Finance

In this aerial view taken from a helicopter, burned homes are seen from above during the Palisades fire near the Pacific Palisades neighborhood of Los Angeles, California on January 9, 2025. 
Josh Edelson | Afp | Getty Images

Insurers exposed to the California homeowners’ market sold off sharply Friday as the devastation caused by the Los Angeles wildfires spread.
Shares of Allstate dropped 6%, while Chubb and Travelers both declined more than 3%. These three stocks were among the biggest losers in the S&P 500 on Friday. AIG and Progressive dipped over 1%.

Allstate, Chubb and Travelers are the most exposed carriers to insured losses in the wildfires, according to JPMorgan. The Wall Street firm noted that Chubb could have a particularly high exposure due to its high-net-worth focus in the region.

Shares of insurers drop Friday

The destructive fires this week could become the most costly in California history. The insured losses from this week’s fires may exceed $20 billion, and the estimate could be even higher if fires spread, JPMorgan estimated Thursday. Those losses would far surpass the $12.5 billion in insured damages from the 2018 Camp Fire, which was the costliest blaze in the nation’s history, according to data from Aon.
Moody’s Ratings expected insured losses to run well into billions of dollars given the area’s high values of homes and businesses in the affected areas.

A man walks his bike among the ruins left behind by the Palisades Fire in the Pacific Palisades neighborhood of Los Angeles, Wednesday, Jan. 8, 2025.
Damian Dovarganes | AP

The Palisades Fire is the largest of the five blazes. It has burned more than 17,000 acres, destroying more than 1,000 structures, according to California authorities. Pacific Palisades is an affluent area where the median home price is more than $3 million, according to JPMorgan.
Insurance companies have asked Southern California Edison to preserve evidence related to the devastating wildfires that have swept Los Angeles, according to a company filing to regulators.

Certain reinsurers were also affected. Arch Capital Group and RenaissanceRe Holdings declined 2% and 1.5% on Friday, respectively. JPMorgan believes that rising loss estimates increase the likelihood of reinsurance attachments at various insurers being breached.
— CNBC’s Spencer Kimball contributed reporting.

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Federal Reserve Governor Michelle Bowman said Thursday she supported the recent interest rate cuts but said the December reduction should be the “final step” in the easing process.
Even with the full percentage points of cuts from September through December, there are still “upside risks to inflation,” she added.
Other Fed speakers this week provided views contrary to that of Bowman, who is generally regarded as one of the committee’s more hawkish members.

Michelle Bowman, governor of the U.S. Federal Reserve, speaks during the Exchequer Club meeting in Washington, D.C., on Feb. 21, 2024.
Kent Nishimura | Bloomberg | Getty Images

Federal Reserve Governor Michelle Bowman said Thursday she supported the recent interest rate cuts but doesn’t see the need to go any further.
In a speech to bankers in California that was part monetary policy, part regulation, Bowman said concerns she has that inflation has held “uncomfortably above” the Fed’s 2% goal lead her to believe that the quarter percentage point reduction in December should be the last one for the current cycle.

“I supported the December policy action because, in my view, it represented the [Federal Open Market Committee’s] final step in the policy recalibration phase,” the central banker said in prepared remarks. Bowman added that the current policy rate is near what she thinks of as “neutral” that neither supports nor restrains growth.
Despite the progress that has been made, there are “upside risks to inflation,” Bowman added. The Fed’s preferred inflation gauge showed a rate of 2.4% in November but was at 2.8% when excluding food and energy, a core measure that officials see as a better long-run indicator.
“The rate of inflation declined significantly in 2023, but this progress appears to have stalled last year with core inflation still uncomfortably above the Committee’s 2 percent goal,” Bowman added.
The remarks come the day after the FOMC released minutes from the Dec. 17-18 meeting that showed other members also were concerned with how inflation is running, though most expressed confidence it will drift back toward the 2% goal, eventually getting there in 2027. The Fed sliced a full percentage point off its key borrowing rate from September through December.
In fact, other Fed speakers this week provided views contrary to that of Bowman, who is generally regarded as one of the committee’s more hawkish members, meaning she prefers a more aggressive approach to controlling inflation that includes higher interest rates.

