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    What Trump’s Win Means for the Federal Reserve and Jerome Powell

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    Donald J. Trump spent his first presidency on a collision course with America’s central bank. Will it intensify?Donald J. Trump spent his first presidency attacking the Federal Reserve, pushing policymakers to cut interest rates and calling Fed officials names that ranged from “boneheads” to “enemy.”That rhetoric is likely to make a return to the White House with Mr. Trump. The Republican has been promising that interest rates will come down on his watch — even though rates are set by the politically independent Fed and the president has no direct control over them.The question looming over markets and the Fed itself is whether Mr. Trump will do more than just talk this time as he tries to get his way. The Fed is in the process of cutting rates, but it is unclear whether it will do so fast enough to please Mr. Trump.Congress granted the Fed independence from the White House so that central bankers would have the freedom to make policy decisions that brought near-term pain but long-term benefits. Higher rates are unpopular with consumers and with incumbent politicians, for instance, though they can leave the economy on a more sustainable path over time.But some in Wall Street and in political circles worry that the Fed’s insulation from politics could come under pressure in the years ahead. Here’s what that might look like.Trump Could Shake Up Fed PersonnelMr. Trump first elevated Jerome H. Powell, the Fed chair, to his current role in early 2018. He then quickly soured on Mr. Powell, who resisted his calls to sharply lower interest rates.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Here’s What to Watch as the Fed Meets Thursday

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    Federal Reserve officials are widely expected to cut rates by a quarter point, as uncertainty about a second Trump presidency looms large.Federal Reserve officials are widely expected to cut interest rates on Thursday. The bigger focus will center on what comes next for America’s central bank.Fed officials are cutting interest rates in response to months of slowing inflation. Policymakers lowered borrowing costs for the first time in four years in September, reducing them by half a percentage point. Officials projected two more smaller rate cuts in 2024 and a string of further reductions in 2025.But a combination of stronger recent economic data and President-elect Donald J. Trump’s return to the White House could muddle that outlook.The job market, which seemed wobbly when the Fed last met in September, has since stabilized. Consumer spending has remained strong, and overall growth looks solid. Those developments suggest that rates might not need to come down as much or as quickly in order to keep the economy steady.And if Mr. Trump follows through on his campaign promises, they could make it more difficult for the Fed to continue lowering interest rates as quickly. He has pledged a combination of tax cuts, tariffs and deportations that economists and Wall Street investors think could fuel inflation.“The main takeaway is that his election injects a higher degree of uncertainty into the outlook both for growth and for inflation,” said Blerina Uruci, chief U.S. economist at T. Rowe Price.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 138 Shares139 Views

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    Russia Raises Interest Rate to 21 Percent, Its Highest in Decades

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    Military spending and recruitment are causing the country’s economy to overheat, leaving regulators in a struggle to rein in rising prices.Russia’s central bank raised the cost of borrowing in the country to its highest level in more than two decades on Friday in an effort to slow inflation that is being fueled by record military spending and recruitment.The central bank raised Russia’s benchmark interest rate to 21 percent during its regular monetary policy meeting. That makes borrowing in the country even more expensive than at the start of Russia’s invasion of Ukraine in February 2022, when the central bank sharply increased interest rates to calm the economy. The effective cost of borrowing in Russia is now the highest since 2003.It was the third increase in a row, and Elvira Nabiullina, the central bank’s president, said that interest rates could rise further later this year.“We don’t see inflationary pressures slowing down,” Ms. Nabiullina, who maintains some policy independence from the Kremlin, told reporters after announcing the new rate.The increase underscores the challenges that Ms. Nabiullina faces as she tries to cool inflation, which she forecasts will average 8.8 percent this year. At that level, prices are rising more than twice as quickly as the central bank considers healthy for the Russian economy.Ms. Nabiullina implicitly blamed Russia’s war in Ukraine for the continued price increases. She said the Kremlin’s decision to raise spending by $15.5 billion next year, mostly to cover war-related costs, was overheating the economy and feeding inflation.In particular, she said, high government spending blunts the central bank’s main tool for controlling inflation — setting interest rates. This is because companies that receive military contracts are willing to take out loans at any cost to meet production deadlines.Labor shortages resulting from military recruitment during the war have also fueled inflation.The war has left hundreds of thousands of Russian men dead or seriously injured, according to Western intelligence agencies. Hundreds of thousands more have left the country to avoid being called up. And hundreds of thousands of others have joined the army to benefit from ever-rising payouts, leaving the civilian economy deprived of workers.“Spare hands no longer exist in the economy,” Ms. Nabiullina said, which leaves companies competing for workers by offering them higher wages.In turn, those rising wages spur consumer spending, further contributing to inflation.Military spending has caused a boom in the Russian economy: The International Monetary Fund said this week that Russia’s economy would grow 3.6 percent this year, 0.4 percentage points higher than its previous forecast. But economists say that the situation is breaking the balance between supply and demand, with potential long-term consequences for the country’s financial stability.Yet the Kremlin is showing no signs of letting up on war spending.“Our main priority are the goals of the special military operation,” Finance Minister Anton Siluanov told RBC, a business newspaper, this week, referring to the war in Ukraine. “We will spend as much money as we need on the battlefield, on the victory.”Oleg Matsnev More

