not for Trump's extremely ill-timed and pointless trade wars. Without tariffs, the Fed would probably be cutting right now, providing ballast to a wobbly labor market and a housing market that's already seeing year-over-year price drops in some parts of the country. Unfortunately, the central bank has to play the hand it's dealt. In the immediate term, we still don't know if companies will pass on higher prices to consumers, accept narrower margins or manage their way to stable prices by laying off parts of their workforce — and maybe it will be a combination of all three. The risks to both the Fed's stable prices and maximum employment mandates are substantial, and that's causing paralysis among policymakers — a weird 'calm before the storm' effect both at the Fed and in financial markets. But at some point before autumn, we are very likely to see something shatter that calm. An alarming jump in initial jobless claims could lead to rate cuts above and beyond any policymaker's base case. A jarring CPI report or two could keep the Fed on hold for longer and prompt a selloff in bonds. And a jump in realized inflation coupled with signs of unanchored inflation expectations could even put hikes back on the table. If they're late to mitigate the damage, Fed policymakers can take cover in blaming Trump's self-sabotaging trade policy. But they must prepare to act immediately and convincingly once the signals break in a particular direction.
Mint
20-06-2025
- Business
- Mint
Equally at sea: The US Federal Reserve has no more clarity than we do
The most powerful institution in global finance is as completely and utterly confused as the rest of us. At its monetary policy decision on Wednesday, the US Federal Reserve's rate-setting committee held rates at 4.25%-4.5%, but Chair Jerome Powell and his colleagues essentially acknowledged that they had no idea what would come next. They couldn't precisely project where US President Donald Trump's tariff rates would end up, much less how they would impact consumer inflation and the labour market. Nor could they confidently handicap jarring changes to immigration and fiscal policies and the evolving war between Israel and Iran. The big risk, of course, is that the uncertainty and indecision will make the Fed late to arrest a potential increase in unemployment. Also Read: The US-China trade truce doesn't solve the Fed's headache In the Summary of Economic Projections, the median member of the Federal Open Market Committee pencilled in two rate cuts this year. But that 'base case' constitutes a massive oversimplification of the outlook, and some investors may be underestimating just how fat the tails are in the distribution of potential outcomes, even over just the next three or four months. Of the 19 respondents, 14 policymakers thought the risks to their inflation forecasts were weighted to the upside—the same number that thought as much about the risks to their unemployment projections. In a nutshell, they don't pretend to know what's coming, but Chair Powell thinks we may find out relatively soon. Here's Powell at his post-decision press conference (emphasis mine): 'We feel like we're going to learn a great deal more over the summer on tariffs. We hadn't expected them to show up much by now, and they haven't. And we will see the extent to which they do over the coming months. And I think that's going to inform our thinking for one thing. In addition, we'll see how the labour market progresses." Also Read: The Fed's 'Mission Impossible' is now 'Mission Accomplished' Given all of the uncertainty, Powell is right to stay in wait-and-see mode, but he can't linger there too long once the data breaks. Meanwhile, those of us on the sidelines should prepare for the policy outlook to shift quite quickly, potentially as soon as the Fed's 16-17 September meeting. Maybe we really will get two rate cuts this year, but it's also perfectly plausible that we'll get 150 basis points worth—or none. It's a great environment for high-stakes gamblers—but not so much for American households. As Powell alluded to, it's largely trade policy that has put us all in this bind. In recent months, the disinflationary trends in housing and non-housing services have the core personal consumption expenditures deflator—the Fed's preferred inflation gauge—up around 2.6% in May from a year earlier (this is based on a Bloomberg Economics estimate from the consumer and producer price data). That's not at all terrible, and it would probably be poised to converge on the Fed's 2% target if not for Trump's extremely ill-timed and pointless trade wars. Without tariffs, the Fed would probably be cutting right now, providing ballast to a wobbly labour market and a housing market that's already seeing year-over-year price drops in some parts of the country. Unfortunately, the central bank has to play the hand it's dealt. In the immediate term, we still don't know if companies will pass on higher prices to consumers, accept narrower margins or manage their way to stable prices by laying off parts of their workforce—and maybe it will be a combination of all three. Also Read: Barry Eichengreen: Is the US Federal Reserve's independence at threat? The risks to both the Fed's stable prices and maximum employment mandates are substantial, and that's causing paralysis among policymakers—a weird 'calm before the storm" effect both at the Fed and in financial markets. But at some point before autumn, we are very likely to see something shatter that calm. An alarming jump in initial jobless claims could lead to rate cuts above and beyond any policymaker's base case. A jarring CPI report or two could keep the Fed on hold for longer and prompt a selloff in bonds. And a jump in realized inflation coupled with signs of unanchored inflation expectations could even put hikes back on the table. If they're late to mitigate the damage, Fed policymakers can take cover in blaming Trump's self-sabotaging trade policy. But they must prepare to act immediately and convincingly once the signals break in a particular direction. ©Bloomberg The author is a columnist focused on US markets and economics.
