Economy

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$1 for 4 weeksThen $75 per month. Complete digital access to quality FT journalism. Cancel anytime during your trial.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

DALLAS (Reuters) -Ongoing economic growth, a solid job market, and inflation that remains above its 2% target mean the Federal Reserve does not need to rush to lower interest rates, Fed Chair Jerome Powell said on Thursday in remarks that may point to borrowing costs remaining higher for longer for households and businesses alike.Powell affirmed that he and his fellow policymakers still consider inflation to be “on a sustainable path to 2%” that will allow the U.S. central bank to move monetary policy “over time to a more neutral setting” that isn’t meant to slow the economy.But what that neutral rate might be in the current environment and how quickly the Fed might try to reach it all remain up in the air, particularly as central bankers assess both the ongoing strength of the economy and the impact the incoming Trump administration’s policies, from higher tariffs to less immigrant labor, may have on economic growth and inflation.Powell largely deflected questions about how new tariffs on imports or running the economy with fewer workers might alter the path of inflation the central bank has been trying to lower.”We can do the arithmetic. If the are fewer workers there’ll be less work done,” Powell said, before adding “this is getting me into political issues that I really want to stay as far away from as I possibly can.”As of now, he said the economy was sending no distress signal that might prompt the Fed to accelerate rate cuts, and to the contrary “if the data let us go a little slower, that seems a smart thing to do.””The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully,” Powell said in prepared remarks delivered at a Dallas Fed event.Fed officials and investors are taking stock of how continued U.S. economic strength and the uncertainty around the economic agenda of President-elect Donald Trump’s administration, particularly regarding tax cuts, tariffs and an immigration crackdown, may affect economic growth and inflation.After Powell’s prepared remarks yields on shorter-term Treasury bonds rose, and traders pared bets about how far the Fed might cut rates in this cycle. The central bank cuts its benchmark overnight right to a 4.5% to 4.75% range at a meeting last week. As of September officials saw the rate dropping as far as 2.9% in 2026, but investors now see it remaining as high as 3.9%. “We still think the FOMC is likely to cut at December but think today’s speech opens the door to dialing down the pace of easing as soon as January,” wrote JP Morgan chief U.S. economist Michael Feroli. NO OBVIOUS ANSWERDuring a question-and-answer session, Powell said that while Fed staff may begin puzzling through the possible impact of tariffs and other campaign proposals from Trump, it will take time to understand, and won’t become clear until new laws or administrative edicts are approved or issued.”The answer is not obvious until we see the actual policies,” Powell said. “I don’t want to speculate…We are still months away from a new administration.”Still, he noted that economic conditions are different now than when Trump began his first term eight years ago, when there was lower inflation, lower growth and lower productivity.A recent surge in immigration, for example, “made for a bigger economy” at a time of post-pandemic labor shortage, Powell said. More broadly, following an election last week that may have turned on voter perceptions of the nation’s economic ills, Powell said the current situation was actually “remarkably good.”The economy’s strengths include a still-low 4.1% unemployment rate, growth at what Powell called a “stout” 2.5% annual pace that remains above Fed estimates of its underlying potential, consumer spending driven by rising disposable income, and growing business investment.Yet key measures of inflation remain above target. The personal consumption expenditures price index for October has not been released yet, but Powell said recent data that feeds into it indicates the PCE excluding food and energy costs rose at a 2.8% rate last month – which would mark a fourth consecutive month in which progress on inflation by that measure has stalled.The Fed uses the headline PCE reading to set its 2% inflation target – Powell said that figure likely was around 2.3% in October – while the “core” measure is considered a guide to the direction of underlying inflation.Traders still expect the Fed to cut interest rates by another quarter of a percentage point at its Dec. 17-18 meeting, and Powell said the central bank still has faith in continued disinflation.But policymakers also remain on guard.Major aspects of inflation “have returned to rates closer to those consistent with our goals … We are watching carefully to be sure that they do … Inflation is running much closer to our 2% longer-run goal, but it is not there yet,” he said. More

