Economy

Kashkari, appearing on the CBS program “Face the Nation,” offered his views on the economic impact of U.S. President-elect Donald Trump’s campaign promise to deport immigrants who are in the United States unlawfully.”If you just assume people are working – either working in farms or working in factories – and those businesses now lose employees, that would probably cause some disruption,” Kashkari said.”The implications are not entirely clear to me,” Kashkari added. “Ultimately it is going to be between the business community and Congress and the executive branch to figure out how they would adjust.”Trump’s election last Tuesday to a second four-year term may pose new uncertainties for the U.S. central bank as it continues to consider interest rate cuts now that inflation is nearing the Fed’s 2% target. The Fed cut the benchmark rate a quarter of a percentage point last week to a range between 4.5% to 4.75%.Kashkari said that while the current expectation is for another quarter point cut at the Fed’s December meeting, “we need to see what the data actually look like” before deciding.”We want to have confidence that inflation is going to go all the way down to our 2% target,” from its current level around half a percentage point above that, Kashkari said.Along with an immigration crackdown, Trump has said he will impose broad tariffs on imported goods and seek tax cuts, which could increase federal deficits. How those policies impact inflation, Kashkari said, will depend on the details and on factors such as how other nations respond to U.S. tariffs.A tariff, a fee or tax charged as goods enter the country, may spark a one-time increase in prices but have no impact on long-run inflation, Kashkari said.But “the challenge becomes if there is a tit for tat,” Kashkari said. “If it is one country imposing tariffs, and then responses, and it is escalating … we will have to wait and see what gets implemented and then how other countries might respond. Right now we are just all guessing.” More

NEW YORK (Reuters) -Investors will focus in the coming week on whether inflation trends can help sustain the record-breaking stock rally that has received a boost from Donald Trump’s victory in the U.S. presidential race.The benchmark S&P 500 surged to an all-time high and hit the 6,000 level for the first time on Friday, as expectations of tax cuts and looser regulations under Trump helped lift the appetite for equities.A reassuring economic outlook from the Federal Reserve, which delivered a widely expected 25 basis point rate cut on Thursday, also helped boost sentiment. The central bank’s ability to keep cutting rates, however, will be tested by whether incoming data shows inflation continuing to moderate.The Nov. 13 consumer price index report needs to “confirm that notion that inflation continues to head in the right direction,” said Art Hogan, chief market strategist at B Riley Wealth.Investors believe Trump’s proposals, in particular higher tariffs, could push up consumer prices. Meanwhile, U.S. data has been stronger than expected, with a recent report showing the economy grew at a solid 2.8% pace in the third quarter.CPI for October is expected to come in at an annual pace of 2.6%, according to economists polled by Reuters. That would be a slight uptick from the 2.4% pace in September, which was the smallest gain since 2021, but well below the four-decade highs reached in 2022 that led the Fed to hike interest rates.More robust inflation could further alter projections for the Fed’s rate-cutting path, after expectations changed with Trump’s election victory. Fed funds futures show investors are now expecting rates to decline to about 3.7% by the end of 2025 from the current 4.5%-4.75% range, about 100 basis points above estimates in September.Expectations of financial easing have helped boost stocks this year, along with solid corporate profits and excitement over the business potential of artificial intelligence. Michael Reynolds, vice president of investment strategy at Glenmede, said the neutral level for the Fed funds rate was about 3%, “and we ultimately expect the Fed to stop short of neutral.” “We ultimately think that they do take that shallow path because inflation is still a risk,” Reynolds said. “We just got through a period of well-above average inflation. Historically, that’s come in waves.” Adding to that risk is Trump’s economic agenda that could juice inflation along with growth during his presidency. “We’re a long way from knowing specifics around either tax policy or trade policy, but those are both on the table and will undoubtedly weigh into the Fed’s calculus as they look ahead from here,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors. Investors also are continuing to adjust to the new political landscape, after big moves this week in the stock market’s so-called “Trump trades.” The small-cap Russell 2000 was up 8% on the week, with smaller, domestically focused companies expected to benefit from Trump’s plans to increase tariffs on imports. The S&P 500 banks index was up about 7% with lenders poised to benefit from the Republican’s expected efforts to slash regulations. The initial market reactions will be tested as Trump fleshes out his policy aims and starts to name political appointments. “Markets have started to digest Trump’s victory,” analysts at UBS Global Wealth Management said in a Thursday note. “As more detailed policy proposals emerge from the Trump transition team, investors should brace for further swings ahead.” More

