Evelyn Reynolds

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    Trump says he should get a say on Federal Reserve interest rate decisions

    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

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    30-Year Home Mortgage Rate Falls to 6.47%

    The key mortgage rate had its biggest one-week decline of the year, falling to the lowest level in 15 months.Mortgage rates have fallen to their lowest level in more than a year, a balm for prospective home buyers and sellers in a challenging real estate market.The average rate on 30-year mortgages, the most popular home loan in the United States, dropped to 6.47 percent this week, Freddie Mac reported on Thursday. That rate has been steadily easing since April, when it rose above 7 percent — a relief for not only buyers, but also potential sellers who have felt locked into lower rates on their existing loans and have kept their houses off the market.The decline, from 6.73 percent a week earlier, was the biggest this year.Mortgage rates stood at around 3 percent in late 2021. They began climbing when the Federal Reserve started raising its benchmark rate to combat inflation, reaching levels not seen in two decades.“The decline in mortgage rates does increase prospective home buyers’ purchasing power and should begin to pique their interest in making a move,” Sam Khater, Freddie Mac’s chief economist, said in a statement.The decline in mortgage rates could also allow existing homeowners to refinance, Mr. Khater said. The share of market mortgage applications that reflect refinancing was the highest in more than two years, according to Freddie Mac.The Fed is expected to start lowering interest rates in September after holding them at 5.3 percent for the past year. Investors increasingly anticipate that the initial cut will be half a percentage point.While the Fed’s benchmark rate and mortgage rates aren’t directly connected, a Fed rate cut could indirectly put even more downward pressure on mortgages. The 10-year U.S. Treasury yield, which underpins borrowing costs, dropped this week as panic ensued after a weaker-than-expected jobs report, contributing to the mortgage-rate movement.Sales of existing homes slipped 5.4 percent in June from a year earlier, according to the National Association of Realtors — a sign of continued sluggishness in the housing market. Homes sat on the market longer, and sellers received fewer offers.The lower mortgage rate could encourage some homeowners to get into the market, said Julia Fonseca, an assistant professor of finance at the University of Illinois at Urbana-Champaign. But as of March, nearly 60 percent of mortgage holders had rates of 4 percent or less, she added, still far from the current cost of borrowing.“It’s a step — but it’s a small step,” Ms. Fonseca said of the latest drop. “We’re moving in the direction of lowering borrowing costs and less lock-in, but we still have a ways to go if we consider how low these rates that people have locked in actually are.” More

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    Weekly jobless claims fall to 233,000, less than expected, in a positive sign for labor market

    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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    Trump Dangles New Tax Cut Proposals With Real Political Appeal

    The most recent and costliest of Mr. Trump’s ideas would end income taxes on Social Security benefits.First it was a tax cut for hotel and restaurant workers in Nevada, a swing state where Donald J. Trump proposed exempting tips from taxes. Then, in front of powerful chief executives gathered in Washington, Mr. Trump floated cutting the corporate tax rate, helping to ease concerns in the business community about his candidacy.Now Mr. Trump is calling for an end to taxing Social Security benefits, which could be a boon for retirees, one of the most politically important groups in the United States.Repeatedly during the campaign, Mr. Trump and Republicans have embraced new, sometimes novel tax cuts in an attempt to shore up support with major constituencies. In a series of social-media posts, at political rallies, and without formal policy proposals, Mr. Trump has casually suggested reducing federal revenue by trillions of dollars.While policy experts have taken issue with the ideas, Mr. Trump’s pronouncements have real political appeal, at times putting Democrats on their back foot. Nevada’s two Democratic senators and its powerful culinary union have endorsed ending taxes on tips. The AARP supports tax relief for seniors receiving Social Security benefits, though it has not taken a position on Mr. Trump’s proposal.“You do have to scratch your head a little bit when someone’s going around offering free lunches everywhere,” said Jesse Lee, a Democratic consultant and former Biden White House official. “We’re all for people having their lunch, but we have to raise taxes on the wealthy to pay for it.”The most recent and most expensive of Mr. Trump’s plans is ending income taxes on Social Security benefits, which could cost the federal government as much as $1.8 trillion in revenue over a decade, according to the Committee for a Responsible Federal Budget. That would burn through the program’s financial reserves more quickly and hasten the moment when the government is no longer able to pay out Social Security benefits in full under current law.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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    No sign of U.S. recession in freight demand, CEO of shipping giant Maersk says

