Economy

This is an on-site version of the White House Watch newsletter. You can read the previous edition here. Sign up for free here to get it on Tuesdays and Thursdays. Email us at whitehousewatch@ft.comGood morning and welcome to White House Watch. We will be off next week — have happy holidays! For now, let’s get into:Donald Trump’s economic plans are hanging over the US Federal Reserve and chair Jay Powell.The central bank lowered interest rates yesterday by a quarter-point, but officials also projected fewer cuts next year as they start to factor in Trump’s proposed economic policies [free to read]. Powell jolted financial markets yesterday as he struck a very guarded tone about how much the bank will be able to lower interest rates against a backdrop of rising inflation risks.A few months ago, Fed officials had pencilled in one percentage point worth of rate cuts throughout 2025. Now, they’re forecasting just two quarter-point decreases for the year, underscoring policymakers’ concerns about lingering inflation.Some content could not load. Check your internet connection or browser settings.They also raised their inflation expectations for next year amid fears that Trump’s policies could bring higher prices, lower growth and greater volatility.“This was an unabashedly hawkish message from the Fed,” Aditya Bhave, senior US economist at Bank of America, told the FT’s Colby Smith, adding that officials’ forecast for two quarter-point rate cuts in 2025 represented a “wholesale shift”.During his press conference yesterday, Powell said some members of the rate-setting Federal Open Market Committee had begun to consider the potential effects of Trump’s proposals.“Some did identify policy uncertainty as one of the reasons for their writing down more uncertainty around inflation,” Powell told reporters. “We just don’t know really very much at all about the actual policy,” he said. “We don’t know what will be tariffed, from what countries, for how long, in what size. We don’t know whether there’ll be retaliatory tariffs. We don’t know what the transmission of any of that will be into consumer prices.”Dean Maki, chief economist at Point72, called the shift “striking” and said it was rooted in speculation about Trump: “It’s hard to see why they would have expected so much higher inflation if they are not incorporating things like tariffs into the forecasts.”Some content could not load. Check your internet connection or browser settings.Transitional times: the latest headlinesWhat we’re hearingThe pace of Trump’s meetings with US CEOs is accelerating as business leaders contort themselves to get time with the president-elect — even if their politics don’t align.As one Washington lobbyist told the FT’s James Politi and James Fontanella-Khan:It takes a lot for an uber-wealthy, creative-type CEO, many of whom lean left, to suck it up and deal with Trump.But what choice do they have?Within Trump’s orbit, the slew of meetings is being cast as a vote of confidence in his incoming administration and economic policies. But corporate America still has serious concerns about the president-elect, especially his plans to enact sweeping tariffs, push mass deportations and roll back some manufacturing subsidies.No matter their true thinking, executives have learned a crucial lesson: it’s better to indulge Trump’s need for exuberance and flattery than to criticise him and risk public rebukes and retaliation.Nikki Haley, Trump’s former US ambassador to the UN who battled him in the Republican primaries, told the FT that “I’m not talking to any CEOs that are fearful of Trump”.Now vice-chair of consultancy Edelman, where she advises companies on how to handle Trump, she said: What I tell CEOs is that it’s good to get face time with President Trump. It’s good to let him know what you’re working on. It’s good to let him know how you’re growing business.ViewpointsRecommended newsletters for youFT Exclusive — Be the first to see exclusive FT scoops, features, analysis and investigations. Sign up hereBreaking News — Be alerted to the latest stories as soon as they’re published. Sign up here More

