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Newsweek
11-07-2025
- Business
- Newsweek
Why Isn't the Fed Cutting Interest Rates? What To Know
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Stubborn inflation, a precarious job market and an economy that is yet to absorb the full impact of President Donald Trump's tariffs has put the Federal Reserve and its 12-person Open Market Committee in "wait and see" mode when it comes to bringing down borrowing costs. But pressure continues to mount for the Fed and Chair Jerome Powell to cut rates from the current target range of 4.25–4.50 percent. Doing so could stimulate economic growth, and would be warmly welcomed by the White House and investors. But a rate cut—certainly the sizable one that Trump is hoping for—could drive up inflation and push the central bank further from its long-term two percent target. Why Is There Pressure for a Rate Cut? "American people want to borrow money cheaply, and they should be able to do that, but unfortunately, we have interest rates that are still too high," White House Press Secretary Karoline Leavitt said last month. Criticism has been strongest from Trump himself, who has taken to calling the Fed's chair "too late Powell," as well as a "numskull," "dumb guy" and "Trump Hater." Since the beginning of his term, Trump has called for cuts to boost spending and reduce the interest paid by the U.S. on its debt, claiming that cutting "a couple of points" would save the federal government up to $900 billion a year in interest payments. Federal Reserve Chair Jerome Powell testifies before the Senate Committee on Banking, Housing, and Urban Affairs on Capitol Hill on June 25, 2025, in Washington, D.C. Federal Reserve Chair Jerome Powell testifies before the Senate Committee on Banking, Housing, and Urban Affairs on Capitol Hill on June 25, 2025, in Washington, he fail to oblige, Trump has threatened to replace Powell or install a "shadow" chair until his term ends in May next year. Those being considered for the task, according to The Washington Post, are Trump's economic adviser Kevin Hassett, Treasury Secretary Scott Bessent and Christopher Waller, a Trump appointee to the Federal Reserve Board of Governors. While Trump's desire to oust Powell would face significant hurdles for violating the central bank's long-standing independence, his calls for a cut have been joined by a handful of Republicans as well as officials from within the Fed itself. Michelle Bowman, who sits on the Board of Governors, said recently that the impact of tariffs on inflation could be less than originally anticipated, and that, "should inflation pressures remain contained, I would support lowering the policy rate as soon as our next meeting," which is scheduled for late July. Why Is the Federal Reserve Not Cutting Rates? "If you were to look just at a policy rule and the Fed's forecasts, they would justify multiple cuts this year," said Michael Pearce, deputy chief U.S. economist at Oxford Economics. "But the Fed is not on autopilot—they take into account the risks around the economy." According to Pearce, inflation and the Fed's desire to at least get on a trajectory toward its two percent target is the main reason it remains in "wait-and-see mode," given the impact of tariffs on remains "in the pipeline." While many have taken effect, reciprocal tariffs—arguably Trump's central weapon for addressing trade imbalances—have again been pushed back, to August 1. This week has also seen Trump unveil a host of new duties, but uncertainty over whether these will go into effect has again placed the Fed, and the economy at large, in wait-and-see mode. Ryan Monarch, who served as a principal economist for the International Finance Division of the Fed's Board of Governors, told Newsweek that the impacts of tariffs on inflation data "have been more muted than expected so far," but that upcoming releases ahead of the September meeting will indicate whether that was the case in June and July. Last week, Powell admitted that the central bank would have likely cut rates already were it not for tariffs and their still unrealized consequences. In their most recent meeting, members of Open Market Committee noted that clarity on the longer-term impacts of these will justify adopting a more restrictive or looser monetary policy. The labor market, preserving the health of which is among the Fed's other central priorities, could also dictate whether and when a cut arrives. Recent data has pointed to a stronger labor market, with the unemployment rate dropping and the economy adding more jobs than expected in June. However, Goldman Sachs' Chief U.S. Economist David Mericle wrote this week that, "while the labor market still looks healthy, it has become hard to find a job," echoing the fears of many that strong topline figures may be masking underlying frailty. Pearce said that, for the Fed, "the upside risks to inflation loom larger than the downside risks to the labor market, justifying them remaining on hold." "Once it becomes clear tariff-related inflation has peaked and we're back on a course toward two percent inflation, those risks could fade quickly and then the Fed would be behind the curve a bit, justifying moving a bit quicker," he added. U.S. President Donald Trump signs the One Big Beautiful Bill Act into law during on July 4, 2025, on the South Lawn of the White House in Washington, D.C. U.S. President Donald Trump signs the One Big Beautiful Bill Act into law during on July 4, 2025, on the South Lawn of the White House in Washington, tariffs, Thomas Hoenig, former president and CEO of the Federal Reserve Bank of Kansas City, told Newsweek that the potentially inflationary impacts of the budget— or "Big Beautiful Bill"—signed into law by Trump last week, could contribute to the Fed's cautious stance. In terms of the political pressure the central bank is facing, Hoenig said that this may pull in