This is a comparison of Wednesday’s Federal Open Market Committee statement with the one issued after the Fed’s previous policymaking meeting that concluded May 1.
Text removed from the prior statement is in red with a horizontal line through the middle.
Text appearing for the first time in the June statement is in red and underlined.
Black text appears in both statements.
Arrows pointing outwards More
The Federal Reserve on Wednesday kept its key interest rate unchanged and signaled that just one cut is expected before the end of the year.
The Federal Open Market Committee also indicated that it believes the long-run interest rate is higher than previously indicated.
“In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective,” policymakers wrote in a statement.
The Federal Reserve on Wednesday kept its key interest rate unchanged and signaled that just one cut is expected before the end of the year.
With markets hoping for a more accommodative central bank, Federal Open Market Committee policymakers following their two-day meeting took two rate reductions off the table from the three indicated in March. The committee also signaled that it believes the long-run interest rate is higher than previously indicated.
New forecasts released after this week’s two-day meeting indicated slight optimism that inflation remains on track to head back to the Fed’s 2% goal, allowing for some policy loosening later this year.
“Inflation has eased over the past year but remains elevated,” the post-meeting statement said, echoing language from the last statement. In the only substantive change, the new statement followed with, “In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective.”
The previous language said there had been “a lack of further progress” on inflation.
Traders seemed encouraged by these comments, with the S&P 500 jumping to a record Wednesday after the statement was issued.
Aggressive cutting seen for 2025
For the period through 2025, the committee now sees five total cuts equaling 1.25 percentage points, down from six in March. If the projections hold, it would leave the federal funds rate benchmark at 4.1% by the end of next year.
Another significant development occurred with the projection for the long-run rate of interest, essentially a level that neither boosts nor restricts growth. That moved up to 2.8% from 2.6%, a nod that the higher-for-longer narrative is gaining traction among Fed officials.
In a further indication of a hawkish bent from central bankers, the dot plot showed four officials in favor of no cuts this year, up from two previously.
Return to 2% target
Elsewhere in the FOMC’s Summary of Economic Projections, participants raised their 2024 outlook on inflation to 2.6%, or 2.8% when excluding food and energy. Both inflation projections were 0.2 percentage point higher than in March.
The Fed’s preferred inflation gauge is the Commerce Department’s personal consumption expenditures price index, which showed respective readings of 2.7% and 2.8% for April. The Fed focuses more on core inflation as a better long-term indicator. The SEP indicates inflation returning to the 2% target, but not until 2026.
The decision and informal forecasts from the 19 meeting participants come during a volatile year for markets and investors’ hopes that the Fed would start easing after it raised benchmark rates to their highest level in some 23 years.
The federal funds rate, which sets overnight borrowing costs for banks but feeds into many consumer debt products, is targeted in a range between 5.25%-5.50%, the result of 11 rate increases between March 2022 and July 2023.
Earlier in the day, as Fed officials were preparing their economic and rate outlooks, the Bureau of Labor Statistics released the consumer price index for May. The report showed that inflation was flat on the month while the annual rate edged lower from the rate in April to 3.3%.
During a press conference, Powell said that report was better than almost anyone had expected, and was factored into the FOMC’s decision.
“We see today’s report as progress and as, you know, building confidence,” Powell said. “But we don’t see ourselves as having the confidence that would warrant beginning to loosen policy at this time.”
Inflation remains well above the Fed’s 2% target, while also being considerably below the peak of just over 9% seen nearly two years ago. Core readings excluding food and energy prices were at 0.2% from the prior month and 3.4% from the year-ago period.
In the first quarter of 2024, economic data softened from where it had been for most of the previous year, with GDP rising at just a 1.3% annualized pace. April and May have been a mixed bag for data, but the Atlanta Fed is tracking GDP growth at 3.1%, a solid pace especially in light of persistent recession worries that have dogged the economy for the past two years.
Inflation data, though, has been equally resilient and has posed problems for central bankers.
The year began with markets expecting a vigorous pace of rate cuts, only to be thwarted by sticky inflation and statements from Fed officials that they are unconvinced that inflation is heading back convincingly to target.
“This is a nothing-burger Fed meeting. They know conditions are improving, but don’t need to rush with rate cuts,” said David Russell, global head of market strategy at TradeStation. “The strong economy is letting Jerome Powell wring inflation out of the system without hurting jobs. Goldilocks is emerging but policymakers don’t want to jinx it.”
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Federal Reserve Bank Chair Jerome Powell announces that interest rates will remain unchanged during a news conference at the bank’s William McChesney Martin building on May 01, 2024 in Washington, DC.
Chip Somodevilla | Getty Images
The Federal Reserve on Wednesday projected only one rate cut for the remainder of 2024, down from its March forecast that called for three reductions.
