Economy

“Given the multi-decade shock to inflation that we have experienced, we should be looking for the worst in the data rather than the best,” Schmid said, noting that prices can be volatile and the Fed needs “longer periods” to be sure of inflation’s path. “However, if inflation continues to come in low, my confidence will grow that we are on track to meet the price stability part of our mandate, and it will be appropriate to adjust the stance of policy,” he said in remarks prepared for delivery to the Kansas Bankers Association’s annual meeting in Colorado Springs, Colorado. With inflation at around 2.5% and the Fed’s goal at 2%, he said, the Fed is “close, but we are still not quite there.” The Fed last week opted to leave the policy rate in the 5.25%-5.50% range, where it has been for more than a year, but signaled it may start reducing borrowing costs next month as inflation and employment risks are more nearly balanced. A weak jobs report two days after the policy decision sparked fears in financial markets that the Fed will need to respond aggressively to cushion the economy from recession. Schmid pushed back on that view, describing the economy as resilient, consumer demand strong, and the labor market as noticeably cooling but still “quite healthy,” when indicators beyond the rise in the unemployment rate are considered. Given those conditions, he said, the Fed’s current policy stance “is not that restrictive.” And to get further declines in inflation, he added, the labor market needs to cool further. “This story could change if conditions were to weaken considerably more,” he said, but in all he signaled that he remains on a wait-and-watch mode. “The path of policy will be determined by the data and the strength of the economy,” he said. “With the tremendous shocks that the economy has endured so far this decade, I would not want to assume any particular path or endpoint for the policy rate.” More

The former president’s economic agenda has made some notable reversals from the policies he pushed while in the White House.At his convention speech last month, former President Donald J. Trump declared that his new economic agenda would be built around a plan to eliminate taxes on tips, claiming that the idea would uplift the middle class and provide relief to hospitality workers around the country.“Everybody loves it,” Mr. Trump said to cheers. “Waitresses and caddies and drivers.”While the cost and feasibility of the idea has been questioned by economists and tax analysts, labor experts have noted another irony: As president, Mr. Trump tried to take tips away from workers and give the money to their employers.The reversal is one of many that Mr. Trump has made in his bid to return to the presidency and underscores his malleability in election-year policymaking. From TikTok to cryptocurrencies, the former president has been reinventing his platform on the fly as he aims to attract different swaths of voters. At times, Mr. Trump appears to be staking out new positions to differentiate himself from Vice President Kamala Harris or, perhaps, just to please crowds.To close observers of the machinations of Mr. Trump’s first term, the shift on tips, a policy that has become a regular part of his stump speech, has been particularly striking.“Trump is posing as a champion of tipped restaurant workers with his no-tax-on-tips proposal, but his actual record has been to slash protections for tipped workers at a time when they were struggling with a high cost of living,” said Paul Sonn, the director of National Employment Law Project Action, which promotes workers’ rights.In 2017, Mr. Trump’s Labor Department proposed changing federal regulations to allow employers to collect tips that their workers receive and use them for essentially any purpose as long as the workers were paid at least the federal minimum wage of $7.25 an hour. In theory, the flexibility would make it possible for restaurant owners to ensure that cooks and dishwashers received part of a pool of tip money, but in practice employers could pocket the tips and spend them at their discretion.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The Federal Reserve was about to cut interest rates, turning the corner after a long fight with inflation. But now, its soft landing is in question.The Federal Reserve’s fight against inflation was going almost unbelievably well. Price increases were coming down. Growth was holding up. Consumers continued to spend. The labor market was chugging along.Policymakers appeared poised to lower interest rates — just a little — at their meeting on Sept. 18. Officials did not need to keep hitting the brakes on growth so much, as the economy settled into a comfortable balance. It seemed like central bankers were about to pull off a rare economic soft landing, cooling inflation without tanking the economy.But just as that sunny outcome came into view, clouds gathered on the horizon.The unemployment rate has moved up meaningfully over the past year, and a weak employment report released last week has stoked concern that the job market may be on the brink of a serious cool-down. That’s concerning, because a weakening labor market is usually the first sign that the economy is careening toward a recession.The Fed could still get the soft landing it has been hoping for — weekly jobless claims fell more than expected in fresh data released on Thursday, a minor but positive development. Stocks rallied in the wake of that report, with the S&P 500 rising 2.3 percent by the end of the day.Given the possibility that everything will turn out fine, central bank officials are not yet ready to panic. During an event on Monday, Mary C. Daly, the president of the Federal Reserve Bank of San Francisco, suggested that officials were closely watching the job market to try to figure out whether it was cooling too much or simply returning to normal after a few roller-coaster years.“We’re at the point of — is the labor market slowing a lot, or slowing a little?” Ms. Daly said, as she pointed to one-off factors that could have muddled the latest report, like Hurricane Beryl and a recent inflow of new immigrant workers that left more people searching for jobs.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

