Economy

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of our Unhedged newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersGood morning. Yesterday, Treasury secretary Scott Bessent and other US officials began another round of trade talks with their Chinese counterparts. On the table are semiconductors, rare earths and magnets. Unhedged originally doubted that the Trump administration would negotiate with China — we were wrong. But whether the negotiations will be fruitful is another question. Email us: [email protected] and Bitcoin Why would you buy a company that buys bitcoin, rather than just buying bitcoin itself? Some people, including some people who write this newsletter, wouldn’t buy either. But let us assume that buying bitcoin is a good idea. Why do it through a corporate wrapper?  One obvious (if unsatisfying and mildly circular) answer is that some of the companies that buy bitcoin outperform bitcoin itself. Here is a chart comparing the performance of bitcoin, a leveraged bitcoin ETF, GameStop (which announced it would start buying bitcoin this spring) and Strategy, the largest corporate bitcoin buyer: Strategy (formerly MicroStrategy, back when it was a software business) absolutely dominates here. But it is not the most amazing example of this phenomenon. That honour goes to Metaplanet, a Japanese hotel developer that announced on Monday that it would raise about $5.4bn to buy bitcoin — an asset it had been buying at a much smaller scale for a year or so:So where is the magic here? ETFs that own gold track the gold price. ETFs that own bitcoin track the bitcoin price. Why should a company that owns bitcoin do better than bitcoin? Strategy provides an explanation of sorts. It currently trades at a 70 per cent premium to its net asset value, which is made up overwhelmingly of its bitcoin holdings. So when it sells equity and uses the proceeds to buy bitcoin, the transaction is instantly accretive. The company can buy more than a dollar of bitcoin by selling a dollar of equity. Here is Strategy’s executive chair, Michael Saylor, speaking in April:How do we generate gain? How do we generate shareholder value? So if we were to sell $100mn of [our] equity at a multiple to net asset value of two, then generally, what happens is we capture a . . . gain of half of that. The spread is 50 per cent. We capture $50mn of that as the gain. That is the accretive component to the existing common stock shareholders. Astute readers will have noticed that this is not an explanation of why Strategy trades at a premium to NAV. It is an explanation of what Strategy can do because it trades at a premium to NAV. So the premium still needs explaining. Saylor argues that the premium exists in part because the stock is both very volatile and very liquid, which makes it attractive to shareholders who can sell at-the-market call options against it and generate a high yield. Now, most companies don’t think of extraordinary volatility as an asset, but Saylor thinks Strategy’s volatility is special: You might get massive volatility either for a good reason or a bad reason. But the management team [in a high-volatility company] normally doesn’t have credibility and durability. How are you going to keep it for a decade? And so you see what we have done is we have created a volatility engine. When you take volatility . . . if you’re smart, you make it a reactor and it becomes a power plant.Readers can make their own assessment of this approach to corporate finance. But I will note that financial strategies involving selling volatility tend to work until they don’t.One more sustainable source of bitcoin-holding companies’ premium valuation is that they are a particularly easy way to gain bitcoin exposure. In the UK, for example, getting bitcoin exposure can be fiddly. Buying bitcoin itself leaves you with the problem of storing it. The ban on buying bitcoin-linked exchange traded notes was only just lifted; buying US bitcoin ETF shares, for both retail and institutional investors, involves annoying paperwork. Buying Strategy shares is easy. And a similar pattern may hold, to greater or lesser degrees, in various other jurisdictions.Indeed, David Bailey, a Metaplanet board member, recently told my colleague Philip Stafford that “Michael Saylor pioneered something with one insight: if you want to sell someone bitcoin you have to meet the buyer where they are.” He went on: “The liquidity’s there everywhere, globally, but it’s trapped. We’re packaging bitcoin into various forms to meet them where they are.”If that’s right, there is an irony here. If the bitcoin-owning companies are ultimately selling bitcoin liquidity, their companies will only add value so long as the bitcoin market remains inefficient and cumbersome. If Bitcoin, as we are promised, becomes a universal and practical alternative to fiat currency, or even just a freely traded store of value like gold, the companies’ premiums to NAV should disappear.China and US solarWe recently wrote about the outlook for US solar companies under the Trump administration. China, however, is the world centre for the solar industry — in particular solar panel production. And China’s domestic solar market is huge; two months ago, China’s solar and wind energy capacity overtook fossil fuels for the first time, according to the country’s energy regulator.But that does not mean that Chinese solar panel producers are good investments. Over the past six months, First Solar — the biggest western solar panel manufacturer — has outperformed many of its Chinese competitors:The Chinese