Here are some of the layoffs announced since the start of October:BANKS* SANTANDER: The Spanish bank said in October it would cut more than 1,400 jobs in its British business.* UNICREDIT: The Italian bank has signed an agreement with labour unions that included 1,000 voluntary redundancies and 500 new jobs, Italy’s banking union Fabi said on Oct. 17.CAR AND CAR PARTS MAKERS* BOSCH: Staff reduction schemes at the world’s biggest car parts supplier have put 8,000-10,000 jobs at risk in Germany, its deputy supervisory board chairman said on Dec. 11. One of those plans is for 3,500 job cuts in its cross-domain computer solutions division by end-2027, half of which will be in Germany.* MICHELIN: The French tyre maker will shut down two sites in Western France, affecting about 1,250 jobs, it said on Nov. 5.* SCHAEFFLER: The German machine and car parts maker, hit by weak demand from auto and industrial clients, said on Nov. 5 it planned to cut 4,700 jobs. As part of these measures, it will close two plants in Austria and Britain, it said on Nov. 27.* STELLANTIS: The Milan-listed automaker said on Nov. 26 it planned to shut its Vauxhall van factory in southern England, putting more than 1,000 jobs at risk.* VALEO: The French car parts supplier plans to cut around 1,000 jobs in Europe, including the closure of two sites in France, sources told Reuters on Nov. 27.INDUSTRIALS AND ENGINEERING* THYSSENKRUPP: The German conglomerate’s steel-making division said on Nov. 25 it planned to cut 5,000 jobs by 2030 and an additional 6,000 jobs through spin-offs or divestitures.RETAIL AND CONSUMER GOODS* AUCHAN: The French supermarket group said on Nov. 5 it planned to cut more than 2,000 jobs amid falling traffic in its stores.* HUSQVARNA: The Swedish garden equipment maker said in October it would cut around 400 jobs, hit by constrained consumer spending.OTHERS* AIRBUS: The French aerospace group said on Dec. 5 it would cut just over 2,000 jobs in its Defence and Space business, fewer than the initially announced 2,500.* EQUINOR: The Norwegian oil, gas and renewable energy producer is cutting 20% of the staff from its renewable energy division, it told Reuters on Nov. 21.* IDORSIA: The Swiss pharmaceutical company said on Nov. 27 it would shed up to 270 jobs as part of its restructuring efforts. * LUFTHANSA: The German flag carrier aims to gradually reduce jobs in administration by 20%, the Manager Magazin reported on Nov. 14.* MONDI: The British packaging maker said in October it would shut down a paper mill in Bulgaria after it was damaged by a fire, affecting around 300 positions.* NOVARTIS: The Swiss drugmaker is closing German biotech firm MorphoSys, acquired at the start of 2024, German news outlet WirtschaftsWoche reported on Dec. 19, saying 330 jobs would be affected.* SMA SOLAR: The German solar power parts supplier said on Nov. 13 it planned to cut up to 1,100 jobs worldwide.* SYENSQO: The Belgian chemicals maker said on Nov. 5 it would cut 300-350 jobs primarily in France, the U.S., Belgium and Italy.* UPM: The Finnish forestry group said on Nov. 27 it would close a plant in Kaltenkirchen, Germany, affecting 154 jobs, its latest in a string of closures this year. In October, it said it may cut up to 110 jobs in the Fibres Finland unit. * YARA: The Norwegian fertiliser maker said on Oct. 15 that planned production changes at its Tertre plant in Belgium, including the closing of its ammonia unit, could result in a dismissal of around 115 workers.Source: Regulatory filings, Reuters articles and company websites More

According to the Monetary Policy Committee (MPC), the Autumn Budget’s policy measures are expected to enhance GDP by 0.75% within a year and contribute an additional 0.5% to the Consumer Price Index (CPI) at its peak.The MPC has revised its short-term growth and CPI forecasts upward, signaling that there is no longer any spare capacity in the UK economy for the coming year. Furthermore, the MPC has indicated a preference for gradual easing if economic developments align with their expectations, setting a higher threshold for any further rate cuts in December.However, the MPC did leave a narrow possibility open for a rate reduction in December, contingent on significant negative developments in domestic prices and wages that would imply a quicker return of inflation to the target rate. The upcoming reports on growth, inflation, and the labor market will be crucial in assessing the validity of the BoE’s forecasts and could influence the MPC’s decision-making process in the lead-up to the next meeting in December.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

