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    Here’s What to Watch as the Fed Meets Thursday

    Federal Reserve officials are widely expected to cut rates by a quarter point, as uncertainty about a second Trump presidency looms large.Federal Reserve officials are widely expected to cut interest rates on Thursday. The bigger focus will center on what comes next for America’s central bank.Fed officials are cutting interest rates in response to months of slowing inflation. Policymakers lowered borrowing costs for the first time in four years in September, reducing them by half a percentage point. Officials projected two more smaller rate cuts in 2024 and a string of further reductions in 2025.But a combination of stronger recent economic data and President-elect Donald J. Trump’s return to the White House could muddle that outlook.The job market, which seemed wobbly when the Fed last met in September, has since stabilized. Consumer spending has remained strong, and overall growth looks solid. Those developments suggest that rates might not need to come down as much or as quickly in order to keep the economy steady.And if Mr. Trump follows through on his campaign promises, they could make it more difficult for the Fed to continue lowering interest rates as quickly. He has pledged a combination of tax cuts, tariffs and deportations that economists and Wall Street investors think could fuel inflation.“The main takeaway is that his election injects a higher degree of uncertainty into the outlook both for growth and for inflation,” said Blerina Uruci, chief U.S. economist at T. Rowe Price.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

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    Democrats Got the Recovery They Wanted. It Wasn’t Enough.

    America’s economic growth is the envy of its global counterparts. But voters wanted more from the Biden administration — specifically, lower prices.Donald Trump has won the 2024 presidential election. Follow live updates and results.Every major U.S. ally is uncomfortably familiar with one of President Biden’s favorite charts. It is a graph of economic recoveries in the wealthy world since the end of the pandemic recession. It shows growth flatlining for the United Kingdom, Germany and Japan over the past two years — while in the United States, growth keeps rocketing up.That chart helps explain why voters have punished ruling parties in election after post-Covid election around the world. Sluggish growth, coupled with a surge in consumer prices, proved toxic for the Conservative Party in Britain. It helped hobble President Emmanuel Macron’s centrist coalition in France and contributed to Japan’s longtime leaders, the Liberal Democrats, losing their majority this fall.Germany’s governing coalition has been so weakened by recession and so flustered by disagreements over how to revive growth that it teetered this week on the brink of collapse.Advisers to Mr. Biden and to Vice President Kamala Harris, his successor candidate in the presidential election, had hoped that America’s outlier economy would rescue them from a similar fate.It did not.Ms. Harris lost to former President Donald J. Trump. Democrats will spend at least months parsing data for conclusions on what drove the defeat. Certainly, economic factors were only one contributor.But as Europe’s stumbling economies woke on Wednesday to the news of Ms. Harris’s defeat, one thing was immediately clear: America’s growth engine may be the envy of the world, but it is not the envy of the American public.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

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    Another Jolt of Uncertainty for a Global Economy Mired in It

    The U.S. presidential election result has ensured a sharp turn in economic policy expected to upend global commerce and diverge from decades of American norms.The U.S. presidential election is over. What remains is a disorienting miasma of fresh economic uncertainty.Despite reams of campaign proposals, just how President-elect Donald J. Trump’s administration will handle policy decisions that are crucial to the global economy’s path — on trade, technology, climate, industrial policy and more — is still unclear.Meanwhile, pre-election sources of instability keep spinning. War rumbles on in Ukraine. Escalating conflict in the Middle East could reignite a rise in food and energy prices. China, a vital engine of global growth, is trying to resuscitate its flattened economy. Many poor and middle-income countries face an unscalable wall of debt.Increasing bouts of extreme weather continue to destroy crops, wreck cities and swell the flow of migrants from economically devastated regions. And advances in artificial intelligence are poised to eliminate, create and reconfigure tens of millions of jobs.Then there is the hangover from the pandemic. Philip N. Jefferson, the vice chair of the Federal Reserve, has said policymakers are still trying to understand the economic aftereffects of this “once-in-a-century disturbance of worldwide consequence.”Inflation, in particular, has become harder to predict in the pandemic’s aftermath as political and military tensions have risen, he noted.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

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    The Fed is expected to cut interest rates again Thursday. Here’s everything you need to know

    The Federal Reserve likely will stick to the business at hand when it wraps up its meeting Thursday with another interest rate cut.
    Market attention probably will turn to what Chair Jerome Powell has to say about the future.
    In keeping with policymakers’ historical desire to stay above the political fray, Powell likely will avoid direct commentary about what to expect from President-elect Donald Trump.

