Economy

The monthly consumer confidence index published by market research firm GfK fell in January to -22 from -17 in December, its lowest reading since December 2023. A Reuters poll of economists had pointed to smaller decline to -18.The GfK survey is not adjusted for seasonal variations and has shown a tendency in recent years to fall in January, but the latest drop was larger than usual.All five of the survey’s components declined, echoing a run of downbeat economic signals since finance minister Rachel Reeves’ Oct. 30 budget, which raised taxes on businesses to help increase funding for investment and public services.”These figures underline that consumers are losing confidence in the UK’s economic prospects,” said Neil Bellamy, consumer insights director at NIQ GfK.He pointed to a big rise in GfK’s savings index – which is not part of the overall consumer confidence index – as an example of the cautious mood among households.Growth in Britain’s economy has slowed to crawl, according to the latest official data, although many economists still think the higher government spending in Reeves’ budget will help to raise growth – albeit temporarily – later this year.The Bank of England is widely expected by investors to cut interest rates on Feb. 6. More

(Reuters) -U.S. President Donald Trump on Thursday said he wants the Federal Reserve to cut interest rates at a time the central bank has hit pause for an uncertain duration, arguing he understands monetary policy better than those charged with setting it. “With oil prices going down, I’ll demand that interest rates drop immediately, and likewise they should be dropping all over the world,” Trump told the World Economic Forum on Thursday in Davos, Switzerland.At a White House event following those comments, Trump said, “I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primarily in charge of making that decision,” in an apparent reference to Federal Reserve Chairman Jerome Powell, who Trump appointed as Fed leader in his first stint as president. Trump’s remarks come five days before the Fed’s first policy meeting to be held during his administration – on Jan. 28 and 29 – with very broad expectations officials will leave rates unchanged. The Fed last cut its overnight interest rate target by a quarter percentage point at its December policy meeting to between 4.25% and 4.5%. For all of 2024, the Fed lowered rates by a full percentage point amid easing inflation pressures and a sense among Fed officials that they wanted monetary policy to exert less restraint on the economy’s momentum. The December meeting also saw officials trim estimates of cuts in 2025 amid expectations of higher levels of inflation and slightly better growth.Trump’s comments on Fed interest rate policy are highly unusual for presidents in the modern era and conflict with the agency’s design of setting interest rate policy independently. The Fed, which does not have to follow any instructions from the president, did not immediately respond to a request for comment. POLICY UNCERTAINTYA number of Fed officials, including Powell, have already expressed a need for caution about lowering rates further because of sticky inflation. Several policymakers had made an effort to take potential Trump policies into account in new forecasts issued at the December policy meeting. Lowering rates when inflation is still above the Fed’s 2% target could prompt price pressures to worsen rather than improve. Speaking last week, New York Fed President John Williams noted that uncertainty surrounding government policy actions makes it particularly hard to offer guidance about the outlook for monetary policy right now. “The economic outlook remains highly uncertain, especially around potential fiscal, trade, immigration, and regulatory policies,” Williams said, “therefore, our decisions on future monetary policy actions will continue to be based on the totality of the data, the evolution of the economic outlook, and the risks to achieving our dual mandate goals.”Trump’s pursuit of large-scale tariffs on America’s trading partners, which are de facto taxes on imports, together with his plan to deport large numbers of undocumented immigrants, run a real risk of reigniting inflation pressures, in the view of many economists and investors. The question that would then loom is whether Fed officials believe the price increase is a one-off or the start of a more enduring rise, which could in turn call for higher interest rates. Some Fed officials believe enough clarity could soon arrive on the inflation front to get back to lowering rates. Citing recent favorable price pressure data, Fed Governor Christopher Waller told CNBC on Jan. 16 that “if we continue getting numbers like this, it’s reasonable to think that possibly rate cuts could happen in the first half of the year.”Waller, who was selected as a Fed governor by Trump and took office in 2020, has also been somewhat skeptical that the trade tariffs envisioned by Trump will drive up inflation in the way many economists reckon. He said on Jan. 8 that, “if, as I expect, tariffs do not have a significant or persistent effect on inflation, they are unlikely to affect my view of appropriate monetary policy.” Trump was broadly critical of the Fed for raising rates during the first two years of his first term in office and lambasted Powell, whom Trump had elevated to lead the U.S. central bank, for leading that effort. Powell’s term as Fed chairman ends in 2026 and before taking office, Trump said he was not inclined to remove Powell early, amid legal questions to whether such an action would even be possible. More

TOKYO (Reuters) – Japan’s core consumer prices rose 3.0% in December from a year earlier to mark the fastest annual pace in 16 months, data showed on Friday, keeping alive market expectations that the central bank will keep raising ultra-low interest rates.The data comes hours before the Bank of Japan concludes its two-day policy meeting, when it is expected to raise short-term interest rates to 0.5% from 0.25%.The increase in the core consumer price index (CPI), which excludes the impact of volatile fresh food prices, matched a median market forecast and followed a 2.7% gain in November.It was the largest year-on-year increase since a 3.1% gain marked in August 2023.The rise was due largely to the phase-out of government subsidies aimed at curbing utility bills, and the impact of stubbornly high food prices as the weak yen kept import costs elevated.An index stripping away the effect of both fresh food and fuel costs, which is closely watched by the BOJ as a better gauge of price pressure driven by domestic demand, rose 2.4% in December from a year earlier, steady from November.The BOJ ended negative interest rates in March and raised its short-term rate target to 0.25% in July on the view Japan was on track to sustainably meet the bank’s 2% inflation target.Governor Kazuo Ueda has signalled readiness to raise rates further if broadening wage hikes underpin consumption and allow companies to keep hiking prices not just for goods but services. More

