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European Central Bank President Christine Lagarde is giving a press conference following the bank’s latest monetary policy decision. The central bank left interest rates unchanged on Thursday, after implementing a cut in June.
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It does not require a financial detective to work out what is going on. Three sudden surges in the value of the yen, on July 11th, 12th and 17th, have raised suspicions that the Bank of Japan (BoJ) is again intervening in currency markets (see chart). The bursts have left the currency, at ¥156 to the dollar, up by 4% against the greenback and marginally above the 37-year lows it reached earlier this month. More
Capital markets are twitchy. When interest rates spiked in 2022, their response was fast. Stocks plunged; bosses deferred plans to go public, issue stock and buy rivals. Sharp-suited bankers suddenly found their calls going unanswered. By contrast, the economy adapts slowly. As inflation climbed, people did not cut back much on spending, instead using their credit cards more. With the labour market healthy, they did not struggle to repay debt as rates rose. The result was a bonanza for consumer banks. They raked in ever more interest from resilient borrowers as defaults and delinquencies stayed low. More
America’s stability can no longer be taken for granted. That is one possible conclusion from the near assassination of Donald Trump, reinforcing lessons already learned from the attack on the Capitol in January 2021. Regrettably, America is not exceptional in this regard. The past few months alone have featured a shooting of Slovakia’s prime minister, an assault on Denmark’s prime minister and attacks on politicians in Germany. More
Believe it or not, corporate America still makes room for the little guy. Around half of working Americans are employed by a firm with less than 500 workers. Nine in ten banks are community institutions that hold less than $10bn in assets. This rather parochial picture, however, is not reflected in the country’s stockmarket, where the falling number of public companies and extreme concentration of value are a concern. Among America’s 3,000 largest public firms, the biggest 1,000 account for 95% of total value. The next 2,000, which form the Russell 2000 index, are collectively worth less than Apple, the world’s most valuable company.Now the unloved miniatures of America’s stockmarket are having their day in the sun. For most of the year, their shareholders watched the bull market from the stands: the Russell 2000 barely budged, while the S&P 500 index of large American firms rose by almost a fifth. Until the past week, that is, when the Russell 2000 was hurled forward as if by both of the market’s charging horns. The index has jumped by 9%, reaching its highest level since the beginning of 2022. Compared with the S&P 500, which is down slightly over the past week, its outperformance is the largest in history. Analysts are debating whether the move is a freak incident, the beginning of a “small-cap summer” or even a “great rotation” from big stocks to small ones. More
Presidential hopeful Donald Trump’s new running mate JD Vance stuck to a hard line on China in his first speech since being selected earlier in the week.
“Together we will protect the wages of American workers and stop the Chinese Communist Party from building their middle class on the backs of American citizens,” Vance said on the third night of the Republican National Convention.
China’s middle-income group had a per capita disposable income of 32,195 yuan ($4,436) last year, according to official data.
Relations between Washington and Beijing are at their lowest in decades amid disputes over trade, technology, human rights and China’s increasingly aggressive approach toward its territorial claims involving self-governing Taiwan and the South China Sea.
Jason Lee | Reuters
BEIJING — U.S. presidential hopeful Donald Trump’s new running mate JD Vance stuck to a hard line on China in his first speech since being selected earlier in the week.
“Together we will protect the wages of American workers and stop the Chinese Communist Party from building their middle class on the backs of American citizens,” Vance said on the third night of the Republican National Convention.
He also called for more factories in the U.S. and restrictions on foreign workers, but did not name specific actions.
Vance, a former critic of Trump, rose to fame for his book “Hillbilly Elegy” — a first-hand account that seeks to describe the impact on the U.S. economy as manufacturing shifted out of the country. As the current Ohio Senator, Vance proposed in September a legislation for promoting gas and hybrid-powered cars made in the U.S. and canceling electric car subsidies.
The ruling Communist Party of China has been increasingly focused on developing advanced manufacturing and said one of its goals for the year 2035 is to “substantially grow the middle-income group as a share of the total population.”
China has 1.4 billion people, more than four times the U.S. population of 336.7 million. McKinsey predicts the number of China’s upper-middle and high-income households could reach 200 million next year.
However, China remains far poorer than the U.S. on a per capita basis.
China’s middle-income group had a per capita disposable income of 32,195 yuan ($4,436) last year, slightly lower than the nationwide level of 39,218 yuan, according to the National Bureau of Statistics. The bureau defined each income category by dividing all surveyed households into five equal parts, including upper-middle-income, middle-income and lower-middle income groups.
Per capita disposable income across the U.S. was multiples higher at $61,033 as of December, according to U.S. Bureau of Economic Analysis data.
