Aurelia Butler

SINTRA, Portugal (Reuters) -The U.S. is back on a “disinflationary path,” Federal Reserve Chair Jerome Powell said on Tuesday, but policymakers need more data before cutting interest rates to verify that recent weaker inflation readings provide an accurate picture of the economy.Data for May showed the Fed’s preferred measure of inflation did not increase at all that month, while the 12-month rate of price increases has ebbed to 2.6%, still above the U.S. central bank’s 2% target but on the way down after a scare in the first months of the year.”We just want to understand that the levels that we’re seeing are a true reading on what is actually happening with underlying inflation,” Powell said at a monetary policy conference in Portugal sponsored by the European Central Bank. “I think the last reading … and the one before it to a lesser suggest that we are getting back on the disinflationary path,” Powell said. “We want to be more confident that inflation is moving sustainably down toward 2% … before we start … loosening policy.”Powell would not comment on when U.S. rate cuts might begin, but acknowledged the Fed has entered a sensitive phase in its deliberations in which the risks to its inflation and employment goals “have come back much closer to balance” – meaning neither can take full priority in setting policy.In particular, some closely watched measures of the job market suggest the U.S. economy may be at a point where further progress on inflation will involve the sort of tradeoffs with rising unemployment that the Fed has so far avoided.”You can’t know that with precision,” Powell said, “but it is understood that we have two-sided risks.”The U.S. unemployment rate has been at or below 4% for more than two years, a fact that many Fed policymakers have used to argue for patience in deciding when to cut the central bank’s benchmark policy rate.”Given the strength we see in the economy we can approach the question carefully,” Powell said, while also noting that policymakers don’t want to keep policy too tight for too long and “lose the expansion.”‘WARNING SIGNS’In separate comments to CNBC, Chicago Fed President Austan Goolsbee said he felt there were “warning signs that the real economy is weakening,” and though conditions still remain strong, the Fed needed to be careful not to keep monetary policy at such a tight level longer than needed.The unemployment rate, while low by historical standards, has risen steadily from 3.4% in April of 2023 to 4% as of May. The U.S. Labor Department will release the monthly employment data for June on Friday.The challenge for the Fed is deciding how and when to signal that a policy change is imminent, particularly given that further progress in lowering inflation is expected to be slow.Powell said on Tuesday that inflation is not likely to be back at the 2% target until late next year or in 2026. But he also anticipated it will have fallen to between 2% and 2.5% a year from now, which he said would be a “great outcome.”Goolsbee and others have argued that at some point falling inflation should trigger lower interest rates to keep the inflation-adjusted “real” cost of borrowing from increasing. U.S. short-term interest-rate futures were little changed on Tuesday, with prices continuing to imply that the Fed would deliver its first rate cut in September and a second one in December. The Fed has kept its benchmark policy interest rate steady in the 5.25%-5.5% range since last July, and still described inflation as “elevated” in its June 12 policy statement.Whether the Fed ends up cutting in September or winds up on a more delayed timetable will hinge on coming employment and inflation reports, including the monthly jobs report on Friday and the July 11 release of the consumer price index for June.The Fed will hold its next policy meeting on July 30-31.While the timing of an initial rate cut may matter little to the larger economic outcomes the Fed is seeking, policymakers are sensitive to the signal they will send by cutting rates.They want to be sure, in particular, that the first reduction in borrowing costs becomes the start of a full monetary easing cycle that brings rates steadily down to a level where the Fed feels it is neither encouraging nor discouraging businesses and households to invest and spend.For many officials that has been an argument in favor of being patient and waiting longer to make the first rate cut. More

