Finance

A lot is riding on the numbers after the decimal point. In the argot of investors, inflation in America is back to having a “two-handle” (that is, running above 2% but below 3%). It is a far better position to be in than a couple of years ago, when price rises were threatening to hit double digits. But there is a big difference between inflation decelerating towards 2% in the coming year or getting stuck nearer 3%. Not only would the latter forestall aggressive interest-rate cuts by the Federal Reserve, it would also put the central bank on a collision course with Donald Trump—a double-whammy of monetary hawkishness and political turbulence that would cast a shadow over the global economy. More

At this time of year, many policymakers want to know how fast their economies will grow in the year ahead. China’s leaders set themselves a still tougher question: how fast their economy “should” grow. They are seeking not a forecast but a target. More

BITCOIN IS BACK. Since Donald Trump’s election victory on November 5th, the world’s dominant cryptocurrency has surged to new heights above $100,000 a unit, enjoying a rise of 138% since the start of the year. Altogether, the world’s cryptocurrencies now have a market capitalisation of almost $4trn—making them more valuable than the entirety of Britain’s stockmarket. More

The consumer price index increased 2.7% in November 2024 from a year earlier, according to the Bureau of Labor Statistics.
Inflation is not accelerating, but remains persistently too high, economists said.
Inflation for groceries, gasoline and new vehicles increased.
The good news is underlying trends still appear positive and disinflation is likely to continue, economists said.

Hispanolistic | E+ | Getty Images

Consumers saw inflation pick up slightly in November as price increases in categories including groceries, gasoline and new cars outweighed a deceleration in others such as shelter during the month.
The consumer price index, a key inflation gauge, rose 2.7% last month relative to November 2023, the Bureau of Labor Statistics reported Wednesday. The annual rate was up from 2.6% in October.

“I don’t see an acceleration” of inflation, said Mark Zandi, chief economist at Moody’s. “But I think it’s persistently too strong.”

“It’s not like there’s any smoking gun saying, ‘This is the problem,'” Zandi said. “It’s kind of broad-based, a little on the high side everywhere.”
That said, there are reasons for optimism, according to economists.
Namely, consumers can take “solace” that economic trends underpinning inflation, such as moderating wage growth in the labor market, remain positive, Zandi said.
“We still think we’re on the overall path of disinflation,” despite the appearance of an inflation “revival,” said Joe Seydl, a senior markets economist at J.P. Morgan Private Bank.

A ‘bounce back’ in food prices

Inflation has pulled back significantly from its pandemic-era peak of 9.1% in June 2022.
The U.S. Federal Reserve aims for a long-term inflation target around 2%. The central bank uses a similar but different inflation gauge than the CPI, known as the personal consumption expenditures price index, or PCE.
“The bulk of this progress is behind us now and inflation may remain stubbornly sticky near current levels for a time,” Rick Rieder, head of BlackRock’s global allocation investment team, wrote in a note Wednesday.

While price pressures have broadly eased across the U.S. economy, there have been some headwinds in recent months.
Grocery inflation jumped notably, from a 0.1% monthly reading in October to 0.5% in November, for example. For context, a consistent CPI reading of about 0.2% each month would generally be in line with target inflation, economists said.

Egg prices jumped about 8% in the month alone and are up 38% over the past year, according to CPI data.
“We saw a bounce back in food prices,” Zandi said. “Part of it is avian flu: Egg prices continue to be very strong.”
Food prices are generally volatile, so one month of elevated grocery inflation data should not set off alarm bells, Zandi said. However, it will be an important category to watch as groceries “probably matter most” to the majority of households relative to pricing, he said.

Cars and housing are other trouble spots

Additionally, categories such as transportation, health care and shelter have been trouble spots, Seydl said.
Vehicle prices and airfare are big components of the transportation category. Their recent inflationary bouts are likely to be short-lived, however, Seydl said.
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New vehicle prices rose 0.6% from October to November, according to CPI data. Those for car insurance rose just 0.1% during that period, but are up 13% over the year.
In 2021, car prices spiked amid a shortage of semiconductors essential to manufacture them. That led to a severe vehicle shortage and high inflation. Later, prices fell as dealers rebuilt their inventories. Now, some price volatility is natural as the market settles back into equilibrium, Seydl said.
Car prices feed into motor vehicle insurance: When prices are elevated, insurers’ cost to replace vehicles after a car accident is also much higher. Insurers also typically need approval from regulators to raise consumer premiums, which takes time.