two ways. "The Fed is an institution of individuals, who are not immune from this kind of political and related pressure," he said, noting its historic fondness for ease. However, he added that the Fed needs to "not appear to be caving to political pressure." When Might the Fed Cut Rates? According to the minutes of its most recent meeting, unanimously approved by all members, the Open Market Committee remains "well positioned to wait for more clarity on the outlook for inflation and economic activity" before considering a cut. "A couple" of policymakers signaled openness to cutting interest rates at the late July meeting, with others argued the Fed can hold off until the end of the year, a split which highlights the "meaningful" upside risks to inflation, but also expectations that the economy can "remain resilient." "We've stuck to our long-held view that the Fed won't cut until December," said Pearce. "With the risks to inflation all to the upside in the second half of the year, from tariffs, fiscal policy, [to] a weaker dollar, wait-and-see is going to be the most comfortable place for Fed officials." He added that a "sudden weakening" of the labor market could "panic" officials into cutting rates sooner than they would otherwise. Monarch believes the mid-September meeting is the "likely candidate" for when the Fed reaches a consensus on cutting rates, but that a flare-up in tariff-related tensions could push the central bank back into cautious territory. He added that the size of any potential cut "depends both on how already enacted tariffs feed through into the economy, and also how much the ongoing trade war continues to escalate." While Trump has called for "at least" a three-point cut, analysts believe the Fed is only likely to reduce rates by a fraction of that this year, if at all. Goldman Sachs currently anticipates three 25-basis-point cuts in September, October and December for a terminal rate of 3-3.25 percent. Hoenig believes the odds of a single, 50-basis-point cut are low, but that "the Fed could be open to such a cut" should unemployment rise suddenly to above 4.5 percent. Inflation falling to or below the two percent target could also prompt the Committee to pull forward its schedule, as could a "a financial surprise or crisis." Pearce, too, currently expects a 25-basis-point cut, but told Newsweek the odds of a larger one have grown "because of the downside risks to the economy, and because the uncertainty is likely to prompt the Fed into waiting longer than it otherwise would." For now, caution remains the Federal Reserve's watchword, as it monitors how tariffs, inflation and the labor market interact and feed into the overall health and trajectory of the U.S. economy.
Hindustan Times
23-06-2025
- Business
- Hindustan Times
India-Russia ties in spotlight as US Senator pushes for targeting business with Moscow
India's economic ties with Russia are in the spotlight again after influential US Senator Lindsey Graham publicly pushed for a new sanctions bill that will also target countries that do business with Moscow. 'I've got 84 co-sponsors for a Russian sanctions bill that is an economic bunker buster against China, India, and Russia for Russia's brutal invasion of Ukraine. I think that bill's going to pass,' Graham said in a television interview on Sunday. US Senator Lindsey Graham, a close political ally of President Trump, has called on India to cut economic ties with Russia. (X) Graham was referring to the Sanctioning Russia Act of 2025, which was introduced in America's Senate in April this year. The bill proposes steep American tariffs on goods and services exports from countries that purchase Russian-origin oil, natural gas, uranium, and petroleum products. It also pushes for expanded sanctions against Russian businesses, government institutions, and top policymakers. India was the second-largest buyer of Russian fossil fuels in May 2025, according to the Centre for Research on Energy and Clean Air. It is estimated that India purchased fossil fuels worth 4.2 billion euros from Russia in May, with crude oil amounting to 72% of the total. The proposed bill also allows the President of the United States to issue a one-time waiver of 180 days to a particular country in case 'the President determines that such a waiver is in the national security interests of the United States'. The bill is intended to put economic pressure on Russia and force it to the negotiating table to end the Ukraine war. Graham, a close political ally of President Trump, has called on India to cut economic ties with Russia. 'To China and India: if you continue to prop up Putin's war machine, you'll have nobody to blame but yourself,' he wrote on X on June 13. So far, the Sanctioning Russia Act of 2025 has been read twice and referred to the Committee on Banking, Housing, and Urban Affairs. It will subsequently have to be passed by the Senate, the House of Representatives, and signed by Trump before it becomes law. During an interview on Sunday, Senator Graham, who is the main sponsor of the bill, pushed for the Sanctioning Russia Act to be passed quickly. Prashant Vashisht, senior vice president at ICRA, an investment information and credit ratings agency, said trying to push Russian oil out of the market could cause a price shock. 'Exports from major suppliers like Iran and Venezuela have already been restricted by sanctions. If India and other countries are forced to stop buying Russian oil, then prices would rise,' said Vashisht. 'India does face a risk of disruption to energy supplies. For example, we have been seeing increasing tensions in West Asia involving countries like Iran. While the situation is still uncertain, disruption of energy exports from major oil producers in the region due to an escalation would be disruptive. If you add to this by taking Russian oil out of the market, then that would create a challenging situation for India.'