    Federal Reserve Board Chairman Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, U.S., September 18, 2024. REUTERS/Tom Brenner
    Tom Brenner | Reuters

    The Federal Reserve likely will stick to the business at hand when it wraps up its meeting Thursday with another interest rate cut, but will have its eye on the future against a backdrop that suddenly has gotten a lot more complicated.
    Financial markets are pricing in a near-certainty that the central bank’s Federal Open Market Committee will lower its benchmark borrowing cost by a quarter percentage point as it seeks to “recalibrate” policy for an economy that is seeing the inflation rate moderate and the labor market soften.

    The focus, though, will turn to what’s ahead for Chair Jerome Powell and his Fed colleagues as they navigate a shifting economy — and the political earthquake of Donald Trump’s stunning victory in the presidential race.
    “We think Powell will refuse to give any early judgment on the implications of the election for the economy and rates, and will seek to be a source of stability and calm,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note issued before the election’s outcome was known.
    In keeping with policymakers’ historical desire to stay above the political fray, Powell “will say the Fed will take the time it needs to study the new administration’s plans” then will “refine this assessment as actual policies are developed and enacted,” Guha added.
    So while the immediate action will be to stay the course and enact the cut, which equals 25 basis points, the market’s attention likely will turn to what the committee and Powell have to say about the future. The fed funds rate, which sets what banks charge each other for overnight lending but often influences consumer debt as well, is currently targeted in a range between 4.75%-5.0%.
    Market pricing currently favors another quarter-point cut in December, followed by a January pause then multiple reductions through 2025.

    Preparing for Trump

    But if Trump’s agenda — tax cuts, higher spending and aggressive tariffs — comes to fruition, it could have a meaningful impact on a Fed trying to right-size policy after the mammoth rate hikes aimed at controlling inflation. Many economists believe another round of isolationist economic moves by Trump could reignite inflation, which held below 3% during Trump’s entire first term despite a similar recipe.
    Trump was a frequent critic of Powell and the Fed during his first term, which ran from 2017-21, and is in favor of low interest rates.
    “Everyone is on the lookout for future rate cuts and whether anything is telegraphed,” said Quincy Krosby, chief global strategist at LPL Financial. “Also, however, there’s the question of whether or not they can declare victory on inflation.”
    Any answers to those questions would be largely left to Powell’s post-meeting news conference.
    Though the committee will release its joint decision on rates, it will not provide an update on its Summary of Economic Projections, a document issued quarterly that includes consensus updates on inflation, GDP growth and unemployment, as well as the anonymous “dot plot” of individual officials’ interest rate expectations.
    Beyond the January pause, there’s considerable market uncertainty about where the Fed is heading. The SEP will be updated next in December.
    “What we’re going to hear more and more of is the terminal rate,” Krosby said. “That’s going to come back into the lexicon if yields continue to climb higher, and it’s not completely associated with growth.”

    So where’s the end?

    Traders in the fed funds futures market are betting on an aggressive pace of cuts that by the close of 2025 would take the benchmark rate to a target range of 3.75%-4.0%, or a full percentage point below the current level following September’s half percentage point cut. The Secured Overnight Financing Rate for banks is a bit more cautious, indicating a short-term rate around 4.2% at the end of next year.
    “A key question here is, what’s the end point of this rate cut cycle?” said Bill English, the Fed’s former head of monetary affairs and now a finance professor at the Yale School of Management. “Fairly soon, they’ve got to think about, where do we think this rate cut period changes with the economy looking pretty strong. They may want to take a pause fairly soon and see how things develop.”
    Powell also may be called on to address the Fed’s current moves to reduce the bond holdings on its balance sheet.
    Since commencing the effort in June 2022, the Fed has shaved nearly $2 trillion off its holdings in Treasurys and mortgage-backed securities. Fed officials have said that the balance sheet reduction can continue even while they cut rates, though Wall Street expectations are for the run-off to end as soon as early 2025.
    “They’ve been happy to just kind of leave that percolating in the background and they probably continue to do that,” English said. “But there’s going to be a lot of interest over the next few meetings. At what point do they make a further adjustment to the pace of runoffs?” More

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    Trump’s Economic Plans Could Worsen Inflation, Economists Say

