Evelyn Reynolds

The sudden popularity of exempting tips from taxes is a reminder of the improvisational nature of economic policymaking under Donald Trump.In Donald J. Trump’s telling, the idea was born over dinner at his Las Vegas hotel, where the waitress serving his table complained about the burden of paying taxes on her tips.“I was actually surprised to hear it,” Mr. Trump said last month at a rally in Virginia, adding that he quickly decided to address the waitress’s problem with a new campaign pledge: “No taxes on tips!”The proposal has rapidly become more than just a rally talking point. The Republican Party has officially embraced it in its platform, and House Speaker Mike Johnson, Republican of Louisiana, has said he would “pass it as soon as we can.” Some Democrats are also warming to making tipped income tax-free, with the two senators representing Nevada, a swing state with large restaurant and casino industries, endorsing it.The sudden popularity of exempting tips from taxes is a reminder of the improvisational nature of economic policymaking under Mr. Trump. Several economists involved in advising the Trump campaign said they hadn’t heard of the idea until Mr. Trump announced it publicly. But Republicans now see it as a key way to appeal to working-class Americans during the campaign against President Biden.Mr. Trump has encouraged his supporters to leave a note on restaurant tabs telling service staff that a Trump victory in November means no taxes on tips. Roughly four million Americans work in jobs where tips are common, according to an estimate by the Budget Lab at Yale.“It’s not like a gang of economists sitting around a table came up with that,” Stephen Moore, a Trump economic adviser, said. “I thought, ‘I don’t know if he’s being serious or not’, but as a political matter it’s a home run.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

U.K. inflation held steady at the Bank of England’s 2% target in June, Official National Statistics data showed Wednesday.
The headline reading came in above analyst expectations at 1.9%, according to economists polled by Reuters.
Services and core inflation were both in line with the previous month.

Alexander Spatari | Moment | Getty Images

U.K. inflation held steady at the Bank of England’s 2% target in June, Official National Statistics data showed Wednesday.
The headline reading came in above analyst expectations at 1.9%, according to economists polled by Reuters, and was in line with the previous 2% reading in May.

Sterling rose slightly shortly after the release, trading at $1.2977 by 7:21 a.m. London time.
Services inflation — which is closely watched by the BOE, given its dominance within the U.K. economy and its reflection of domestically-generated price rises — remained at 5.7% in June.
Core inflation, excluding energy, food, alcohol and tobacco, was 3.5%, also on par with the 3.5% recorded in May.

Higher restaurant and hotel prices were the largest contributors to upward pressure, while clothing and footwear costs posted the biggest declines, the ONS said.
Consumers are increasing their spending on leisure activities over the summer months, including on cultural experiences and concerts as high-profile artists such as Taylor Swift, Bruce Springsteen, Pink and Sting tour the country.

Bank of England rate cut in focus

Investors have been eyeing a potential August interest rate cut, as headline inflation showed signs of sustained easing. Market expectations of such a trim waned just after the release of the latest print.
Jane Foley, head of FX strategy at Rabobank, said that the stubbornness of services inflation could invite caution from BOE policymakers ahead of their meeting next month.
“It’s really not a done deal for August,” she told CNBC’s “Squawk Box Europe” on Wednesday.
“I think many of the members of the policy committee, and a lot of economists will be looking at that services sector inflation and worrying a bit,” she added.
Jonathan Haskel, a member of the BOE’s Monetary Policy Committee, last week said that he thought rates should remain on hold due to continued pressures in the labor market.
BOE chief economist Huw Pill added later in the week that the timing of a rate cut remained an “open question” due to “uncomfortable strength” in wage growth.
The BOE’s main interest rate has stayed at a 16-year high of 5.25% since August 2023, back when inflation was 7.9%.
Wednesday’s reading is the first since the U.K.’s general election on July 4, but does not reflect the change in government. The U.K.’s new chief secretary to the Treasury, Darren Jones, said in a statement that prices remain too high.
“We face the legacy of fourteen years of chaos and economic irresponsibility. That is why this Government is taking the tough decisions now to fix the foundations so we can rebuild Britain and make every part of Britain better off,” he said Wednesday. More