In a speech delivered Wednesday in Paris, Governor Christopher Waller had a more optimistic take on inflation, saying that imputed, or estimated, prices that feed into inflation data are keeping rates high, while observed prices are showing moderation. He expects “further reductions will be appropriate” to the Fed’s main policy rate, which currently sits in a range between 4.25%-4.5%.
Earlier Thursday, regional Presidents Susan Collins of Boston and Patrick Harker of Philadelphia both expressed confidence the Fed will be able to lower rates this year, if it a slower pace than previously thought. The FOMC at the December meeting priced in the equivalent of two quarter-point cuts this year, as opposed to the four expected at the September meeting.
Still, as a governor Bowman is a permanent voter on the FOMC and will get a say this year on policy. She is also considered one of the favorites to be named the vice chair of supervision for the banking industry after President-elect Donald Trump takes office later this month.
Speaking of the incoming administration, Bowman advised her colleagues to refrain from “prejudging” what Trump might do on issues such as tariffs and immigration. The December minutes indicated concerns from officials over what the initiatives could mean for the economy.
At the same time, Bowman expressed concern about loosening policy too much. She cited strong stock market gains and rising Treasury yields as indications that interest rates were restraining economic activity and tamping down inflation.
“In light of these considerations, I continue to prefer a cautious and gradual approach to adjusting policy,” she said.

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.css-1f0x4sl{color:var(–ds-color-london-5);font-family:var(–ds-type-system-serif);font-weight:400;font-size:var(–ds-type-scale-1);line-height:var(–ds-type-leading-lower);}.css-1f0x4sl del,.css-1f0x4sl s{-webkit-text-decoration:strikethrough;text-decoration:strikethrough;}.css-1f0x4sl strong,.css-1f0x4sl b{font-weight:700;}.css-1f0x4sl em,.css-1f0x4sl i{font-style:italic;}.css-1f0x4sl sup{font-feature-settings:’sups’ 1;}.css-1f0x4sl sub{font-feature-settings:’subs’ 1;}.css-1f0x4sl small,.css-1f0x4sl .small-caps{display:inline;font-size:inherit;font-variant:small-caps no-common-ligatures no-discretionary-ligatures no-historical-ligatures no-contextual;line-height:var(–ds-type-leading-lower);text-transform:lowercase;}.css-1f0x4sl u,.css-1f0x4sl .underline{-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:0.125rem;text-decoration-thickness:0.0625rem;}.css-1f0x4sl a{color:var(–ds-color-london-5);-webkit-text-decoration:underline;text-decoration:underline;text-decoration-color:var(–ds-color-chicago-45);text-decoration-thickness:0.125rem;text-underline-offset:0.125rem;}.css-1f0x4sl a:hover{color:var(–ds-color-chicago-30);-webkit-text-decoration:underline;text-decoration:underline;text-decoration-thickness:0.0625rem;}.css-1f0x4sl a:focus{background-color:var(–ds-color-chicago-95);color:var(–ds-color-london-5);outline:none;-webkit-text-decoration:underline;text-decoration:underline;text-decoration-color:var(–ds-color-chicago-45);text-decoration-thickness:0.125rem;}.css-1f0x4sl a:active{background-color:var(–ds-color-chicago-95);color:var(–ds-color-london-5);-webkit-text-decoration:none;text-decoration:none;}.css-1f0x4sl [data-caps=’initial’],.css-1f0x4sl .drop-cap{float:left;font-feature-settings:’ss08′ 1;font-size:3.5rem;height:3.25rem;line-height:1;margin:0.0625rem 0.2rem 0 0;text-transform:uppercase;}.css-1f0x4sl [data-ornament=’ufinish’],.css-1f0x4sl .ufinish{color:var(–ds-color-economist-red);}.css-1f0x4sl [data-ornament=’ufinish’]::before,.css-1f0x4sl .ufinish::before{font-size:var(–ds-type-scale-1);content:’ ‘;}There are normally few thrills to be had from investment-grade bonds, which is just the way it should be. After all, this is lending to the very safest companies. Just now, however, bondholders are throwing a veritable rave. More