MOSCOW (Reuters) -The Russian economy is showing signs of overheating which is stoking worryingly high inflation, President Vladimir Putin said, expressing hope for a “balanced” rate decision by the central bank when it meets on Friday.Addressing Russians in his annual phone-in, Putin generally backed the central bank’s tight monetary policy but also suggested it could have acted in more timely fashion.The regulator is expected to hike its key interest rate aggressively by 200 basis points to 23%, the highest level in over 20 years. Its successive rate rises have prompted strong criticism from businesses. “There are some issues here, namely inflation, a certain overheating of the economy, and the government and the central bank are already tasked with bringing the tempo down,” said Putin. Putin said he had had a conversation with central bank governor Elvira Nabiullina before Thursday’s phone-in, who had warned him that inflation would be 9.2%-9.3% in 2024, well above the central bank’s estimate of 8.5%. Putin said Nabiullina had not told him what the rate decision would be. “I hope that it will be balanced and meet the needs of today,” he said.Putin said that as a result of the tight monetary policy and government measures to cool the economy down, economic growth rates will come down in 2025 from this year’s 4%.”I think the (growth rate) next year should be somewhere around 2-2.5%, a sort of soft landing in order to maintain macroeconomic indicators,” Putin added.INFLATION IS A BAD THINGPutin said that the central bank could have used instruments other than the key rate earlier to cool down the economy, while the government could have worked with different sectors of the economy to boost supply. “It would have been necessary to make these timely decisions. This is an unpleasant and bad thing, in fact, the rise in prices. But I hope that in general, while maintaining macroeconomic indicators, we will cope with this too,” he said.Putin said that Western sanctions, as well as this year’s bad harvest due to extreme weather in many agricultural regions across Russia, were also to blame for high prices. Stubbornly high inflation, driven in recent months by soaring food prices, has hit Russians’ pockets. Latest inflation data showed prices for tomatoes rising by 4.1% and prices for cucumbers by 10% during one week in December.This time last year, Putin was forced to issue a rare apology over rising prices for eggs. A year on, the spiralling cost of butter has prompted thefts at some supermarkets. Households’ inflationary expectations, a key gauge for the central bank, hit this year’s highest level this month. Grigory Zakuraev, a factory worker, told Reuters that 1,000 roubles at the supermarket goes far less than it did three years ago. “Everything has gone up in price,” he said. “Of course, you feel it on the wallet, the change in prices, inflation.” More

The Bank of England on Thursday ended its last meeting of the year with a decision to leave interest rates unchanged, after U.K. inflation rose to an eight-month high.
Three members of the Monetary Policy Committee voted to reduce rates, while six were in favor of a hold. Economists polled by Reuters had forecast only one member would vote to cut.
BOE staff also downgraded their economic forecast for the fourth quarter of 2024, now predicting no growth, compared with the 0.3% expansion predicted in its November report.

The Bank of England pictured in December 2024.
Sopa Images | Lightrocket | Getty Images

LONDON — The Bank of England on Thursday ended its last meeting of the year with a decision to leave interest rates unchanged, after U.K. inflation rose to an eight-month high.
Analysts had widely expected a rate hold at the December meeting, as policymakers remain concerned with stubborn services inflation and wage growth.

The BOE has already taken its key rate from 5.25% to 4.75% this year in two quarter-percentage-point moves.
In a deviation from expectations, three members of the Monetary Policy Committee voted to reduce rates, while six were in favor of a hold. Economists polled by Reuters had forecast only one member would vote to cut.
Sterling pared gains against the U.S. dollar directly following the BOE announcement, trading 0.25% higher at 12:40 p.m. The greenback staged a broad rally on Wednesday after the U.S. Federal Reserve cut interest rates by a quarter point but signaled a more hawkish outlook for 2025. It gave up some gains on Thursday morning.

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In a statement, the BOE said the increase in U.K. headline inflation in November to 2.6% was slightly higher than previously expected, adding that services inflation remained “elevated.”
BOE staff also downgraded their economic forecast for the fourth quarter of 2024, now predicting no growth, compared with the 0.3% expansion predicted in its November report.

U.K. growth figures have come in weaker than expected in recent months, with the economy posting a surprise 0.1% contraction in October.
Money markets this week pared back bets on the pace of further trims next year after the publication of data on inflation and summer wage growth, and are now pricing in roughly 50 basis points of upcoming cuts, down from an outlook of around 70 basis points’ worth of cuts on Monday.