Some Republicans want to use revenue collected from higher duties on foreign goods to finance tax cuts. Economists say such a shift could widen the gap between the rich and the poor.When former President Donald J. Trump met with House Republicans last month, he touched on a mix of policies core to his economic agenda: cutting income taxes while also significantly raising tariffs on foreign goods.Mr. Trump told Republicans he would “love to raise tariffs” and cut income taxes on Americans, potentially to zero, said Representative Marjorie Taylor Greene, Republican of Georgia.“Everyone was clapping in the room,” Ms. Greene said. “He said, ‘If you guys are going to go vote on something today, vote to lower taxes on Americans.’”Tariffs and tax cuts were core to Mr. Trump’s economic thinking while he was in the White House. If he wins in November, he is promising a much more aggressive approach, including potentially a blanket 10 percent tariff on nearly all imports and a 60 percent tax on Chinese goods.Mr. Trump and his supporters say that mixing tariffs with tax cuts will revitalize American businesses and manufacturing, boosting jobs and benefiting working-class Americans. And they see tariffs on foreign products as a lucrative source of revenue, one that could be used to offset a drop in tax receipts.Some economists have a different view, saying that cutting taxes while raising tariffs could have harmful consequences by widening the gap between the rich and the poor. Companies often pass on the cost of tariffs to consumers in the form of higher prices. As a result, economists say, lower-income households would be hit hardest by tariffs since they spend a greater share of their income on goods. Income taxes tend to fall more heavily on wealthier Americans since many low-income workers do not make enough money to owe federal income taxes.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

“Türkiye stands out with a staggering growth of over 157% in wealth per adult between 2022 and 2023, leaving all other nations far behind,” Swiss bank UBS wrote in its Global Wealth Report 2024.
The next-highest countries in terms of average wealth growth per adult were Qatar at 20% and South Africa with about 16%. In the U.S., average wealth per adult grew just 2.5%.
Inflation in Turkey sits at just over 71%, an eye-watering figure for its population of 85 million people, many of whom have seen a dramatic drop in their purchasing power over the last several years.

Golden Horn and Bosphorus at sunset, Istanbul, Turkey
Matteo Colombo | Digitalvision | Getty Images

Turkey came out miles ahead of the rest of the world in an annual global wealth ranking — in a result that may come as surprising, given the country’s high levels of inflation.
“Türkiye stands out with a staggering growth of over 157% in wealth per adult between 2022 and 2023, leaving all other nations far behind,” Swiss bank UBS wrote in its Global Wealth Report 2024, using the local spelling for the country’s name.

The next-highest countries in terms of average wealth growth per adult were Russia and Qatar with nearly 20% and South Africa with just over 16%. In the U.S., average wealth per adult grew by nearly 2.5%.
Inflation in Turkey sits at nearly 72%, an eye-watering figure for the country’s 85 million people, many of whom have seen a dramatic drop in their purchasing power over the last several years. In the last five years, the Turkish lira has lost nearly 83% of its value against the dollar, and the currency trades at 33 lira to the greenback as of 09:07 a.m. London time on Wednesday.
But for Turks who own assets like homes, wealth has grown, as inflation pushes up the costs of those holdings.
The UBS report defines net worth or “wealth” as “the value of financial assets plus real assets (principally housing) owned by households, minus their debts.” In a call with journalists, some of the report’s authors broke down the relationship between inflation and wealth rises in Turkey.
“In certain ways, the high pace of inflation also helps explain why wealth has risen much much more in local currency terms, at least [more] than in other countries because it’s worth keeping in mind that wealth is measured in nominal terms,” Samuel Adams economist at UBS Global Wealth Management, told CNBC.

“If inflation is very high, what tends to happen is that if you have a real asset like housing, the house prices tend to rise in line with inflation, if not even faster,” he said. “So those people with have homeownership, or who have equities, which also tend to perform fairly well in those environments, they tend to see their wealth accumulate a bit faster.
“Of course, it doesn’t mean that everybody benefits to the same extent,” Adams added. “If you’re not in those assets, if your wage rises don’t keep pace with inflation, then, of course, it will be fairly negatively affected.”
The report also noted the “currency effect”, which is what changes wealth growth the most — local currency growth figures for wealth are often significantly different from those in dollar terms.
“Türkiye’s already exceptional growth of over 63% in USD … more than doubles to nearly 158% in Turkish lira,” it said. Other examples in the report included Japan, which in dollar terms has seen less than 2% average growth in wealth per adult in U.S. dollar terms between 2022-23, but in local currency that growth was 9%.

