Finance

Fed’s Hammack calls for patience in assessing what impacts tariffs will have on the economy

Published

1 month ago

April 24, 2025

Cleveland Fed President Beth Hammack said Thursday she thinks policymakers need to be patient rather than pre-emptive in assessing how tariffs will impact inflation and growth.

In her first broadcast interview since taking the reins at the central bank district in August 2024, Hammack noted the high level of uncertainty now and did not commit to a specific course of action regarding interest rate policy.

“I think we need to be patient. I think this is a time when we want to make sure we’re moving in the right direction, than moving too quickly in the wrong direction,” she told CNBC’s “Squawk Box.” “So I would rather take our time make sure we’re looking at the data, the hard data … which are actually really good.”

Hammack’s remarks come at a sensitive time for the Fed, which has been left to assess the impact of President Donald Trump’s tariffs on both inflation and employment.

Several central bank officials, including Chair Jerome Powell, have said the duties pose threats to both sides of the Fed’s “dual mandate,” posing another challenge on how to calibrate monetary policy. Hammack also voiced concerns over how the Fed might balance those priorities.

“It could be that we have the two sides of our mandate and conflict, which is the most challenging for monetary policy,” she said. “If it’s higher inflation, lower employment, that’s where things get really complicated.”

Markets strongly expect the Fed will stand pat on interest rates when it meets May 6-7, then resume cutting rates in June with the likelihood of a total three or four cuts by the end of the year, according to CME Group data.

“If we have convincing data by June, then I think you’ll see the committee move if we know which way to move at that point,” Hammack said.

However, uncertainty over tariff policy and how the Fed might react has contributed to substantial market volatility in recent months, with stocks struggling, Treasury yields rising and the U.S. dollar falling.

A former Goldman Sachs executive, Hammack said she is sensitive to market movements but only in how they affect broader economic conditions.

“Our job is not to focus on what the markets are doing. Our job is to focus on how that’s going to impact households and businesses, and what that’s going to mean in the real economy,” she said. “So we’re not steering the markets. We’re steering the real economy.”

Hammack noted that the “hard” economic data such as unemployment and inflation is still relatively good, while “soft” data such as surveys shows elevated levels of concern.

“What we’re hearing right now is that the uncertainty is really weighing on businesses,” she said. “It’s creating issues for them in terms of planning, in terms of thinking about where they’re going to go, and so some of them have put pauses on whether they’re going to make bigger investments, whether they’re going to invest in new facilities, new capital plans, and then they’re thinking about their hiring plans.”

“I wish I had a crystal ball. We don’t have one,” Hammack added.

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Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

21 hours ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

23 hours ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”