Airline prices, similar to those of autos, are also “finding a bottom,” Seydl said. Actual fares are roughly where they were before the Covid-19 pandemic, according to CPI data.
“We haven’t really had any airfare inflation from 2019 to today,” Seydl said. “We have just seen a lot of volatility.”
Labor costs are the primary input for health-care inflation, he said.
While wage growth has broadly eased across much of the economy — generally lessening the likelihood that businesses will raise prices to compensate for labor — the health-care sector still has a labor shortage, making price strength “pretty resilient,” Seydl said.
Prices for medical care services were up 0.4% from October to November, and 4% over the year.

As the largest CPI component, housing also continues to prop up overall inflation readings. Shelter accounted for 40% of the monthly CPI increase, according to the Bureau of Labor Statistics.
However, it has declined notably. The shelter index increased 4.7% over the last year, the smallest 12-month increase since February 2022, the Bureau of Labor Statistics said.
Inflation for rent and owners’ equivalent rent — an estimate of the rental price a homeowner could command for their property — saw their smallest one-month increases since July 2021 and April 2021, respectively.

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Chinese Vice Premier He Lifeng has met with several U.S. finance executives in the last month as Beijing seeks to build relationships ahead of President-elect Donald Trump’s planned tariffs on China.
He Lifeng is one of China’s four vice premiers, and heads the ruling Chinese Communist Party’s economic and finance committee.
“The Chinese are seeking all possible avenues to access those now ascending to power in Washington. The Trump Team,” said Peter Alexander, founder of Shanghai-based consulting firm Z-Ben Advisors.

Aly Song | Reuters

Chinese Vice Premier He Lifeng has met with several U.S. finance executives in the last month as Beijing seeks to build relationships ahead of President-elect Donald Trump’s planned tariffs on China.
He Lifeng is one of China’s four vice premiers, and heads the ruling Chinese Communist Party’s economic and finance committee.

He met with BlackRock Chairman and CEO Larry Fink in Beijing on Dec. 5, and Goldman Sachs President and COO John E. Waldron on Dec. 4, according to state media. That followed a meeting with Citigroup CEO Jane Fraser on Nov. 21, state media said.
“The Chinese are seeking all possible avenues to access those now ascending to power in Washington. The Trump Team,” said Peter Alexander, founder of Shanghai-based consulting firm Z-Ben Advisors. “Back channeling is how China operates, even prefers, when building lines of communications.”
Goldman Sachs said it was aware of the reports. The two other financial firms did not respond to a CNBC request for comment.
Trump has filled his Cabinet picks with at least 10 reported billionaires, including two with a finance-heavy background: hedge fund manager Scott Bessent for treasury secretary and Cantor Fitzgerald CEO Howard Lutnick for commerce secretary.

“I do think the Wall Street folks that are coming into commerce and treasury will serve a moderating role on the trade protectionist side,” said Clark Packard, research fellow at the Cato Institute. “It’s all relative because I do think there’s going to be something protectionist on the trade side. Those voices will be the voices that work to mitigate some of that.”

“Especially at Treasury they’re pretty worried about market reaction,” Packard said. “The one thing that can truly maybe scare Trump away from a really aggressive [policy] would be the market reaction.”
U.S. stocks are on track for a relatively rare second straight year of more than 20% gains. After tumbling early this year, Chinese stocks rebounded after Beijing signaled a shift toward stimulus in late September. Chinese authorities on Monday affirmed that supportive stance in a high-level meeting.

‘Keeping its options open’

With actions such as hosting Wall Street executives and imposing export controls on critical minerals, Beijing is keeping its options open, said Zongyuan Zoe Liu, who is Maurice R. Greenberg senior fellow for China studies at the Council on Foreign Relations. “They are preparing for the worst-case scenario.”
But she cautioned that it’s unlikely that financial institutions can do much to mitigate tariffs and tensions with the U.S. “Business transactions and Wall Street executives, one way or another, they would not give up opportunities in any market as long as it fits into their profile,” Liu said.
Chinese financial media summarized He Lifeng’s meetings with the U.S. executives as sending a signal on Beijing’s willingness to open up the financial sector and attract long-term, foreign institutional investment. Foreign capital inflows are often cast by Chinese state media as a symbol of support for the domestic market.
The Chinese vice premier also met with Invesco President and CEO Andrew Schlossberg in Beijing on Nov. 12, and HSBC Group Chairman Mark Tucker on Nov. 14, according to state media. HSBC said it had nothing to add to the report. Invesco did not respond to a request for comment.
U.S.-China capital markets have been “arguably the most dynamic and inter-connected aspect” of the bilateral relationship in the last two decades, said Winston Ma, adjunct professor at NYU School of Law.
“When the cross-border finance relationship is constructive and cooperative, it could lead to MAP, i.e. mutual assured [prosperity]; otherwise it will be MAD, mutual assured destruction,” Ma said, referring to a Cold War deterrence principle. More