When looking at the U.S. middle class, median income was $106,100 in 2022, according to Pew Research.
But the share of Americans that were considered middle class fell to 51% in 2023, down from 61% in 1971, Pew said. The share of upper-income Americans grew by slightly more than that of the lower-income segment during that time, the research showed.
Vance in his speech criticized Wall Street and “cheap foreign goods” from China. He also blamed China for the fentanyl crisis.
Since joining the World Trade Organization in 2001, China has increased its role in global supply chains. Many of the world’s largest companies have relied on lower-cost manufacturing hubs in China for supplies.
Trump has said he plans to raise tariffs on Chinese goods to 60% if reelected in fall. He increased duties on Chinese products when he was president about six years ago, and the Biden administration left them intact.
Vance told Fox News earlier this week that instead of the war in Ukraine, China was the “real issue” for the U.S. and posed the “biggest threat.”
Asked about Vance’s comment, China’s Ministry of Foreign Affairs spokesperson Lin Jian said Tuesday at a daily press briefing, “We are always opposed to making China an issue in U.S. elections.”
— CNBC’s Lora Kolodny contributed to this report. More
Keeping with statements from other policymakers, Waller’s sentiments point to an unlikelihood of a rate cut when the Federal Open Market Committee meets later this month, but a stronger likelihood of a move in September.
Central bankers have become more optimistic from data in recent months that has shown inflation easing after a surprisingly higher move for the first three months in 2024.
Federal Reserve Board Governor Christopher Waller poses before a speech at the San Francisco Fed, in San Francisco, California, U.S., March 31, 2023.
Ann Saphir | Reuters
Federal Reserve Governor Christopher Waller on Wednesday suggested that interest rate cuts are ahead soon as long as there are no major surprises on inflation and employment.
“I believe current data are consistent with achieving a soft landing, and I will be looking for data over the next couple months to buttress this view,” Waller said in remarks for a program at the Kansas City Fed. “So, while I don’t believe we have reached our final destination, I do believe we are getting closer to the time when a cut in the policy rate is warranted.”
Keeping with statements from other policymakers, Waller’s sentiments point to an unlikelihood of a rate cut when the Federal Open Market Committee meets later this month, but a stronger likelihood of a move in September.
Central bankers have become more optimistic from data in recent months that has shown inflation easing after a surprisingly higher move for the first three months in 2024.
Waller outlined three potential scenarios in the days ahead: One, in which the inflation data turns even more positive and justifies a rate cut in “the not too distant future”; a second in which the data fluctuates but still points toward moderation; and a third in which inflation turns higher and forces the Fed into a tighter policy stance.
Of the three, he considers the third scenario of unexpectedly stronger inflation as the least likely.
“Given that I believe the first two scenarios have the highest probability of occurring, I believe the time to lower the policy rate is drawing closer,” Waller said.
However, he noted that while financial markets focus strongly on the date the Fed might move on a cut, FOMC members do not.
“Assuming there’s not a big shot to the economy, from a macro perspective it doesn’t really matter that much,” Waller said. “It’s not a particular meeting, it’s when do we think conditions are right to go.”
Waller’s comments on Wednesday are of particular note because he has been among the more hawkish FOMC members this year, or those who have advocated for tighter monetary policy as fears escalated that inflation is proving more durable than expected.
In May, Waller told CNBC that he expected cuts to be “several months away” as he awaited more convincing data that inflation was receding. His speech Wednesday indicated that the threshold is close to being met.
For one, he said the labor market “is in a sweet spot” in which payrolls are expanding while wage gains are cooling. At the same time, the consumer price index declined 0.1% in June, while the 3.3% annual rate for core prices was the lowest since April 2021.
“After disappointing data to begin 2024, we now have a couple of months of data that I view as being more consistent with the steady progress we saw last year in reducing inflation, and also consistent with the FOMC’s price stability goal,” he said. “The evidence is mounting that the first quarter inflation data may have been an aberration and that the effects of tighter monetary policy have corralled high inflation.”
The comments also are consistent with what New York Fed President John Williams told The Wall Street Journal in an interview published Wednesday. Williams noted that inflation data is “all moving in the right direction and doing that pretty consistently” and is “getting us closer to a disinflationary trend that we’re looking for.”
Markets again are pricing in a more accommodative Fed.
Traders in the fed funds futures market are pricing in an initial quarter percentage point rate cut in September followed by at least one more before the end of the year, according to the CME Group’s FedWatch measure.
Fed funds futures contracts currently are implying a 4.62% rate at the end of the year, about 0.6 percentage point below the current level.
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