SINGAPORE (Reuters) – The dollar was headed for its best week in more than a month on Friday, buoyed by expectations of fewer Federal Reserve rate cuts and the view that Donald Trump’s policies could further stoke inflation when he assumes office in January.The greenback hovered near a one-year high against a basket of currencies at 106.88, eyeing a weekly gain of 1.8%, which would mark its best performance since September.The euro was in turn on track for its worst weekly performance in seven months with a fall of 1.75%. The common currency last bought $1.0530, languishing near a one-year low hit in the previous session.Sterling traded 0.02% lower at $1.2666 and was similarly set to lose 2% for the week, its worst weekly fall since January 2023.Fed Chair Jerome Powell said on Thursday the central bank does not need to rush to lower interest rates, citing ongoing economic growth, a solid job market and sticky inflation as reasons for caution against easing policy too quickly.Traders reacted by paring bets of the pace and scale of future U.S. rate cuts, with Fed funds futures now implying just 71 basis points worth of easing by end-2025.Pricing for a 25 bp rate cut next month has also fallen to just 48.3% from 82.5% a day ago, according to the CME FedWatch tool.”Markets just took (Powell’s) comments at face value and therefore scaled back expectations for the pace of FOMC cuts,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:CMWAY) (CBA).”We still think a December 25bp cut is likely. I think that’s a reasonable baseline, but I think Powell’s comments just underscored the resilience of the U.S. economy.”Markets are going to focus on the prospect of President Trump’s policy platform, so in the near term, we could see further gains in the U.S. dollar.”Higher trade tariffs and tighter immigration under President-elect Trump’s incoming administration are projected to fuel inflation, potentially slowing the Fed’s easing cycle longer term.Expectations for deeper deficit spending are also lifting U.S. Treasury yields, providing the dollar with additional support. [US/]Against a resurgent dollar, the yen has once again come under the spotlight, as it continues to weaken deeper into a territory that triggered intervention from Japanese authorities in the past.The yen was last 0.2% lower at 156.57 per dollar, on track for a weekly decline of 2.5%.The Japanese currency has fallen some 11% since its September peak and weakened past the 156 per dollar level for the first time since July in the previous session.”The pace always matters more than the level. Given the yen has already weakened by 11% against the dollar over the past two months, I think we are getting closer to an actual intervention,” said CBA’s Kong.Data on Friday showed Japan’s economy expanded by an annualised 0.9% over the July-September quarter, slowing from the previous three months due to tepid capital spending.Elsewhere, the Australian dollar eased 0.06% to $0.6450 and was set to lose just over 2% for the week, its worst weekly performance in four months.The New Zealand dollar was similarly eyeing a weekly fall of 2%. It last edged 0.05% lower to $0.5846, languishing near a one-year low.In cryptocurrencies, bitcoin dipped back below the $90,000 level as some investors took profits after a stellar run.The world’s largest cryptocurrency has surged nearly 30% on a two-week rolling basis on the view that friendlier U.S. regulation was imminent under Trump’s administration and could usher in a new boom for all corners of the asset class.Still, some remain cautious on bitcoin’s relentless rally and the risks involved with its volatility.”There are several risks factors that are converging. With crypto at all-time highs, both FOMO and risks are also at all-time highs,” said Joshua Chu, co-chair of the Hong Kong Web3 Association.”This factor in the traditional profit-taking rule means that non-institutional investors chasing after the FOMO rally will be taking on considerable risks.” More

HAVANA (Reuters) – Cuba is unlikely to see any growth in 2024, Economy Minister Joaquin Alonso said on Thursday, as its already sputtering state-run economy struggles to recover from a string of natural disasters this year.Hurricanes Oscar and Rafael struck the Caribbean island in October and November, knocking out power to millions and exposing new vulnerabilities in an already decrepit and obsolete electrical grid. The storms, together with a powerful magnitude 6.8 earthquake earlier this week near the country’s second largest city, Santiago – destroyed at least 34,000 homes, officials said, and knocked out infrastructure across the nation.”The economy should not grow this year,” Alonso told reporters in Havana. “Indisputably there has to be an impact.”Daily rolling blackouts, which have plagued most of the island this year, remain the norm throughout Cuba. Authorities called for extended emergency blackouts in capital Havana on Thursday.”The economic development of a country depends greatly on energy and we have had electrical problems throughout the year and not just this month,” Alonso added.Several weeks of managing natural disasters have sapped resources in the Communist-run country already suffering severe shortages of food, fuel, water and medicine. The multi-year crisis had spawned a record-breaking exodus of Cubans off the island.Cuba’s economy contracted 1.9% in 2023, the economy ministry said in July. More

