Economy

Republican presidential nominee Donald Trump on Thursday said that he should have a voice when the Federal Reserve makes its decisions on interest rates.
While in office from 2017-21, Trump was a fierce critic of Chair Jerome Powell, whom Trump appointed in 2018.

Republican presidential candidate former President Donald Trump speaks during a press conference at his Mar-a-Lago estate on August 08, 2024, in Palm Beach, Florida. 
Joe Raedle | Getty Images

Republican presidential nominee Donald Trump on Thursday said that he should have a voice when the Federal Reserve makes its decisions on interest rates.
“I feel the president should have at least (a) say in there,” Trump said during a news conference at his Mar-a-Lago residence in Florida. “Yeah, I feel that strongly. I think that in my case, I made a lot of money, I was very successful, and I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman.”

The comments seem to reinforce reporting earlier this year, from the Wall Street Journal and elsewhere, that advisors close to the former president are looking at a host of changes for the central bank should he be elected in November.
Among the ideas being floated are forcing the Fed to consult with the president when making rate decisions. Others include making the central bank run regulatory changes past the White House and using the Treasury Department as an overseer for the Fed’s actions.
While in office from 2017 to 2021, President Trump was a fierce critic of Chair Jerome Powell, whom Trump appointed in 2018.
“Well, look, the Federal Reserve is a very interesting thing. It’s sort of gotten it wrong a lot, and he’s tending to be a little bit later on things,” Trump said of Powell and his colleagues. Powell “gets a little bit too early and a little bit too late. And, you know, that’s very largely a, it’s a gut feeling. I believe it’s really a gut feeling. And I used to have it out with him.”
Fed officials often stress the importance of the central bank’s independence from political influence, and Powell has said repeatedly that criticisms from Trump or other officials don’t weigh into monetary policy decisions.

Trump insisted that he and Powell “get along fine” though part of the changes his team is looking at include dismissing Powell or at least not reappointing him when his term as chair expires in 2026.
The Fed has undergone criticism for waiting too long to raise rates when inflation started to spike in 2021, and now faces the same scrutiny for not reducing even though inflation rates have moved steadily lower.
Sen. Elizabeth Warren (D-Massachusetts), for instance, has repeatedly called on the Fed to lower rates.
The Fed hiked benchmark interest rates 5.25 percentage points from March 2022-July 2023 in an effort to bring down inflation. Markets widely expect the central bank to start reducing rates in September. Trump generally favors lower interest rates and criticized the Fed frequently for raising in 2018. More

The key mortgage rate had its biggest one-week decline of the year, falling to the lowest level in 15 months.Mortgage rates have fallen to their lowest level in more than a year, a balm for prospective home buyers and sellers in a challenging real estate market.The average rate on 30-year mortgages, the most popular home loan in the United States, dropped to 6.47 percent this week, Freddie Mac reported on Thursday. That rate has been steadily easing since April, when it rose above 7 percent — a relief for not only buyers, but also potential sellers who have felt locked into lower rates on their existing loans and have kept their houses off the market.The decline, from 6.73 percent a week earlier, was the biggest this year.Mortgage rates stood at around 3 percent in late 2021. They began climbing when the Federal Reserve started raising its benchmark rate to combat inflation, reaching levels not seen in two decades.“The decline in mortgage rates does increase prospective home buyers’ purchasing power and should begin to pique their interest in making a move,” Sam Khater, Freddie Mac’s chief economist, said in a statement.The decline in mortgage rates could also allow existing homeowners to refinance, Mr. Khater said. The share of market mortgage applications that reflect refinancing was the highest in more than two years, according to Freddie Mac.The Fed is expected to start lowering interest rates in September after holding them at 5.3 percent for the past year. Investors increasingly anticipate that the initial cut will be half a percentage point.While the Fed’s benchmark rate and mortgage rates aren’t directly connected, a Fed rate cut could indirectly put even more downward pressure on mortgages. The 10-year U.S. Treasury yield, which underpins borrowing costs, dropped this week as panic ensued after a weaker-than-expected jobs report, contributing to the mortgage-rate movement.Sales of existing homes slipped 5.4 percent in June from a year earlier, according to the National Association of Realtors — a sign of continued sluggishness in the housing market. Homes sat on the market longer, and sellers received fewer offers.The lower mortgage rate could encourage some homeowners to get into the market, said Julia Fonseca, an assistant professor of finance at the University of Illinois at Urbana-Champaign. But as of March, nearly 60 percent of mortgage holders had rates of 4 percent or less, she added, still far from the current cost of borrowing.“It’s a step — but it’s a small step,” Ms. Fonseca said of the latest drop. “We’re moving in the direction of lowering borrowing costs and less lock-in, but we still have a ways to go if we consider how low these rates that people have locked in actually are.” More

