ECB's Schnabel Calls Bar for Another Cut Very High: Econostream
In an interview with Econostream, Schnabel said interest rates are 'in a good place,' with disinflation proceeding broadly as expected and the 20-nation economy proving resilient.
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Fed might've cut rates if the July jobs report had come first
A weaker-than-expected July jobs report could have justified a Federal Reserve interest rate cut had the data been available sooner. Brian Jacobsen, chief economist and strategist at Annex Wealth Management, says tariffs — not just high rates — are driving the hiring slowdown. He also notes that market volatility might persist until the Fed pivots. To watch more expert insights and analysis on the latest market action, check out more Morning Brief. Related videos Europe's most expensive city revealed, as living costs near £3,500 per month £50k in savings? Here's how to unlock up to £4.5k in passive income overnight How will the Lloyds share price be affected by today's Supreme Court ruling? Meet the 75p dividend stock with a higher yield than Legal & General shares Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Wall Street Journal
an hour ago
- Wall Street Journal
Is Trumponomics Working, or Not? - Opinion: Potomac Watch
Full Transcript This transcript was prepared by a transcription service. This version may not be in its final form and may be updated. Narrator: From the opinion pages of The Wall Street Journal, this is Potomac Watch. Paul Gigot: Is the American economy struggling or on the cusp of a new golden age or somewhere in between? Even economists of various stripes can't seem to decide in a week when we're getting a flood of economic data that ought to be able to tell us just where we are on economic growth, and heading into the future. We'll try to make sense of all the numbers for you here on Potomac Watch, as well as the Federal Reserve decision to stand pat on interest rates. Welcome. I'm Paul Gigot. This is our daily podcast from The Wall Street Journal opinion pages. And I'm here with two of my closest colleagues and watchers on the economy. Joe Sternberg and Mary O'Grady. Welcome to you both. So let's just start out with a couple of details here for facts to give us a little backdrop. First, the Fed didn't change its interest rates this week with Chairman J. Powell basically saying at his presser that they're still waiting to see about the impact of tariffs on inflation. And in the meantime, the economy's not bad. Growth is slow, but it's doing fine. We also get a flood of new tariff deals by the president. They're coming daily now ahead of his Friday, August 1st deadline for reaching agreements. A lot of those deals are coming in with higher tariffs. So many people thought, higher than the 10% that he imposed in April. Meanwhile, you get GDP. The gross domestic product numbers came in at 3% for the second quarter, which sounds pretty good except if you look in the internals of what was driving those numbers. Not so good. Weaker data. Crash of imports accounted for most of the growth for complicated reasons of national accounts. And more important, business investments fell. Let's listen to Chuck Schumer, the Senate, the Democratic leader, give his assessment of where the economy is. Chuck Schumer: Today's GDP number is in fact a mirage because some ominous numbers lurk under the hood. Business investment plunged in the second quarter by 3.1%. The fact that business investment plunged so starkly is very troubling. It shows that already businesses are worried about growing their operations. Worried about hiring more workers. Worried about trading with their international partners. And worried in general about the future. Paul Gigot: Well, I got to love that harbinger of doom tone by Chuck Schumer there. I want to go out and sell everything I have in terms of investments after that. But is he right, Joe, is his assessment of that GDP report right? Joe Sternberg: Well, as unusual it is for you to hear me say that I agree with anything that Chuck Schumer has said, mark this date, because it won't happen often. I do think that he's right. That there's reason to be concerned about what was in this report and for exactly the reasons that Senator Schumer said. I think that the big crucial ingredient for any economy to grow in any medium or long-term basis is business investment. You have to have that confidence that entrepreneurs, investors can put money into business projects. That they can grow their businesses. That they can create more productivity. And then that they can hire people in increased wages. And that was the big thing that I think is missing in this GDP report right now. And I think that a lot of it is a consequence of so much of the uncertainty that we've had over the past three to six months about trade policy. I think there was some uncertainty about tax policy before the One Big Beautiful Bill Act passed. And that will have been ameliorated now and businesses at least know that they aren't staring down the barrel of a multi-trillion dollar tax increase, since that bill has passed now. But I think that this is a sign that the economy is not firing on all cylinders the way that you would ordinarily hope that it would. And certainly, the way that I think a lot of voters probably hoped that it would when they elected President Trump last year. Paul Gigot: So Joe's got a pretty reasonably pessimistic take Mary. But then why did Jerome Powell and the Federal Reserve say we think the economy is good enough that we don't need to cut interest rates as President Trump and others in his administration have urged? Mary O'Grady: Well, the Fed's job is monetary policy. And its primary goal is supposed to be price stability. Of course, it also has a mandate for employment. But I think that looking at these numbers, there's no reason to cut any. The inflation numbers are still not at the 2% target that the Fed wants on an annualized basis, and the economy is still not in recession. So you don't use the Fed when you have potential threat of inflation to juice the economy when the economy is not in trouble. And I guess I would add to that, that there were no surprises here. The Fed doesn't like to surprise the markets and they had pretty much signaled that they weren't going to cut. So what Jerome Powell did yesterday was totally in keeping with what was expected. And there's also no surprise on the economy. I've been joking, hardly anybody laughs at my joke, but that April 2nd was hibernation day, not liberation day. And what I mean by that is lots of investors jumped to the sidelines. They just said, "We're going to wait. We're going to go to our caves and wait until we find out what's going on here." And that's why you have this paralysis of business investment, because companies are not going to sink a lot of money in where it doesn't make sense if the tariff regime is too high to support that investment. So I think Jerome Powell was completely right. We have to wait and see what Donald Trump is doing with his policies to damage the economy, and we have to go from there. But for now, we don't have inflation under control and we don't have a recession. Paul Gigot: So we've got