The central bank’s “terminal rate” for 2024, or the rate at which its benchmark fed funds rate will peak, went up to 5.1%, equivalent to a target range of 5%-5.25%. That means that the Fed is only forecasting one quarter-point rate cut from the current target range of 5.25% to 5.5%.
The so-called “dot plot,” which indicates how 19 FOMC members, both voters and nonvoters, showed four officials in favor of no cuts this year, while seven members projected one reduction. The remaining eight officials forecast two rate cuts for 2024.
Here are the Fed’s latest targets:
Arrows pointing outwards
Back in March, the Fed projected three rate cuts this year with the fed funds rate hitting 4.6%. After a cool inflation report Wednesday but before the Fed’s new forecast release, traders were pricing in two cuts this year.
For 2025, the central bank anticipated four rate cuts in total or a full percentage point reduction in the benchmark fed funds rate. More
Meme stock champion Roaring Kitty, whose real name is Keith Gill, held onto his positions of 5 million GameStop common shares and 120,000 call options.
If his position is in the money, many suspect that Gill won’t have the capital to exercise the options and E-Trade may have to intervene.
Gill could start selling his calls early to turn a quick profit and avoid the drama in a week and a half, but many argue that it’s not a good look for the champion of the stock.
Keith Gill, a Reddit user credited with inspiring GameStop’s rally, during a YouTube livestream arranged on a laptop at the New York Stock Exchange on June 7, 2024.
Michael Nagle | Bloomberg | Getty Images
As Roaring Kitty continues to watch his favorite GameStop shares swing wildly, he might be contemplating what to do with his massive options position that is approaching expiration.
The meme stock champion, whose real name is Keith Gill, has so far held onto his positions of 5 million GameStop common shares and 120,000 call options, according to a screenshot he shared Monday evening. The mammoth options position — involving 12 million underlying GameStop shares — could be a nightmare for Gill to offload or exercise even if the calls end up profitable or “in the money.”
His call options against GameStop have a strike price of $20 and an expiration date of June 21. Shares of the video game company have gained about 8% so far this week to around $30 a share. If the stock trades above $20 that Friday, which makes his call position in the money, Gill could exercise the options at $20 apiece, allowing him to purchase an additional 12 million shares at the discounted price. However, many think it’s unlikely he has enough capital to pull off such a move.
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For Gill to exercise the calls, he would need to have $240 million to take custody of the stock (12 million shares bought at $20 apiece). His last screenshot showed he has $29.4 million in cash in his E-Trade account, though he could deposit more money from other undisclosed accounts.
During Friday’s livestream, Roaring Kitty told some 600,000 viewers that he doesn’t have any institutional backers, but he didn’t entirely rule out the possibility of having more cash elsewhere.
E-Trade dilemma
Let’s say he doesn’t have the $240 million to exercise the calls. As June 21 looms, his broker E-Trade may have to intervene by liquidating his options before expiration.
“If they remain in the money and he doesn’t close them, the brokerage may be forced to take action on his behalf,” said CC Lagator, co-founder of brokerage Options AI.
The Morgan Stanley-owned E-Trade declined to comment.
E-Trade’s client agreement for self-directed accounts stated that the brokerage may decline, cancel or reverse a client’s orders or instructions at its discretion and without notice.
If Gill doesn’t give an instruction prior to expiration, the broker could sell the contracts that his cash balance doesn’t support, or submit a “do not exercise” (DNE) order for the same amount.
“The DNE option would be extremely costly as it marks them at zero. I’d imagine they would be in contact in the days ahead to make sure he has a plan. They can’t wait until the last hour,” Lagator said.
E-Trade has been debating whether to ban Gill from the trading platform over concerns regarding potential market manipulation, The Wall Street Journal reported last week.
Selling early?
Theoretically, Gill could start selling his calls early to turn a quick profit and avoid the drama in a week and a half, but many argue that it’s not a good look.
“He definitely has the public perception that’s perhaps to some degree stopping him from selling because then he would definitely be marked as a manipulator, kind of like a modern-day pump-and-dump scheme,” said Tony Zhang, chief strategist at OptionsPlay.
Meanwhile, market participants would easily catch wind of his sale given the sheer size of his position, said traders. His active selling could also put downward pressure on the stock and it could inspire his legion of retail traders to follow suit.
The Securities and Exchange Commission has been monitoring GameStop’s options trading activity, while Gill is under the scrutiny of the Massachusetts securities division.
Rolling the options
Gill also has the costly option to roll those calls to a further expiration date to buy some time, which means exiting the current position and immediately entering a similar position. He could opt for that up until 4 p.m. ET on June 21.
“It’s not something you just want to sit there doing on your laptop in the last hour. It’s too big. Again, if he’s in contact with them, it would be in his best interest to be working with their risk teams and trading desks, if rolling is his plan,” Lagator said.
