Economy

“Fed funds futures now price less than a 20% probability of a follow-up cut on 29 January,” Standard Chartered said, adding that this was “too low.”The December labor market data will likely point to ongoing softness that would justify another cut in January.”Our baseline forecast is that it cuts again on 29 January, because we expect the incoming labour market data to soften further,” the bank said.”A higher unemployment rate or nonfarm payrolls growth of 125k or less should be enough [for the Fed to cut in January],” it added.With a December rate cut now widely expected, the Fed’s summary of economic (SEP) projections are likely to garner the bulk of investor attention amid expectations that the Fed could signal fewer cuts.But the Fed is likely to wait until at least March to make a major tweak to monetary policy, Standard Chartered said. The bank expects the Fed’s summary SEP to project an end-2025 federal funds rate at 3.625%, with a potential drop to 3.125%.While the bank believes the the Fed is poised to cut rates, the extent and timing of future cuts may be more measured than currently anticipated by the market. More

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WASHINGTON (Reuters) – Bitcoin hit a record high above $107,000 on Monday after President-elect Donald Trump reiterated plans to create a U.S. bitcoin strategic reserve, stoking the enthusiasm of crypto bulls. Here’s how the plan could work.WHAT IS A STRATEGIC RESERVE?A strategic reserve is a stock of a critical resource which can be released at times of crisis or supply disruptions. The best-known example is the U.S. Strategic Petroleum Reserve, the world’s largest supply of emergency crude oil, which was created by an act of Congress in 1975 after a 1973-74 Arab oil embargo throttled the U.S. economy. Presidents have tapped the stockpile to calm oil markets during war or when hurricanes hit oil infrastructure along the U.S. Gulf of Mexico. Canada has the world’s only strategic reserve of maple syrup, while China has strategic reserves of metals, grains and even pork products.HOW WOULD A U.S. STRATEGIC BITCOIN RESERVE WORK?Analysts and legal experts are divided on whether Trump could use his executive powers to create the reserve, or whether an act of Congress would be necessary. Some have argued Trump could create the reserve via an executive order directing the U.S. Treasury’s Exchange Stabilization Fund, which can be used to purchase or sell foreign currencies, and to also hold bitcoin.The reserve could include bitcoin that the government has seized from criminal actors. That stands at around 200,000 tokens, worth about $21 billion at the current price, according to bitcointreasuries.net. Trump suggested in a July speech unveiling his bitcoin reserve plan that this stockpile could be the starting point, although it remains unclear what the legal process would be for moving them out of the Justice Department. Trump has not said if the government would add to that stockpile by buying more bitcoin in the open market. To do that, the government may have to issue debt, although some proponents of a bitcoin reserve say the United States could sell some of its gold reserves and use the proceeds to buy bitcoin.Currently, the most concrete bitcoin reserve proposal circulating in Washington comes from pro-crypto Republican Senator Cynthia Lummis, who personally holds five bitcoins, she told CNBC last month. In July, she introduced a bill, yet to gain traction, that would create a reserve operated by the Treasury. The bill envisages that the Treasury would create a program to buy 200,000 bitcoins annually for five years until the stockpile hit one million tokens. This would represent about 5% of the total global supply of bitcoin of around 21 million. The Treasury would fund the purchases with profits on Federal Reserve banks’ deposits and gold holdings.The bitcoin reserve would subsequently be maintained for a minimum of 20 years. WHAT ARE THE BENEFITS OF A BITCOIN RESERVE?In his July speech, Trump suggested a bitcoin reserve would help the U.S. dominate the global bitcoin market in the face of growing competition from China.Other proponents argue that by holding a stockpile of bitcoin, which they say is likely to continue appreciating over the long term, the U.S. could reduce its deficit without raising taxes, strengthening the U.S. dollar. In November, Lummis told Fox Business that her plan would allow the United States to cut its debt in half in 20 years. “What that does is help us protect ourselves against inflation and protect the U.S. dollar on the world stage,” she said. A strong dollar would in turn give the United States more leverage over foreign adversaries like China and Russia, proponents say. WHAT ARE THE RISKS?Crypto skeptics say that, unlike most other commodities, bitcoin has no intrinsic use and is not crucial to the functioning of the U.S. economy. Created in 2008, bitcoin remains too young and volatile to presume its value will continue to rise in the long term, while crypto wallets remain notoriously vulnerable to cyber attacks, they also argue. And given its volatility, any government purchases or sales could have an outsized impact on bitcoin’s price. More