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By Medha Singh and Lisa Pauline Mattackal(Reuters) -“Never sell your bitcoin,” Donald Trump told a cheering crowd at a crypto convention in Nashville, Tennessee in late July.The Republican presidential candidate’s speech was the latest overture in his effort to court crypto-focused voters ahead of November’s election and offered a bevy of campaign promises, including a plan for a state bitcoin reserve.     “If elected, it will be the policy of my administration to keep 100% of all the bitcoin the U.S. government currently holds or acquires into the future,” Trump said, adding the funds would serve as the “core of the strategic national bitcoin stockpile.”  Indeed, Trump isn’t the only one with such a proposal. U.S. Senator Cynthia Lummis has introduced legislation that would see the U.S. government purchase one million bitcoin, around 5% of total supply, while independent candidate Robert F Kennedy Jr has suggested a government stockpile of four million bitcoin. A strategic reserve would be one use for the massive amount of bitcoin held by the U.S. government. The jury’s out on what it would be used for, whether it’s feasible, or if it’s even welcome for the broader crypto market, though. The U.S. government holds a bumper cache of crypto: around $11.1 billion worth which includes 203,239 bitcoin tokens, according to data firm Arkham Intelligence which said the pile came from criminal seizures, including from online marketplace Silk Road, which was shut down in 2013. At current levels, the U.S. holds about 1% of overall global bitcoin supply – which stands at about 19.7 million tokens, according to Blockchain.com. Bitcoin’s total supply is capped at 21 million coins. To compare against big non-state investors, Michael Saylor’s Microstrategy (NASDAQ:MSTR) holds about 226,500 bitcoin tokens, as per second-quarter results. BlackRock (NYSE:BLK)’s iShares Bitcoin Trust and Grayscale Bitcoin Trust hold 344,070 and 240,140 tokens respectively, according to data site BitcoinTreasuries. A government bitcoin stockpile could shore up bitcoin’s price. “It would have a positive impact on price. It would have to because we’ve never had such a limited supply commodity, albeit digital, assume a new state of a reserve asset,” said Mark Connors, head of global macro at Onramp Bitcoin. Yet such a reserve also means fewer tokens for crypto investors to trade with and could leave them exposed if the government ever sold part of its reserves. “RFK talked about having 19% of bitcoin, the same amount of the gold supply – I can’t imagine a single bitcoiner would be happy about that,” Connors added. Governments besides the United States also boast bumper hoards of bitcoin, with BitcoinTreasuries reporting China is the second largest government holder, with 190,000 coins. ‘A LOT TO FIGURE OUT’While the prospect of a national bitcoin reserve is uncertain, crypto watchers are nonetheless pondering what form it could take.Connors suggested the Federal Reserve could manage the reserves for the Treasury Department, as it does with gold. On the other hand, the stockpile could be more akin to the Strategic Petroleum Reserve, where both the president and Congress have varying amounts of control, according to Frank Kelly, senior political strategist at asset manager DWS Group. “There’s a lot to parse and figure out there,” Kelly said. There’s also an irony that jars with many true bitcoin believers: the digital asset intended to be decentralized and free of government control becoming part of a state reserve. Regardless of what happens with a bitcoin stockpile, many market players are happy enough to see crypto becoming a significant campaign talking point. “There’s a general view in the industry that both parties are paying much more attention to digital assets,” said Rahul Mewawalla, CEO of Mawson Infrastructure Group  which operates data centers for bitcoin mining.”The expectation is that will continue post November.” More

Initial claims for state unemployment benefits fell 17,000 to a seasonally adjusted 233,000 for the week ended Aug. 3, the Labor Department said on Thursday, the largest drop in about 11 months. Economists polled by Reuters had forecast 240,000 claims for the latest week. The data suggested fears the labor market is unraveling were overblown and the gradual softening in the labor market remains intact.The government’s monthly nonfarm payrolls report on Friday showed job gains slowed markedly in July and the unemployment rate rose to 4.3%, raising fears in markets that the labor market may be deteriorating at a pace that would call for strong action from the Fed.MARKET REACTION:STOCKS: S&P 500 E-minis extended gains and were up 0.76%BONDS: The yield on benchmark U.S. 10-year notes rose to 3.99%, the two-year note yield jumped to 4.044% FOREX: The dollar index turned 0.27% higher COMMENTS: THOMAS HAYES, CHAIRMAN, GREAT HILL CAPITAL LLC, NEW YORK”Since the jobs report on Friday, everyone’s been nervous about a recession with the Sahm Rule triggered. The initial jobless claims came in lower than expected, alleviating some of the fear that the labor market was completely rolling over.””We have a reasonably robust economy and not an imminent recession, so we can wait a few more weeks for that final first cut from the Fed.”IAN LYNGEN, HEAD OF US RATES STRATEGY, BMO CAPITAL MARKETS (emailed note)”The drop in initial filings was larger-than-anticipated and the resulting price action suggests the update is being interpreted as evidence that the labor market remains on solid footing despite the July BLS report. Overall, the lack of information suggesting a further deterioration of the employment landscape was the most relevant takeaway from the final data release of the week.”MARC CHANDLER, CHIEF MARKET STRATEGIST, BANNOCKBURN GLOBAL FOREX, NEW YORK“When it comes to the labor market, it’s multi-dimensional. There’s not one number. And so I think that the weekly jobless claims is one of those numbers. Today is a little bit softer, I think, than people expected, but the four-week moving average still moves higher.”“The talk of an imminent recession seems wide of the mark.” (This story has been refiled to correct a typo in the headline) More