solar market is brutally competitive. Solar panels are now essentially commodities. Margins are slim and volatile. Recently, leading Chinese manufacturers have struggled. JinkoSolar posted a loss in its first quarter; Trina Solar reported a big loss for all of fiscal 2024. First Solar’s earnings last quarter were not particularly strong, but it made money. Cheng Wang at Morningstar explains:While global oversupply has rendered many solar markets unprofitable, the US market remains highly profitable due to trade barriers that restrict supply. Since most US solar firms are domestically focused, they continue to generate healthy profits. This may explain the valuation difference.Joe Osha of Guggenheim notes that US has had solar import controls for a while. “The price divergence [between the US and elsewhere] is dramatic; in the US [panels cost] more than twice what they cost in other markets.” According to Osha, the possibility of even higher tariffs on China actually presents an opportunity for First Solar and other US producers.Solar equipment tariffs are controversial. They might make sense if having a domestic solar panel industry is a legitimate national security priority, or if the Chinese government is engaged in predatory dumping. But the price Americans pay is more expensive solar power. Having the tariffs in place may or may not be worth it. Domestic solar producers profit either way.(Reiter)One good readMoney versus power.FT Unhedged podcastCan’t get enough of Unhedged? Listen to our new podcast, for a 15-minute dive into the latest markets news and financial headlines, twice a week. Catch up on past editions of the newsletter here.Recommended newsletters for youDue Diligence — Top stories from the world of corporate finance. Sign up hereThe Lex Newsletter — Lex, our investment column, breaks down the week’s key themes, with analysis by award-winning writers. Sign up here More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Huawei’s founder said the US was exaggerating the Chinese chipmaker’s capabilities and played down his company’s technology amid trade talks between Beijing and Washington that include discussions of export controls.In a rare interview with China’s state-run People’s Daily on Tuesday, Ren Zhengfei said Huawei’s Ascend chip, the main rival to Nvidia’s products in China, “still lags behind the US by one generation”. He added that the “US has exaggerated Huawei’s capabilities — we’re not that strong yet”.Ren’s comments come as Nvidia chief executive Jensen Huang has sounded the alarm in recent weeks on Huawei’s progress with its artificial intelligence chips, saying Washington’s limits on the US chipmaker selling to China have given rise to a “formidable” competitor that threatens to undermine American dominance of AI technology.The US and China began a new round of trade talks on Monday in London, which included discussion of Washington’s export controls on key technology.During the first round of talks in Geneva, the US did not discuss export controls. However, Beijing’s recent use of restrictions on some critical rare earths and minerals used in car manufacturing — which threatens to shut down factory lines in the US, Europe and Japan — has brought the issue into trade discussions.Huawei has benefited from Washington’s ban on shipments of Nvidia chips to China as Chinese tech giants have accelerated purchases of Ascend chips and made preparations to adopt Huawei’s technology. Still, the majority of Chinese AI companies, including DeepSeek, use Nvidia chips to train the large language models that power AI tools. Domestic alternatives are increasingly used for the less complex task of calling upon the models to generate responses in tools such as chatbots.Analysts and Huawei researchers have previously complained about technical glitches in using the company’s chips for training LLMs, citing difficulty in making the chips work together and distributing computing workloads across them.Ren on Tuesday hinted the company had made strides to resolve these issues, saying Huawei could “compensate” for poorer performance through cluster computing, which involves linking multiple chips to boost AI server power.“Using clustering and stacking, our computing results are comparable to the world’s best,” he said.Huawei’s new CloudMatrix 384 AI server is the centrepiece of its strategy to compete with Nvidia by assembling a large number of chips to bolster bandwidth capacity and handle more data. The server connects 384 AI processors using Huawei’s optical technology.Several Huawei customers are already testing the CloudMatrix server, working with the company’s engineers to resolve issues related to the heat generated by the large number of chips operating in unison and the machine’s weight, said a person involved in the testing.Huawei’s biggest challenge was creating “an ecosystem” of developers that will use its platform to build AI models, the person added. One of Nvidia’s advantages is its software platform Cuda, which developers say is easy to use.Ren said Huawei was investing Rmb180bn ($25bn) a year on research and development, with Rmb60bn going into basic research not aimed at developing products but making breakthrough discoveries.He added that China had distinct advantages when building out its technological capabilities.“AI depends on abundant electricity and advanced network infrastructure,” he said. “China’s power generation and grid systems are world-class. Our telecoms infrastructure is the most advanced in the world.”Additional reporting by Demetri Sevastopulo in Washington More

