Finance

Donald Trump has not been shy: he wants interest rates down, fast. For months, the president has berated the Federal Reserve for dithering and cutting rates too slowly. In July he flirted with firing Jerome Powell, the Fed’s chair, but backed off. Another angle of attack opened up when Bill Pulte, the head of the Federal Housing Finance Agency, claimed that Lisa Cook, a governor on the central bank’s board, had lied on her mortgage applications. More

Friday’s booming rally turned into Monday’s reality check as investors weighed just how aggressive the Federal Reserve will be on lowering interest rates.
The implied probability for another cut in October was just 42%. That second cut is about fully priced in for December, but there’s just a 33% expectation for three total moves this year.
There are ongoing questions about the impact of Fed rates in the current climate.

Traders work on the floor of the New York Stock Exchange on Aug. 22, 2025, in New York City.
Spencer Platt | Getty Images

Friday’s booming rally turned into Monday’s reality check as investors weighed just how aggressive the Federal Reserve will be on lowering interest rates and how the moves might impact the broader business and economic climate.
Chair Jerome Powell, in his annual address at the Jackson Hole, Wyoming, symposium, gave Wall Street hope of easier days ahead when he said conditions “may warrant adjusting our policy stance,” which is generally seen as “Fedspeak” for cutting rates.

Stocks soared while Treasury yields plummeted on the news as the knee-jerk reaction took hold for a rate reduction when the Federal Open Market Committee issues its next decision on Sept. 17.
However, cheer turned to caution Monday as market experts weighed what happens next, even if a move next month is baked in. Stocks were mostly lower and shorter-maturing Treasury yields, which are more sensitive to Fed action, moved higher.
“I’m on the slower side more than the faster side if the Fed, does go,” said Jason Granet, chief investment officer at BNY. “He definitely moved the door ajar, as opposed to kicked it wide open for September.”
Traders on Monday were pricing in a near-certainty of a September quarter percentage point reduction from the Fed’s current target rate, currently around 4.3%. The implied probability of 82% was only slightly higher than a week ago but well above the 62% odds of a month ago, according to the CME Group’s FedWatch measure of futures prices.
However, there is less certainty from there.

Potential slow pace ahead

The implied probability for another cut in October was just 42%. That second cut is about fully priced in for December, but there’s just a 33% expectation for three total moves this year.
“I think there’s more to play for in the data between now and the September meeting,” Granet said. “So then the question will start to center around pace.”
Skeptics of a faster easing pace center their arguments around ongoing concerns about tariff-induced inflation and an economy that is holding up despite signs that the labor market is slowing.
“Although we are aware of the extreme political pressures on the Fed to ease, and we acknowledge cracks emerging in some labor market data, from our perch … the case for cuts looks modest,” Lisa Shalett, chief investment officer at Morgan Stanley, said in a note. “And we can’t help but ask — what problem, exactly, does the Fed feel an urgency to solve?”
Despite the market pricing, Morgan Stanley sees just a 50% probability for a September reduction. The firm also cited uncertainty about inflation as well as the Fed’s commitment to independence amid the heat from President Donald Trump and White House officials to lower rates.
Shalett also cautioned clients about putting too much faith in Fed easing for the next leg up in stocks as “we question the impact of rate cuts in any case, given the reality that absent recession, an easing cycle is apt to be shallow while the interest rate sensitivity of the biggest economic agents has meaningfully declined.”

Worries over a repeat of 2024

Indeed, there are ongoing questions about the impact of Fed rates in the current climate.
At this time a year ago, the central bank entered an easing mode that ended up having unintended consequences — an inverse move in Treasury yields and mortgage rates pushed by worries that the Fed might be taking its foot off the brake too soon along with expectations for stronger economic growth.
That’s the kind of consideration that has market veteran Ed Yardeni wondering about the wisdom of another round of cuts as he worries that Powell might be wrong about the temporary impulse of inflation from Trump’s tariffs.
“The Fed won’t listen to me. Of course, they’ll do what they’re going to do,” the head of Yardeni Research said Monday on CNBC. “The cautious tale is what happened last year when the Fed lowered by 100 basis points and the bond yield went up 100 basis points.”
Should that happen again, it would thwart the White House’s hopes for lower financing costs on the national debt and a boost for the housing market through lower mortgage rates.
On the bright side, though, Yardeni thinks the equity market rally will get a boost from rate cuts, and he is maintaining his bullish view on stocks even in the face of a potential policy mistake. Yardeni thinks the S&P 500 could add another 2% from here to close the year around 6,600, then climb another 14% in 2026 to close at 7,500.
“I think we’re going to have a continuation of the bull market, but I think it’s going to be earnings led,” he said. “If the Fed does go ahead and lower rates on Sept. 17, I think my targets may be too conservative right now.”

