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Economics

Powell indicates further, smaller rate cuts, insists the Fed is ‘not on any preset course’

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Federal Reserve Chair Jerome Powell said Monday that the recent half percentage point interest rate cut shouldn’t be interpreted as a sign that future moves will be as aggressive, in fact indicating the next moves will be smaller.

The central bank chief asserted during a speech in Nashville, Tennessee, that he and his colleagues will seek to balance bringing down inflation with supporting the labor market and let the data guide future moves.

“Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course,” he told the National Association for Business Economics in prepared remarks. “The risks are two-sided, and we will continue to make our decisions meeting by meeting.”

Powell did indicate that if the economic data remains consistent, there are likely two more rate cuts coming this year but in smaller, quarter percentage point, increments. That stands in contrast with market expectations for more aggressive easing.

“This is not a committee that feels like it’s in a hurry to cut rates quickly,” he said during a Q&A period following his speech with Morgan Stanley economist Ellen Zentner. “If the economy performs as expected, that would mean two more rate cuts this year, a total of 50 [basis points] more.”

Stocks fell as Powell spoke, with the Dow Jones Industrial Average off more than 150 points. Treasury yields moved higher, with the benchmark 10-year Treasury note most recently yielding close to 3.8%, up nearly 5 basis points on the session.

The remarks come less than two weeks after the rate-setting Federal Open Market Committee approved the half percentage point, or 50 basis points, reduction in the Fed’s key overnight borrowing rate. A basis point equals 0.01%.

Though markets had been largely expecting the action, it was unusual in that the Fed historically has only moved in such large increments during events such as the Covid pandemic in 2020 and the global financial crisis in 2008.

The likelihood of another 50 basis points in cuts would be consistent with estimates provided in the FOMC’s “dot plot” indicating individual officials’ assessments of where rates are headed.

Addressing the decision at the Sept. 17-18 meeting, Powell said it reflected policymakers’ belief that it was time for a “recalibration” of policy that better reflected current conditions. Beginning in March 2022, the Fed began fighting surging inflation; policymakers of late have shifted their attention to a labor market that Powell characterized as “solid” though it has “clearly cooled over the last year.”

“That decision reflects our growing confidence that, with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in an environment of moderate economic growth and inflation moving sustainably down to our objective,” Powell said.

“We do not believe that we need to see further cooling in labor market conditions to achieve 2 percent inflation,” Powell added.

Futures market pricing is indicating that the Fed is more likely to move cautiously at its Nov. 6-7 meeting and approve a quarter-point reduction. However, traders see the December move as a more aggressive half-point cut.

For his part, Powell expressed confidence in economic strength and sees inflation continuing to cool.

Inflation during August was around 2.2% annually, according to the Fed’s preferred personal consumption expenditures price index released Friday. While that is close to the central bank’s 2% goal, core inflation, which excludes gas and groceries, was still running at a 2.7% pace. Policymakers usually consider core inflation as a better guide for longer-run trends being that food and energy prices are more volatile than many other items.

Perhaps the most stubborn area of inflation has been housing-related costs, which rose another 0.5% in August. However, Powell said he believes the data eventually will catch up with easing prices for rent renewals.

“Housing services inflation continues to decline, but sluggishly,” he said. “The growth rate in rents charged to new tenants remains low. As long as that remains the case, housing services inflation will continue to decline. Broader economic conditions also set the table for further disinflation.”

Economics

Trump’s approval rating on economy at lowest of presidential career

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President Donald Trump is registering the worst economic approval numbers of his presidential career amid broad discontent over his handling of tariffs, inflation and government spending, according to the latest CNBC All-America Economic Survey.

The survey found that the boost in economic optimism that accompanied Trump’s reelection has disappeared, with more Americans now believing the economy will get worse than at any time since 2023 and with a sharp turn toward pessimism about the stock market.

The survey of 1,000 Americans across the country showed 44% approving of Trump’s handling of the presidency and 51% disapproving, slightly better than CNBC’s final reading when the president left office in 2020. On the economy, however, the survey showed Trump with 43% approval and 55% disapproval, the first time in any CNBC poll that he has been net negative on the economy while president.