From recapitalising rural banks to propping up the stock market, Central Huijin, an arm of China’s sovereign wealth fund, has supported the country’s financial system since its launch two decades ago. But over the past year, the scale of its interventions has thrust it into the spotlight. Central Huijin’s holdings of exchange traded funds soared past Rmb1tn ($140bn) in 2024, a seven-fold increase year on year, as the government ordered stimulus measures aimed at boosting the economy.Beijing has made clear its desire to build bigger financial institutions to help its already state-dominated financial sector navigate economic and market turmoil. Central Huijin, with both its direct buying and vast portfolio of firms, is a key component of this initiative.During the escalation of the trade war with the US in April, Central Huijin openly pledged to support markets and, for the first time, described itself in a statement as a member of the “national team” of prominent state-backed investors in the country’s markets.“Central Huijin is obviously being asked to play a big role,” said George Magnus, a research associate at Oxford university’s China Centre.Some content could not load. Check your internet connection or browser settings.“It will be called upon more and more to intervene in the financial sector and the stock market as China adapts to the reality of higher non-performing loans, tighter credit conditions, and weaker asset prices,” he added.Central Huijin is also a crucial tool as the government reshapes a sprawling financial sector that remains largely closed off from the outside world.“Huijin is becoming a strategic co-ordinator,” said one Beijing-based policy adviser. “It’s a convenient tool for the state to lever when it needs to tighten its grip on vital financial resources.”Since its launch in 2003, the fund has historically acted as the government’s lender of last resort in opaque rescues of regional banks. It also holds controlling or strategic stakes in major lenders, such as ICBC and China Everbright, as well as the troubled insurance units spun off from Anbang, a Chinese financial conglomerate that entered bankruptcy proceedings in 2024 after years of struggling with insolvency.Some content could not load. Check your internet connection or browser settings.The fund became a fully-owned subsidiary of China’s sovereign wealth fund, China Investment Corporation, in 2007.Following a sweeping leadership reshuffle and last September’s stimulus move, the fund has significantly broadened its portfolio, going deeper into ETFs and expanding across the financial system.It is now led by Zhang Qingsong, 59, a former central banker with three decades of experience in China’s financial system. He also held senior management posts at lenders such as Agricultural Bank of China and Bank of China, which gave him deep familiarity with Huijin’s expansive portfolio.In February, the Ministry of Finance transferred its controlling stakes in China’s three largest bad-debt managers — Cinda, Orient and Great Wall — to Huijin, at no cost. Its total assets under management amount to $1.1tn as of June 2024, according to company filings, but it also has stakes in a portfolio of state financial institutions with total assets of at least $29tn, according to Financial Times calculations — a huge proportion of the country’s entire financial assets. Huijin did not respond to a request for comment. Although April was the first time Huijin had publicly declared itself as playing in the position of state intervention fund in the “national team” — or in the language of China’s market regulator, as a “quasi-stabilisation fund” — it has acted similarly in the past to help set a floor for China’s stock market during times of distress. It previously played the same role propping up shares during the market rout of 2015, investing an estimated Rmb1.2tn in more than 900 companies to prevent a meltdown. It has exited many of those holdings since 2021, though it still held stakes in 165 listed companies as of the first quarter of 2025, according to the Wind financial data service.Some content could not load. Check your internet connection or browser settings.But from early 2024, its focus shifted to increasing its holdings of exchange traded funds tracking major indices, which avoided issues arising from single-stock purchases. The buying intensified in April following Donald Trump’s “liberation day” tariffs, when Huijin pledged to step up ETF purchases “when necessary.” An estimate from a Shanghai-based analyst not allowed to publicly speak on the matter suggests ETF purchases by Huijin in April alone may have reached Rmb200bn. Huijin’s expanded role this year has been helped by broader co-ordinated moves from other regulators, with significant support from the People’s Bank of