    Many Americans fretted about inflation as they headed out to vote. But Donald J. Trump’s approach comes with risks of a renewed boost.Americans have been chafing against higher prices for years now, propelling unhappy voters to the polls and helping to deliver the White House to the Republican candidate, Donald J. Trump.But how Mr. Trump’s policies would help on costs is unclear. And in fact, many economists have warned that his proposals could instead make inflation worse.Inflation measures how much prices are rising over a given period, usually a year. It picked up sharply starting in 2022 and remained rapid in 2023. While prices are no longer climbing as quickly, those two years of rapid increase have left costs for many common purchases — from eggs to apartments and restaurant meals — notably more expensive than consumers remember them being as recently as 2019 or 2020.For months, that has weighed on consumer confidence and caused many voters to give the nation’s economic performance poor marks, even though the unemployment rate is very low and companies have been hiring.Voters regularly cited the economy as a top concern in polls headed into the election, and they often suggested that they thought Mr. Trump would do a better job in managing it. While the economic perception gap between Mr. Trump and Vice President Kamala Harris, the democratic candidate, closed somewhat over time, it never fully faded.While rapid inflation had been a global trend, Mr. Trump regularly pinned the blame for it on the Biden administration. And exit polls suggested that voters were indeed worried about the economy as they headed out to vote. Roughly three in four voters said that inflation had caused their families hardship over the past year.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

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    Gender? Economy? Experts weigh in on which factor is most likely to flip the presidential race

    When the votes are counted in the U.S. presidential election, will it be the gender gap, the income gap, the Latino vote or the media and marketing campaigns that turned out to be decisive?
    CNBC senior economics reporter Steve Liesman sat down with four polling experts for an in-depth look into the data to see which ones could turn the election to either Vice President Kamala Harris or former President Donald Trump. The panel included Steve Kornacki, NBC News national political correspondent; Mark Murray, NBC News senior political editor; Micah Roberts, Public Opinion Strategies partner and CNBC’s Republican pollster; and Jay Campbell, Hart Research partner and CNBC’s Democratic pollster.

    The conclusion? Yes, it is likely to be the economy. But it is also other factors such as character and turnout, which candidate represents change, who generates enthusiasm and who the persuadable voters finally decide to support that will help determine the outcome.
    See the full video above to hear the discussion.

    Don’t miss these insights from CNBC PRO More

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    U.S. Farmers Brace for New Trump Trade Wars Amid Tariff Threats

    Despite their concerns, some farm operators still support the former president and prefer his overall economic plan.To former President Donald J. Trump, “tariff” is the most beautiful word in the dictionary.But to farmers in rural America, the blanket import duties that Mr. Trump wants to enact if elected are a nightmare that they would rather not live through again.As president, Mr. Trump imposed tariffs in 2018 and 2019 on $300 billion of Chinese imports, a punishment he wielded in order to get China to negotiate a trade deal with the United States. His action triggered a trade war between Washington and Beijing, with China slapping retaliatory tariffs on American products. It also shifted more of its soybean purchases to Brazil and Argentina, hurting U.S. soybean farmers who had long relied on the Chinese market.When Mr. Trump finally announced a limited trade deal in 2019, American farmers were frazzled and subsisting on subsidies that the Trump administration had handed out to keep them afloat.Now it could happen all over again.“The prospect of additional tariffs doesn’t sound good,” said Leslie Bowman, a corn and soybean farmer from Chambersburg, Pa. “The idea of tariffs is to protect U.S. industries, but for the agricultural industry, it’s going to hurt.”The support of farmers in swing states such as Pennsylvania could be pivotal in determining the outcome of Tuesday’s election. Mr. Trump remains popular in rural America, and voters such as Mr. Bowman say they are weighing a variety of factors as they consider whom to vote for.Mr. Trump has said that if he wins the election he will put tariffs as high as 50 percent on imports from around the world. Tariffs on Chinese imports could be even higher, and some foreign products would face levies upward of 200 percent. Economists have warned that such tariffs could reignite inflation, slow economic growth and harm the industries that Mr. Trump says he wants to help.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

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    Top Wall Street execs are getting skeptical on the Fed’s easing path

    America’s consumer price index, a key inflation gauge, was up 2.4% in September compared to the same period in 2023, according to the U.S. Bureau of Labor Statistics.
    On Friday, new data showed U.S. job creation in October slowed to its weakest pace since late 2020.
    Markets largely ignored the bad news, as the nonfarm payrolls report flagged acute climate and labor disruptions.