Cityscape at sunset on March 4, 2024 in Istanbul, Turkey.
Dia Images | Getty Images News | Getty Images

Evaluating countries’ average wealth growth between the years of 2008 and 2023, “the most dramatic evolution has taken place in Türkiye,” UBS wrote, “where average wealth per adult in this period has shot up by 1708% in local currency.”
UBS Global Wealth Management’s Chief Economist Paul Donovan pointed out that being asset-rich does not necessarily mean being cash-rich — in Turkey, this could actually be the opposite.
“In terms of living standards rather than wealth, it’s also important to remember that if you own a house, the value of your house has gone up, but your real wage may be negative at the same time. So you can be … asset rich and cash poor,” Donovan said last week.
“That’s certainly a possibility, where a lot of the stresses that have arisen in the Turkish economy over the last few years have come about because of negative real income,” he added, “not necessarily what’s happening on the asset side.” More

The Republican presidential candidate told Bloomberg Businessweek he would allow the Fed chair to finish his term if he wins in November.
Federal Reserve Chair Jerome Powell, who took the helm at the central bank in 2018, has had a strained relationship with former President Donald Trump.
In 2019, Trump had called for lower interest rates, arguing the rate policy at the time put the U.S. at a disadvantage against other nations. He took to social media to criticize the central bank leader.
In February of this year, Trump told Fox Business that he wouldn’t reappoint Powell.

Republican presidential nominee and former U.S. President Donald Trump raises his fist during Day 1 of the Republican National Convention (RNC) at the Fiserv Forum in Milwaukee, Wisconsin, U.S., July 15, 2024. 
Elizabeth Frantz | Reuters

Donald Trump will allow Federal Reserve Chair Jerome Powell to complete his term at the central bank if he won the November election, the Republican presidential candidate told Bloomberg Businessweek in an interview.
“I would let him serve it out, especially if I thought he was doing the right thing,” Trump told Bloomberg Businessweek. President Joe Biden nominated Powell to serve a second four-year term as Fed chief in May 2022.

Powell is also a Fed governor, a position he will hold until Jan. 31, 2028.
These comments mark an about-face from the former president, who has had a strained relationship with the central bank leader.
Powell took the helm as Fed chief in February 2018, and he had faced criticism from then-President Trump over the years on interest rate policy.
Back in 2019, Trump criticized the central bank and its leader — even as policymakers lowered rates three times that year, eventually to a target range of 1.5% to 1.75% — arguing the U.S. was at an economic disadvantage against other countries with lower rates.
As recently as February of this year, Trump told Fox Business that he would not reappoint Powell to lead the Fed. “I think he’s political,” he told journalist Maria Bartiromo. “I think he’s going to do something to probably help the Democrats, I think, if he lowers interest rates.”
Read the Bloomberg Businessweek article here.

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Both candidates on the Republican ticket have argued that the U.S. currency should be weaker to support American exports.Donald J. Trump’s selection of Ohio Senator J.D. Vance to be his vice-presidential nominee pairs him with a kindred spirit on trade, taxes and a tough stance on China. But it is their shared affinity for a weak dollar that could have the most sweeping implications for the United States and the global economy.In most cases, Mr. Trump likes his policies to be “strong,” but when it comes to the value of the dollar, he has long expressed a different view. Its strength, he has argued, has made it harder for American manufacturers to sell their products abroad to buyers that use weaker currencies. That’s because their money is worth so much less than the dollars that they need to make those purchases.“As your president, one would think that I would be thrilled with our very strong dollar,” Mr. Trump said in 2019, explaining that U.S. companies like Caterpillar and Boeing were struggling to compete. “I am not!”The dollar has been the world’s dominant currency since World War II, and central banks hold about 60 percent of their foreign exchange reserves in dollars, according to the Congressional Research Service.The United States has maintained a “strong dollar” policy since the 1990s, when Robert E. Rubin, the Treasury secretary at the time, declared that he did not view it as a threat to the ability of American business to compete abroad. The United States avoids taking measures to steer the strength of the dollar, and Treasury secretaries tend to argue that currency values should be determined by market forces. When countries, such as China, have acted to weaken their currencies, the U.S. has shamed them as currency manipulators.It is not clear how Mr. Trump would go about weakening the dollar. His Treasury Department could try to sell dollars to buy foreign currency or try to persuade the Federal Reserve to just print more dollars.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