China. As China seeks to consolidate its financial sector, Huijin can help facilitate mergers and expedite approval times.Its activity has also coincided with an official push for higher dividends in China, while a decline in mutual fund fees is expected to reduce its costs.A senior executive at a Beijing fund house said that it was hard for managers to keep fees at previous, higher levels, given the “giant” inflows from Huijin.Many analysts anticipate that an intervention fund such as Central Huijin’s would ultimately exit the market after holding positions for several years, but this could take longer than usual, given the size of purchases this time.And, with the mainland’s A-share markets now carrying more strategic weight than they did a decade ago, and valuations still at low levels, the Shanghai-based analyst suggested Huijin and the authorities may be willing to hold positions for “20, 30, even 40 years”.“I don’t see any near-term risk of the national team exiting the market or policy turning negative,” he said. “It is not the story at the moment.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is professor of economics at King’s College London, and a former member of the Bank of England’s Monetary Policy CommitteeThe discussion on the UK fiscal position is focused on whether it is consistent with the government’s self-imposed fiscal rules. As that becomes more doubtful, it leads to debate about whether these rules should be modified, and the IMF has recently offered its own advice on the matter. While the UK will face difficult choices to align spending with available resources in the longer term, the fund argued further refinements of the fiscal framework could help minimise the frequency of policy changes.The UK is no stranger to the game of revising rules that a government is worried about meeting.Institute for Government data cited in a House of Lords report last year showed that fiscal rules in the UK had an average life of only four years, shorter than in any other major country.But the emphasis on the rules misses the point. Anyone who doubts that the national debt is a burden can think of the simple arithmetic. With a national debt of 100 per cent of GDP, not much larger than today’s level, 4 per cent of GDP needs to be collected as taxation simply to pay the interest on it — £100 of borrowing today in effect becomes £104 to be repaid next year. Instead of repaying, the debt can be rolled over but unless the interest is paid the debt will cumulate. This does not matter if incomes are rising fast enough. With 5 per cent money income growth, a debt of £104 in a year’s time is more affordable than a debt of £100 this year. But rapid money income growth comes either through growth in real GDP or through high inflation. The prospects for the first are not sufficiently good to be able to rely on it, while the Monetary Policy Committee is supposed to prevent the second from happening. Sustained growth in real GDP of even 2 per cent a year is not in prospect.In these circumstances, the national debt should be used as a buffer, allowed to rise in response to adverse economic shocks and then driven down in “normal” economic times. The trouble is that, because economic performance has been poor for nearly 20 years, the debt was allowed to increase sharply in response to shocks — the financial crisis, Covid-19 and the recent gas price surge — while reducing it was always something to deal with in the future. The current fiscal rules do not materially address this.We frequently hear the argument that borrowing to invest is different from borrowing to consume. On this there are two points to make. Investing in, say, hospitals is unlikely to have a large impact on national income, but the interest on the borrowing to finance them still has to be paid. Also, future virtue — limiting future borrowing to financing investment — does not address the fact that we have the existing debt to deal with.It is true, of course, that, relative to GDP, the national debt was much higher after the second world war. But those who draw comfort from the fact that this was managed might stop to think about the mechanisms that were used. First, although real growth was higher than it is at the moment, the main tool was inflation. Second, interest rates on government debt were held down by imposing regulations on institutional investors. Banks were required to have large holdings of government debt, for example. Perhaps the focus on getting pension funds to invest in British assets shows the shape of things to come. Third, international movements of capital were controlled. Foreign currency for ordinary holiday-makers was rationed to stop people evading the regulations on capital movements.The politics of the current situation are, of course, dreadful. Tax increases to pay for the NHS or even rearmament are easier to sell to the public than ones to reduce the national debt. So a more regulated future is likely. The best advice from economists would probably be to begin a programme of material debt reduction now. But that, of course, is not going to happen. The consequence is a much more unstable future given likely heightened market volatility at times when the debt burden comes into focus. The risk of higher inflation is, itself, likely to lead investors to demand higher interest rates, making things even worse. On top of this, investors are likely to seek a higher risk premium for UK assets because of the uncertainty. