Economy

WASHINGTON (Reuters) -The U.S. House of Representatives passed a defense policy bill on Wednesday, governing a record $895 billion in annual military spending, despite inclusion of a controversial policy targeting gender-affirming care for transgender children.The tally was 281-140 in favor of the National Defense Authorization Act, or NDAA, sending it for consideration by the Democratic-led U.S. Senate.In addition to the typical NDAA provisions on purchases of military equipment and boosting competitiveness with archrivals like China and Russia, this year’s 1,800-page bill focuses on improving the quality of life for the U.S. military.It authorizes a 14.5% pay increase for the lowest-ranking troops, and 4.5% for the rest of the force, which is higher than usual. It also authorizes the construction of military housing, schools and childcare centers.The bill bans the military health program, TRICARE, from covering gender-affirming care for the transgender children of service members if it could risk sterilization.Including the provision in the bill, which sets policy for the Department of Defense, underscored how much attention transgender issues have gotten in U.S. politics and indicated Republicans plan to continue to highlight the politically polarizing topic. President-elect Donald Trump and many other Republicans blasted Democrats for supporting transgender rights during the 2024 election campaign, which ended with Republicans keeping control of the House and taking control of the Senate and White House starting next month.’WOKE IDEOLOGY’After it passed, Republican House Speaker Mike Johnson praised the measure as refocusing the military on its core mission. “Our men and women in uniform should know their first obligation is protecting our nation, not woke ideology,” he said in a statement.The measure did not include some other Republican proposals on social issues, including an effort to prohibit TRICARE from covering gender-affirming care for transgender adults and a measure that would have reversed the Pentagon’s policy of funding travel for abortion for troops stationed in states where the procedure is banned. The massive bill is one of the few major pieces of legislation that Congress passes every year and lawmakers take great pride in having passed it every year for more than six decades.The bill is a compromise between Democrats and Republicans in the House and Senate, reached during weeks of negotiations behind closed doors. House passage sends the measure to the Democratic-led Senate. Passage there would send it to the White House for President Joe Biden to sign into law or veto.The NDAA authorizes Pentagon programs, but does not fund them. Congress must separately pass funding in a spending bill for the fiscal year ending in September 2025. That bill is unlikely to be enacted before March. More

At the peak of the outage, which started around 12:50 p.m. ET., more than 100,000 incidents were reported with Facebook (NASDAQ:META) and nearly 70,000 with Instagram.The number of reports has come down to over 1,000 for both apps as of 6 p.m. ET. Downdetector’s numbers are based on user-submitted reports. The actual number of affected users may vary. Some Facebook and Instagram users posted on X that they were encountering an error that said “something went wrong” and that Meta was working to get it fixed.Earlier this year, a technical issue led to an outage that impacted hundreds of thousands of Facebook and Instagram users globally for more than two.The platforms faced another outage in October, when services were largely restored within an hour. More

NEW YORK (Reuters) – Kristin Johnson, a top Democratic official at the Commodity Futures Trading Commission, signalled on Wednesday she would be willing to stay on at the agency under new Republican leadership, serving as a “gadfly” on key issues like crypto and artificial intelligence.President-elect Donald Trump is expected to replace the current Democratic CFTC chair Rostin Behnam with a Republican pick, eventually giving the governing party control of the five-member commission.While the CFTC, which oversees commodity derivatives markets, has traditionally been a junior player in financial policy, it is likely to play a more prominent role as Trump’s administration starts to overhaul cryptocurrency regulations. Johnson’s term is due to expire in April, but speaking at the Reuters NEXT conference in New York on Wednesday, she said she was confident she could carry on doing constructive work in the CFTC’s minority, assuming the White House agrees with Democrats to re-nominate her for a second term.The Biden administration earlier this year nominated Johnson for a top Treasury Department role, but that move and other Democratic nominations have stalled with so little time left on the congressional calendar. “A lot of what happens in the minority is … raising really critical points that the majority might be willing to forego or compromise on … so kind of being a gadfly,” Johnson said.She added: “As a former academic I think I have this in spades.”During her time at the CFTC, Johnson has advocated for stronger rules to protect consumers from fraud in digital currency markets after the collapse of crypto exchange FTX, and is focusing on the ways artificial intelligence could be used both to commit financial crimes and to police them.”What happens next in the journey of integrating AI into financial markets is a really big and important question,” she said. “I think it’s a non-partisan question that really will be at the fore for the incoming administration.” More

