Evelyn Reynolds

Wharton’s Jeremey Siegel no longer thinks it’s vital for an emergency interest rate reduction, but still wants policymakers to cut quickly and aggressively.
“Would it be bad? No. But would it be necessary? No, not at this time,” he said.

Jeremy Siegel
Scott Mlyn | CNBC

Wharton School Professor Jeremy Siegel no longer thinks it’s vital for the Federal Reserve to implement an emergency interest rate reduction, but still wants policymakers to cut quickly and aggressively.
Siegel caused a stir Monday when he told CNBC that Fed Chair Jerome Powell and his colleagues should institute an emergency 0.75 percentage point decrease now and follow it up with another one in September.

Those comments came with markets cratering amid fears over a recession and concern that the Fed is being too slow-footed in easing policy now that the inflation rate has decelerated. However, positive data since then and a ferocious market rally Thursday apparently have eased the urgency.
“I no longer certainly think it’s necessary. But I want [Powell] to move down to 4% as fast as possible,” Siegel said during a phone interview. “Would it be bad? No. But would it be necessary? No, not at this time.”
The Fed on July 31 voted to hold its key interest rate between 5.25%-5.5%, a decision that quickly came under criticism when a report the next day on weekly jobless claims showed a spike and a manufacturing gauge put the sector further into contraction.
However, data Thursday showed claims moved lower from the previous week, and a service sector reading earlier in the week also was better than expected.
“Obviously, I wanted to shake things up,” Siegel said of his call for an intermeeting move. “There’s no way he’s going to do that without things falling apart. I don’t think things are falling apart. But by all criteria and all monetary rules … they should be under 4%.”

Markets pricing indicates the Fed will cut by at least a quarter percentage point in September and likely by a full point by the end of 2024. However, those expectations have been volatile as investors watch how quickly the Fed thinks it should ease policy.
An emergency cut under these circumstances is “just not the way Jay Powell does things,” Siegel said. “But Jay Powell has done things way too slow, certainly on the way up, and I just want to make sure he doesn’t make the same mistakes on the way down.” More

Republican presidential nominee Donald Trump on Thursday said that he should have a voice when the Federal Reserve makes its decisions on interest rates.
While in office from 2017-21, Trump was a fierce critic of Chair Jerome Powell, whom Trump appointed in 2018.

Republican presidential candidate former President Donald Trump speaks during a press conference at his Mar-a-Lago estate on August 08, 2024, in Palm Beach, Florida. 
Joe Raedle | Getty Images

Republican presidential nominee Donald Trump on Thursday said that he should have a voice when the Federal Reserve makes its decisions on interest rates.
“I feel the president should have at least (a) say in there,” Trump said during a news conference at his Mar-a-Lago residence in Florida. “Yeah, I feel that strongly. I think that in my case, I made a lot of money, I was very successful, and I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman.”

The comments seem to reinforce reporting earlier this year, from the Wall Street Journal and elsewhere, that advisors close to the former president are looking at a host of changes for the central bank should he be elected in November.
Among the ideas being floated are forcing the Fed to consult with the president when making rate decisions. Others include making the central bank run regulatory changes past the White House and using the Treasury Department as an overseer for the Fed’s actions.
While in office from 2017 to 2021, President Trump was a fierce critic of Chair Jerome Powell, whom Trump appointed in 2018.
“Well, look, the Federal Reserve is a very interesting thing. It’s sort of gotten it wrong a lot, and he’s tending to be a little bit later on things,” Trump said of Powell and his colleagues. Powell “gets a little bit too early and a little bit too late. And, you know, that’s very largely a, it’s a gut feeling. I believe it’s really a gut feeling. And I used to have it out with him.”
Fed officials often stress the importance of the central bank’s independence from political influence, and Powell has said repeatedly that criticisms from Trump or other officials don’t weigh into monetary policy decisions.

Trump insisted that he and Powell “get along fine” though part of the changes his team is looking at include dismissing Powell or at least not reappointing him when his term as chair expires in 2026.
The Fed has undergone criticism for waiting too long to raise rates when inflation started to spike in 2021, and now faces the same scrutiny for not reducing even though inflation rates have moved steadily lower.
Sen. Elizabeth Warren (D-Massachusetts), for instance, has repeatedly called on the Fed to lower rates.
The Fed hiked benchmark interest rates 5.25 percentage points from March 2022-July 2023 in an effort to bring down inflation. Markets widely expect the central bank to start reducing rates in September. Trump generally favors lower interest rates and criticized the Fed frequently for raising in 2018. More

Initial jobless claims totaled a seasonally adjusted 233,000 for the week, a decline of 17,000 and lower than the Dow Jones estimate for 240,000.
Stock market futures, which had been negative earlier, turned sharply positive after the release

An employment sign is seen on the window of a department store on August 02, 2024 in New York City. 
Michael M. Santiago | Getty Images News | Getty Images

Initial claims for unemployment insurance totaled less than expected last week, countering other signs that the labor market is weakening.
First-time filings for jobless benefits came to a seasonally adjusted 233,000 for the week, a decline of 17,000 from the previous week’s upwardly revised level and lower than the Dow Jones estimate for 240,000, the Labor Department said Thursday.