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Foreign buyers of Chinese drone parts are paying sharply higher prices as Beijing tightens exports of critical components amid US President Donald Trump’s trade war.Suppliers and intermediaries who ship parts have as much as doubled their prices for foreign customers, who have few alternative sources, as Beijing strengthens enforcement of controls, said purchasers at the Shenzhen Unmanned Aerial Systems Expo in southern China last month.The nearly $41bn commercial drone market has become increasingly important to militaries across the globe as devices meant for civilian use are deployed on battlefields in Ukraine and the Middle East.Beijing has sought to regulate drone and parts exports to prevent their use in combat by other countries. In recent years, China has demanded exporters apply for special licences that many say are difficult to obtain, especially for component makers that export in smaller volumes.In the past year, the government has increased the number of technologies subject to controls, while manufacturers and suppliers say enforcement has tightened in recent months as Trump threatened higher tariffs on China.The restrictions, which apply to components with military and commercial applications, have made it difficult for global drone makers to source parts because few countries provide alternatives.China makes 70-80 per cent of the world’s commercial drones and dominates production of critical elements such as speed controllers, sensors, cameras and propellers, according to analytics provider Drone Industry Insights.A Turkish drone maker said it had to rely on expensive and unreliable freight forwarders to ensure supply of the restricted components it needed. Those forwarders have ratcheted up prices in recent months.“For example, last month it was $2,000 for air delivery, but today they want almost $3,500,” said a person from the company.A French buyer who produces targeting and surveillance drones for military use said he was heavily reliant on Chinese components. He estimated European producers were three years behind their Chinese counterparts.“We try to make European drones, but we cannot make it with the same technologies as China,” he said.Restrictions updated in September for thermal imaging cameras are a particular problem. Chinese suppliers now asked for double the price “because they take more risk” in seeking to avoid controls, said the French buyer.While freight forwarders offered workarounds, they often insisted buyers pay in renminbi and sign customs declarations under their own names, creating legal risks for importers, he added.But with his supplies running low and having failed to find alternatives in locations such as Vietnam, the French buyer will have to look for suppliers willing to organise shipping themselves. “For now . . . it’s almost impossible,” he said.Salespeople at the Shenzhen fair could be seen handing out business cards offering “sensitive goods shipment” for drones and “imitation brands”, and said they had been instructed to target US, European and Middle Eastern customers.Khalil Esterhamlari, head of the Shenzhen-based China Iran Innovation and Cooperation Centre, said the strict customs scrutiny had forced him to cancel plans to help Iranian clients source firefighting drones. Nowadays, he is only able to export agricultural drones.Manufacturers at the exhibition said the controls were hindering their plans to expand overseas, while many sourcing agents said they did not know why makers of larger aircraft bothered advertising to foreign clients.Zhao Yan, a representative for Shanxi Xitou UAV Intelligent Manufacturing, a state-owned exporter of military and commercial drones, said even legally exported drones could end up on battlefields.“It is like a kitchen knife — we produce them for cutting vegetables, but whether they can be used for other purposes is determined by the buyer,” he said. “We sell our products to compliant buyers through compliant channels. As for what they use them for, we can’t decide.”China’s commerce ministry did not respond to a request for comment. More