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    G7 Finalizes $50 Billion Ukraine Loan Backed by Russian Assets

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    The economic lifeline is expected to be disbursed by the end of the year.The Group of 7 nations finalized a plan to give Ukraine a $50 billion loan using Russia’s frozen central bank assets, Biden administration officials said on Wednesday.The loan represents an extraordinary maneuver by Western nations to essentially force Russia to pay for the damage it is inflicting on Ukraine through a war that shows no sign of ending.“These loans will support the people of Ukraine as they defend and rebuild their country,” President Biden said in a statement. “And our efforts make it clear: Tyrants will be responsible for the damages they cause.”The announcement comes after months of debate and negotiation among policymakers in the United States and Europe over how they could use $300 billion of frozen Russian central bank assets to support Ukraine.The United States and the European Union enacted sanctions to freeze Russia’s central bank assets, most of which are held in Europe, after its invasion of Ukraine in early 2022. As the war dragged on, officials in the United States pushed for the funds to be seized and given directly to Ukraine to aid in its economic recovery.European officials had concerns about the lawfulness of such a move, however, and both sides eventually agreed over the summer that they would use the interest that the assets were earning to back a $50 billion loan.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Yellen Rebukes Chinese Lending Practices in Call for Debt Relief

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    In an interview, the Treasury secretary also highlighted progress at the World Bank and the International Monetary Fund ahead of annual meetings this week.Treasury Secretary Janet L. Yellen rebuked China’s “opaque” lending practices and urged global financial institutions and other creditors to accelerate debt relief to low- and middle-income countries in an interview on Monday.Her comments came ahead of this week’s annual meetings of the International Monetary Fund and the World Bank, where global economic policymakers are gathering in Washington at a pivotal moment for the world economy. Inflation has eased, but war in the Middle East has threatened to jolt energy markets. High interest rates are dogging poorer economies, which have struggled to pursue critical development initiatives given their mounting debt burdens.“It’s a substantial burden and can impede their investments in things that will promote sustainable development or dealing with pandemics or climate change,” Ms. Yellen said of the debt burdens of low- and middle-income countries.The I.M.F. and the World Bank have faced backlash in recent years for moving too slowly in their efforts to help struggling economies and for pushing nations to enact economic reform measures, such as sharp spending cuts, that have brought resistance and social unrest.The Treasury secretary will hail signs of progress at multilateral institutions like the monetary fund and the World Bank in a speech on Tuesday that highlights an expansion of lending capacity and faster approval of new projects under the direction of the Biden administration.Global debt continues to be a problem, however, and the United States has been pushing for a broader international relief initiative that goes beyond efforts to aid countries that are on the brink of defaulting on their loans.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Trump Brags About His Math Skills and Economic Plans. Experts Say Both Are Shaky.