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WASHINGTON (Reuters) – Donald Trump’s former Treasury secretary, Steven Mnuchin, said he will not seek to join the president-elect’s new administration but is ready to offer advice to his successor, including on how to strengthen sanctions on Iran and Russia and contain the growth of U.S. debt.In an interview, Mnuchin told Reuters it was important for the Treasury to work towards strengthening U.S. trade policy. This includes holding Beijing to its U.S. goods purchase commitments in Trump’s January 2020 Phase One deal to rebalance U.S.-China trade, which he said “they’re not living up to.”Serving as Treasury chief during Trump’s first term “was the experience of a lifetime, and I’m happy to advise on the outside,” Mnuchin said on Friday. “I’m sure they’ll have a lot of great choices.”He declined to name any favorites.Reuters reported on Friday that two prominent hedge fund investors, Scott Bessent, founder of Key Square Group, and John Paulson had emerged as the top contenders for Treasury secretary, and that Bessent had met with Trump.Mnuchin founded Liberty Strategic Capital, a private equity firm, after leaving office with investments from Softbank (OTC:SFTBY) Group and Abu Dhabi’s Mubadala sovereign wealth fund.ECONOMIC TEAMMnuchin said it was important that all parts of Trump’s economic team – the Treasury, Commerce Department, U.S. Trade Representative’s office and White House National Economic Council – work closely together as a group, as they did during trade and tariff negotiations with China in 2018 and 2019.Mnuchin, a former Goldman Sachs executive, said financial markets experience was important for the Treasury secretary to have, but so is a strong management background. This is because Treasury spans vast areas of the economy from regulatory and tax policy to international sanctions, with the latter taking considerable time during his tenure, he said.The U.S. needs stronger enforcement of financial sanctions and more actions to cut off oil revenues from Iran and Russia, he said, noting that sanctions on Russia over its war in Ukraine have been “more of a headline” than effective.A G7-imposed price cap of $60 per barrel of Russian crude oil may be reducing Russia’s oil revenues, but “Russia is selling plenty of oil and gas,” he added.These actions need to be combined with an increase in U.S. oil and gas production and stronger output from other Middle East countries to make up for sanctions-reduced supplies from Russia and Iran to keep prices stable, Mnuchin said.MANAGING DEFICITSAsked whether Trump’s plans to extend expiring individual tax cuts next year and end taxes on tips, Social Security and overtime income would run up a worrisome amount of U.S. debt, Mnuchin said that growing deficits needed to be brought under control.He said he believes that Congress and the administration can strike a balance between extending the tax cuts and finding savings in both discretionary and non-discretionary spending. Some revenue will be made up through stronger economic growth and from Trump’s higher tariffs, he added.Mnuchin defended the Trump administration’s heavy COVID-19 relief spending which, along with a revenue collapse during the pandemic, led to a record $3.1 trillion deficit in fiscal 2020, but he said the Biden administration had overspent.The U.S. deficit in fiscal 2024 ended on Sept. 30 topped $1.8 trillion, the highest outside of the COVID era, as public debt interest costs exceeded $1 trillion for the first time. “I think the spending we did in COVID was necessary, or there would have been a worldwide depression, not a recession,” Mnuchin said. “But I think the ongoing spending of the Biden administration clearly created inflation and created big deficits, and that has to be addressed.” More

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Farage, the Brexit-campaigner and self-described troublemaker, is a friend of Trump and was at his election victory party in Florida.He has offered to act as an interlocutor between the British government and the Trump administration, which takes power in January.The Treasury minister Darren Jones said on Sunday that the government would likely reject that offer.”I think that’s probably unlikely,” he told Sky News, saying Farage, who is a member of parliament, should probably spend his time with his constituents rather than in the United States.Governments around the world are trying to figure out how to deal with Trump, who has promised to increase tariffs and whose first four-year term was characterised by a protectionist trade policy and isolationist rhetoric, including threats to withdraw from NATO.Starmer delayed starting a recruitment process for a new ambassador to Washington until the result of the U.S. election was known.The role will be crucial in the coming years in navigating Britain’s relationship with the Trump administration. Farage said at the weekend he has “a great relationship” with Trump and would be willing to act as an intermediary for the government because it is in the national interest. More