Trump’s Republican base remains solidly behind him, but Democrats, at -90 net economic approval, are 30 points more negative than their average during his first term, and independents are 23 points more negative. Blue collar workers, who were key to the president’s election victory, remain positive on the Trump’s handling of the economy, but their disapproval numbers have shot up by 14 points compared to their average for his first term.

“Donald Trump was reelected specifically to improve the economy, and so far, people are not liking what they’re seeing,” said Jay Campbell, partner with Hart Associates, the Democratic pollster on the survey.

The poll was conducted April 9 through 13th and has a margin of error of +/-3.1%.

The results show that Trump has so far been able to convince only his base that his economic policies will be good for the country over time: 49% of the public believe the economy will get worse over the next year, the most pessimistic overall result since 2023. That figure includes 76% of Republicans who see the economy improving. But 83% of Democrats and 54% of independents see the economy getting worse. Among those believing the president’s policies will have a positive impact, 27% say it will take a year or longer. However, 40% of those who are negative about the president’s policies say they are hurting the economy now.

“We’re in a turbulent, kind of maelstrom of change when it comes to how people feel about what’s going to happen next,” said Micah Roberts, managing partner with Public Opinion Strategies, the Republican pollsters for the survey. “The data… suggests more than ever that it’s the negative partisan reaction that’s driving and sustaining discontent and trepidation about what comes next.”

While partisanship is the most significant part of the president’s negative showing, he loses some support among Republicans in key areas like tariffs and inflation, and has seen a notable deterioration among independents.

Tariffs look to be a substantial part of the overall public’s discontent. Americans disapprove of across-the-board tariffs by a 49 to 35 margin, and majorities believe they are bad for American workers, inflation and the overall economy. Democrats give tariffs a thumbs down by an 83-point margin and independents by 26 points. Republicans approve of the tariffs by a 59-point spread — 20 points below their 79% net approval of the president.

Large majorities of Americans see Canada, Mexico, the EU and Japan as more of an economic opportunity for the United States rather than an economic threat. In fact, all are viewed more favorably than when CNBC asked the question during Trump’s first term. The data suggest the public, including majorities of Republicans, do not embrace the antipathy the president has expressed towards those trading partners. On China, however, the public sees it as a threat by a 44% to 35% margin, substantially worse than when CNBC last asked the question in 2019.

The president’s worst numbers come on his handling of inflation, which the public disapproves of by a 37 to 60% margin, including strong net negatives from Democrats and independents. But at 58%, it’s the lowest net positive approval from Republicans for any of the issues asked about the president. 57% of the public believe we will soon be, or are currently in, a recession, up from just 40% in March 2024. The figure includes 12% who think the recession has already begun.

The public also disapproves of the president’s handling of federal government spending by a 45% to 51% and foreign policy by a 42% to 53% margin.

Trump’s best numbers come on immigration, where his handling of the Southern border is approved by a 53% to 41% margin, and deportation of illegal immigrants is approved 52% to 45%. The president achieved a slight majority of support from independents on deportations and 22% support from Democrats on the Southern border. While still modest, it’s the best-performing issue for Trump among Democrats.

Meanwhile, Americans have turned more negative on the stock market than they’ve been in two years. Some 53% say it’s a bad time to invest, with just 38% saying it’s a good time. The numbers represent a sharp turnaround from the stock market optimism that greeted the president’s election. In fact, the December survey represented the sharpest swing toward market optimism in the survey’s 17-year history and the April survey is the sharpest turn towards pessimism.

The president’s troubles with his approval rating do not appear to be translating for now into significant potential gains for Democrats. Asked about congressional preference, 48% of the public support Democratic control and 46% support Republican control, barely changed from CNBC’s March 2022 survey.

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Economics

‘He should bring them down’

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U.S. President Donald Trump and U.S. Federal Reserve Chair Jerome Powell.

Win McNamee | Annabelle Gordon | Reuters

President Donald Trump on Friday lobbed his latest criticism at Federal Reserve Chair Jerome Powell, as the White House’s discontent for the economic policy leader hits a fever pitch.