Initial jobless claims totaled a seasonally adjusted 233,000 for the week, a decline of 17,000 and lower than the Dow Jones estimate for 240,000.
Stock market futures, which had been negative earlier, turned sharply positive after the release

An employment sign is seen on the window of a department store on August 02, 2024 in New York City. 
Michael M. Santiago | Getty Images News | Getty Images

Initial claims for unemployment insurance totaled less than expected last week, countering other signs that the labor market is weakening.
First-time filings for jobless benefits came to a seasonally adjusted 233,000 for the week, a decline of 17,000 from the previous week’s upwardly revised level and lower than the Dow Jones estimate for 240,000, the Labor Department said Thursday.

The report comes with Wall Street on edge amid signs that job growth is slowing and even signaling a potential recession on the horizon. Stock market futures, which had been negative earlier, turned sharply positive following the 8:30 a.m. ET release while Treasury yields held higher.
While the top-line number helped allay some fears, the level of continuing claims, which run a week behind, edged up to 1.875 million, the highest since Nov. 27, 2021.
Jobless claims have been trending higher for much of the year, though still remain relatively tame. The recent uptick has been attributed to disruptions from Hurricane Beryl as well as summer shutdowns at auto plants.
The four-week average rose to 240,750, the highest in nearly a year. In the previous week, claims had jumped by 14,000, adding to worries that layoffs are on the rise.
“Claims pulled back in the latest week, adding to evidence that weather and seasonal auto plant shutdowns were responsible for the previous week’s dramatic rise,” said Robert Frick, corporate economist at Navy Federal Credit Union. “If you’re looking for additional weakness in the labor market, you’ll need to find it somewhere else.”

Concerns escalated over the state of the labor market following last Friday’s nonfarm payrolls report, which showed an increase of just 114,000 in July. At the same time, the unemployment rate rose to 4.3%, triggering the so-called Sahm Rule that gauges recessions by measuring changes in the jobless rate.
Markets have been highly volatile since then, with a huge three-day sell-off starting last Thursday that ignited worries of deeper troubles in the U.S. economy.
In turn, traders expect the Federal Reserve to begin cutting interest rates in September, with some even calling for an emergency intrameeting reduction to counter the recent weakness. Markets are assigning a strong probability of a half percentage point reduction for the first move and a full percentage point cut by the end of the year, according to the CME Group’s FedWatch tracker of fed funds futures contracts.

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Economists forecast headline CPI to have risen by 0.3% month-over-month due mainly to a pickup in core services inflation and energy prices. This would keep the year-over-year rate unchanged at 3.0% and the NSA index printing at 314.993.They also expect core CPI to have increased by 0.2% month-over-month.”While this is not quite as low as June, it is in line with prior trend in deflation and should meet the Fed’s benchmark for beginning rate cuts in September,” economists said in the note.The modest reversal in core CPI relative to last month is primarily driven by core services inflation.According to BofA, this is due to two factors. First, core services excluding rent and owners’ equivalent rent (OER) edged down in June largely due to a plunge in airfares. However, for July, they expect the decline in airfares to be much more moderate at -1.0%. Second, shelter prices are expected to pick up to 0.3%, with lodging away from home rising 0.8% month-over-month. Elsewhere in shelter, the deceleration in rents and OER is expected to hold at 0.3%.Overall, BofA expects core services to rise 0.3% month-over-month. While non-housing services inflation is likely to moderate over time due to cooling services wage inflation, a sustained period of deflation is unlikely, economists noted.Last month’s deceleration in shelter came as a surprise, but not by much. In their previous forecast, BofA economists had rents and OER decelerating in August.”Hence, we think the signal is real and expect the deceleration to hold,” they wrote.They are forecasting some modest firming, but after rounding, this should still result in a 0.3% month-over-month rise for both components.”Another month of 0.3% m/m increases in shelter should give the Fed further confidence that inflation is decelerating toward 2%,” BofA’s team continued.Besides services, core goods prices are expected to have fallen for a fifth consecutive month, partly due to another decline in vehicle prices.Should the July CPI report align with their expectations, economists said they would maintain their expectation for the Fed to start its cutting cycle in September and deliver 50 basis points in rate cuts this year.”We acknowledge that financial markets are pricing in more than 100bp cuts for this year with some debate over the likelihood of a larger up-front cut or intermeeting move, but we do not think the current situation meets the bar for action.” More

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