Finance

Chicago Fed President Goolsbee says if economy deteriorates, Fed will ‘fix it’

Published

5 months ago

August 5, 2024

Chicago Fed President Austan Goolsbee: If conditions start to deteriorate, the Fed will 'fix it'

Chicago Federal Reserve President Austan Goolsbee on Monday vowed that the central bank would react to signs of weakness in the economy and indicated that interest rates could be too restrictive now.

Asked whether weakening in the labor market and manufacturing sector could prompt a response from the Fed, Goolsbee did not commit to a specific course of action but said it does not make sense to keep a “restrictive” policy stance if the economy is weakening. He also declined to comment on whether the Fed would institute an emergency intermeeting cut.

“The Fed’s job is very straightforward: maximize employment, stabilize prices and maintain financial stability. That’s what we’re going to do,” the central bank official said during an interview on CNBC’s “Squawk Box” program. “We’re forward-looking about it. So if the conditions collectively start coming in like that on the through line, there’s deterioration on any of those parts, we’re going to fix it.”

The interview occurred with markets in turmoil.

Futures tied to the Dow Jones Industrial Average were off nearly 1,300 points, or close to 3%, as Treasury yields plummeted. The moves continued a downward trajectory that began Thursday, a day after the Fed opted not to lower interest rates, raising concerns that policymakers were behind the curve as inflation falls and the economy weakens.

Those fears were heightened Friday when the Labor Department said nonfarm payrolls increased by just 114,000 and the unemployment rate climbed to 4.3%, triggering a signal known as the Sahm Rule that the economy could be in recession.

However, Goolsbee said he does not believe that to be the case.

“Jobs numbers came in weaker than expected, but [are] not looking yet like recession,” he said. “I do think you want to be forward-looking of where the economy is headed for making the decisions.”

He also said, however, that Fed policy is restrictive now, a position it should only be in if the economy looks like it is overheating. The central bank has kept its benchmark rate in a range between 5.25% and 5.5% since July 2023, the highest level in some 23 years.

“Should we reduce restrictiveness? I’m not going to bind our hands of what should happen going forward because we’re still going to get more information. But if we are not overheating, we should not be tightening or restrictive in real terms,” he said.

Policymakers have been focused on the “real” fed funds rate, which is the Fed’s benchmark minus the inflation rate. As inflation declines, the real rate increases — unless the Fed chooses to cut. The real rate now is around 2.73%. Fed officials judge the long-term real rate to be closer to 0.5%.

Markets expect the Fed to head into an aggressive easing mode, starting in September with a 0.5 percentage-point rate cut that is now fully priced in as measured by 30-day fed funds futures contracts. Traders expect the Fed to slice 1.25 to 1.5 percentage points off the funds rate by the end of the year, according to the CME Group’s FedWatch Tool.

Finance

Treasury delays deadline for small businesses to file new BOI form

Published

9 hours ago

December 26, 2024

Business Finance News

Janet Yellen, U.S. Treasury secretary, on a tour of the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, on Jan. 8, 2024.

Valerie Plesch/Bloomberg via Getty Images

The U.S. Treasury Department has delayed the deadline for millions of small businesses to Jan. 13, 2025, to file a new form, known as a Beneficial Ownership Information report.

The Treasury had initially required many businesses to file the report to the agency’s Financial Crimes Enforcement Network, known as FinCEN, by Jan. 1. Noncompliance carries potential fines that could exceed $10,000.

This delay comes as a result of legal challenges to the new reporting requirement under the Corporate Transparency Act.

The rule applies to about 32.6 million businesses, including certain corporations, limited liability companies and others, according to federal estimates.

Businesses and owners that didn’t comply would potentially face civil penalties of up to $591 a day, adjusted for inflation, according to FinCEN. They could also face up to $10,000 in criminal fines and up to two years in prison.

However, many small businesses are exempt. For example, those with over $5 million in gross sales and more than 20 full-time employees may not need to file a report.

Why Treasury delayed the BOI reporting requirement

The Treasury delayed the compliance deadline following a recent court ruling.

A federal court in Texas on Dec. 3 had issued a nationwide preliminary injunction that temporarily blocked FinCEN from enforcing the rule. However, the 5th U.S. Circuit Court of Appeals reversed that injunction on Monday.

CNBC Small Business Survey finds confidence rising among small businesses

“Because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, we have extended the reporting deadline,” according to the FinCEN website.

FinCEN didn’t return a request from CNBC for comment about the number of businesses that have filed a BOI report to date.

Some data, however, suggests few have done so.

The federal government had received about 9.5 million filings as of Dec. 1, according to statistics that FinCEN provided to the office of Rep. French Hill, R-Ark. That figure is about 30% of the estimated total.

Hill has called for the repeal of the Corporate Transparency Act, passed in 2021, which created the BOI requirement. Hill’s office provided the data to CNBC.

“Most non-exempt reporting companies have not filed their initial reports, presumably because they are unaware of the requirement,” Daniel Stipano, a partner at law firm Davis Polk & Wardwell, wrote in an e-mail.

There’s a potential silver lining for businesses: It’s “unlikely” FinCEN would impose financial penalties “except in cases of bad faith or intentional violations,” Stipano said.

“In its public statements, FinCEN has made clear that its primary goal at this point is to educate the public about the requirement, as opposed to taking enforcement actions against noncompliant companies,” he said.

Certain businesses are exempt from BOI filing

The BOI filing isn’t an annual requirement. Businesses only need to resubmit the form to update or correct information.

Many exempt businesses — such as large companies, banks, credit unions, tax-exempt entities and public utilities — already furnish similar data.

Businesses have different compliance deadlines depending on when they were formed.

For example, those created or registered before 2024 have until Jan. 13, 2025, to file their initial BOI reports, according to FinCEN. Those that do so on or after Jan. 1, 2025, have 30 days to file a report.

There will likely be additional court rulings that could impact reporting, Stipano said.

For one, litigation is ongoing in the 5th Circuit, which hasn’t formally ruled on the constitutionality of the Corporate Transparency Act.

“Judicial actions challenging the law have been brought in multiple jurisdictions, and these actions may eventually reach the Supreme Court,” he wrote. “As of now, it is unclear whether the incoming Trump administration will continue to support the Government’s position in these cases.”