Less than 30% of CEOs see either a mild or severe recession taking place over the next six months, per Chief Executive Group’s latest survey.
That’s well below the more than 60% who sad the same in April as tariffs put businesses on high alert.

Alexander Spatari | Moment | Getty Images

Business leaders are walking back recessionary expectations for the U.S. that initially spiked in the aftermath of President Donald Trump’s tariff announcement, according to data released Monday.
Less than 30% of CEOs forecast either a mild or severe recession over the next six months, per Chief Executive Group’s survey of more than 270 taken last week. That’s down from 46% who said the same in May and 62% in April.

The share of CEOs polled this month who said they expect some level of growth in the U.S. economy also shot up above 40%. That’s nearly double from the 23% who gave the same prediction in April.

Expectations for flat economic growth have surged in recent months, rising above 30% from 15% in April. That comes as some market participants question if “stagflation” — a term used to described an environment with stagnating economic growth and sticky inflation — could be on the horizon.
Chief Executive’s latest data reflects a shifting outlook among corporate America’s leaders as they follow the evolving policy around Trump’s tariffs. Many large companies have left their earnings outlooks unchanged, citing the uncertainty around what the president’s final trade policy will and will not include.
Trump sent U.S. financial markets spiraling in April after first unveiling his plan for broad and steep levies on many countries and territories, which market participants worried would hamper consumer spending. He placed many of those duties on pause shortly after, which helped the market recoup much of its losses.
The White House has been negotiating deals with countries during this reprieve, which is set to expire early next month. The Trump administration announced an agreement with the United Kingdom and is holding talks with China in London on Monday.

Recession talk

Talk of an economic slowdown has once again become a hot topic in corporate America. “Recession” and similar iterations of the word have come up on 150 S&P 500-listed earnings calls so far this year, about double the amount seen in the same period of 2024, according to a CNBC analysis of FactSet data.
“We do recognize that sweeping changes in global trade policy could contribute to broader macroeconomic volatility, including the potential to tip certain regions into a recession,” said Michael DeVeau, finance chief at International Flavors & Fragrances, on the company’s earnings call last month.

Firms have raised alarm that tariffs could hit their bottom lines and that they will need to pass down higher costs by raising prices. Some also said rising fears of a recession because of the levies have pushed consumers to tighten their belts financially.
The University of Michigan’s closely followed consumer sentiment index has plunged near its lowest levels on record as the tariff announcements rattled everyday Americans.
However, a New York Federal Reserve survey released Monday paints a brighter picture. The data showed that the average consumer is growing less concerned about inflation after Trump walked back some of his most severe trade plans.
“From the macro, the worst concerns, I think, have passed,” Home Depot CEO Edward Decker said last month. “We’ve gone from a dynamic of where we were going to have a near certain recession and stock market correction in early April, to where today stock markets fully recovered (and) recession expectations are way down in the past month.” More

The New York Fed’s Survey of Consumer Expectations showed the one-year inflation outlook took a substantial dip in May, down to 3.2% — a 0.4 percentage point decrease from April.
While the survey showed inflation expectations are still above the Fed’s 2% annual target, they represent progress and a change in a fearful attitude that coincided with Trump’s saber-rattling.

