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Fed jumbo 50 bps rate cut should not raise alarm, analyst says

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Federal Reserve Chairman Jerome Powell.

Andrew Harnik | Getty Images

The U.S. Federal Reserve can afford to make a jumbo 50 basis point rate cut next week without spooking markets, an analyst has suggested, as opinion on the central bank’s forthcoming meeting remains hotly divided.

Michael Yoshikami, CEO of Destination Wealth Management, said Monday that a bigger cut would demonstrate that the central bank is ready to act without signaling deeper concerns of a broader downturn.

“I would not be surprised if they jumped all the way to 50 basis points,” Yoshikami told CNBC’s “Squawk Box Europe.”

“That would be considered, on one hand, a very positive sign the Fed is doing what is needed to support jobs growth,” he said. “I think the Fed at this point is ready to get out ahead of this.”

His comment follow similar remarks Friday from Nobel Prize-winning economist Joseph Stiglitz, who said the Fed should deliver a half-point interest rate cut at its next meeting, contending that it went “too far, too fast” with its previous policy tightening.

Fed rate cut of 50 basis points in September would not be surprising, wealth manager says

Policymakers are widely expected to lower rates when they meet on Sept. 17-18, but the extent of the move remains unclear. A disappointing jobs print on Friday stoked fears of a slowing labor market and briefly tipped market expectations toward a larger cut, before shifting back.

Traders are now pricing in around a 75% chance of a 25 bps rate cut in September, while 25% are pricing in a 50 bps rate reduction, according to the CME Group’s FedWatch Tool. A basis point is 0.01 percentage point.

Yoshikami acknowledged that a larger cut could reinforce fears that a “recessionary ball” is coming, but he insisted that such views were overblown, noting that both unemployment and interest rates remain low by historic levels and company earnings have been strong.

He said the recent market sell-off, which saw the S&P 500 notch its worst week since March 2023, was based on “massive profits” accrued last month. August saw all the major indices post gains despite a volatile start to the month, while September is traditionally a weaker trading period.

Not concerned about a U.S. recession, CIO says

Thanos Papasavvas, founder and chief investment officer of ABP Invest, also acknowledged a “rise in concern” around a potential economic downturn.

The research firm recently adjusted its probability of a U.S. recession to a “relatively contained” 30% from a “mild” 25% in June. However, Papasavvas said that the underlying components of the economy — manufacturing and unemployment rates — were “still resilient.”

“We’re not particularly concerned that we’re heading into a U.S. recession,” Papasavvas told CNBC Monday.

The perspectives stand in stark contrast to other market watchers, such as economist George Lagarias, who told CNBC last week that a bumper rate cut could be “very dangerous.”

“I don’t see the urgency for the 50 [basis point] cut,” Forvis Mazars’ chief economist told CNBC’s “Squawk Box.”

“The 50 [basis point] cut might send a wrong message to markets and the economy. It might send a message of urgency and, you know, that could be a self-fulfilling prophecy,” Lagarias added.

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Buffett denies social media rumors after Trump shares wild claim that investor backs president crashing market

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Berkshire Hathaway responds to 'false reports' on social media

Warren Buffett went on the record Friday to deny social media posts after President Donald Trump shared on Truth Social a fan video that claimed the president is tanking the stock market on purpose with the endorsement of the legendary investor.

Trump on Friday shared an outlandish social media video that defends his recent policy decisions by arguing he is deliberately taking down the market as a strategic play to force lower interest and mortgage rates.

“Trump is crashing the stock market by 20% this month, but he’s doing it on purpose,” alleged the video, which Trump posted on his Truth Social account.

The video’s narrator then falsely states, “And this is why Warren Buffett just said, ‘Trump is making the best economic moves he’s seen in over 50 years.'”

The president shared a link to an X post from the account @AmericaPapaBear, a self-described “Trumper to the end.” The X post itself appears to be a repost of a weeks-old TikTok video from user @wnnsa11. The video has been shared more than 2,000 times on Truth Social and nearly 10,000 times on X.

Buffett, 94, didn’t single out any specific posts, but his conglomerate Berkshire Hathaway outright rejected all comments claimed to be made by him.

“There are reports currently circulating on social media (including Twitter, Facebook and Tik Tok) regarding comments allegedly made by Warren E. Buffett. All such reports are false,” the company said in a statement Friday.

