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Winners and losers as America at last reaches a budget deal

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“General Hospital” has the distinction of running longer than any soap opera in American television history. Yet the months-long budget melodrama in Washington, DC, which mercifully concluded on March 23rd, at times felt destined to become almost as much of a fixture of American life as the medical serial that debuted in 1963.

The 2024 fiscal year began nearly six months ago, but only now has Congress managed to pass a long-term budget deal to fully fund the federal government through the remainder of the fiscal year. Kevin McCarthy was ousted as House speaker in October 2023 after preventing a lapse in government funding. Mike Johnson, his successor, allowed three more “continuing resolutions” to avoid unnecessary government shutdowns, but the delays culminated in an agreement that differed little from what the White House and Congress had agreed to in principle nearly a year ago.

The $1.2trn package just passed covers about 75% of government spending. (The remainder already had been authorised in a bill signed into law earlier in the month.) The latest legislation cleared the Republican-controlled House on Friday March 22nd on a 286-134 vote, while the Democrat-led Senate approved it, after much last-minute haggling, in the early hours of Saturday morning, by 74-24. The bill, more popular with Democrats than Republicans, marginally reduces government spending but on its own won’t significantly alter America’s fiscal destiny.

“It’s good to see Congress put something in place to control spending levels for one year,” says Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan non-profit group. That doesn’t mean members of Congress should be patting themselves on the back. “There’s so much more to be done, and they are all the things that politicians are saying they won’t do, including raising taxes, fixing Social Security and fixing Medicare.”

Underperformance has never prevented legislators from claiming victory anyway. Democrats and Republicans alike will be happy to take credit for a 5.2% salary increase for military personnel, and even some Republicans can applaud 12,000 new special immigrant visas for American allies in Afghanistan attempting to flee Taliban rule. The bill also includes policy prizes that fall under neater partisan categories.

Mr Johnson won new money for Immigration and Customs Enforcement to expand immigration-detention capacity and pay for 22,000 border-patrol agents. Republicans also secured a one-year ban on funding for the UN Relief and Works Agency, which provides aid to Palestinian refugees, along with a 6% reduction in broader spending on foreign programmes. All are real wins for a party increasingly supportive of Israel, sceptical of immigration and isolationist in its global outlook.

Democrats, however, blocked a host of other policies popular among Republicans, such as anti-abortion provisions. Members of Mr Biden’s party are also touting $1bn for a climate-change programme at the Pentagon and another $1bn for child care and Head Start, an education programme for young children from poor families. This mixed outcome in any deal ought to be expected, given America’s divided government, but Republican hardliners were not impressed.

Chip Roy, a congressman from Texas, acknowledged after the bill was released that Republicans would not get everything they wanted when Democrats controlled the White House and Senate. He opposed the measure regardless. “Any Republican who votes for this bill OWNS the murders, the rapes and the assaults by the people that are being released into our country,” Mr Roy said, citing its insufficiently harsh immigration provisions. “A vote for this bill is a vote against America.”

Mr McCarthy lost his job after years of enduring this sort of over-the-top rhetorical abuse, but his replacement has largely followed his lead. The final deal had been negotiated behind closed doors between Mr Biden’s team and congressional leaders. Mr Johnson listened to the hardline Freedom Caucus, to which Mr Roy belongs, but ultimately ignored the group. To avoid a government shutdown, he even ignored a rule that previously required the House not vote on a bill until 72 hours after its text was released.

As a relatively unknown congressman, Mr Johnson was one of the most conservative members of the lower chamber. He is still deeply conservative, but the price of power is recognising the need to compromise. The provisions in this bill will expire at the end of September, weeks before the presidential election. In all likelihood a short-term spending bill will be cobbled together to carry legislators through campaign season, to avoid a messy spending fight just as Americans get ready to vote.

For now, Mr Johnson has said that he would turn his focus to providing aid for Israel, Taiwan and Ukraine. He previously declined to take up a Senate bill that paired military assistance with immigration reform, and some members of the House are working on a strategy to force a vote on the issue. If Mr Johnson supported assistance for Ukraine after cutting a deal with Democrats, could he meet the same fate as Mr McCarthy?

Marjorie Taylor Greene, a Republican congresswoman from Georgia, filed a “motion to vacate” the speakership after the legislation passed, calling it a “warning”. There is no guarantee that the resolution will be taken up, and Mr Johnson appears more secure than Mr McCarthy did before his fall in October. “The funny thing is that the reason he might survive is that there’s no one else,” says Yuval Levin of the American Enterprise Institute, a conservative think-tank. “This job, which is normally pretty desirable, is so undesirable that nobody wants to fire the current guy, because nobody wants to take it.”

Economics

Inflation rate slipped to 2.1% in April, lower than expected, Fed’s preferred gauge shows

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Inflation rate slipped to 2.1% in April, lower than expected, Fed’s preferred gauge shows

Inflation barely budged in April as tariffs President Donald Trump implemented in the early part of the month had yet to show up in consumer prices, the Commerce Department reported Friday.

The personal consumption expenditures price index, the Federal Reserve’s key inflation measure, increased just 0.1% for the month, putting the annual inflation rate at 2.1%. The monthly reading was in line with the Dow Jones consensus forecast while the annual level was 0.1 percentage point lower.

Excluding food and energy, the core reading that tends to get even greater focus from Fed policymakers showed readings of 0.1% and 2.5%, against respective estimates of 0.1% and 2.6%.