The report comes with Wall Street on edge amid signs that job growth is slowing and even signaling a potential recession on the horizon. Stock market futures, which had been negative earlier, turned sharply positive following the 8:30 a.m. ET release while Treasury yields held higher.
While the top-line number helped allay some fears, the level of continuing claims, which run a week behind, edged up to 1.875 million, the highest since Nov. 27, 2021.
Jobless claims have been trending higher for much of the year, though still remain relatively tame. The recent uptick has been attributed to disruptions from Hurricane Beryl as well as summer shutdowns at auto plants.
The four-week average rose to 240,750, the highest in nearly a year. In the previous week, claims had jumped by 14,000, adding to worries that layoffs are on the rise.
“Claims pulled back in the latest week, adding to evidence that weather and seasonal auto plant shutdowns were responsible for the previous week’s dramatic rise,” said Robert Frick, corporate economist at Navy Federal Credit Union. “If you’re looking for additional weakness in the labor market, you’ll need to find it somewhere else.”

Concerns escalated over the state of the labor market following last Friday’s nonfarm payrolls report, which showed an increase of just 114,000 in July. At the same time, the unemployment rate rose to 4.3%, triggering the so-called Sahm Rule that gauges recessions by measuring changes in the jobless rate.
Markets have been highly volatile since then, with a huge three-day sell-off starting last Thursday that ignited worries of deeper troubles in the U.S. economy.
In turn, traders expect the Federal Reserve to begin cutting interest rates in September, with some even calling for an emergency intrameeting reduction to counter the recent weakness. Markets are assigning a strong probability of a half percentage point reduction for the first move and a full percentage point cut by the end of the year, according to the CME Group’s FedWatch tracker of fed funds futures contracts.

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U.S. inventories “are not at a level that is worrisome or that seems to indicate a significant slowdown right in the offing,” Maersk CEO Vincent Clerc told CNBC, as fears of a recession in the world’s largest economy mount.
Chinese exports have helped drive overall container demand in the most recent quarter, Clerc said.
Maersk on Wednesday reported a decline in year-on-year underlying profit to $623 million from $1.346 billion in the second quarter, and a dip in revenue to $12.77 billion from $12.99 billion.

Shipping giant Maersk, considered a barometer for global trade, is not seeing signs of a U.S. recession as freight demand remains robust, the company’s chief executive said Wednesday.
“We’ve seen in the last couple of years, actually, [the shipping container] market remaining surprisingly resilient to all the fear of recessions that there has been,” Vincent Clerc told CNBC’s “Squawk Box Europe” Wednesday, adding that container demand was generally a good indicator of underlying macroeconomic strength.

U.S. inventories — goods being stored before delivery or processing — “are higher than they were at the beginning of the year, but they are not at a level that is worrisome or that seems to indicate a significant slowdown right in the offing,” Clerc said, despite noting some unpredictability in numbers for companies replenishing stocks.
“We look also at purchase orders from a lot of retailers and consumer brands that need to import into the U.S. for the coming month of demand, and it seems still to be pretty robust … at least the data and the indicators that we’re having seem to point toward still some good level of confidence that the current consumption levels in the U.S. will continue.”
The last week has seen a sudden escalation in worries about a recession in the world’s biggest economy, the U.S., following a set of weaker-than-expected jobs data which has divided economists and market participants.
U.S. retail trade inventories — a measure of unwanted build — in May were up 5.33% from a year ago at $793.86 billion, according to the most recent release from the U.S. Census Bureau.
A report released by leasing platform Container xChange on Wednesday said indicators suggest inventories are higher than demand, meaning a less “prosperous time” in the coming months for container traders, the logistics market and retailers who stockpiled.

Maersk’s Clerc said the company had been surprised by the resilience of container volumes across the last few years, and said it expected that to continue in the coming quarters — with no indication the global economy is heading toward recessionary territory.
Chinese exports have been the engine behind strong container volumes as the global share of containers originating in or heading for China has increased, he continued.
In 2022, the Danish firm had a markedly more gloomy outlook, warning of a drag on demand from inflation, the threat of a global recession, the European energy crisis and the war in Ukraine.
A combination of those factors drove down freight rates in 2023, sending Maersk’s profits tumbling.
That trend was partially reversed this year amid soaring geopolitical tensions in the Red Sea, which led shipping firms to divert trade routes around the southern coast of Africa — extending journey times and taking capacity out of the global system.

Red Sea to cause further inflation

Clerc told CNBC Wednesday he expected Red Sea diversions to continue at least until the end of the year.
“That, of course, requires more capacity, more ships in order to move global trade around the world, and that has created some shortages here in the second quarter and in the third quarter that we’re dealing with at the moment,” he said.
“That means, in the short term, higher cost, and we have had to take on significant cost as a result of this, both in terms of having needing more ships and needing also more containers to do the job that is expected of us.”
If the situation persists, Maersk will see “significant inflation” in its cost base which it will need to pass on to customers, he continued, with Asia to Europe or U.S. east coast routes costing between 20% and 30% more.
The impact of capacity constraints in the short term has been positive for the Danish shipping giant’s margins and led to three profit upgrades in recent months, Clerc added.
Maersk on Wednesday reported a decline in year-on-year underlying profit to $623 million from $1.346 billion in the second quarter, and a dip in revenue to $12.77 billion from $12.99 billion.
While weaker on an annual basis, the company said ocean freight margins were “significantly better” than in the first quarter of 2024 and fourth quarter of 2023, with an earnings before interest and taxes margin of 5.6% versus -2% and -12.8% in those prior periods.
Maersk shares were 1.6% lower at 12:45 p.m. in London on Wednesday. More