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    In a combative interview, the former president hinted at even higher tariffs as an economic magic bullet.Former President Donald J. Trump has been offering up new tax cuts to nearly every group of voters that he meets in recent weeks, shaking the nerves of budget watchers and fiscal hawks who fear his expensive economic promises will explode the nation’s already bulging national debt.But on Tuesday, Mr. Trump made clear that he was unfazed by such concerns and offered a one-word solution: growth. Despite the doubts of economists from across the political spectrum, Mr. Trump said that he would just juice the economy by the force of his will and scoffed at suggestions that his pledges to abolish taxes on overtime, tips and Social Security benefits could cost as much as $15 trillion.“I was always very good at mathematics,” Mr. Trump told John Micklethwait, the editor in chief of Bloomberg News, in an interview at the Economic Club of Chicago.Faced with repeated questioning about how he could possibly grow the economy enough to pay for those tax cuts, Mr. Trump dismissed criticism of his ideas as misguided. He professed his love of tariffs and insisted that surging output would cover the cost of his plans.“We’re all about growth,” Mr. Trump said, adding that his mix of tax cuts and tariffs would force companies to invest in manufacturing in the United States.The national debt is approaching $36 trillion. The Committee for a Responsible Federal Budget projected last week that Mr. Trump’s economic agenda could cost as much as $15 trillion over a decade. Economists from the Peterson Institute for International Economics, a nonpartisan think tank, estimated last month that if Mr. Trump’s plans were enacted, the gross domestic product could be 9.7 percent lower than current forecasts, shrinking output and dampening consumer demand.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Meet Michelle Bowman, the Fed Official Cited by JD Vance

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    Michelle Bowman, a Trump-appointed Fed official recently cited by JD Vance, has been gaining prominence.When Senator JD Vance wanted to back up the assertion he made during the vice-presidential debate that new immigrants are exacerbating America’s housing affordability crisis, he cited a Federal Reserve study. Except it wasn’t a study. It was a speech by Michelle Bowman, a Fed governor appointed by former President Donald J. Trump.Ms. Bowman’s name is likely little known outside Washington. But that may be about to change, as Ms. Bowman positions herself as a prominent conservative voice at the central bank ahead of a possible Trump presidency.Ms. Bowman, 53, was first nominated to the Fed’s seven-person Board of Governors by Mr. Trump in 2018. A former state bank commissioner of Kansas, she had previously worked in community banking and as an adviser in the Department of Homeland Security during the George W. Bush administration. She filled the governor spot on the Fed Board that is earmarked for community bankers.Unlike many Fed officials, she is not a doctoral economist with a string of coastal schools behind her name. Ms. Bowman holds a degree in advertising and journalism from the University of Kansas and a law degree from Washburn University. Given her limited macroeconomic experience, she has never been a closely watched player when it comes to the Fed’s interest rate decisions. Her speeches have long focused on nitty-gritty banking issues.But Ms. Bowman’s criticism of the Fed’s approach to bank rules over the last two years — as well as her recent and rare move to push back on the central bank’s half-point interest rate cut — has raised her public profile.In September, Ms. Bowman voted against the central bank’s decision to lower interest rates sharply. That stood out, because Fed governors hardly ever dissent on economic policy: Hers was the first “no” vote by a governor since 2005.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Would a Strong Job Market Stop Fed Rate Cuts? This Official Says No.

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    Mary C. Daly, the president of the Federal Reserve Bank of San Francisco, said that the central bank shouldn’t act “out of fear.”Federal Reserve officials predicted at their last meeting that they would make two more quarter-point rate cuts before the end of 2024 as inflation continued to slow and the job market cooled further.But in the weeks since, labor data have come in stronger, opening a big question: What does it mean for the interest rate outlook if the job market does not slow from here?One Fed official suggested on Tuesday that the central bank should keep lowering interest rates as expected even if the economy is chugging along, so long as inflation continues to cool. Policymakers, she suggested, should not try to slow the economy down if evidence suggests that price increases are coming under control.“I’m very opposed to cutting off expansion out of fear,” Mary C. Daly, the president of the Federal Reserve Bank of San Francisco, said during an interview on Tuesday morning, ahead of a speech she delivered at New York University.She pointed out that back in 2019, in the year leading up to the pandemic, the job market was very strong but that it did not lead to rapid inflation. In that experience, low unemployment allowed for solid wage gains, and it pulled new people into the labor market.“We should not kill off job growth and good growth as long as it doesn’t produce inflation,” she said. “If we could get 2019 again, I’d be all for it — why not?”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More