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There are two ways, the world’s central bankers learned at this year’s Jackson Hole conference in Wyoming, to tame a horse. You can break the animal with fear, but it will never forget the pain. The kinder way, demonstrated to attendees one evening, is to establish consistent boundaries, enforced with gentle consequences like noisy clapping. This, says Martins Kazaks, president of the Bank of Latvia, is much like central banking. Although you can raise interest rates to crush inflation, at the cost of a recession, it is better when everyone believes in the inflation target, such that nobody raises prices and wages in the first place. If the boundaries are credible, the central bank can be gentler. More

You are a finance minister after a decade of meagre economic growth, shocks from a financial crisis, a pandemic and sky-high energy prices. Public debt is worth more than your country’s gross domestic product, interest rates are at their highest in years and merely servicing outstanding debt is taking up an ever-greater share of tax revenue. Inflation is stubborn. America’s profligacy is satisfying much of the world’s appetite for government bonds, meaning your debt must pay more to attract investors. You lie awake worrying about how to make the numbers add up. Your fellow ministers, meanwhile, fret for their careers: populist parties are on the rampage. The economic context calls for fiscal consolidation; the political one warns against austerity. What do you do? More

It was a topsy-turvy week for Wall Street, saved by a big Friday rally. The market was looking at a weekly loss at Thursday’s close. But a day later, Federal Reserve Chairman Jerome Powell came through, hinting at possible interest rate cuts ahead. His speech on Friday at the central bank’s economic symposium in Jackson Hole, Wyoming, was just what investors had hoped to hear, and the stocks that can benefit the most led the market. The cyclical, more economically sensitive names were strong with DuPont and Home Depot among the winners Friday and for the week. Defensive groups lagged, which put Bristol Myers Squibb and Costco in the red for the session and the week. While lower rates lift all boats, some of our big tech stocks finished up only slightly Friday but down for the week. Why? Well, the number of rate cuts this year won’t impact names like Meta Platforms or a Microsoft quite as much. Instead, their fortunes are more tied to the boom in artificial intelligence rather than lower borrowing costs. The Dow Jones Industrial Average hit a new all-time high Friday, closing at a record and exceeding its previous record close from early December. The S & P 500 and Nasdaq Composite rallied on Friday too, but it was not enough to eclipse last week’s milestones. While the Dow and S & P 500 both advanced overall this week, the tech-heavy Nasdaq posted a weekly loss. “In the end, Powell managed to thread the needle perfectly and, as a result, all three major averages are rallying,” Zev Fima, a portfolio analyst for the CNBC Investing Club, wrote in a Friday analysis. “When we look underneath the hood of the S & P 500, the leading sector is consumer discretionary — and that makes sense because lower rates mean more money discretionary money in consumers’ pockets.” It was a big week for Disney as well. The company finally launched its new ESPN flagship streaming app Thursday, allowing the sports channel to become a standalone streaming service. The product was designed to expand access for existing subscribers and sports fans outside of the traditional streaming bundle to all of ESPN’s content. “We think this will contribute nicely to ESPN’s bottom line over time as engagement grows,” Disney CEO Bob Iger told CNBC on Thursday. Some on Wall Street, however, were concerned when management said that Disney would not break out subscriber numbers for the new ESPN offering. After all, many people view them as a key metric to evaluating the success of streaming platforms. But Iger said that subscriber figures are “irrelevant,” and that Disney is taking more of an “agnostic” strategy instead. “We don’t feel like the way to measure this is immediate, nor do we feel like the way to measure this is in just subscribers,” the CEO added. Three Club names reported quarterly earnings this week. On Monday evening, Palo Alto Networks posted a better-than-expected quarter and issued upside guidance for fiscal year 2026. The cybersecurity company beat estimates across all key metrics, including revenue, adjusted earnings per share (EPS), adjusted free cash flow margin, next-generation security annual recurring revenue (ARR), and total remaining performance obligation (RPO). The upbeat fiscal outlook gave us reassurance about Palo Alto’s planned $25 billion acquisition of CyberArk, which recently sent the stock tanking on worries that the offer was made because the core business was not doing well. That turned out not to be the case. The stock was among our biggest weekly winners with a 5% gain. Club holdings CrowdStrike and Nvidia will both report earnings next Wednesday. Home Depot posted mixed results on Tuesday morning, missing analysts’ estimates on the top and bottom lines. That was a first for the home improvement retailer since 2014. Still, the stock surged after management made it clear during the post-earnings conference call that momentum seen in the quarter was set to continue, barring any unforeseen economic shocks. We’re still confident in key catalysts for Home Depot shares, such as lower rates and its push further into the pro market with big acquisitions. The stock was among our best performers of the week, with a gain of over 3%. It was also among the top of the Dow 30, too. TJX Companies released an impressive quarterly earnings report Wednesday. Management increased the discounted retailer’s full-year outlook, and the company saw strength in all of its operating segments, causing the stock to be one of the top performers in the S & P 500 that session. As a result, the Club raised our TJX price target to $150 apiece from $145, and reiterated a buy-equivalent 1 rating on shares. The stock pulled back modestly Friday but still gained nearly 3% this week. We executed only one trade. The Club purchased more shares of our newest holding, Cisco Systems , on Tuesday morning. The stock experienced a big decline following its earnings release last week — a reaction we saw as overblown. Although the quarter wasn’t clean, Cisco CEO Chuck Robbins did a solid job assuaging investor concerns and breaking down why the security business experienced a revenue miss. The stock finished the week 1.7% higher. (Jim Cramer’s Charitable Trust is long DD, HD, BMY, COST, TJX, DIS, META, MSFT, PANW, CRWD, NVDA, CSCO. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. More

