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    Powell Says the Fed Is in No Hurry to Adjust Rates Amid Trump Policy Uncertainty

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    Jerome H. Powell says the Fed is focused on separating “signal from the noise,” as the president whipsaws on tariffs.Jerome H. Powell, chair of the Federal Reserve, said the central bank is focused on the “net effect” of President Trump’s sweeping economic agenda amid high uncertainty about which policies will actually be enacted, as he reiterated that officials are still not in a “hurry” to adjust interest rates.“As we parse the incoming information, we are focused on separating the signal from the noise as the outlook evolves,” Mr. Powell said at an event on Friday. “We do not need to be in a hurry, and are well positioned to wait for greater clarity.”If inflation stays sticky but the economy remains strong, the Fed chair said the central bank can “maintain policy restraint for longer.” But if either the labor market were to weaken more than expected, or inflation were to rapidly decline, Mr. Powell said officials can “ease policy accordingly.”His comments underscore the delicate balancing act that Fed is trying to navigate at a tenuous moment for the economy.In an interview on Friday, Austan D. Goolsbee, president of the Chicago Fed and a voting member on this year’s policy-setting committee, warned that a situation in which inflation stayed sticky while growth deteriorated at the same time would be a “harder problem” for the Fed to solve and something that is increasingly “on the radar screen” as a result of the policies that Mr. Trump is pursuing.“Tariffs on intermediate goods are a negative supply shock,” he said, referring to goods that are used to make other products and services for consumers. “If there were large negative supply shocks that were to hit the economy, they would have a tendency to both drive down employment and drive up prices.”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 Tests Fed’s Independence With Order Expanding Authority Over Agencies

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    The Federal Reserve’s independence from the White House has long been enshrined in the law. But an executive order that President Trump signed this week seeking to extend his administration’s reach over independent agencies is prompting concerns about how much further he will go to challenge that separation.Mr. Trump’s directive took aim at regulatory agencies that had typically operated with limited political interference as authorized by Congress.The order partly shielded the Fed by exempting the central bank’s decisions on interest rates. Those are voted on at every meeting by seven presidentially appointed members of the Board of Governors, who typically serve 14-year terms, as well as a rotating set of five presidents from the regional reserve banks.But the order sought to exert authority over how the Fed oversees Wall Street, decisions that are ratified with majority support by the board.The order was the president’s latest attempt to centralize the executive branch’s power over the government. It requires independent organizations to submit proposed rule changes to the White House for review and gives the Office of Management and Budget oversight of how these institutions spend funds and set priorities. It also asserts that the president’s and the Justice Department’s interpretations of the law are binding and that alternative interpretations require authorization.The expansive nature of the order has raised questions about whether Mr. Trump’s decree is legally applicable to an institution like the Fed. It has also fueled speculation that the president — who has a history of trying to influence the central bank’s decision on interest rates — may eventually turn his scrutiny to monetary policy decisions.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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    Can the Federal Reserve Look Past Trump’s Tariffs?

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    Top officials are grappling with how to handle potential price increases caused by the administration’s policies.As President Trump’s efforts to restructure the global trade system with expansive tariffs begin to take shape, one question continues to dog officials at the Federal Reserve: How will these policies impact the central bank’s plans to lower interest rates?One influential Fed governor made clear on Monday that he did not expect Mr. Trump’s policies to derail the Fed’s efforts to get inflation under control, suggesting instead that fresh interest rate cuts are still in play this year.“My baseline view is that any imposition of tariffs will only modestly increase prices and in a nonpersistent manner,” Christopher J. Waller, the official, said in remarks at an event in Australia Monday evening. “So I favor looking through these effects when setting monetary policy to the best of our ability.”Economists are concerned that tariffs, which are essentially taxes on American consumers, will increase prices in the United States, at least temporarily, and over time slow economic growth.Mr. Waller acknowledged that the economic impact of the tariffs could be larger than anticipated depending on how they are structured and later put in place. But he suggested that any uptick in prices from tariffs could be blunted by other policies, which could have “positive supply effects and put downward pressure on inflation.”Mr. Waller’s views matter given that he is one of the seven officials who make up the Board of Governors and votes at every policy meeting.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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    Solid Labor Market Gives Fed Cover to Extend Rate Pause

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    Less than six months ago, Federal Reserve officials were wringing their hands about the state of the labor market. No major cracks had emerged, but monthly jobs growth had slowed and the unemployment rate was steadily ticking higher. In a bid to preserve the economy’s strength, the Fed took the unusual step of lowering interest rates by double the magnitude of its typical moves.Those concerns have since evaporated. Officials now exude a rare confidence that the labor market is strong and set to stay that way, providing them latitude to hold rates steady for awhile.The approach constitutes a strategic gamble, which economists by and large expect to work out. That suggests the central bank will take its time before lowering borrowing costs again and await clearer signs that price pressures are easing.“The jobs data just aren’t calling for lower rates right now,” said Jon Faust of the Center for Financial Economics at Johns Hopkins University, who was a senior adviser to the Fed chair, Jerome H. Powell. “If the labor market seriously broke, that may warrant a policy reaction, but other than that, it takes some progress on inflation.”Across a number of metrics, the labor market looks remarkably stable even as it has cooled. Monthly jobs growth has stayed solid and the unemployment rate has barely budged from its current level of 4.1 percent after rising over the summer. The number of Americans out of work and filing for weekly benefits remains low, too.“People can get jobs and employers can find workers,” said Mary C. Daly, president of the San Francisco Fed, in an interview earlier this week. “I don’t see any signs right now of weakening.”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 Shares149 Views