During a Friday afternoon question-and-answer session with reporters, Trump pointed to examples of prices going down.

“If we had a Fed Chairman that understood what he was doing, interest rates would be coming down, too,” Trump said. “He should bring them down.”

Trump has long argued that the Fed, which sets monetary policy in the U.S., should cut down interest rates. His latest comments come as the White House has ratcheted up its attacks on Powell in recent days.

White House economic adviser Kevin Hassett said Friday that Trump and his team are assessing whether they can remove the Fed chair. Powell has said previously that he cannot be fired under law and intends to serve through the end of his term as chair in May 2026.

“The president and his team will continue to study that matter,” Hassett said at the White House after a reporter questioned if firing Powell “is an option in a way that it wasn’t before,” according to Reuters.

Trump posted on Truth Social on Thursday that “Powell’s termination cannot come fast enough.” His post included the nickname of “Too Late” for Powell, a continuation of Trump’s habit of giving satirical titles to political rivals.

His use of the word “termination” raised questions around if Trump was referring to Powell’s potential removal from his post ahead of schedule. Hassett said on Friday the administration will look at if there’s “new legal analysis” that would allow for Powell’s firing.

Powell appeared to irk Trump after saying Wednesday that the president’s contentious tariff plan could drive up inflation in the near-term and create challenges for the central bank in managing goals of high employment rates and price stability. Powell said Trump’s levies — many of which are currently on pause — are “likely to move us further away from our goals.”

“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” Powell said in prepared remarks before the Economic Club of Chicago. “If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close.”

Powell also said that the Fed was “well positioned to wait for greater clarity before considering any adjustments to our policy stance.”

The Federal Open Market Committee has its borrowing rate currently targeted in a range between 4.25% and 4.5%, where it has sat since December. Fed funds futures are pricing in a more than 90% likelihood that the central bank holds rates steady again at its policy meeting next month, according to CME’s FedWatch tool.

As Trump’s team has scaled up criticisms, some Democrats have gone on defense. Sen. Elizabeth Warren, D-Mass., warned on Thursday that a president firing the Fed chief would be dire for U.S. financial markets.

“Understand this: If Chairman Powell can be fired by the president of the United States, it will crash markets in the United States,” Warren said on CNBC.

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China targets U.S. services and other areas after decrying ‘meaningless’ tariff hikes on goods

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Dilara Irem Sancar | Anadolu | Getty Images

China last week announced it was done retaliating against U.S. President Donald Trump’s tariffs, saying any further increases by the U.S. would be a “joke,” and Beijing would “ignore” them.

Instead of continuing to focus on tariffing goods, however, China has chosen to resort to other measures, including steps targeting the American services sector.

Trump has jacked up U.S. levies on select goods from China by up to 245% after several rounds of tit-for-tat measures with Beijing in recent weeks. Before calling it a “meaningless numbers game,” China last week imposed additional duties on imports from the U.S. of up to 125%.

While the Trump administration has largely focused on pressing ahead on his tariff plans, Beijing has rolled out a series of non-tariff restrictive measures including widening export controls of rare-earth minerals and opening antitrust probes into American companies, such as pharmaceutical giant DuPont and IT major Google.

Before the latest escalation, in February Beijing had put dozens of U.S. businesses on a so-called “unreliable entity” list, which would restrict or ban firms from trading with or investing in China. American firms such as PVH, the parent company of Tommy Hilfiger, and Illumina, a gene-sequencing equipment provider, were among those added to the list.

Its tightening of exports of critical mineral elements will require Chinese companies to secure special licenses for exporting these resources, effectively restricting U.S. access to the key minerals needed for semiconductors, missile-defense systems and solar cells.

In its latest move on Tuesday, Beijing went after Boeing — America’s largest exporter — by ordering Chinese airlines not to take any further deliveries for its jets and requested carriers to halt any purchases of aircraft-related equipment and parts from U.S. companies, according to Bloomberg.