There’s worry retail investor exuberance in the exchange-traded fund space is flashing a warning signal for markets.
As individuals pour billions of dollars into some of the riskiest pockets of the exchange-traded fund market, some experts like ETF Action’s Mike Akins question whether the trend is a sign of markets overheating.

“Product proliferation in the ETF market is at its all-time high right now,” the firm’s founding partner told CNBC’s “ETF Edge” this week. “We are seeing signs of all of those types of niche strategies, especially in the thematic and innovative space, starting to approach 2020, 2021 types of flows again, right at the top of the market.”
Institutional investors make up roughly 64% of the overall ETF market, recent 13F filings compiled by ETF Action show. By contrast, they are largely absent from fast-growing categories like single-stock ETFs and leveraged or inverse strategies, making up approximately 9% and 10% of investors there, respectively.
Nontraditional ETFs, which include inverse and leveraged funds, have raked in more than $60 billion year to date, ETF Action data shows as of Friday. According to Akins, the few institutions involved in these speculative strategies are largely there to provide liquidity rather than to allocate.
“These strategies are incredibly volatile. They’re 99% owned by retail. There are no institutions allocating these strategies, but there’s billions of dollars coming into them,” he added.
Yield-focused products, such as covered call ETFs tied to individual stocks, are particularly risky, Akin contends. While they may generate steady income when underlying shares are rising, the payouts can become unsustainable if the stocks falter.

‘It’s a train wreck’

“If you have a yield-covered strategy that’s paying out 100% income on an annual basis and the underlying doesn’t keep going up, it’s a train wreck,” he said.
Retail appetite for these funds harkens back to the pandemic-era surge in thematic ETFs including Ark Innovation (ARKK), which saw massive retail-driven inflows at the height of the bull market. The historical parallels should give investors pause, Akin says.
“When you start seeing the flows into those products take off, generally, that is a contrarian signal that we’re overheating across the market, and that’s been shown time and time again in terms of money flows chasing returns.”
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Fed Chair Jerome Powell on Friday gave a tepid indication of possible interest rate cuts ahead as he noted a high level of uncertainty that is making the job difficult for monetary policymakers.
“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he said during his annual address at Jackson Hole, Wyoming.
While not addressing White House demands for rate cuts specifically, Powell did note the importance of Fed independence.