FRANKFURT (Reuters) – The European Central Bank is all but certain to cut interest rates again on Thursday and signal further easing in 2025 as inflation in the euro zone is nearly back at its target and the economy is faltering. The ECB has already cut rates at three of its last four meetings. Debate has nevertheless shifted to whether it is easing policy fast enough to support an economy that is at risk of recession and facing political instability at home and the prospect of a fresh trade war with the United States.That question is likely to dominate Thursday’s meeting but policy hawks, who still command a comfortable majority on the 26-member Governing Council, are likely to back just a small cut of 25 basis points, taking the benchmark rate to 3%.In a possible compromise with more dovish policymakers, the cut could come with tweaks to the ECB’s guidance to make clear that further policy easing is coming provided there are no new shocks to inflation, which could hit the central bank’s 2% target in the first half of 2025.”Fundamentals fully justify the December cut and a more dovish forward guidance, given the deterioration in the growth picture. Underlying inflationary pressures have eased and risks of further headwinds to growth have increased after the U.S. election results,” Annalisa Piazza at MFS Investment Management said. A cut is warranted because fresh projections will show inflation, above target for three years now, back at 2% in a few months’ time. That is partly because economies are barely growing across the 20 countries that share the euro.The outlook is so fraught with risk that some policymakers argue the ECB now risks undershooting its inflation target, as it did for nearly a decade before the pandemic, and should move more quickly to avoid falling behind the curve. But hawks say inflation is still a risk given rapid wage growth and the fast-rising cost of services, so that a steady stream of incremental steps is appropriate. U.S. protectionism and political instability in France and Germany are further reasons for caution. Governing Council members simply do not know what policies will be approved by president-elect Donald Trump’s new U.S. administration, how Europe will respond – or what the economic impact will be. Political turmoil in France and Germany’s upcoming election add to the uncertainty and could force the ECB to step in, reinforcing arguments that it should leave itself space to take bold action if needed. “The risk of a confidence crunch that could yet lead to a much steeper downturn in France, spreading through the euro zone via trade links, has inevitably risen,” Sandra Horsfield at Investec (LON:INVP) said. “Keeping powder dry for such an eventuality might be wise. Besides, a steep cut now might fan rather than ease market qualms,” she added. STRING OF CUTSFinancial markets have fully priced in a 25 basis point rate cut on Thursday, with the odds of a bigger step now close to zero – a big change from a few weeks ago when a half percentage point cut was seen as a real possibility. Investors then see a cut at every meeting until June, followed by at least one more cut in the second half of 2025, taking the deposit rate to at least 1.75% by year-end.Any change in the ECB’s guidance for the future is likely to be at the margins. It could drop its reference to needing “restrictive” policy to tame inflation, an implicit signal that rates will come down at least to the so-called neutral level at which they are neither stimulating nor slowing economic activity. The problem is that neutral is an undefined concept and each policymaker has a different estimate, putting the range between 1.75% and 3%, with most seeing it between 2% and 2.5%.But the ECB is likely to keep its intentions vague after having burned itself repeatedly by making explicit commitments that proved difficult or impossible to keep. “Given the massive international geopolitical and policy uncertainty, the ‘data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction’ is still appropriate,” Lorenzo Codogno at LC Macro Advisors said. More

(Reuters) -Photoshop maker Adobe (NASDAQ:ADBE) forecast fiscal 2025 revenue below Wall Street estimates on Wednesday, suggesting the company’s investments to weave AI into its software applications were taking longer than expected to bear fruit. Shares of the San Jose, California-based company fell nearly 9% in extended trading.The company forecast annual revenue for 2025 between $23.30 billion and $23.55 billion, compared with estimates of $23.78 billion, according to data compiled by LSEG.Adobe is making significant investments in AI-driven image and video generation technologies in response to the growing competition from well-capitalized startups such as Stability AI and Midjourney.Although Adobe projected strong growth for the second half of the year in June, its forecast on Wednesday indicated the company was still struggling to monetize its AI push. “While the market’s initial fears about AI disruption have subsided, Adobe’s continued lack of AI monetization makes it increasingly difficult to pick them as a clear AI winner,” said Charlie Miner, analyst at Third Bridge.The company’s advancements into video-generation technology put it head-to-head with ChatGPT maker OpenAI, which boasts its own model, Sora. Adobe expects foreign exchange volatility and its shift towards subscriptions to cut into its fiscal 2025 revenue by about $200 million.However, DA Davidson analyst Gil Luria said the company is well-positioned to benefit from a return of enterprise spending, including from AI.”Adobe’s image and video AI generation capabilities are getting broad adoption, which should continue to grow as the models get better,” Luria said. Last month, the company added software tools that let customers use AI to create images based on Adobe’s library of stock images. It forecast first-quarter revenue between $5.63 billion and $5.68 billion, which fell short of estimates of $5.73 billion. Adobe’s fourth-quarter revenue rose 11% to $5.61 billion from a year ago, beating market expectations of $5.54 billion.On an adjusted basis, the company earned $4.81 per share, compared with estimates of $4.66. More

¥9000 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.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

If President-elect Donald Trump is going to push inflation back down to a more tolerable level, he will need help from housing costs.
It’s not clear that inflation is consistently and convincingly headed back to the Federal Reserve’s 2% goal, at least not until housing inflation eases even more.
The average national rent in October stood at $2,009 a month, down slightly from September but still 3.3% higher than a year ago.