Fruit and vegetables are seen at a Walmart supermarket in Houston, Texas, on May 15, 2025.
Ronaldo Schemidt | Afp | Getty Images

Americans grew less fearful about inflation in May as President Donald Trump backed off the most severe of his tariff proposals, according to a New York Federal Reserve survey Monday.
The central bank’s Survey of Consumer Expectations showed that the one-year inflation outlook took a substantial dip, down to 3.2% — a 0.4 percentage point decrease from April.

At the three-year horizon, the outlook fell 0.2 percentage point to 3%, while the five-year forecast edged down to 2.6% from 2.7%.
While all three are still above the Fed’s 2% annual target, they represent progress and a change in a fearful attitude that coincided with Trump’s saber-rattling on tariffs, culminating with the April 2 “liberation day” announcement.
Trump initially slapped universal 10% tariffs on all U.S. imports and a menu of so-called reciprocal duties on dozens of nations. However, he soon backed off the latter measures, opting for a 90-day negotiating window that expires in July.
The New York Fed survey, which is less volatile than others such as the University of Michigan and Conference Board measures, provides some good news for the White House at a time when administration officials are trying to tamp down worries about tariff-induced inflation.
“By every measure of inflation, it’s down by more than it’s been in more than four years,” National Economic Council Director Kevin Hassett said Monday morning on CNBC’s “Squawk Box.” “While the tariff revenue has been going up, inflation has been coming down, which is contrary to the story that everybody else has been saying, but very consistent with what we’ve been saying.”

Inflation as measured by the Fed’s preferred personal consumption expenditures price index was at 2.1% in April, matching the lowest it’s been since February 2021. Excluding food and energy, core PCE stood at 2.5%, a gauge Fed officials believe is a better measure of longer-term trends.
The Fed survey showed expectations dipping across most price groups, though respondents did see food prices rising by 5.5% over the next year, a 0.4 percentage point increase from May and the most since October 2023. Elsewhere, respondents saw gas price increases easing to 2.7%, down 0.8 percentage point. The outlooks for medical care, college education and rent increases also were lower on a monthly basis.
There also was a positive move in employment, with those expecting to lose their job over the next 12 months dipping to 14.8%, down half a percentage point.
Other areas showed optimism as well: The probability of missing a minimum debt payment over the next three months fell half a point to 13.4%, its lowest since January. Respondents also had more confidence in stocks, with 36.3% expecting the market to be higher a year from now, up 0.6 percentage point.

Don’t miss these insights from CNBC PRO More

The dueling narratives come as the administration is asking an appeals court to preserve a set of tariffs recently deemed to be illegal.Shortly after a federal trade court declared many of President Trump’s tariffs to be illegal, Howard Lutnick, the commerce secretary, took to television to brush aside the setback.“It cost us a week, maybe,” Mr. Lutnick said this month on Fox News, noting that other countries remained eager to strike new deals despite tariffs being in legal jeopardy.“Everybody came right back to the table,” he added.With the fate of the president’s tariffs hanging in the balance, the Trump administration has tried to project dueling narratives. Top aides have insisted publicly that their negotiations remain unharmed, even as some of those same officials have pleaded with the court to spare Mr. Trump from reputational damage on the global stage.The administration will face two crucial tests on Monday. The government is scheduled to submit a new legal brief to a federal appeals court outlining why the tariffs should not go away, while Mr. Lutnick and other close Trump advisers meet with their Chinese counterparts in London to hammer out new trade terms.The court could factor in “any sort of public statements the administration makes” as it decides whether to preserve existing tariffs as the case plays out, said Ted Murphy, a co-leader of the trade practice at the law firm Sidley Austin.While Mr. Murphy said it remained to be seen how judges would view the government’s recent bullishness, he said that a decision that invalidated the president’s tariffs could “weaken the U.S. position” abroad.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