Federal Reserve Chair Jerome Powell on Friday gave a tepid indication of possible interest rate cuts ahead as he noted a high level of uncertainty that is making the job difficult for monetary policymakers.
In his much-anticipated speech at the Fed’s annual conclave in Jackson Hole, Wyoming, the central bank leader in prepared remarks cited “sweeping changes” in tax, trade and immigration policies. The result is that “the balance of risks appear to be shifting” between the Fed’s twin goals of full employment and stable prices.

Watch Powell deliver his remarks

While he noted that the labor market remains in good shape and the economy has shown “resilience,” he said downside dangers are rising. At the same time, he said tariffs are causing risks that inflation could rise again — a stagflation scenario that the Fed needs to avoid.
With the Fed’s benchmark interest rate a full percentage point below where it was when Powell delivered his keynote a year ago, and the unemployment rate still low, conditions allow “us to proceed carefully as we consider changes to our policy stance,” Powell said.
“Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” he added.
That was as close as he came during the speech to endorsing a rate cut that Wall Street widely believes is coming when the Federal Open Market Committee next meets Sept. 16-17.
However, the remarks were enough to send stocks soaring and Treasury yields tumbling. The Dow Jones Industrial Average showed a gain of more than 600 points following the public release of Powell’s speech while the policy-sensitive 2-year Treasury note saw a 0.08 percentage point fall to around 3.71%.

In addition to market expectations, President Donald Trump has demanded aggressive cuts from the Fed in scathing public attacks he has lobbed at Powell and his colleagues.
The Fed has held its benchmark borrowing rate in a range between 4.25%-4.5% since December. Policymakers have continued to cite the uncertain impact that tariffs will have on inflation as a reason for caution and believe that current economic conditions and the slightly restrictive policy stance allow for time to make further decisions.

Importance of Fed independence

While not addressing the White House demands for lower rates specifically, Powell did note the importance of Fed independence.
“FOMC members will make these decisions, based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach,” he said.
The speech comes amid ongoing negotiations between the White House and its global trading partners, a situation often in flux and without clarity on where it will end. Recent indicators show consumer prices gradually pushing higher but wholesale costs up more rapidly.
From the Trump administration’s view, the tariffs will not cause lasting inflation, thus warranting rate cuts. Powell’s position in the speech was that a range of outcomes is possible, with a “reasonable base case” being that the tariff impacts will be “short lived — a one-time shift in the price level” that likely would not be cause for holding rates higher. However, he said nothing is certain at this point.
“It will continue to take time for tariff increases to work their way through supply chains and distribution networks,” Powell said. “Moreover, tariff rates continue to evolve, potentially prolonging the adjustment process.”
In addition to summarizing the current conditions and potential outcomes, the speech touched on the Fed’s five-year review of its policy framework. The review resulted in several notable changes from when the central bank last performed the task in 2020.
At that time, in the midst of the Covid pandemic, the Fed switched to a “flexible average inflation targeting” regime that effectively would allow inflation to run higher than the central bank’s 2% goal coming after a prolonged period of holding below that level. The upshot is that policymakers could be patient with slightly higher inflation if it meant insuring a more comprehensive labor market recovery.
However, shortly after adopting the strategy, inflation began to climb, ultimately hitting 40-year highs, while policymakers largely dismissed the rise as “transitory” and not needing rate hikes. Powell noted the damaging impacts from the inflation and the lessons learned.
“As it turned out, the idea of an intentional, moderate inflation overshoot had proved irrelevant. There was nothing intentional or moderate about the inflation that arrived a few months after we announced our 2020 changes to the consensus statement, as I acknowledged publicly in 2021,” Powell said. “The past five years have been a painful reminder of the hardship that high inflation imposes, especially on those least able to meet the higher costs of necessities.”
Also during the review, the Fed reaffirmed its commitment to its 2% inflation target. There have been critics on both sides of the issue, with some suggesting the rate is too high and can lead to a weaker dollar, while others seeing a need for the central bank to be flexible.
“We believe that our commitment to this target is a key factor helping keep longer-term inflation expectations well anchored,” Powell said.