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    High Inflation and New Tariffs Will Make the Fed’s Job Tougher

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    Fresh tariffs amid high inflation are making the Fed’s job uniquely difficult and feeding uncertainty about what to expect for interest rates this year.High inflation is stoking fresh debate about how the Federal Reserve should respond to President Trump’s sweeping plans to reorder the world economy through tariffs, leading to questions about whether old playbooks still apply.On Saturday, Mr. Trump is poised to impose 25 percent tariffs on imports from Mexico and Canada as well as an additional 10 percent tariff on Chinese goods. That move comes on the heels of threats to impose hefty tariffs on Colombia, which were rescinded after its government complied with Mr. Trump’s demands to accept deported migrants.Howard Lutnick, Mr. Trump’s nominee to oversee the Commerce Department and trade, said at a confirmation hearing on Wednesday that he favored “across-the-board” tariffs that would hit entire countries.The volume of trade policy proposals is making the Fed’s already tricky job even more difficult and sowing uncertainty about what to expect from the central bank as it tries to fully wrestle inflation back to more normal levels.Tariffs are broadly seen by economists and policymakers as likely to stoke higher prices for U.S. businesses and consumers at least initially, and over time weigh on growth. That, as well as Mr. Trump’s plans to also enact mass deportations, steep tax cuts and reduced deregulation, has complicated the path forward for the Fed, which is debating how quickly to resume rate cuts and by what magnitude after pressing pause this week.What comes next is far from clear, leaving central bank officials to parse playbooks both old and new to formulate the right strategy.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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    Federal Debt Is Now Worrying Even Progressives

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    Long a focus of conservatives, the level of public borrowing is starting to concern left-leaning economists. Proposed remedies still differ radically.The 119th Congress began, as it so often has in recent years, with calls from Republican politicians for wrestling down the national debt, which is near a record level relative to the size of the economy.But this time, the G.O.P. had company: Progressive economists and budget wonks, who have often dismissed finger-wagging about debt levels as a pretext for slashing spending on programs for the poor, are starting to ring alarm bells as well.What’s changed? In large part, long-term interest rates look unlikely to recede as quickly as had been hoped, forcing the federal government to make larger interest payments. And the Trump administration has promised to extend and expand its 2017 tax cuts, which will cost trillions if not matched by spending reductions.“I find it easier to stay calm about this threat when I think the interest rate is low and steady, and I think in the past year or so that steadiness has been dented,” said Jared Bernstein, who led the Council of Economic Advisers in the Biden administration. “If one party refuses to raise revenues, and the Democrats go along more than is fiscally healthy, that’s also a big part of the problem.”To be clear, conservative warnings on the debt have generally been met with little action over the past two decades. A paper by two political scientists and an economist recently concluded that after at least trying to constrain borrowing in the 1980s and 1990s, Republicans have “given up the pretense” of meaningful deficit reduction. Democrats and Republicans alike tend to express more concerns about fiscal responsibility when their party is out of power.Historically, the stock of debt as a share of the economy has risen sharply during wars and recessions. It peaked during World War II. In the 21st century, Congress has not managed to bring the debt back down during times of peace and economic growth.Revenues Are Not Keeping Up With Projected SpendingIf not addressed, debt will probably mount to unprecedented levels.

    Source: Congressional Budget OfficeBy The New York TimesSpending Has Been Creeping UpAs a share of economic output, mandatory outlays — mostly Medicare, Medicaid, and Social Security — are growing fastest. But as debt rises, so do interest costs.

    Source: Office of Management and BudgetBy The New York TimesWe 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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    What to Watch at the Federal Reserve’s First Meeting of 2025

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    The U.S. central bank is expected to hold interest rates steady as officials weigh a solid economy and rising inflation risks.The Federal Reserve is set to stand pat at its first gathering of 2025, pressing pause on interest rate cuts as policymakers take stock of how the world’s largest economy is faring.After lowering interest rates by a full percentage point last year — starting with a larger-than-usual half-point cut in September — central bank officials are at a turning point.A strong labor market has afforded the Fed room to move more slowly on reducing rates as it seeks to finish off its fight against high inflation. Officials see the economy as being in a “good place” and their policy settings as appropriate for an environment with receding recession risks but nagging concerns about inflation.Stoking fears are a spate of economic policies in the pipeline from President Trump, which include sweeping tariffs, mass deportations, widespread deregulatory efforts and lower taxes. The economic impact of those policies is unclear, but policymakers and economists appear most wary about the possibility of fresh price pressures at a time when progress on taming inflation has been bumpy.The Fed will release its January policy statement at 2 p.m. in Washington, and Jerome H. Powell, the Fed chair, will hold a news conference right after.Here is what to watch for on Wednesday.A prudent pauseA pause on interest rate cuts from the Fed has been an a highly expected outcome ever since Mr. Powell stressed this fall that the central bank was not “in a hurry” to bring them down.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