    A trader works as a screen displays the Fed rate announcement, on the floor of the New York Stock Exchange on June 12, 2024.
    Brendan McDermid | Reuters

    RIYADH, Saudi Arabia — Major Wall Street CEOs see ongoing inflation pressures in the U.S. economy and aren’t convinced that the Federal Reserve will continue its rate-easing path with a further two reductions this year.
    The Fed cut its benchmark rate by 50 basis points in September, indicating a turning point in its management of the U.S. economy and in its outlook for inflation. In late-September reports, strategists at J.P. Morgan and Fitch Ratings had predicted two additional interest rate trims by the end of 2024 and expect such reductions to continue into 2025.

    The CME Group’s FedWatch tool puts the probability of a 25-basis-point cut at this week’s November meeting at 98%. The current probability of the benchmark rate being taken down by another 25 basis points at the December meeting is 78%.
    But some CEOs appear skeptical. Speaking last week at Saudi Arabia’s showcase economic conference, the Future Investment Initiative, they see more inflation on the horizon for the U.S., as the nation’s economic activity and both presidential candidates’ policies involve developments that will potentially be inflationary and stimulatory — such as public spending, the onshoring of manufacturing, and tariffs.

    A group of CEOs speaking at an FII panel moderated by CNBC’s Sara Eisen — which included Wall Street hegemons such as the bosses of Goldman Sachs, Carlyle, Morgan Stanley, Standard Chartered and State Street — were asked to raise their hand if they thought two additional rate cuts would be implemented by the Fed this year.
    No one put their hand up.
    “I think inflation is stickier, honestly, you look at the kind of jobs report and the wage reports in the U.S., I think it’s going to be hard for inflation to come down to the 2% level,” Jenny Johnson, Franklin Templeton president and CEO, told CNBC in an interview on Wednesday, saying she thinks only one further interest rate cut will take place this year.

    “Remember a year ago, we were all here talking about recession? Was there going to be [one]? Nobody’s talking about recession anymore,” she said.
    Larry Fink, whose mammoth BlackRock fund oversees over $10 trillion in assets, also sees one rate reduction before the end of 2024.
    “I think it’s fair to say we’re going to have at least a 25 [basis-point cut], but, that being said, I do believe we have greater embedded inflation in the world than we’ve ever seen,” Fink said at another FII panel last week.
    “We have government and policy that is much more inflationary. Immigration — our policies of onshoring, all of this — no one is asking the question ‘at what cost.’ Historically we were, I would say, a more consumer-driven economy, the cheapest products were the best and the most progressive way of politicking,” he noted. 

    America’s consumer price index, a key inflation gauge, was up 2.4% in September compared to the same period in 2023, according to the U.S. Bureau of Labor Statistics. That figure is a tick down from the 2.5% print of August, implying a slowdown in price growth. The September reading was also the smallest annual one since February 2021.
    On Friday, new data showed U.S. job creation in October slowed to its weakest pace since late 2020. Markets largely ignored the bad news, as the nonfarm payrolls report flagged acute climate and labor disruptions.
    Goldman Sachs CEO David Solomon said inflation will more embedded into the global economy than what market participants are currently predicting, meaning price rises could prove to be stickier than the consensus.
    “That doesn’t mean that it’s going to rear its head in a particularly ugly way, but I do think there’s the potential, depending on policy actions that are taken, that it can be more of a headwind than the current market consensus,” he said.
    Morgan Stanley CEO Ted Pick went even further, declaring last Tuesday that the days of easy money and zero-interest rates are firmly in the past.
    “The end of financial repression, of zero interest rates and zero inflation, that era is over. Interest rates will be higher, will be challenged around the world. And the end of ‘the end of history’ — geopolitics are back and will be part of the challenge for decades to come,” Pick said, referencing the famous 1992 Francis Fukuyama book, “The End of History and the Last Man,” which argued that conflicts between nations and ideologies were a thing of the past with the ending of the Cold War.

    Speaking on Sara Eisen’s panel Tuesday, Apollo Global CEO Marc Rowan even questioned why the Fed was cutting rates at a time when so much fiscal stimulus had propped up a healthy-looking U.S. economy. He noted the U.S. Inflation Reduction Act and the CHIPS and Science Act and an increase in defense production.
    “We’re all talking about, in the U.S., of shades of good. We really are talking about shades of good. And to come back to your point on rates, we massively increased rates, and yet, [the] stock market [is] at a record high, no unemployment, capital market issuance at will, and we’re stimulating the economy?,” he said.
    “I’m trying to remember why we’re cutting rates, other than to try and equalize the bottom quartile,” he later added. More