Business Times
19-06-2025
- Business
- Business Times
The Fed is just as confused as the rest of us
THE most powerful institution in global finance is as completely and utterly confused as the rest of us. At its policy decision on Wednesday (Jun 18), the US Federal Reserve's rate-setting committee held rates at 4.25 to 4.5 per cent, but Chair Jerome Powell and his colleagues essentially acknowledged that they had no idea what would come next. They couldn't precisely project where US President Donald Trump's tariff rates would end up, much less how they would impact consumer inflation and the labour market. Nor could they confidently handicap jarring changes to immigration and fiscal policies and the evolving war between Israel and Iran. The big risk, of course, is that the uncertainty and indecision will make the Fed late to arrest a potential increase in unemployment. In the Summary of Economic Projections, the median member of the Federal Open Market Committee pencilled in two rate cuts this year. But that 'base case' constitutes a massive oversimplification of the outlook, and some investors may be underestimating just how fat the tails are in the distribution of potential outcomes, even over just the next three or four months. Of the 19 respondents, 14 policymakers thought the risks to their inflation forecasts were weighted to the upside — the same number that thought as much about the risks to their unemployment projections. In a nutshell, they don't pretend to know what's coming, but Powell thinks we may find out relatively soon. At his post-decision press conference, Powell said: 'We feel like we're going to learn a great deal more over the summer on tariffs. We hadn't expected them to show up much by now, and they haven't. And we will see the extent to which they do over coming months. And I think that's going to inform our thinking for one thing. In addition, we'll see how the labour market progresses.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Given all the uncertainty, Powell is right to stay in wait-and-see mode, but he can't linger there too long once the data breaks. Meanwhile, those of us on the sidelines should prepare for the policy outlook to shift quite quickly, potentially as soon as the Fed's Sep 16-17 meeting. Maybe we really will get two rate cuts this year, but it's also perfectly plausible that we'll get 150 basis points worth – or none. It's a great environment for high-stakes gamblers – but not so much for American households. As Powell alluded to, it's largely trade policy that has put us all in this bind. In recent months, the disinflationary trends in housing and non-housing services have the core personal consumption expenditures deflator – the Fed's preferred inflation gauge – up around 2.6 per cent in May from a year earlier. That's not at all terrible, and it would probably be poised to converge on the Fed's 2 per cent target if not for Trump's extremely ill-timed and pointless trade wars. Without tariffs, the Fed would probably be cutting right now, providing ballast to a wobbly labour market and a housing market that's already seeing year-over-year price drops in some parts of the country. Unfortunately, the central bank has to play the hand it's dealt. In the immediate term, we still don't know if companies will pass on higher prices to consumers, accept narrower margins or manage their way to stable prices by laying off parts of their workforce – and maybe it will be a combination of all three. The risks to both the Fed's stable prices and maximum employment mandates are substantial, and that's causing paralysis among policymakers – a weird 'calm before the storm' effect both at the Fed and in financial markets. But at some point before autumn, we are very likely to see something shatter that calm. An alarming jump in initial jobless claims could lead to rate cuts above and beyond any policymaker's base case. A jarring CPI report or two could keep the Fed on hold for longer and prompt a selloff in bonds. And a jump in realised inflation coupled with signs of unanchored inflation expectations could even put hikes back on the table. If they're late to mitigate the damage, Fed policymakers can take cover in blaming Trump's self-sabotaging trade policy. But they must prepare to act immediately and convincingly once the signals break in a particular direction. BLOOMBERG