Consumer spending, though, slowed sharply for the month, posting just a 0.2% increase, in line with the consensus but slower than the 0.7% rate in March. A more cautious consumer mood also was reflected in the personal savings rate, which jumped to 4.9%, up from 0.6 percentage point in March to the highest level in nearly a year.

Personal income surged 0.8%, a slight increase from the prior month but well ahead of the forecast for 0.3%.

Markets showed little reaction to the news, with stock futures continuing to point lower and Treasury yields mixed.

People shop at a grocery store in Brooklyn on May 13, 2025 in New York City.

Spencer Platt | Getty Images

Trump has been pushing the Fed to lower its key interest rate as inflation has continued to gravitate back to the central bank’s 2% target. However, policymakers have been hesitant to move as they await the longer-term impacts of the president’s trade policy.

On Thursday, Trump and Fed Chair Jerome Powell held their first face-to-face meeting since the president started his second term. However, a Fed statement indicated the future path of monetary policy was not discussed and stressed that decisions would be made free of political considerations.

Trump slapped across-the-board 10% duties on all U.S. imports, part of an effort to even out a trading landscape in which the U.S. ran a record $140.5 billion deficit in March. In addition to the general tariffs, Trump launched selective reciprocal tariffs much higher than the 10% general charge.

Since then, though, Trump has backed off the more severe tariffs in favor of a 90-day negotiating period with the affected countries. Earlier this week, an international court struck down the tariffs, saying Trump exceeded his authority and didn’t prove that national security was threatened by the trade issues.

Then in the latest installment of the drama, an appeals court allowed a White House effort for a temporary stay of the order from the U.S. Court of International Trade.

Economists worry that tariffs could spark another round of inflation, though the historical record shows that their impact is often minimal.

At their policy meeting earlier this month, Fed officials also expressed worry about potential tariff inflation, particularly at a time when concerns are rising about the labor market. Higher prices and slower economic growth can yield stagflation, a phenomenon the U.S. hasn’t seen since the early 1980s.

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Economics

German inflation May 2025

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19 May 2025, Berlin: Apricots are sold at a greengrocer for 7.98 euros per kilogram. Grapes and papaya are also on offer.

Photo by Jens Kalaene/picture alliance via Getty Images

Germany’s annual inflation hit 2.1% in May approaching the European Central Bank’s 2% target but coming in slightly hotter than analyst estimates, preliminary data from statistics office Destatis showed Friday.

The print compares with a 2.2% reading in April and with a Reuters projection of 2%.

The print is harmonized across the euro zone for comparability.

So-called core inflation, which strips out more volatile food and energy prices, dipped slightly from April’s 2.8% to 2.9% in May. The closely watched services print meanwhile eased sharply, coming in at 3.4% compared to 3.9% in the previous month.

Energy prices fell markedly for the second month in a row, tumbling by 4.6% in May.

Germany’s consumer price index has been closing in on the European Central Bank’s 2% target over recent months, in a positive signal amid ongoing uncertainty about the economic outlook for Europe’s largest economy.

Domestic and global issues have mired expectations for Germany’s financial future.

One the one hand, U.S. President Donald Trump’s tariffs could damage economic growth, given Germany’s status as an export-reliant country, though the potential impact of such duties on inflation remains unclear. But frequent policy shifts and developments have been muddying the picture.

On the other hand, Germany’s newly minted government is starting to get to work and has made the economy a top priority. Questions linger about when and to what extent the new Berlin administration’s policy plans might be realized.

The ECB is set to make its next interest rate decision on June 5, with traders last pricing in an over 96% chance of a quarter point interest rate reduction, according to LSEG data. Back in April, the central bank had cut its deposit facility rate by 25 basis points to 2.25%.

This is a breaking news story, please check back for updates.

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Economics

Trump advisor Hassett confident tariffs will stay despite judges’ ruling

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National Economic Council Director Kevin Hassett speaks to reporters at the White House in Washington, D.C., U.S., April 14, 2025. 

Kevin Lamarque | Reuters

A top economic advisor to President Donald Trump expressed confidence Thursday that court rulings throwing out aggressive tariffs will be overturned on appeal.

Kevin Hassett, director of the National Economic Council, said in an interview that he fully believes the administration’s efforts to use tariffs to ensure fair trade are perfectly legal and will resume soon.

“We’re right that America has been mishandled by other governments,” Hassett said during a Fox Business interview. “This trade negotiation season has been really, really effective for the American people.”

The comments follow a ruling from judges on the Court of International Trade who said Trump exceeded his authority on tariffs, which are aimed both at combating barriers against American goods abroad and stemming the flow of fentanyl across the U.S. border.

While the Centers for Disease Control and Prevention has said that fentanyl is the primary driver in domestic overdose deaths, the judges ruled that related tariffs “fail because they do not deal with the threats set forth in those orders.”

Hassett bristled at the ruling and said the administration will continue its anti-fentanyl efforts.

“These activist judges are trying to slow down something right in the middle of really important negotiations,” he said. “The idea that the fentanyl crisis in America is not an emergency is so appalling to me that I am sure that when we appeal, this decision will be overturned.”

The administration has multiple options to get around the judges’ ruling, including other sections of trade laws it can utilize. However, Hassett said that’s not the plan at the moment.

“The fact is that there are measures that we can take with different numbers that we can start right now. There are different approaches that would take a couple of months to put these in place,” he said. “We’re not planning to pursue those right now, because we’re very very confident that this ruling is incorrect.”

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