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The financial institution anticipates a divided decision, with at least one member likely to push for a more aggressive 50 basis point reduction. Furthermore, Bank of America foresees new forward guidance from Banxico, suggesting the possibility of an accelerated pace of rate cuts.Banxico has previously indicated in its November forward guidance that it plans to lower rates in subsequent meetings. The rationale behind the expected rate cuts includes core inflation remaining under 4%, a sluggish economy despite an unexpected growth in third-quarter GDP, and the U.S. Federal Reserve’s own rate-cutting measures. Despite these factors, challenges such as headline inflation hovering around 5%, close to 5% services inflation, a tight labor market, a weakening Mexican peso, and uncertainties surrounding domestic reforms and U.S. policies under President-elect Donald Trump, create a complex backdrop for monetary policy decisions.Moreover, inflation expectations are still above the 3.0% target, which adds to the caution exercised by Banxico. With these considerations in mind, Bank of America predicts a gradual but consistent reduction in the policy rate for the remainder of this year and into the early part of the next, aiming for a rate of 8.75%. However, there remains a risk that Banxico may opt for a more rapid pace, potentially enacting 50 basis point cuts as soon as December and possibly cutting rates more deeply than Bank of America currently expects.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

The measure would likely keep the roughly $6.2 trillion federal budget running at its current level, funding everything from the military to air traffic controllers to federal securities regulators at their current level. It is expected to include an extension of the farm bill, an omnibus package passed every five years, a Republican Senate aide said.The stopgap measure is needed because Congress failed to pass its 12 annual appropriations bills in time for the current fiscal year, which began on Oct. 1. The government’s “mandatory” programs – which include Social Security and Medicare retirement and healthcare benefits and represent about two-thirds of the budget – renew automatically.Congress’ failure to address the gap between federal revenue and spending has contributed to the rising national debt — currently north of $36 trillion. Congress will have to address that again early next year, when a 2023 deal to extend the nation’s “debt ceiling” expires. Failure could shock bond markets with potentially severe economic consequences.Democrats had pushed for a longer bill, funding the government through the end of its current fiscal year, which ends Sept. 30. But Republicans balked, wanting to wait for final agreement until after President-elect Donald Trump is sworn in on Jan. 20 and their party takes its majorities in both the Senate and House of Representatives. Trump and congressional Republicans campaigned this year on a promise of significantly cutting the number of federal workers and proposing deep cuts to many of the government’s programs.(This story has been refiled to say ‘negotiators aim,’ not ‘negotiating deal,’ in the headline) More

Finance Minister Joerg Kukies and his budget department have communicated with all ministries and government bodies, detailing that the interim government will manage the country’s finances based on the 2025 draft budget until a new administration formulates its own fiscal strategy.The temporary budget will restrict spending to obligations that are legally mandated and essential for the nation’s operations. This includes disbursing funds for unemployment and child benefits, student grants, and ongoing or planned construction projects. In case of emergencies, parliament retains the authority to sanction additional expenditures.The requirement for a provisional budget arose after the coalition parties failed to reach a consensus on the 2025 budget in November. Subsequently, Chancellor Scholz relieved Christian Lindner, a member of the Free Democrats, from his role as finance minister. On Monday, lawmakers are expected to endorse a motion to dissolve parliament, which will facilitate the early elections.The interim budget is set to stay in effect throughout the coalition discussions and until the incoming government establishes its budget for the year 2025. Finance ministry officials anticipate that the new government will likely finalize its budget in the latter half of the next year.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More