If Gill holds the calls to expiration date with the stock falling below $20, this position would expire worthless. It cost him more than $60 million to acquire the position.
‘Options 101’
Still, if Gill somehow comes up with enough money to exercise all of his calls, it would leave him a total of 17 million shares and he would become the fourth-biggest shareholder in GameStop, behind Vanguard, BlackRock and Ryan Cohen’s RC Ventures, according to FactSet.
Alternatively, he could sell his other 5 million shares of GameStop to help fund the transaction to exercise the calls, but still, the stock would have to trade above $48 for him to secure enough money, nowhere near where it is now.
On Tuesday, Gill made light of his dilemma, posting on X a meme of a banana reading “Options Basics 101.”
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Merchandise lines the shelves of a GameStop store on May 28, 2024 in Miami, Florida.
Michael Nagle | Bloomberg | Getty Images
GameStop raised more than $2 billion in a recent stock sale as the video game company took advantage of a revived meme rally sparked by the return of trader Roaring Kitty.
The retailer announced Tuesday evening that it completed an at-the-market equity offering, selling the maximum number of 75 million shares to raise proceeds of $2.14 billion. GameStop said it intends to use the money for general corporate purposes, which may include acquisitions and investments.
The stock dipped more than 1% in premarket trading Wednesday. The shares continued their roller-coaster ride this week, up 8% so far.
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Wedbush GameStop analyst Michael Pachter estimated that the sale had an average share price of $28.50, implying that it coincided with the big sell-off during meme stock leader Roaring Kitty’s Youtube livestream last Friday.
GameStop shares dropped 40% on Friday after the company released its earnings report days ahead of schedule, reporting that sales declined 29% in the first quarter.
Roaring Kitty, AKA Keith Gill, hosted his first livestream in a few years that day, which seemed to exacerbate the sell off. Gill reiterated his previous investing thesis and offered little new reasoning behind his large stake. He revealed that he did not have any institutional backers and the GameStop positions he had shared in screenshots were his only bets.
Pachter has an underperform rating on GameStop and a 12-month price target of $11, which is more than 60% lower than Tuesday’s close of $30.49.
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The federal government has issued more than $1 billion in tax credits for new and used electric vehicles as an upfront cash incentive to car buyers, the Treasury Department and IRS said.
The advance payments kicked in Jan. 1, 2024.
The credits for new and used cars, for a respective $7,500 and $4,000, were previously available only when EV buyers filed their annual tax returns.
Halfpoint Images | Moment | Getty Images
The federal government has issued more than $1 billion in tax credits as an upfront cash incentive to buyers of electric vehicles, the U.S. Treasury Department and Internal Revenue Service said Wednesday.
The Inflation Reduction Act created a mechanism whereby tax credits for buyers of new and used EVs — worth up to $7,500 and $4,000, respectively — could be delivered by car dealers at the point of sale.
The provision kicked in on Jan. 1.
Previously, consumers had to wait until filing their annual tax return, perhaps months or more than a year after their vehicle purchase, to get the federal credit. Americans can now also get the EV tax credit upfront regardless of their federal tax liability, which wasn’t the case prior to 2024.
“This has never been done before,” Deputy Treasury Secretary Wally Adeyemo said during a press call.
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He called the $1 billion threshold a “major milestone” that was hit faster than expected.
“A lot of people would like to see the savings right now instead of waiting to file their taxes next year,” Adeyemo said.
Trying to help EVs compete on price
The transition to EVs is a big component of the Biden administration’s push to reduce U.S. greenhouse gas emissions and curb global warming.
The federal tax credit aims to make EVs more affordable for many households relative to their gasoline-powered counterparts.
The EV tax credits make the cars “very price competitive and in some cases cheaper than the combustion engine vehicles” available on car lots, Adeyemo said.
The average purchase price for electric cars was $55,242 in April 2024, versus $44,989 for traditional cars, according to Cox Automotive data. However, prices are quickly dropping: Average prices for new EVs declined by 9% in the first quarter of 2024 relative to the same period last year, it said.
However, not all new EV models are currently available for a federal tax credit, as automakers aim to meet certain manufacturing standards in the Inflation Reduction Act. The law requires certain parts of the car be manufactured in North America to qualify for a full or partial EV credit.
The U.S. Energy Department maintains an updated list of automakers and models that qualify for an EV credit.
There are limitations on EV tax credit availability
Since the start of the year, about 125,000 consumers have opted to get their “new clean vehicle” tax credit as an upfront payment, according to Treasury and IRS data. That accounts for 90% of transactions for new EVs that qualified for an advance payment, they said.