MEXICO CITY (Reuters) -The Bank of Mexico on Thursday lowered its benchmark interest rate by 25 basis points for a third straight meeting, underscoring progress on bringing down core inflation and signaling future rate cuts were possible. The five-member governing board of Banxico, as Mexico’s central bank is known, voted unanimously to cut the key rate to 10.25%.Analysts polled by Reuters had overwhelmingly forecast the reduction, which comes a week after the Federal Reserve cut borrowing costs in the United States by a similar magnitude. In a statement announcing its decision, Banxico noted the inflation outlook has improved while the closely watched core inflation rate, considered a good indicator for price trends, is expected to keep decreasing.”Looking ahead, the Board expects that the inflationary environment will allow further reference rate adjustments,” the statement said.In October, core inflation, which excludes volatile energy and food prices, slowed to 3.80% in the 12 months through October, down from 3.91% in September. Meanwhile, annual headline inflation rate ticked up to 4.76% in October, from 4.58% in September.Banxico targets headline inflation at 3%, plus or minus one percentage point.”The board left the door open to further interest rate cuts over the coming months, but officials will be keeping a close eye on the peso – especially if the incoming Trump administration steps up its threats to impose tariffs on Mexico,” said Jason Tuvey, deputy chief emerging markets economist at Capital Economics. Mexico’s peso currency has weakened sharply over the past six months, as a series of post-Mexican election reforms shook investor confidence in the country’s legal system, and as Donald Trump’s U.S. election victory last week fuels uncertainty over the future of the critical bilateral trade relationship. Alberto Ramos, head of Latin America research at Goldman Sachs, said the bank expects Banxico to deliver another 25-basis-point cut at its December meeting.However, Ramos said “the bar to accelerate the pace of cuts to 50 basis points is relatively high given prevailing domestic and external uncertainty, in particular around a number of issues in the U.S.-Mexico bilateral agenda,” namely concerning tariffs.Banxico’s board raised its forecast for average headline inflation in the fourth quarter, but still sees the rate converging to its target in the fourth quarter of 2025. More

On Thursday, Gerard Malouf & Partners launched a lawsuit against the country’s top two supermarkets, Woolworths and Coles, accusing the duo of promoting misleading discount claims on daily-use products.Earlier in September, Australia’s consumer watchdog took the supermarket chains to court over “illusory” discounts, claiming that the firms had benefitted from revenue derived from the affected millions of units of products.The country’s incumbent prime minister, Anthony Albanese, who has faced pressure to do more to combat rising grocery prices and who goes to an election within a year, said the actions alleged by the regulator would be unacceptable if true.Gerard Malouf & Partners, however, clarified that its lawsuit was different from that of the Australian Competition and Consumer Commission (ACCC), as the former is seeking refunds for the affected customers. The consumer protection law firm said its suit had been launched to retrieve the price difference consumers had to fork out between the advertised ‘discounted’ prices and the real prices for hundreds of commonly purchased products at Coles between February 2022 and May 2023, and at Woolworths between September 2021 and May 2023.”We estimate that the average Australian consumer could be eligible for a refund ranging between A$200 and A$1,300 +, depending on their shopping habits and purchases at these retailers,” the law firm’s chairman, Gerard Malouf, said in a statement on Thursday.The law firm alleged that everyday items at both the companies had been subject to price hikes and the discounted prices were either higher or same as the price before the increase. More

(Reuters) -Britain should stand up for free trade and rebuild ties with the European Union as the global economy fragments, Bank of England Governor Andrew Bailey said in a speech on Thursday that cast an eye towards Donald Trump’s White House return.Bailey said a commitment to open trade was vital to boost weak investment in Britain and restore productivity growth, along with an unlocking of capital from businesses and pension funds, something planned by finance minister Rachel Reeves.Brexit – which was backed by voters in 2016 and took effect in early 2020 – had contributed to a weakening of Britain’s trade flows and weighed on the potential productive capacity of its economy, Bailey said. “As a public official I take no position on Brexit per se. That’s important. But I do have to point out consequences,” Bailey said in his annual Mansion House speech to financial services leaders in London.”It underlines why we must be alert to and welcome opportunities to rebuild relations while respecting the decision of the British people.”While the new Labour government has ruled out rejoining the EU’s single market or customs union, Prime Minister Keir Starmer has said he wants to improve trade ties and diplomatic relations with the bloc.Finance minister Rachel Reeves, speaking just before Bailey at the same event, said Britain needed to “reset” its relationship with the EU and that she also looked forward to working closely with Trump to strengthen trade ties.Bailey said Britain needed to look at the wider picture for growth, and not just the impact of Brexit.While Bailey did not refer directly to the U.S. election in his speech, policymakers around the world are still digesting Trump’s victory and the prospect of double-digit tariffs on goods imported by the United States.These would have far-reaching implications for global trade and inflation, the BoE governor said.”The picture is now clouded by the impact of geopolitical shocks and the broader fragmentation of the world economy,” Bailey said.”Amidst the important need to be alert to threats to economic security, let’s please remember the importance of openness… We must do what we sensibly can to preserve safe openness of the economy,” Bailey said. Earlier on Thursday, fellow BoE rate-setter Catherine Mann, who is a U.S. economist, said the BoE should keep interest rates on hold until upside risks to inflation – including those posed by the election of Trump – dissipate.Bailey said he backed finance minister Reeves’ plans to boost public investment announced in a budget two weeks ago.But he agreed with the government’s budget forecaster that the budget measures alone would not raise long-run potential economic growth in Britain by much.”That needs to be accompanied by stronger business investment… And that business investment will depend on quite a few things including good public infrastructure,” he said. More