In its latest World Economic Outlook update, the International Monetary Fund said “the momentum on global disinflation is slowing, signaling bumps along the path.”
The rise in sequential inflation in the U.S. earlier in 2024 has put it behind other major economies in the quantitative easing path, the report said. 

The International Monetary Fund warned Tuesday that upside risks to inflation have increased, calling into question the prospect of multiple Federal Reserve interest rate cuts this year. 
In its latest World Economic Outlook update, the IMF said “the momentum on global disinflation is slowing, signaling bumps along the path.” The rise in sequential inflation in the U.S. earlier in 2024 has put it behind other major economies in the quantitative easing path, the report said. 

The report comes as traders ramp up bets for a Fed rate cut in September. Per the CME Group’s FedWatch tool, Wall Street has priced in a 100% chance of lower rates at the Sept. 18 meeting. Traders also expect another rate decrease in November.
However, IMF chief economist Pierre-Olivier Gourinchas told CNBC’s “Squawk on the Street” on Tuesday that one rate cut from the Fed is most appropriate this year, highlighting still-stubborn services and wage inflation as complications to the path to lower inflation. 
Gourinchas said that while the robust wages and service inflation are “not necessarily a source of worry,” they are points of concern for the U.S. economy. His comments came after the U.S. Labor Department said the consumer price index grew last month at its slowest year-over-year pace since April 2021.
Despite the encouraging CPI report, Gourinchas stated the uptick in inflation earlier in the year indicates that the path toward lower inflation and rate cuts “could take a little bit longer than maybe the markets are expecting.” 
“We’re more in the camp that there could be some cuts in the latter part of the year but maybe just one, or 2024 and maybe the rest of 2025,” Gourinchas said. 

Across advanced economies globally, the IMF forecasts the rate of disinflation to slow in 2024 and 2025 due to broadly high service inflation and commodity prices. 
Concerning the U.S. economy, the financial institution lowered its growth outlook by 0.1 percentage point to 2.6% in 2024 on cooling consumption and slower-than-expected growth at the start of the year.

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For the last couple of years, the tech community has tested no-strings-attached payments of $500 or $1,000 a month to those in dire need. Some of these experiments have happened in the heart of Silicon Valley, where a one-bedroom apartment rents for $3,000 a month and a modest house is often an unaffordable luxury.Silicon Valley’s backing of these efforts has propelled the idea of a guaranteed income — also known as cash transfers, unconditional cash and, in its most utopian form, universal basic income — into the mainstream. But a bipartisan political consensus around the movement is fracturing even though the data seems to show that the programs are effective.In recent months, the Texas attorney general went to court to prevent public funds from being used in a basic income program in Houston. Republicans in Iowa, Idaho and South Dakota banned similar programs. A ban in Arizona was vetoed by the governor.The movement has scored a few victories, too. A proposal for a statewide basic income program is likely to be on the ballot in Oregon this fall. The measure would give $750 to each state resident annually, funded by a 3 percent tax on corporations with revenue over $25 million.It is a critical moment for guaranteed income, which has been touted by the OpenAI chief executive Sam Altman, the Tesla chief executive Elon Musk, the Twitter co-founder Jack Dorsey, the Salesforce chief executive Marc Benioff and others.On Monday, the results from the biggest direct income program to date, the Unconditional Income Study, will be released. The study was the idea of Mr. Altman, who has emerged as the chief cheerleader of a boom in artificial intelligence that, he says, will sweep away all that came before it. Anyone whose job can be done by A.I. software might need a guaranteed income by and by.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More