Economy

(Reuters) -U.S. stock index futures dove on Friday as investors grappled with the possibility of a government shutdown and a higher interest rate path ahead of a key inflation report due on the day.Dozens of Republicans defied President-elect Donald Trump’s spending bill, leaving Congress with no clear plan before government funding expires at midnight. Failure to extend the deadline could disrupt holiday travel.Trump’s plans on tariffs, tax cuts and deregulation were among the factors that pushed the Federal Reserve to raise its 2025 forecast for inflation and halve the central bank’s projections of rate cuts that slammed Wall Street on Wednesday.”We doubt there will be a new agreement in time to avert a partial shutdown after December 20, but we expect a new spending bill around the end of the year,” Paul Christopher, head of global investment strategy at Wells Fargo (NYSE:WFC) Investment Institute, said in a note.”Even if a shutdown occurs, we believe there is likely to be little economic or financial-market impact.” Data-wise, investors will look to the Commerce Department’s personal consumption expenditure (PCE) report, due at 8:30 a.m. ET, for clues on how inflation will guide the Fed’s policy. The data is expected to show U.S. consumer spending rose 0.2% last month, the same pace as October.Traders currently expect fewer than two U.S. rate cuts by the end of next year after the central bank lowered rates by a quarter point as expected this week.Comments from San Francisco Fed President Mary Daly are also on the radar, ending the media blackout period Fed policymakers had entered ahead of Wednesday’s decision. At 6:52 a.m. ET, Dow E-minis were down 186 points, or 0.44%, S&P 500 E-minis were down 52 points, or 0.88% and Nasdaq 100 E-minis were down 305.25 points, or 1.43%. The Nasdaq was set to fall for the first time in five weeks and the S&P 500 was on pace for its worst week since September. The Dow was on track for its sharpest weekly fall since March 2023.Investors are expecting more gains for the stock market in 2025, fueled by a solid economy supporting corporate profits, moderating interest rates and pro-growth policies from incoming President Donald Trump.Elsewhere, European stocks dropped as Trump threatened to hit the European Union with tariffs if the bloc does not make large oil and gas trades.Most megacap and growth stocks were lower in premarket trading, with Tesla (NASDAQ:TSLA) down 5.2% and Nvidia (NASDAQ:NVDA) and Amazon.com (NASDAQ:AMZN) off 3.1% and 2.6% respectively. Nike (NYSE:NKE) dropped 4.4% after the sportswear seller forecast revenue would fall by low double-digits in the third quarter.FedEx (NYSE:FDX) jumped 9.5% after announcing the much-anticipated spinoff of its freight trucking division, as it restructures operations to focus on its core delivery business.Eli Lilly (NYSE:LLY) advanced 9.6% after Danish rival Novo Nordisk (NYSE:NVO)’s experimental next-generation obesity drug achieved lower-than-expected weight loss in a late-stage trial. Other weight-loss drug developers also gained, with Amgen (NASDAQ:AMGN) up 4.3% and Viking Therapeutics (NASDAQ:VKTX) soaring 16.9%. More

Russia’s central bank on Friday unexpectedly left its key interest rates unchanged at 21%, citing improved monetary tightness that had created the conditions to tame sky-high inflation.
Markets had widely expected the central bank to hike interest rates by another 200 basis on Friday, after taking such a step in October.
Russia’s consumer price index hit 8.9% in November on an annual basis, up from 8.5% in October.

MOSCOW, Russia: The Russian central bank has cut its key interest rate by 300 basis points for a third time since its emergency hike in late February, citing cooling inflation and a recovery in the ruble.
KIRILL Kudryavtsev | AFP | Getty Images

Russia’s central bank on Friday unexpectedly left its key interest rates unchanged at 21%, citing improved monetary tightness that had created the conditions to tame sky-high inflation.
“Monetary conditions tightened more significantly than envisaged by the October key rate decision,” the bank said, noting factors “autonomous” from its monetary policy.

“Given the notable increase in interest rates for borrowers and the cooling of credit activity, the achieved tightness of monetary conditions creates the necessary prerequisites for resuming disinflation processes and returning inflation to the target, despite the elevated current price growth and high domestic demand,” it added.
Markets had widely expected the central bank to hike interest rates by another 200 basis on Friday, after taking such a step in October amid an ongoing effort to subdue inflation stoked by the military costs of Moscow’s invasion of Ukraine and by Western sanctions against its key commodity exports.
The bank on Friday said it would assess the need for a key rate increase at its upcoming meeting in February. It currently forecasts annual inflation will decline to 4% in 2026 and remain at this target in the forward horizon.
Russia’s consumer price index is currently more than twice this rate — annual inflation hit 9.5% as of Dec. 16, the bank said Friday, noting persisting pressures, especially in the household and business sectors. The consumer price index hit 8.9% in November on an annual basis, up from 8.5% in October. The increase was largely driven by rising food prices, with the cost of milk and dairy products soaring this year.

Inflation an ‘alarming signal’

The hold to interest rates comes even after Russian President Vladimir Putin admitted during his Thursday annual Q&A session with Russian citizens that the nation’s inflation was problematic and that there was evidence of the economy overheating. He nevertheless stressed that Russia could still achieve 3.9%-4% of economic growth this year.

“Of course, inflation is such an alarming signal. Just yesterday, when I was preparing for today’s event, I spoke with the chairperson of the Central Bank, Elvira [Nabiullina] who told me that it was already somewhere around 9.3%. But wages have grown by 9% in real terms, I want to emphasize this — in real terms minus inflation — and the disposable income of the population has also grown,” he said, according to comments reported by Interfax and translated by Google.
The International Monetary Fund predicts Russia will notch 3.6% growth this year, before a deceleration to 1.3% growth in 2025.
The “sharp slowdown,” the IMF said, was envisaged “as private consumption and investment slow amid reduced tightness in the labor market and slower wage growth.”
“What we are seeing right now in the Russian economy, [is] that it is pushing against capacity constraint,” Alfred Kammer, director of the European Department at the IMF, said when the fund released its latest economic outlook in October.
“So we have a positive output gap, or you could put it differently — the Russian economy is overheating. What we are expecting for next year is simply also the impact that going over your supply capacity, you cannot maintain for very long. So we see an impact on moving into more normal territory there. And of course, that is supported by a tight monetary policy by the Central Bank of Russia,” he said.
“A tight monetary policy, in order to bring down inflation, slows down aggregate demand, and in 2025 will have these effects on GDP. That’s why we are seeing the slowdown in 2025,” Kammer added. More

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