Economy

WASHINGTON (Reuters) – Inflation should continue falling in 2025 and allow the U.S. Federal Reserve to further reduce interest rates, though at an uncertain pace, Federal Reserve governor Christopher Waller said on Wednesday.Waller said that while it was true inflation “appears to have stalled” above the Fed’s 2% target in the waning months of 2024, market-based inflation estimates, as well as one month and shorter-term inflation readings, have left him confident that inflation is continuing to ease in the U.S. even if the pace of improvement is less certain.”This minimal further progress has led to calls to slow or stop reducing the policy rate,” Waller said in remarks to an Organization for Economic Cooperation and Development event in Paris. “However, I believe that inflation will continue to make progress toward our 2% goal over the medium term and that further reductions will be appropriate.””The pace of those cuts,” he said, “will depend on how much progress we make on inflation, while keeping the labor market from weakening.”The Fed reduced its policy rate of interest a full percentage point in the final three meetings of 2024, but is expected to leave the rate steady in the current 4.25% to 4.5% range at the upcoming Jan. 28-29 policy meeting.Waller did not say how many rate cuts he thought would be appropriate this year, but noted that among Fed officials “the range of views is quite large, from no cuts to as many as five cuts” that would reduce the Fed’s policy rate by another 1.25 percentage points.Along with slower progress on inflation, Fed officials have been reluctant to commit to further rate cuts because the economy itself is performing well, with growth above estimates of long-run potential and continued hiring and wage growth that, in turn, has supported consumer spending.”I continue to believe that the U.S. economy is on a solid footing,” Waller said, with “nothing in the data or forecasts that suggests the labor market will dramatically weaken over coming months.”The Fed gets new jobs data on Friday for the month of December.Fed policymakers are also trying to sort how the policies of the incoming Trump administration may change the course of the economy, with the possible impact of tariffs one front-of-mind concern.Waller said that while increased tariffs “raise the possibility that a new source of upward pressure on inflation could emerge in the coming year,” he said it would probably not cause a persistent increase in prices pressures and thus “are unlikely to affect my view of appropriate monetary policy.” More

President-Elect Donald Trump is considering putting the U.S. in a state of national emergency to execute his broad tariff plan, according to CNN, citing sources familiar.
A final decision has not yet been made and Trump’s team is also evaluating alternative legal options for implementing the taxes on imports, CNN’s sources said.
Stock futures slipped following CNN’s report.

U.S. President-elect Donald Trump makes remarks at Mar-a-Lago in Palm Beach, Florida, U.S. Jan. 7, 2025. 
Carlos Barria | Reuters

President-Elect Donald Trump is contemplating calling a national economic emergency to implement his wide-reaching tariff policies, four sources familiar with the matter told CNN.
A declaration of this nature will give Trump power to create the tariff program he made a pinnacle of his campaign for the White House through the International Economic Emergency Powers Act, CNN reported. Also known as IEEPA, the act allows the president to oversee imports in a period of national crisis.

Stock futures weakened following the CNN report and the U.S. dollar gained in value against most other currencies.
CNN’s sources noted that a final decision has not been reached on whether Trump will declare a national emergency. Trump’s team is also evaluating alternative legal arguments, such as pointing to specific sections of the U.S. trade law, per CNN’s reporting.
Trump pitched taxes on imports frequently on the campaign trail, calling at times for fees of 60% or more on Chinese products. Weeks after his victory, the Republican vowed to hike tariffs on Chinese imports by 10% and slap 25% fees on products coming from Canada or Mexico.
The Washington Post reported Monday that Trump would narrow the focus of his tariffs, an approach Wall Street seems to favor. But the President-Elect later denied that report.
Read CNN’s full story here. More

The survey’s findings align with previous indicators, including the Purchasing Managers Index (PMI), which also signaled no significant change in the final quarter of the year.The survey’s Economic Sentiment Indicator (ESI) fell from a revised 95.6 in November to 93.7 in December, a drop that was steeper than both consensus and our own forecasts, which predicted 95.6 and 95.3 respectively. This decline is in line with the stagnation of the GDP in the fourth quarter.The survey also indicates a loosening labor market, with the employment expectations index dropping from 98.9 to 97.3. This decrease is consistent with the further weakening of employment growth from 0.2% quarter-on-quarter in the third quarter to just above zero.Inflationary pressures remain persistent according to the survey data. Selling price expectations for firms in the industrial and construction sectors have risen slightly. The services selling price expectations index also increased, reaching a 10-month high and remaining above pre-Covid norms. Despite the economic activity’s weakness, these findings from the survey may increase concerns among ECB policymakers about the strength of domestic price pressures.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