    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

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    in Economy

    Apple Store Workers Get First U.S. Contract

    The agreement at a Maryland store, the first to unionize, raises wages roughly 10 percent over three years and guarantees benefits and severance pay.Workers at the first unionized Apple Store in the country ratified a labor contract with the tech giant on Tuesday, after a year and a half in which bargaining appeared to stall for long stretches and union campaigns at other stores fell short.After the union announced the outcome, Apple said it did not dispute the result and was pleased to have an agreement.The contract, covering about 85 workers at a Towson, Md., store who voted to join the International Association of Machinists and Aerospace Workers in June 2022, will provide a typical worker with a raise of roughly 10 percent over the next three years.The workers will also effectively receive the same benefits as those in nonunion stores — a point of contention since the company introduced new benefits that excluded union stores in the fall of 2022 — as well as guaranteed severance pay.“We are giving our members a voice in their futures and a strong first step toward further gains,” the store’s bargaining committee said in a statement after reaching a deal with the company. “Together, we can build on this success in store after store.”The contract talks had appeared to bog down over equal access to the benefits that other stores receive, and over a nationwide change in Apple’s scheduling and availability policy for part-time workers. The union said the policy change would have forced roughly half a dozen Towson workers to quit because of conflicts with other commitments.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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    Disney Parks Struggle, Exposing New Trouble Spot

    Companywide profit increased, the result of hit movies and streaming growth. But Disney said softening theme park demand “could impact the next few quarters.”In Disney’s seemingly never-ending game of corporate Whac-a-Mole, a new trouble spot has arisen: Americans — battered by years of high inflation — have less money to spend on amusement, imperiling growth at Disney theme parks.On Wednesday, Disney reported weaker-than-expected theme park results for the three months that ended on June 29. Revenue increased 2 percent from a year earlier, to $8.4 billion, while operating profit declined 3 percent, to $2.2 billion. Disney blamed a “moderation of consumer demand” that “exceeded our previous expectations,” along with higher costs. Disney said softening demand “could impact the next few quarters.”Disney added that it was “aggressively managing our cost base.”Theme parks have taken on much greater financial importance at Disney over the past decade. They have been the A.T.M.s that have paid for Disney’s costly expansion into streaming and picked up the slack for the company’s atrophying cable television business. Last year, Disney Experiences, a division that includes theme parks and cruise ships, contributed 70 percent of the Walt Disney Company’s operating profit, up from about 30 percent a decade ago.Robert A. Iger, Disney’s chief executive, has called theme parks and cruise ships “a key growth engine” for the company. Last year, Disney said it would spend roughly $60 billion over the next decade to expand its parks and to continue building Disney Cruise Line, double the amount of the previous decade. Josh D’Amaro, chairman of Disney Experiences, is expected to unveil an array of specific expansion projects on Saturday at a fan convention in Anaheim, Calif.But there are reasons to worry that the U.S. economy could be headed toward a recession. In addition, the global postpandemic surge in travel is largely over. Citing a “normalization” of demand, Comcast said last month that quarterly revenue at its Universal theme parks had fallen 11 percent, while pretax earnings plunged 24 percent.Mr. Iger has been trying to move Disney beyond a tumultuous period when activist investors sought to alter the company’s direction. One activist, Nelson Peltz, mounted a proxy contest for board seats this year and harshly criticized Disney’s streaming strategy, succession planning and lagging stock price. Disney fended off the attacks, but its share price has fallen 27 percent since early April.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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    To Avoid an Economic Recession, Consumer Spending Is Key

    It has powered the economic recovery from the pandemic shock. Now wallets are thinner, and some businesses are feeling the difference.The economy’s resurgence from the pandemic shock has had a singular driving force: the consumer. Flush with savings and buoyed by a sizzling labor market, Americans have spent exuberantly, on goods such as furniture and electronics and then on services including air travel and restaurant meals.How long this spending will hold up has become a crucial question.Despite contortions in world markets, many economists are cautioning that there is no reason to panic — at least not yet. In July, there was a notable slowdown in hiring and a jump in the unemployment rate to its highest level since October 2021, but consumer spending has remained relatively robust. Wages are rising, though at a slower rate, and job cuts are still low.“Overall, there isn’t evidence of a retrenchment in consumer spending,” said Gregory Daco, chief economist at the consulting firm EY-Parthenon. The strength of spending helped power greater-than-expected economic growth in the spring.That could change if the labor market’s slowdown accelerates.Already, some consumers, especially those with lower incomes, are feeling the dual pinch of higher prices and elevated interest rates that are weighing on their finances. Credit card delinquencies are rising, and household debt has swelled. Pandemic-era savings have dwindled. In June, Americans saved just 3.4 percent of their after-tax income, compared with 4.8 percent a year earlier.On calls with investors and in boardrooms around the country, corporate executives are acknowledging that customers are no longer spending as freely as they used to. And they are bracing themselves for the slide to continue.“We are seeing cautious consumers,” Brian Olsavsky, Amazon’s chief financial officer, said on a call with reporters last week. “They’re looking for deals.”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