Having deliveries to China cut off will add to the cash-strapped plane maker’s troubles, as it struggles with a lingering quality-control crisis.

In another sign of growing hostilities, Chinese police issued notices for apprehending three people they claimed to have engaged in cyberattacks against China on behalf of the U.S. National Security Agency.

Chinese state media, which published the notice, urged domestic users and companies to avoid using American technology and replace them with domestic alternatives.

“Beijing is clearly signaling to Washington that two can play in this retaliation game and that it has many levers to pull, all creating different levels of pain for U.S. companies,” said Wendy Cutler, vice president at Asia Society Policy Institute.

“With high tariffs and other restrictions in place, the decoupling of the two economies is at full steam,” Cutler said.

Targeting trade in services

China is seen by some as seeking to broaden the trade war to encompass services trade — which covers travel, legal, consulting and financial services — where the U.S. has been running a significant surplus with China for years.

China Beige Book CEO: U.S. needs to articulate what they want from China

Earlier this month, a social media account affiliated with Chinese state media Xinhua News Agency, suggested Beijing could impose curbs on U.S. legal consultancy firms and consider a probe into U.S. companies’ China operations for the huge “monopoly benefits” they have gained from intellectual-property rights.

China’s imports of U.S. services surged more than 10-fold to $55 billion in 2024 over the past two decades, according to Nomura estimates, driving U.S. services trade surplus with China to $32 billion last year.

Last week, China said it would reduce imports of U.S. films and warned its citizens against traveling or studying in the U.S., in a sign of Beijing’s intent to put pressure on the U.S. entertainment, tourism and education sectors.

“These measures target high-visibility sectors — aviation, media, and education — that resonate politically in the U.S.,” said Jing Qian, managing director at Center for China Analysis.

While they might be low on actual dollar impact given the smaller scale of these sectors, “reputational effects — such as fewer Chinese students or more cautious Chinese employees — could ripple through academia and the tech talent ecosystem,” he added.

Nomura estimates $24 billion could be at stake if Beijing significantly step up restrictions on travel to the U.S.

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Travel dominated U.S. services exports to China, reflecting expenditure by millions of Chinese tourists in the U.S., according to Nomura. Within travel, education-related spending leads at 71%, it estimates, mostly coming from tuition and living expenses for the more than 270,000 Chinese students studying in the U.S.

Entertainment exports, encompassing films, music and television programs, accounted for just 6% of U.S. exports within this sector, the investment firm said, noting that Beijing’s latest move on film imports “carries more symbolic heft than economic bite.”

“We could see deeper decoupling — not only in supply chains, but in people-to-people ties, knowledge exchange, and regulatory frameworks. This may signal a shift from transactional tension to systemic divergence,” said Qian.

Can Beijing get more aggressive?

Analysts largely expect Beijing to continue deploying its arsenal of non-tariff policy tools in an effort to raise its leverage ahead of any potential negotiation with the Trump administration.

“From the Chinese government’s perspective, the U.S. companies’ operations in China are the biggest remaining target for inflicting pain on the U.S .side,” said Gabriel Wildau, managing director at risk advisory firm Teneo.

Apple, Tesla, pharmaceutical and medical device companies are among the businesses that could be targeted as Beijing presses ahead with non-tariff measures, including sanction, regulatory harassment and export controls, Wildau added.

Shoppers and staff are seen inside the Apple Store, with its sleek modern interior design and prominent Apple logo, in Chongqing, China, on Sept. 10, 2024.

Cheng Xin | Getty Images

While a deal may allow both sides to unwind some of the retaliatory measures, hopes for near-term talks between the two leaders are fading fast.

Chinese officials have repeatedly condemned the “unilateral tariffs” imposed by Trump as “bullying” and vowed to “fight to the end.” Still, Beijing has left the door open for negotiations but they must be on “an equal footing.”

On Tuesday, White House press secretary Karoline Leavitt said Trump is open to making a deal with China but Beijing needs to make the first move.

“In the end, only when a country experiences sufficient self-inflicted harm might it consider softening its stance and truly returning to the negotiation table,” said Jianwei Xu, economist at Natixis.

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