$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

Donald J. Trump suggested presidents should have input on interest rates, a comment likely to stoke fears that he could try to limit the Federal Reserve’s political independence.Donald J. Trump suggested on Thursday that the president should have a say in setting interest rates — a comment that could rekindle fears that the Republican nominee might try to influence the politically independent Federal Reserve if he is re-elected to the White House.“I feel that the president should have at least say in there, yeah, I feel that strongly,” Mr. Trump said at a news conference Thursday at his Mar-a-Lago club in Palm Beach, referring to the rate-setting process. “I think I have a better instinct than, in many cases, people that would be on the Federal Reserve, or the chairman.”Mr. Trump made a habit of loudly criticizing Fed policy while he was in office, often personally attacking Jerome H. Powell, the Fed chair.Mr. Trump elevated Mr. Powell to his leadership position, to which President Biden has since reappointed him. But Mr. Powell angered Mr. Trump by keeping interest rates higher than he would have preferred. Mr. Trump responded by calling the Fed chair and his colleagues “boneheads” and at another point asking in a social media post who was a bigger “enemy,” Mr. Powell or Xi Jinping, China’s president.Mr. Trump acknowledged that history of animosity on Thursday, saying that he “used to have it out with him.”While Mr. Trump flirted with the idea of firing Mr. Powell during his time in the Oval Office, it is not clear whether it would be legal to dismiss or demote a sitting Fed chair. In the end, Mr. Trump never tried it. Still, there have been big questions about what might await the Fed if Mr. Trump were to win re-election. Mr. Powell’s term as chair runs to mid-2026.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Wharton’s Jeremey Siegel no longer thinks it’s vital for an emergency interest rate reduction, but still wants policymakers to cut quickly and aggressively.
“Would it be bad? No. But would it be necessary? No, not at this time,” he said.

Jeremy Siegel
Scott Mlyn | CNBC

Wharton School Professor Jeremy Siegel no longer thinks it’s vital for the Federal Reserve to implement an emergency interest rate reduction, but still wants policymakers to cut quickly and aggressively.
Siegel caused a stir Monday when he told CNBC that Fed Chair Jerome Powell and his colleagues should institute an emergency 0.75 percentage point decrease now and follow it up with another one in September.

Those comments came with markets cratering amid fears over a recession and concern that the Fed is being too slow-footed in easing policy now that the inflation rate has decelerated. However, positive data since then and a ferocious market rally Thursday apparently have eased the urgency.
“I no longer certainly think it’s necessary. But I want [Powell] to move down to 4% as fast as possible,” Siegel said during a phone interview. “Would it be bad? No. But would it be necessary? No, not at this time.”
The Fed on July 31 voted to hold its key interest rate between 5.25%-5.5%, a decision that quickly came under criticism when a report the next day on weekly jobless claims showed a spike and a manufacturing gauge put the sector further into contraction.
However, data Thursday showed claims moved lower from the previous week, and a service sector reading earlier in the week also was better than expected.
“Obviously, I wanted to shake things up,” Siegel said of his call for an intermeeting move. “There’s no way he’s going to do that without things falling apart. I don’t think things are falling apart. But by all criteria and all monetary rules … they should be under 4%.”

Markets pricing indicates the Fed will cut by at least a quarter percentage point in September and likely by a full point by the end of 2024. However, those expectations have been volatile as investors watch how quickly the Fed thinks it should ease policy.
An emergency cut under these circumstances is “just not the way Jay Powell does things,” Siegel said. “But Jay Powell has done things way too slow, certainly on the way up, and I just want to make sure he doesn’t make the same mistakes on the way down.” More

“The Fed’s out of the election business. The Fed is in the economic business,” Goolsbee said in an interview on Fox News, noting the Fed has been very clear about what economic data would motivate an interest-rate cut, a hold on policy, or even a rate hike.As for the recent stock-market rout, he said, “We’re not in the business of responding to the stock market. We’re in the business of maximizing employment and stabilizing prices.” More

The Fed has “some time” to assess whether this is an economy that’s “gently moving into a normalizing state … or one where you really do have to lean into it,” Barkin said Thursday at a virtual event put on by the National Association for Business Economics.The Richmond fed president also poured cold water on recent fears the labor market is signalling economic doom ahead, noting that the slowing wage growth points to normalizing in the labor market. The Fed, however, would be worried if job growth started to disappear, but that doesn’t appear to be an immediate concern. “What I hear from folks on the ground in the labor market is that people are cutting back on hiring, but not firing,” Barkin added. On the inflation front, Barkin said he was “pretty optimistic” that incoming data over the next few months would show good readings. In a sign that the market concerns about an impending recession is cooling, Barkin flagged the recent dip in bets on a 50 basis points cut in September suggests that the market is returning to the Fed’s view that the economic growth is slowing rather than at risk of falling off a cliff.  Bets on a 50bps cut in September fell to 56% from 72% a day earlier, according to Investing.com’s Fed Rate Monitor Tool. More