Finance

Powell says Fed is awaiting ‘greater clarity’ on Trump policies before making next move on rates

Published

3 months ago

March 7, 2025

U.S. Federal Reserve Chair Jerome Powell testifies before a Senate Banking, Housing and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress,” at Capitol Hill in Washington, U.S., Feb. 11, 2025.

Craig Hudson | Reuters

NEW YORK — Federal Reserve Chairman Jerome Powell said Friday that the central bank can wait to see how President Donald Trump‘s aggressive policy actions play out before it moves again on interest rates.

With markets nervous over Trump’s proposals for tariffs and other issues, Powell reiterated statements he and his colleagues have made recently counseling patience on monetary policy amid the high level of uncertainty.

The White House “is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation,” he said in a speech for the U.S. Monetary Policy Forum. “It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy.”

Noting that “uncertainty around the changes and their likely effects remains high” Powell said the Fed is “focused on separating the signal from the noise as the outlook evolves. We do not need to be in a hurry, and are well positioned to wait for greater clarity.”

The comments seem at least somewhat at odds with growing market expectations for interest rate cuts this year.

Markets price in three cuts from the Fed this year

As markets have been roiled by Trump’s shifting positions on his agenda — specifically his tariff plans — traders have priced in the equivalent of three quarter percentage point reductions by the end of the year, starting in June, according to the CME Group’s FedWatch gauge.

However, Powell’s comments indicate that the Fed will be in a wait-and-see mode before mapping out further policy easing.

“Policy is not on a preset course,” he said. “Our current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate.”

The policy forum is sponsored by the University of Chicago’s Booth School’s Clark Center for Global Markets and included multiple Fed officials in the audience. Most central bank policymakers lately have said they expect the economy to hold up and inflation to fall back to the Fed’s 2% goal, with the rate climate still unclear as Trump’s policy comes more clearly into view.

In his assessment, Powell also spoke in mostly positive terms about the macro environment, saying the U.S. is in “a good place” with a “solid labor market” and inflation moving back to target.

However, he did note that recent sentiment surveys showed misgivings about the path of inflation, largely a product of the Trump tariff talk. The Fed’s preferred gauge showed 12-month inflation running at a 2.5% rate, or 2.6% when excluding food and energy.

“The path to sustainably returning inflation to our target has been bumpy, and we expect that to continue,” Powell said.

Fed Governor Adriana Kugler, who was not at the forum, said in a speech delivered Friday in Portugal that she sees “important upside risks for inflation” and said that “it could be appropriate to continue holding the policy rate at its current level for some time.”

The remarks also came the same day that the Labor Department reported a gain of 151,000 in nonfarm payrolls for February. Though the total was slightly below market expectations, Powell said the report is more evidence that “the labor market is solid and broadly in balance.”

“Wages are growing faster than inflation, and at a more sustainable pace than earlier in the pandemic recovery,” he said.

Average hourly earnings rose 0.3% in February and were up 4% on an annual basis. The jobs report also indicated that the unemployment rate edged higher to 4.1% as household employment dipped.

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Published

2 days ago

June 6, 2025

Business Finance News

Finance

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

Published

2 days 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.”