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Current and former Federal Reserve officials have offered their thoughts about the Trump administration’s recent mortgage fraud allegations toward Fed Governor Lisa Cook.
Former Boston Fed President Eric Rosengren told CNBC on Friday that “until there’s some facts out, I don’t think people should draw any conclusion,” while others such as Cleveland Fed President Beth Hammack called Cook an “outstanding economist and a person of high integrity.”
President Donald Trump has said that he will fire Cook if she does not step down as Fed governor.

Lisa Cook, governor of the US Federal Reserve, during the Federal Reserve Board open meeting in Washington, DC, US, on Wednesday, June 25, 2025.
Al Drago | Bloomberg | Getty Images

Current and former Federal Reserve officials struck a common note when asked about Lisa Cook’s situation: It’s imperative the central bank’s independence is preserved.
Cook, a Fed governor nominated in 2022 by then-President Joe Biden, has faced attacks over accusations of mortgage fraud from Federal Housing Finance Agency Director Bill Pulte. Justice Department attorney Ed Martin also urged Chair Jerome Powell to fire Cook from her post and confirmed a criminal investigation will take place.

The central bank official rejected the idea of resignation Wednesday, saying in a statement she has “no intention of being bullied to step down from my position because of some questions raised in a tweet.”
Cleveland Fed President Beth Hammack told CNBC on Friday that she stood by Cook, noting: “I know Lisa Cook to be an outstanding economist and a person of high integrity, and I think it’s critically important that the Fed maintains its independence on monetary policy so we can ensure great outcomes for the American public.”

The latest developments have fanned concerns on Wall Street surrounding the Fed’s independence. Trump has notably been a vocal critic of Powell, nicknaming him “too late” with regards to the timing of modifying interest rates and accusing him of being “political.”
Although Trump has said that it’s “highly unlikely” he would fire Powell before his term as chair is up in May 2026, the president has already started considering several candidates to succeed him and just last week threatened to allow a “major lawsuit” against Powell to proceed while pushing for lower rates yet again.
The Fed, which has maintained a strictly data-dependent stance, has kept rates steady since December.

Trump also pressed Cook to resign this week in the wake of the accusations. He even said Friday that he will fire her if she does not leave her post. The odds that Cook will be out as governor this year spiked on prediction market Kalshi following those comments, rising to more than 30% from roughly 21% earlier in the day.

U.S. President Donald Trump speaks by a wall featuring the names of former U.S. presidents and first ladies, as he visits The People’s House: A White House Experience museum, in Washington D.C., U.S., August 22, 2025.
Jonathan Ernst | Reuters

Former Boston Fed President Eric Rosengren thinks more information is needed before a decision — by Cook or the administration — is made.
“I don’t know what Lisa Cook is going to choose to do. It is a difficult situation for her, but today we have allegations but no facts,” Rosengren said Friday on CNBC’s “Money Movers.” “Until there’s some facts out, I don’t think people should draw any conclusion.”

Safeguarding independence

When asked about the pressure that the Fed is facing, including the resignation calls against Cook, former Fed Vice Chair Roger Ferguson emphasized the importance of the institution educating the American public on “what it does and why it’s important” as well as “why we’ve gone through a period of inflation.”
“People for the first time literally in 30 or 40 years had to deal with that, so everyone now understands, ‘Wow, this inflation thing is a secret tax on the middle-income and … lower-class individuals,” he said on CNBC’s “Squawk Box” on Friday. “The Fed is the institution whose mandate is to control inflation, as well as the other side, and so I turn this around and say it’s really time for all of us to educate the American people. That’s the way we ensure independence.”

Ferguson added that it hasn’t turned out well in places around the world where central bank independence has been undermined. For the U.S., he’s still optimistic about the Fed’s future in that regard.
“I think it maintains independence because the population will get behind and say, ‘Wait a minute, we had inflation, it’s not a good thing, we need an independent Fed to maintain that. Congress, etc., do your job, protect the Fed as best you can,'” he remarked. More