WASHINGTON (Reuters) -The U.S. Supreme Court turned away appeals challenging a Democratic-backed ban in Illinois on assault-style rifles such as AR-15s and sidestepped several other gun-related disputes on Tuesday, though it already has agreed to hear one major firearms case in its next term concerning homemade “ghost guns.”The justices declined to hear a group of cases appealing a lower court’s rejection of the argument raised by challengers that the Illinois ban violates the U.S. Constitution’s Second Amendment right to keep and bear arms. The justices also ordered lower courts to re-examine challenges to New York state’s Democratic-backed law that bars firearms in numerous “sensitive places” and to federal laws that prohibit gun possession by people convicted of serious crimes and users of illegal drugs. In these cases, the justices directed the lower courts to reassess their various decisions in light of the Supreme Court’s June 21 ruling in a case called U.S. v. Rahimi that upheld a federal law banning domestic abusers from having guns.The Supreme Court in April agreed to decide the legality of a federal regulation aimed at reining in “ghost guns” as President Joe Biden’s administration combats the increasing use of these largely untraceable weapons in crimes nationwide. It is set to hear the case in its next term, which starts in October. The justices took up the administration’s appeal of a lower court’s decision finding that the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) exceeded its authority in issuing the 2022 rule targeting parts and kits for ghost guns, which can be assembled at home in minutes.The court in the nine-month term it has just completed issued a pair of important gun rulings. In addition to the Rahimi decision, the justices on June 14 rejected a federal ban on “bump stock” devices that enable semiautomatic weapons to fire rapidly like machine guns. ILLINOIS LAWThe Illinois law bans the sale and distribution of many kinds of high-powered semiautomatic “assault weapons,” including AK-47 and AR-15 rifles, as well as large-capacity magazines. It was passed in 2023 after a massacre at a 2022 Independence Day parade in the Chicago suburb of Highland Park that killed seven people.The Chicago-based 7th U.S. Circuit Court of Appeals ruled in 2023 that the challengers were unlikely to prevail, in part because the Second Amendment does not apply to the banned rifles and magazines, which it concluded “are much more like machine guns and military-grade weaponry than they are like the many different types of firearms that are used for individual self-defense.”The Supreme Court, in a landmark 2008 ruling expanding gun rights, noted that “M-16 rifles and the like” are not protected under the Second Amendment. The Supreme Court on May 20 also declined to hear a challenge to Maryland’s assault rifle ban.Justice Samuel Alito indicated he would have heard the Illinois cases, while fellow conservative Justice Clarence Thomas in an opinion voiced doubt about the 7th Circuit’s decision on the state’s ban. Thomas said the matter was still at a preliminary stage and the justices should review it in due course. The availability of assault rifles, which are popular among gun enthusiasts, continues to provoke fierce debate in a nation bitterly divided over how to address persistent firearms violence including frequent mass shootings.The Supreme Court, which has a 6-3 conservative majority, has taken an expansive view of Second Amendment rights. In 2022, it recognized a Second Amendment right to carry a handgun in public for self defense, striking struck down New York state gun limits. That ruling established a legal standard requiring such measures to be comparable with the nation’s “historical tradition” of firearm restrictions in order to comply with the Second Amendment.However, the Rahimi ruling clarified that modern gun restrictions need only a historical “analogue,” not a “twin,” signaling the limits of the Bruen standard. The New York law now at issue, enacted after the Bruen ruling, prohibits possessing a gun in “sensitive” locations such as courts, government buildings, schools, medical offices, public parks, theaters and New York City’s popular Times Square. The cases concerning the scope of the ban on felons owning guns included challengers convicted of nonviolent crimes, such as Bryan Range, a Pennsylvania man convicted of welfare fraud. The Biden administration appealed a judicial decision that applying the ban to Range violated his Second Amendment rights.The administration also appealed a judicial decision backing an admitted marijuana user caught with guns in his car who claimed the drug user gun ban violated his Second Amendment rights. This is the same law under which Biden’s son, Hunter Biden, was convicted last month in Delaware. More

SINTRA, Portugal (Reuters) -European Central Bank President Christine Lagarde welcomed a small fall in inflation last month as a step in the right direction, even as data on Tuesday showed prices for services continued to rise nearly twice as fast as the headline figure.The ECB began undoing its steepest ever streak of interest rate hikes last month after a major fall in inflation over the past 1-1/2 years but is in no hurry to lower borrowing costs further as progress from here appears to be slower.Inflation in the 20 countries that share the euro slowed to 2.5% in June from 2.6% a month earlier.”It’s heading in the right direction for the indicator that we use,” Lagarde told the ECB Forum on Central Banking near Sintra, Portugal, after the data was released. She said the ECB was “very advanced” on the disinflationary path and predicted that inflation would be “in the low twos” in 12 months’ time before hitting the ECB’s 2% goal in the second half of next year.Economists are scrutinizing underlying price trends to gauge whether the ECB can achieve that aim, particularly services inflation, which came in at 4.1% for the second consecutive month in June.Lagarde acknowledged that services inflation hadn’t “budged”, saying this was in large part due to wages finally catching up with prices, but argued that was partly being compensated for by lower manufactured goods price inflation. “We don’t need to have services at 2% because manufacturing goods are below 2% and at the end of the day it’s going to be a balance,” Lagarde said.Other policymakers, speaking anonymously on the sidelines of the event, said Tuesday’s inflation data was a nail in the coffin for any rate cut in July, with no policy move now in prospect until September’s meeting.Financial markets expect the ECB to cut rates on Sept. 12 and possibly again on Dec. 12. More

(Reuters) – Chicago Federal Reserve Bank President Austan Goolsbee on Tuesday said he sees some “warning signs” of weakening in the economy, adding that the U.S. central bank’s goal is to get inflation down without stressing the labor market.”I see some warning signs the real economy is weakening,” Goolsbee told CNBC in an interview on the sidelines of a European Central Bank conference in Sintra, Portugal. If inflation continues on its path of recent months, he said, he would have more confidence that it is heading toward the Fed’s 2% goal, the hurdle that the Fed has set for cutting interest rates. And as inflation drops, he added, Fed policy gets tighter by default. “You only want to stay this restrictive for as long as you have to,” he said. More

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