President-elect Donald Trump has outlined plans to levy tariffs on U.S. trading partners, including Mexico, Canada and China, when he takes office.
Economists and other experts expect tariffs to raise costs for consumers.
Some observers think the tariffs are a negotiating tactic and that Trump won’t impose them.

Peter Kramer/NBC via Getty Images

U.S. consumers would likely see prices increase if President-elect Donald Trump follows through with a plan to levy import tariffs, experts said Tuesday during CNBC’s Financial Advisor Summit.
“Either way, there is a cost to consumers,” said Erica York, senior economist at the Tax Foundation.

A tariff is a tax placed on imported goods. Tariffs are paid by U.S. companies that import those goods.
Businesses could pass along higher prices to consumers at the store to offset the cost of tariffs, for example, experts said.

Tariffs may also reduce business profits, thereby lowering returns for shareholders and perhaps pushing businesses to hold down wages or employment opportunities for workers, York said.
“It is such a company-specific decision,” she said.

No ‘guarantee’ that prices won’t rise

In an NBC News interview that aired Dec. 8, Trump said he would fulfill his campaign promise to impose tariffs, but said he couldn’t guarantee U.S. households wouldn’t pay more because of tariffs.

“I can’t guarantee anything,” Trump said. “I can’t guarantee tomorrow.”
Trump imposed tariffs during his first term on washing machines, solar panels, steel, aluminum and a range of Chinese goods, for example. The Biden administration kept many of them intact.
Trump has called for a more sweeping tariff regime during his second term.
On the campaign trail, he floated the idea of universal tariffs, of up to 20%, on all trade partners, and of at least 60% on Chinese goods.

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Such a policy would raise costs by $3,000 in 2025 for the average U.S. household, according to an October analysis by the Tax Policy Center.
Low- and middle-income households “who might already be living paycheck to paycheck” would likely see the largest financial impact from tariffs, said Marianela Collado, CEO and senior wealth advisor at Tobias Financial Advisors.
In November, Trump also pledged to impose 25% tariffs on Canada and Mexico — the U.S.’ largest trading partners — if they didn’t address drug trafficking and migration across the border.

Uncertainty around Trump tariff plan

However, there’s considerable uncertainty around how tariffs might be implemented, including the countries and products that are targeted.
It’s also unclear if Trump has the authority to unilaterally impose universal tariffs, York said.
Some market experts aren’t convinced Trump means to follow through on his pledges.
His various tariff policies are likely “starting gambits” meant as leverage to “coerce” trading partners during negotiations, said David Zervos, chief market strategist at Jefferies, during the CNBC summit.
“People are trying to take something literal and at [Trump’s] word when we know that’s not how” he operates, Zervos said.

However, others were less sure of that outcome.
“I hope … they really are just negotiating tactics,” said Barbara Doran, CEO and chief investment officer of BD8 Capital Partners. “But they may not be.”
Tariff revenue may be used to help offset the cost of a tax-cut package Republicans are eyeing on Capitol Hill.
Trump also nominated Jamieson Greer as his U.S. trade representative; Greer was chief of staff to Trump’s former U.S. trade representative, Robert Lighthizer, who was an architect of Trump’s first-term tariffs.
“I think it’s still a big wild card,” Doran said of tariffs. More

Interest rates at their highest in decades, wars in Europe and the Middle East, elections in countries as important as America and India. No matter. The world economy delivered another strong performance in 2024; according to the IMF, global GDP will rise by 3.2%. Inflation has eased and employment growth remains solid. Stockmarkets have risen by more than 20% for the second consecutive year. More

Are you smarter than a ten-year-old? New data suggest that a shockingly large portion of adults in the rich world might not be. Roughly one-fifth of people aged 16 to 65 perform no better in tests of maths and reading than would be expected of a pupil coming to the end of their time at primary school, according to a study released on December 10th by the OECD, a club of mostly rich countries. Worse still, adults in many places have grown less literate over the past ten years. More