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WASHINGTON (Reuters) – Federal Reserve officials have been signaling that further interest rate cuts are on hold for now given slowed progress on inflation and a still-strong U.S. economy, but minutes from the central bank’s December meeting may show just how deeply that sentiment is shared among policymakers facing a newly uncertain economic environment under the incoming Trump administration.After cutting rates by a quarter of a percentage point at the Dec. 17-18 meeting, Fed Chair Jerome Powell said policymakers could now be “cautious” about further reductions, and noted that some officials had begun approaching upcoming decisions as if they were “driving on a foggy night or walking into a dark room full of furniture” because of uncertainty around the impact of President-elect Donald Trump’s tariff, tax and other proposals. The minutes, to be released at 2 p.m. EST (1900 GMT) on Wednesday, may help clarify how policymakers will approach further rate reductions. Projections issued after the December meeting showed officials anticipating just a half percentage point worth of rate cuts this year, compared to a full percentage point as of September.The minutes “are likely to fully reflect this relatively hawkish viewpoint,” analysts from Citi wrote. “This would include discussion of concerns that inflation could remain persistently elevated if policy rates do not remain suitably restrictive,” and perhaps discussion as well that the rate of interest needed to fully return inflation to the Fed’s 2% target has moved higher.”That would be part of the rationale for the committee now planning to slow the pace of rate cuts,” the Citi team wrote.The Fed reduced the policy rate by a full percentage point over its last three meetings of 2024, with the benchmark rate now set in a range of 4.25% to 4.5%.Economic data since then has remained steady across several important fronts, with growth still seen at well above 2%, the unemployment rate staying in the low 4% range, and the Fed’s preferred measure of inflation, known as the personal consumption expenditures price index, most recently measured at 2.4%.Fed officials who have spoken publicly since the last meeting have said there is no reason to rush further cuts until it is clear something has changed in the data – a clear drop in hiring and rise in unemployment, for example, or a renewed decline in inflation toward the 2% target.Richmond Fed President Thomas Barkin, for example, said last week that he felt the Fed should keep credit conditions tight until there was “real confidence that inflation has stably gotten down to the 2% target … The second would be a significant weakening on the demand side of the economy.”New jobs data on Friday will show how employment and wages changed in December. A separate labor market survey for November, released on Tuesday, painted an overall picture of stability – or at least only slow change. There was a small uptick in job openings, considered a sign of continued economic strength, but a small drop in hiring and in the number of workers who voluntarily quit, considered signs of a weaker hiring environment.The meeting minutes may also show Fed officials discussing in more detail when to halt their current effort to reduce the size of the central bank balance sheet. Having shaved about $2 trillion off their bond holdings since the summer of 2022, officials are widely expected to end the effort at some point in 2025.Some Fed watchers expect the minutes to provide new information about the end of so-called quantitative tightening. More

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“We first really have to reach the 2% lower limit in Germany. We are not there yet,” Merz told broadcaster Bayerischer Rundfunk on Wednesday in response to Trump’s call for NATO members to spend 5% of gross domestic product on defence. “The 2, 3 or 5% (targets) are basically irrelevant, the decisive factor is that we do what is necessary to defend ourselves,” said Merz, leader of the opposition Christian Democrats and favoured to succeed Olaf Scholz.Trump has frequently complained that most NATO members are not paying their fair share, and he floated demanding an increase in NATO defence contributions during the campaign. NATO estimated that 23 of its 32 members would meet its goal of spending 2% of GDP in 2024.Markus Soeder, leader of the Christian Democrats’ Bavarian sister party, the Christian Social Union (CSU), who had chancellor ambitions before ceding to Merz as the conservative candidate, told broadcaster ntv/RTL that military spending must be increased significantly, to “well over 3%.”Germany is only able to meet the current NATO target of 2% due to a special fund, but there is uncertainty about how to maintain that spending level when the fund is exhausted in 2028.Pressure from Trump and a more aggressive Russia have made defence spending a key campaign issue ahead of parliamentary elections in Germany set for Feb. 23, about a month after Trump takes office.Merz has said that Germany can cover future defence spending increases without a special fund, while German Economy Minister Robert Habeck, who is the Greens’ chancellor candidate, said last week that Germany should aim for a target of 3.5%, which he said could only be reached by financing through loans. Dirk Wiese, deputy leader of the parliamentary group of Scholz’s Social Democrats, told RTL/ntv that Trump’s demand was “complete madness.” Wiese also said that he did not support Habeck’s proposal, echoing Scholz, who called it “somewhat half-baked.” More

Global real estate firm Jones Lang LaSalle (JLL) said that property transactions in Germany rose to 35.3 billion euros ($36.42 billion) in 2024, an increase of 14% from a slump in 2023.Colliers, meanwhile, recorded transactions of 36.2 billion euros, up 12%.Both firms forecast moderate growth in deals in 2025, but total transactions will remain well below long-term averages, underscoring the sector’s continued struggles.Michael Baumann, Colliers’ head of capital markets in Germany, said geopolitical uncertainties, the outcome of federal elections next month and the course of the economy “could dent the gradual recovery on the investment markets”.For years, property in Europe and particularly Germany boomed as interest rates fell, spurring demand. But starting in 2022, a sudden jump in interest rates and building costs tipped some developers into insolvency as bank financing dried up and deals froze.Germany has been hardest hit in Europe’s real estate-related rout that has also struck China and the United States.($1 = 0.9693 euros) More