In addition, 25,000 buyers have opted for upfront payment for the “previously owned clean vehicle” credit, representing 80% of qualifying transactions, the agencies said.
These figures account for just “a small amount” of all EVs sold in the U.S. since the start of the year, Adeyemo said. They don’t include consumers who lease EVs or purchases that don’t qualify for credits.
Senate Republicans introduced a measure in May to end federal tax credits available for electric vehicles and a separate one to end the tax breaks for EV charging stations.
“The electric vehicle tax credit benefits the wealthiest of Americans and costs hardworking American taxpayers billions of dollars,” Sen. John Barrasso, R.-Wyo., said in a written statement about the EV bill, which he co-sponsored.
Adeyemo, when asked about such criticism of the EV tax credit, pointed to the tax break’s limits on income and on households’ expected lifetime financial savings to suggest it doesn’t benefit the wealthiest households.
For example, single and married taxpayers are ineligible for a tax break for new EVs if their annual income exceeds $150,000 and $300,000, respectively. Those income limits are lower for used EVs: $75,000 and $150,000, respectively.
There are also limitations based on EV sticker price. For example, SUVs and smaller cars qualify only if their sticker prices are below $80,000 and $55,000, respectively. More
Apple device users will soon be able to tap into buy now, pay later loans from Affirm for purchases, the companies said Tuesday.
Affirm will surface as an option for Apple Pay users on iPhones and iPads later this year.
Apple also said that installment loans via credit and debit cards would be available on Apple Pay in the U.S. with Citigroup, Synchrony and Fiserv-related issuers.
Chris Ratcliffe | Bloomberg | Getty Images
Apple device users will soon be able to tap into buy now, pay later loans from Affirm for purchases, the companies said Tuesday.
Affirm will surface as an option for U.S. Apple Pay users on iPhones and iPads later this year, the San Francisco-based fintech company said in a filing. Apple confirmed the news in its own update.
“This provides users with additional payment choices, and offers the ease, convenience and security of Apple Pay alongside the features users love in Affirm – flexibility, transparency and no late or hidden fees,” Affirm said in an email statement.
The move is a boost to Affirm and the buy now, pay later sector in general. When Apple introduced its own BNPL product last year, investors were concerned that the tech giant would crowd out stand-alone providers like Affirm. But the fact that Apple decided to also allow Affirm products in its ecosystem shows that the fintech company has something unique to offer.
For instance, while Apple’s BNPL loan lets users repay purchases in four installments over six weeks, Affirm has an array of longer-term offerings that can be repaid over a year or more. The companies didn’t provide details on the terms of the new loans.
“The bottom-line — in our view — is that Affirm’s strong brand and sophisticated underwriting technology have a moat that Apple likely could not replicate on its own,” Mizuho Securities analyst Dan Dolev said in a research note.
Citi, Synchrony
Apple also said that installment loans via credit and debit cards would be available on Apple Pay in the U.S. with Citigroup, Synchrony and Fiserv-related issuers. Traditional credit card players have begun offering BNPL-style installment loans after their popularity surged during the Covid pandemic
Synchrony said in an email that it was planning personalized installment loans with promotions based on the transaction size and merchant involved, with the possible use of promotional interest rates and loan durations.
“This announcement with Apple marks an opportunity for Synchrony to scale our flexible payment options and offer our merchants the ability to expand their presence in a growing mobile payments ecosystem,” Mike Bopp, Synchrony’s chief growth officer, said in an email.
Thanks to the ubiquity of the iPhone, Apple Pay has more than 500 million users around the world and a leading market share in the U.S. for its mobile payment and digital wallet platform.
Shares of Affirm rose 11% Tuesday, while Apple’s stock was up 7.3%.
Affirm’s stock rose despite the fact that the company indicated it would take time for the partnership to significantly boost its revenue.
“Affirm does not expect this partnership to have a material impact on revenue or gross merchandise volume in fiscal year 2025,” the company said in its filing.
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Ahead of America’s election in November, company bosses, financiers and diplomats are busy calling on Donald Trump’s allies, trying to divine the economic policies that the former president will pursue if he is re-elected. But there is one man in Mr Trump’s orbit who holds more sway than most and who, for now, is virtually inaccessible. That is because he is inmate number 04370-510 in the Federal Correctional Institution of Miami.Peter Navarro, a leading economic adviser in Mr Trump’s first administration, is more than halfway through a four-month sentence for contempt of Congress. He bristles with indignation at the justice system, disdains Joe Biden’s record and longs to steer America towards hardline protectionism. In written correspondence with The Economist, Mr Navarro has laid out how he thinks Mr Trump should approach trade—from turning up the heat on China to slapping tariffs on just about everyone else. It is a dark, angry vision for the global economy. As polls stand, it is one Mr Navarro may shortly be able to promote from inside the White House. More