Homes under construction in Englewood Cliffs, New Jersey on Nov. 19th, 2024.
Adam Jeffery | CNBC

If President-elect Donald Trump is going to push inflation back down to a more tolerable level, he will need help from housing costs, an area where federal policymakers have only a limited amount of influence.
The November consumer price index report contained mixed news on the shelter front, which accounts for one-third of the closely followed inflation index.

On one hand, the category posted its smallest full-year increase since February 2022. Moreover, two key rent-related components within the measure saw their smallest monthly gains in more than three years.
But on the other hand, the annual rise was still 4.7%, a level that, excluding the Covid era, was last seen in mid-1991 when CPI inflation was running around 5%. Housing contributed about 40% of the monthly increase in the price gauge, according to the Bureau of Labor Statistics, more than food costs.
With the CPI annual rate now nudging up to 2.7% — 3.3% when excluding food and energy — it’s not clear that inflation is consistently and convincingly headed back to the Federal Reserve’s 2% goal, at least not until housing inflation eases even more.
“It would be expected that over time, we would start to see year-over-year slower growth in rents,” said Lisa Sturtevant, chief economist at Bright MLS, a Maryland-based listing service that covers six states and Washington, D.C. “It just feels like it’s taking a long time, though.”

Still rising but not as fast

Indeed, housing inflation has been on a slow, uneven trek lower since peaking in March 2023. Much like the overall CPI, shelter components continue to rise, though at a slower pace.

The housing issue has been caused by ongoing cycle of supply outstripping demand, a condition that began in the early days of Covid and which has yet to be resolved. Housing supply in November was about 17% below its level five years ago, according to Realtor.com.
Rents have been a particular focus for policymakers, and the news there also has been mixed.
The average national rent in October stood at $2,009 a month, down slightly from September but still 3.3% higher than a year ago, according to real estate market site Zillow. Rents over the past four years are up some 30% nationally.
Looking at housing, costs also continue to climb, a condition exacerbated by high interest rates that the Federal Reserve is trying to lower.

Though the central bank has cut its benchmark borrowing rate by three-quarters of a percentage point since September, and is expected to knock off another quarter point next week, the typical 30-year mortgage rate actually has climbed about as much as the Fed has cut during the same time frame.
All of the converging factors post a potential threat to Trump, whose policies otherwise, such as tax breaks and tariffs, are projected by some economists to add to the inflation quandary.
“We know that some of the president-elect’s proposed initiatives are quite inflationary, so I think the prospects for continued progress towards 2% are less sure than they might have been six months ago,” Sturtevant said. “I don’t feel like I’ve been compelled by anything in particular that suggests that targeting the supply issue is something that the federal government can meaningfully do, certainly not in the short term.”

Optimism for now

During the presidential campaign, Trump made deregulation a cornerstone of his economic platform, and that could spill into the housing market by opening up federal land for construction and generally lowering barriers for homebuilders. Trump also has been a strong proponent for lower interest rates, though monetary policy is largely out of his purview.
The Trump transition team did not respond to a request for comment.
The mood on Wall Street was generally upbeat about the housing picture.
“Rents may finally be normalizing to levels consistent with 2% inflation,” Bank of America economist Stephen Juneau said in a note. The November housing data “will be viewed as encouraging at the Fed,” wrote economist Krushna Guha, head of central bank strategy at Evercore ISI.
Still, shelter expenses “continue to be the number one source for higher prices, and that the rate of increase has slowed is no comfort,” said Robert Frick, corporate economist at Navy Federal Credit Union.
That could cause trouble for Trump, who faces a potential Catch-22 that will make easing the housing burden difficult to solve.
“We’re not going to drop rates until shelter costs come down. But shelter can’t come down until rates are lower,” Sturtevant said. “We know that there are some wild cards out there that we might not have been talking about two or three months ago.” More

The US Treasury building in Washington, DC, US, on Tuesday, Aug. 15, 2023.
Nathan Howard | Bloomberg | Getty Images

The U.S. budget deficit swelled in November, putting fiscal 2025 already at a much faster pace than a year ago when the shortfall topped $1.8 trillion, the Treasury Department reported Wednesday.
For the month, the deficit totaled $366.8 billion, 17% higher than November 2023 and taking the total for the first two months of the fiscal year more than 64% higher than the same period a year ago on an unadjusted basis.

The increase came despite receipts that totaled $301.8 billion, about $27 billion more than last November. Outlays totaled $668.5 billion, or nearly $80 billion more from a year ago.
The increase in red ink brought the national debt to $36.1 trillion as the month drew to a close.
On an adjusted basis, the deficit was $286 billion and has totaled $544 billion year to date, an increase of 19%.
Though the Fed has enacted two rate cuts since September totaling three-quarters of a percentage point, interest expenses continue to be a big contributor to the deficit. Net interest expenses totaled $79 billion on the month and are now at $160 billion for the fiscal year, outpacing all other outlays except Social Security, Medicare, defense and health care.
The Treasury Department expects to pay $1.2 trillion this year in total interest on debt.

Don’t miss these insights from CNBC PRO More