The order sets a 180-day deadline for an Artificial Intelligence Action (WA:ACT) Plan to create a policy “to sustain and enhance America’s global AI dominance in order to promote human flourishing, economic competitiveness, and national security.”Trump also told his AI adviser and national security assistant to work to remove policies and regulations put in place by former President Joe Biden.Trump on Monday revoked a 2023 executive order signed by Biden that sought to reduce the risks that artificial intelligence poses to consumers, workers and national security.Biden’s order required developers of AI systems that pose risks to U.S. national security, the economy, public health or safety to share the results of safety tests with the U.S. government, in line with the Defense Production Act, before they were released to the public. More

UNITED NATIONS (Reuters) – The United States will leave the World Health Organization on Jan. 22, 2026, the United Nations said on Thursday, after being formally notified of the decision by President Donald Trump, who has accused the agency of mishandling the pandemic and other international health crises.Trump announced the move on Monday, hours after he was sworn in for a second four-year term. The WHO said on Tuesday that it regretted the move from its top donor country. Trump must give a one-year notice of U.S. withdrawal from the Geneva-based body and pay Washington’s dues under a 1948 joint resolution of the U.S. Congress. The United States is by far the WHO’s biggest financial backer, contributing around 18% of its overall funding. WHO’s most recent two-year budget, for 2024-2025, was $6.8 billion. It was not immediately clear how much the U.S. owes. “I can confirm we have now received the U.S. letter on the WHO withdrawal. It is dated 22 January 2025. It would take effect a year from yesterday, on 22 January 2026,” said deputy U.N. spokesperson Farhan Haq. The U.S. departure will likely put at risk programs across the organization, according to several experts inside and outside the WHO, notably those tackling tuberculosis, the world’s biggest infectious disease killer, as well as HIV/AIDS and other health emergencies.The withdrawal order signed by Trump said the administration would cease negotiations on the WHO pandemic treaty while the withdrawal is in progress. U.S. government personnel working with the WHO will be recalled and reassigned, and the government will look for partners to take over necessary WHO activities, according to the order.Trump’s withdrawal from the WHO was not unexpected. He took steps to quit the body in 2020 during his first term as president. Before the U.S. withdrawal could be completed last time, Joe Biden won the presidential election and put a stop to it on his first day in office on Jan. 20, 2021. More

(Reuters) – A look at the day ahead in Asian markets. Investors divert their focus away from Washington on Friday for the first time since President Donald Trump’s inauguration on Monday, towards Tokyo and the Bank of Japan, which is widely expected to raise interest rates to a 17-year high of 0.5%.Assuming the BOJ does raise rates by a quarter of a percentage point – a 95% certainty, according to market pricing – that focus will narrow in even more on Governor Kazuo Ueda’s press conference and the signals he sends about future policy steps.The ideal scenario for asset prices in Japan and beyond would probably be a “dovish hike,” with Ueda more inclined to cool rather than fuel investor expectations about the pace of further tightening, even though wage growth is gathering steam.Japanese money markets are erring on the cautious side, pricing in only another 25 bps of tightening this year after Friday’s expected increase. Even if one sets aside the BOJ’s historical scars and institutional anxiety when it comes to raising rates, Ueda himself has struck a measured tone in recent public remarks, most notably on Dec. 25 and a week earlier in his press conference after the BOJ kept rates on hold.Calming the equity and bond market horses, however, is not without risk – it may inject unwanted volatility into the currency markets, pushing the yen back down towards the 160.00 per dollar area and the intervention danger zone. Ueda’s dovish stance after the BOJ’s December meeting pushed the yen down to 158 per dollar, the lowest since July. A weaker exchange rate may give the Japanese stock market a lift, but the yen is perilously close to all-time lows and finance minister Katsunobu Kato and other officials have recently warned against speculative selling.Of course, a rapid appreciation of the yen isn’t in anyone’s interest either. That is often associated with – and can trigger – bouts of wider market turbulence. Japan is the world’s largest creditor with some $3.3 trillion of net foreign assets, and the risk of Japanese repatriation flows quickly becoming a torrent is one officials will be well attuned to.While events in Japan top the agenda on Friday – Japan also releases inflation figures – Trump is still making headlines, insisting on Thursday that global interest rates and oil prices come down. He also said he expected the Fed to listen to him and that he would consider speaking to Fed Chair Jerome Powell about the matter.His comments took the wind out of the dollar and oil’s sails, and lifted the S&P 500 to a record closing high. They also brought U.S. bond yields off their highs but concern over the fiscal outlook continues to weigh heavily on Treasuries. Here are key developments that could provide more direction to markets on Friday:- Japan interest rate decision – Australia, India PMIs (January)- Taiwan GDP (Q4) More

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