Time of India
02-06-2025
- Politics
- Time of India
PM inaugurates first phase of Indore metro
INDORE : Prime Minister Narendra Modi on Saturday inaugurated the first phase of the Indore metro project through video link from Bhopal, marking the beginning of the first metro rail service in Madhya Pradesh. Speaking at the Women Empowerment Mega Conference in Bhopal on the occasion of the 300th birth anniversary of Devi Ahilya Bai Holkar, Modi said, "Madhya Pradesh has received its first metro today. Indore has already earned global recognition for its cleanliness. Now, the city will also be known for its metro." Commercial operations started on Saturday on the approximately 6 km 'Super Priority Corridor' between Gandhi Nagar Station and Station No 3 of the 'Super Corridor', officials said. The phase, built at a cost of Rs 1,520 crore, has five metro stations, all named in the honour of prominent women -- Devi Ahilya Bai Holkar Terminal, Maharani Lakshmi Bai Station, Rani Avanti Bai Lodhi Station, Rani Durgavati Station and Veerangana Jhalkari Bai Station. The inaugural metro ride from Devi Ahilya Bai Holkar Terminal was reserved only for women passengers including a group of sanitation workers. At the inauguration event held in Indore, Union Minister of State for Housing and Urban Affairs Tokhan Sahu said, "Prime Minister Modi has given a major gift to Indore in the form of metro rail service. Indore has become the 24th city in the country to launch metro services." Madhya Pradesh Urban Development Minister Kailash Vijayvargiya said the city has witnessed the evolution of public transport from bullock carts and horse carriages to buses. "Now, with the launch of metro rail, this is a historic moment," he said. The foundation of the Super Priority Corridor, where operations started on Saturday, was laid on September 14, 2019. A trial run on the corridor, located in a newly developed part of the city, was conducted in September 2023. While metro stations in the city are designed to accommodate six-coach trains, currently three-coach trains with a capacity to carry 980 passengers are in operation. A total of 31.32 km of metro network is planned for Indore, the commercial capital of Madhya Pradesh, with an estimated cost of Rs 7,500.8 crore. The complete network will have 28 stations, serving the city which currently has a population of over 35 lakh.
Hans India
29-05-2025
- Business
- Hans India
Rajasthan CM to hold meeting with Union Minister on urban and energy projects
Jaipur: Rajasthan Chief Minister Bhajan Lal Sharma is scheduled to hold an important meeting with Union Energy, Housing, and Urban Affairs Minister Manohar Lal Khattar on Thursday in Delhi. The meeting is expected to play a crucial role in accelerating major infrastructure and energy projects in Rajasthan. The meeting reflects the continued efforts to strengthen the vision of Prime Minister Narendra Modi's 'double engine' governance model, aimed at coordinated development through active collaboration between the Centre and states. Accompanying the Chief Minister to Delhi will be senior Rajasthan government officials, including Energy Secretary Aarti Dogra and UDH Secretary Vaibhav Galaria. The agenda for the meeting includes detailed discussions on Jaipur Metro Phase-2, E-bus network expansion, Smart battery storage projects and Urban development initiatives under the NCR Planning Board. The Chief Minister recently approved the Detailed Project Report (DPR) for Jaipur Metro Phase-2, which aims to enhance north-south connectivity across the city through modern, high-speed public transportation. The proposed 42.80 km corridor will have 36 stations, 34 elevated and 2 underground, and will stretch from Todi Mode to Prahladpura. Key areas to be covered include Jaipur International Airport's new terminal, VKI and Sitapura Industrial Areas, Vidyadhar Nagar, SMS Hospital and Stadium, Collectorate and Proposed Inter-State Bus Terminal (ISBT). The project carries an estimated cost of Rs 12,260 crore, with financing support from the Asian Development Bank (ADB) and the Asian Infrastructure Investment Bank (AIIB). Implementation will be overseen by the Rajasthan Metro Rail Corporation, a 50:50 joint venture between the central and state governments, which will also handle all future metro initiatives in the state. In addition to the metro project, the meeting will also address the rollout of an electric bus network, smart battery storage systems, and various urban development projects under the NCR Planning Board. These initiatives are expected to bolster Rajasthan's push for sustainable urban transport and improved living standards in growing urban areas.