‘More divided than ever’

“The split vote decision and the dovish tone of the minutes suggest that a February interest rate cut remains very much in play, if not yet a done deal,” Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in emailed comments.
“The Bank of England risks backing itself into a corner over the pace of policy loosening because, with inflation likely to drift higher, the timing of future interest rate cuts could become increasingly complex, especially if stagflation fears become reality.”

Matthew Ryan, head of market strategy at Ebury, said BOE officials appeared “more divided than ever” on the path ahead for rates, with doves focusing on the fragile U.K. economy, while hawks favored a gradual approach due to the recent uptick in inflation. The recent U.K. budget and the threat of escalating trade tensions under U.S. President Donald Trump next year will also be viewed as inflationary risks, Ryan said.
U.K. borrowing costs were higher following the Thursday announcement, with the yield on 10-year government bonds up 4 basis points at 4.596%. Gilt yields have been in focus this week, as the U.K.’s risk premium over that of Germany reached its highest level since 1990. German bond yields were also up on Thursday, with the yield on 10-year bunds — the euro zone benchmark — jumping by 5 basis points.
The European Central Bank last week cut rates by a quarter point in its fourth such move of the year, signaling a firm intention to enact more monetary easing in 2025. More

LONDON (Reuters) -Bank of England policymakers split over whether to cut interest rates on Thursday with more officials than expected seeking to help the slowing economy with lower borrowing costs despite lingering inflation pressure.The BoE kept its benchmark Bank Rate on hold at 4.75% – as widely expected – but three of the Monetary Policy Committee’s nine members voted to cut them to 4.5%: Deputy Governor Dave Ramsden and external members Swati Dhingra and Alan Taylor.Economists polled by Reuters had expected only one MPC member to vote for a cut. Sterling fell by a third of a cent against the U.S. dollar after the decision was announced.Governor Andrew Bailey said the central bank needed to stick to its existing “gradual approach” to cutting rates.”With the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year,” he said.Economists polled by Reuters last week forecast the BoE would cut rates four times next year. But financial markets have scaled back their expectations sharply in response to faster-than-expected wage growth and only see up to two cuts.Interest rate-sensitive British two-year government bond yields fell sharply before partially recovering to stand around 2 basis points lower than before the decision. Interest rate futures priced in less of a chance of a rate cut in the immediate future – down to a one-in-three possibility at the BoE’s next meeting in February from two-in-five earlier. Expectations for 2025 as a whole were little changed.”The MPC’s ability to ease interest rates next year will be constrained by the challenging inflation backdrop,” Yael Selfin, chief economist at KPMG UK, said.”This will put the BoE in a unique position relative to its counterparts in Europe, particularly the ECB, where a weakening growth outlook increases the urgency to cut rates,” she added.But Suren Thiru, economics director at accountancy body ICAEW, said there were signs the BoE could move more quickly.”The split vote decision and the dovish tone of the minutes suggest that a February interest rate cut remains very much in play, if not yet a done deal,” he said.SLOWER RATE CUTSThe BoE has already been less willing to cut rates than either the U.S. Federal Reserve or the European Central Bank, reducing rates by just half a percentage point this year.Official figures on Wednesday showed British consumer price inflation rose to 2.6% in November – the highest in the Group of Seven rich economies by a small margin, and slightly higher than the BoE itself had forecast last month.”Headline inflation is expected to continue to rise slightly in the near term,” the BoE said.However, the central bank also cut its growth forecast for the final quarter of this year to zero from a 0.3% forecast just six weeks ago.Britain’s economy contracted in September and October – the first back-to-back monthly falls in output since 2020 – according to official data last week and business sentiment has tumbled since finance minister Rachel Reeves announced a 25 billion pound tax hike for employers in her Oct. 30 budget.MPC members who backed keeping rates on hold said it remained “particularly uncertain” whether these higher costs would be passed on to consumers through higher prices or lead to job losses and slower pay growth.”Recent developments added to the argument for a gradual approach to the withdrawal of policy restrictiveness, while eschewing any commitment to changing policy at a specific meeting,” they said.The three MPC members who voted to cut rates said a “very restrictive” policy stance risked pushing inflation too far below its 2% target in the medium term and creating an unduly large amount of spare capacity in the economy. More