CNBC’s Becky Quick spoke to Buffett Friday about this statement and he said he wanted to knock down misinformation in an age where false rumors can be blasted around instantaneously. Buffett told Quick that he won’t make any commentary related to the markets, the economy or tariffs between now and Berkshire’s annual meeting on May 3.

‘A tax on goods’

While Buffett hasn’t spoken about this week’s imposition of sweeping tariffs from the Trump administration, his view on such things has pretty much always been negative. Just in March, the Berkshire CEO and chairman called tariffs “an act of war, to some degree.”

“Over time, they are a tax on goods. I mean, the tooth fairy doesn’t pay ’em!” Buffett said in the news interview with a laugh. “And then what? You always have to ask that question in economics. You always say, ‘And then what?'”

During Trump’s first term, Buffett opined at length in 2018 and 2019 about the trade conflicts that erupted, warning that the Republican’s aggressive moves could cause negative consequences globally.

“If we actually have a trade war, it will be bad for the whole world … everything intersects in the world,” Buffett said in a CNBC interview in 2019. “A world that adjusts to something very close to free trade … more people will live better than in a world with significant tariffs and shifting tariffs over time.”

Buffett has been in a defensive mode over the past year as he rapidly dumped stocks and raised a record amount of cash exceeding $300 billion. His conglomerate has a big U.S. focus and has large businesses in insurance, railroads, manufacturing, energy and retail.

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Stocks making the biggest moves midday: PLTR, CAT, AAPL JPM

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Powell sees tariffs raising inflation and says Fed will wait before further rate moves

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US Federal Reserve Chair Jerome Powell holds a press conference after the Monetary Policy Committee meeting, at the Federal Reserve in Washington, DC on March 19, 2025. 

Roberto Schmidt | Afp | Getty Images

Federal Reserve Chair Jerome Powell said Friday that he expects President Donald Trump’s tariffs to raise inflation and lower growth, and indicated that the central bank won’t move on interest rates until it gets a clearer picture on the ultimate impacts.

In a speech delivered before business journalists in Arlington, Va., Powell said the Fed faces a “highly uncertain outlook” because of the new reciprocal levies the president announced Wednesday.

Though he said the economy currently looks strong, he stressed the threat that tariffs pose and indicated that the Fed will be focused on keeping inflation in check.

“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said in prepared remarks. “We are well positioned to wait for greater clarity before considering any adjustments to our policy stance. It is too soon to say what will be the appropriate path for monetary policy.”

The remarks came shortly after Trump called on Powell to “stop playing politics” and cut interest rates because inflation is down.

There’s been a torrent of selling on Wall Street following the Trump announcement of 10% across-the-board tariffs, along with a menu of reciprocal charges that are much higher for many key trading partners.

Powell noted that the announced tariffs were “significantly larger than expected.”

“The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” he said. “The size and duration of these effects remain uncertain.”

Focused on inflation

While Powell was circumspect about how the Fed will react to the changes, markets are pricing in an aggressive set of interest rate cuts starting in June, with a rising likelihood that the central bank will slice at least a full percentage point off its key borrowing rate by the end of the year, according to CME Group data.

However, the Fed is charged with keeping inflation anchored with full employment.

Powell stressed that meeting the inflation side of its mandate will require keeping inflation expectations in check, something that might not be easy to do with Trump lobbing tariffs at U.S. trading partners, some of whom already have announced retaliatory measures.

A greater focus on inflation also would be likely to deter the Fed from easing policy until it assesses what longer-term impact tariffs will have on prices. Typically, policymakers view tariffs as just a temporary rise in prices and not a fundamental inflation driver, but the broad nature of Trump’s move could change that perspective.

“While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent,” Powell said. “Avoiding that outcome would depend on keeping longer-term inflation expectations well anchored, on the size of the effects, and on how long it takes for them to pass through fully to prices.”

Core inflation ran at a 2.8% annual rate in February, part of a general moderating pattern that is nonetheless still well above the Fed’s 2% target.

In spite of the elevated anxiety over tariffs, Powell said the economy for now “is still in a good place,” with a solid labor market. However, he mentioned recent consumer surveys showing rising concerns about inflation and dimming expectations for future growth, pointing out that longer-term inflation expectations are still in line with the Fed’s objectives.

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