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Federal Reserve officials at their December meeting expressed concern about inflation and the impact that President-elect Donald Trump’s policies could have on efforts to reduce it.
The policymakers said they will move more slowly on interest rate cuts due to the uncertainty, minutes of the meeting showed Wednesday.
The minutes included at least four mentions about the impact that changes in immigration and trade policy could have on the U.S. economy.

Federal Reserve officials at their December meeting expressed concern about inflation and the impact that President-elect Donald Trump’s policies could have, indicating that they would be moving more slowly on interest rate cuts because of the uncertainty, minutes released Wednesday showed.Without calling out Trump by name, the meeting summary featured at least four mentions about the effect that changes in immigration and trade policy could have on the U.S. economy.Since Trump’s November election victory, he has signaled plans for aggressive, punitive tariffs on China, Mexico and Canada as well as the other U.S. trading partners. In addition, he intends to pursue more deregulation and mass deportations.However, the extent of what Trump’s actions will be and specifically how they will be directed creates a band of ambiguity about what is ahead, which Federal Open Market Committee members said would require caution.”Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes said. “As reasons for this judgment, participants cited recent stronger-than-expected readings on inflation and the likely effects of potential changes in trade and immigration policy.”
FOMC members voted to lower the central bank’s benchmark borrowing rate to a target range of 4.25%-4.5%.

However, they also reduced their outlook for expected cuts in 2025 to two from four in the previous estimate at September’s meeting, assuming quarter-point increments. The Fed cut a full point off the funds rate since September, and current market pricing is indicating just one or two more moves lower this year. Traders are assigning a nearly 100% chance that the FOMC will stand pat at its Jan. 28-29 meeting, according to the CME Group’s FedWatch gauge.
Minutes indicated that the pace of cuts ahead indeed is likely to be slower.
“In discussing the outlook for monetary policy, participants indicated that the Committee was at or near the point at which it would be appropriate to slow the pace of policy easing,” the document said.
Moreover, members agreed that “the policy rate was now significantly closer to its neutral value than when the Committee commenced policy easing in September. In addition, many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters.”Those conditions include inflation readings that remain above the Fed’s 2% annual target, a solid pace of consumer spending, a stable labor market and otherwise strong economic activity in which gross domestic product had been growing at an above-trend clip through 2024.”A substantial majority of participants observed that, at the current juncture, with its policy stance still meaningfully restrictive, the Committee was well positioned to take time to assess the evolving outlook for economic activity and inflation, including the economy’s responses to the Committee’s earlier policy actions,” the minutes said.
The summary further noted that some members had begun to incorporate policy changes into their forecasts, though how many did so was unclear.Officials stressed that future policy moves will be dependent on how the data unfolds and are not on a set schedule. The Fed’s preferred gauge showed core inflation running at a 2.4% rate in November, and 2.8% when including food and energy prices, compared with the prior year. The Fed targets inflation at 2%.

In documents handed out at the meeting, most officials indicated that while they see inflation gravitating down to 2%, they don’t forecast that happening until 2027 and expect that near-term risks are to the upside.
At his news conference following the Dec. 18 rate decision, Chair Jerome Powell likened the situation to “driving on a foggy night or walking into a dark room full of furniture. You just slow down.”That statement reflected that mindset of meeting participants, many of whom “observed that the current high degree of uncertainty made it appropriate for the Committee to take a gradual approach as it moved toward a neutral policy stance,” the minutes said.
The “dot plot” of individual members’ expectations showed that they anticipate two more rate cuts in 2026 and possibly another one or two after, ultimately taking the long-run fed funds rate down to 3%.

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