LONDON (Reuters) – The Bank of England wrapped up a big year of central bank rate cuts by keeping rates steady on Thursday, a day after the Federal Reserve eased policy but suggested it would be more cautious in 2025. Seven of the world’s 10 major, developed-market central banks cut rates this year, with only Australia and Norway still on hold. Japan, the outlier, is in hiking mode. 1/ SWITZERLAND The Swiss National Bank, which has been at the forefront of monetary easing, cut rates by an unexpectedly large 50 basis points (bps) to 0.5% last week, the lowest since November 2022 and the bank’s biggest reduction in almost a decade. Swiss annual inflation was most recently reported at just 0.7% and the SNB, which is alert to the safe-haven Swiss franc strengthening beyond levels domestic exporters can bear, said it could reduce borrowing costs again next year. 2/ CANADA The Bank of Canada also cut rates by 50 bps to 3.25% last week, marking the first time since the COVID-19 outbreak that it has implemented consecutive half-point cuts. It indicated further easing would be gradual after annual inflation accelerated to 2%, but with Canada’s weak economy threatened by U.S. President-elect Donald Trump’s proposed tariffs, markets placed 50% odds on a 25-bps cut next month. 3/ SWEDENSweden’s Riksbank cut rates by a quarter-point to 2.5% on Thursday, in line with expectations, but signalled it can slow its easing pace in early 2025 after 150 bps of cuts so far this year. The central bank said it favours a more tentative approach – noting that monetary policy affects the economy with a lag. 4/ NEW ZEALAND New Zealand’s economy sank into recession in the third quarter, Thursday data showed, a dire result that cements the case for more aggressive rate cuts.The Reserve Bank of New Zealand next meets in February and its governor says there is scope for a 50-bps cut.It has lowered its cash rate by 125 bps to 4.25% so far this cycle and markets are pricing around another 100 bps of cuts by the middle of next year. 5/ EURO ZONEThe ECB is firmly in easing mode, cutting its deposit rate by 25 bps to 3% last week in its fourth such move this year and keeping the door open to further reductions. It also signalled that further cuts are possible by removing a reference to keeping rates “sufficiently restrictive”, economic jargon for a level of borrowing costs that curbs economic growth.Markets price in roughly 110 bps worth of further tightening by end-2025.6/ UNITED STATES The Federal Reserve cut rates on Wednesday, as expected, but Chair Jerome Powell said more reductions in borrowing costs now hinge on further progress in lowering stubbornly high inflation. That jolted markets, sending stocks down sharply and bond yields higher as investors dialled back expectations of rate cuts for 2025. 7/ BRITAIN The Bank of England kept its main interest rate unchanged at 4.75% on Thursday but policymakers became more divided about whether rate cuts were needed to tackle a slowing economy.The more dovish tone sparked a rally in UK government bond prices, pushing yields down. Still, markets price in less than a 50% chance of a 25-bps rate cut when the BoE next meets in February.8/ NORWAY Norway’s central bank held its policy rate steady at a 16-year high of 4.5% on Thursday.Looking forward, the Norges Bank believes that while restrictive policy is still needed, the time to begin easing is approaching and it expects to start lowering borrowing costs in March next year. 9/ AUSTRALIA The Reserve Bank of Australia held rates steady at a 12-year high of 4.35% last week but softened its tone on inflation, raising the market-implied probability of a quarter-point cut in February to more than 50%. The RBA, which has not changed borrowing costs for more than a year, has taken note of a surprise economic growth slowdown as high rates deterred households from spending despite a recent round of tax cuts. 10/ JAPAN The Bank of Japan, the only G10 central bank in a hiking cycle, kept interest rates unchanged on Thursday, as expected, but markets seized on remarks from governor Kazuo Ueda suggesting the BOJ preferred to wait for Spring wage data before moving again. Investors had seen a January rate increase as likely, and their reassessment of this sent the yen and bond yields tumbling. More