what? Middling growth? Muddling through, something like that? Mary O'Grady: What I would call a growth recession maybe. Paul Gigot: So growth of what? One to two, something like that? In terms of GDP growth, which is underwhelming, I think. It's certainly not a new goal. Mary O'Grady: And self-inflicted. Paul Gigot: And we're going to get into that. We're going to take a break and when we come back we'll talk about the Federal Reserve and its rate cutting policy when we come back. Welcome back. I'm Paul Gigot here with the Potomac Watch daily podcast of Wall Street Journal opinion. I'm here with Mary O'Grady and Joe Sternberg. Let's listen to Kevin Hassett, who is President Trump's man leading the National Economic Council at the White House, talk about the Fed. Kevin Hassett: And so at some point, the idea that the tariffs are going to cause an explosion in inflation is something that people are going to have to give up. And if an independent Federal Reserve is data-driven and looking at the data, that our expectation is that they're going to recognize what the ECB has already recognized. That it's okay. It's safe now to cut rates. Paul Gigot: ECB being the European Central Bank, Joe, which you know well covering it. But Hassett is getting to a point of real contention here. And that is, a lot of economists have been saying that the tariffs would cause a burst of inflation. The Federal Reserve through J. Powell has been saying, "Well, we're waiting and seeing what the inflationary effects will be." Powell said that on Wednesday that you can see some evidence of inflation hitting some prices. And I looked at the June inflation numbers and that was absolutely true. You could see it in some imported goods like appliances and food, but there was no broad-based increase in inflation. So does Hassett have a point here that in fact the tariffs will not be inflationary. And so the Fed can look through them and cut rates if not this time, which it didn't, but September. And another time, as the markets seem to be saying, in maybe December. Joe Sternberg: Well, I think you can look at this as an economic issue first and then a political issue briefly second. So on the economics, I think one of the things that's going on here in a weird way is that the Trump policy communication team, including Kevin Hassett, are actually falling into a trap that Jerome Powell has set. Or maybe for a different metaphor, they're chasing a red herring that Powell had put out there. Because remember, before Trump came in and the tariffs started, the Fed had not achieved its 2% inflation target. They had brought inflation down from the peak of 2022. They were still struggling with that last mile to get the inflation rate down to 2%. And so months ago, we were pointing out that in a way the tariffs were a real political blessing for J. Powell because now all of a sudden he could say, "Oh, hey, actually, if we're worried about inflation, it's the fault of the tariffs. Now we have this new thing coming in." And so I think that one of the things that's surprising for me about the Trump team at the moment is that they are letting themselves get drawn into that argument when they could just as easily be saying, "Well, the problem that we've got if we have an inflation problem isn't the tariffs. It's the Fed hasn't finished doing the job that they started with the rate increases a few years ago." Now, against that, you also have the fact that yes, economists might end up concluding that the tariffs are not inflationary in the sense that they aren't going to create this sustained acceleration in the increase in prices over time. Maybe you get a change in the price level, which is a one-off ratchet up as the economy absorbs the tariffs. And then prices just increase at the normal slower rate that they were before. That's an economic argument that the tariffs are not inflationary. That's not going to be much of a political solution because people are still going to notice that things are more expensive. And that they aren't going to get cheaper after that initial price-level bump has been absorbed by the economy. So I think that it could be a situation that people like Kevin Hassett or Treasury Secretary Scott Bessent will get out there, and will end up winning the economic argument on the inflationary non-consequences of the tariffs and still lose the political argument about prices. Paul Gigot: I know, Mary, your view is that tariffs do not cause generalized inflation unless the Fed would monetize through easy money those tariffs. Classic monetary economic school saying that inflation is a monetary phenomenon. But they do increase one time if you get the assessment. But there's also the macroeconomic impact of tariffs. And one of the themes we've been hearing from a lot of folks, many of them in the Trump camp or those allied with Trump, is, "Hey, what happened to the recession, man?" You economists said, not us, but some economists said, "There'd be a recession with all of the barrage of tariffs. But look, things are doing just fine." And now Trump is demonstrating the creativity and the brilliance of his trade strategy because he's cutting all of these deals with countries. Boom, EU. Japan. On Wednesday, it was late, it was South Korea. And he's already struck them with Vietnam and many other countries. And more here probably, between now and the deadline for the deals that he set on August 1st, Friday. What's your view about why we haven't seen more broad-based economic damage from the tariffs? Mary O'Grady: Well, let's remember that economic growth, real growth is productivity gains. And I think we're getting productivity gains, basically from technology. I'll use the shorthand of AI, it's more complicated than that, but AI and robotics have helped us make productivity gains. I think that there's a counterfactual here that is difficult to quantify. But I think there cannot be any doubt that when you raise taxes, you reduce economic activity. You tax something, you get less of it. So I think the argument that, those of us who believe in free trade, is that we're not for these tariffs. Productivity growth would be better than what it is. Some of it is being made up for using AI and robotics. But free trade is definitely part of the productivity gains that we've seen in recent years, and we're losing those. As to the deals he's supposedly making, these genius deals. Basically, what he's presenting are frameworks for deals. So we now have a framework for a deal with Europe. And it looks like he's saying, "15% across the board tariffs." I'm not sure what Europe thinks it got out of this deal, but the detail is completely missing. When you negotiate a trade deal, you go line by line. And he's talking about sectoral tariffs separate and apart from his framework deals. We're going to have to see what those deals actually involved. And how many carve outs he's going to get. Because what's happening now is that every special interest, every industry that wants something special, is going to the White House and making their case. I think we're going to see lots of carve outs. And you might even see some countries not really abiding by the so-called deals that he says he struck. So I think there's a lot more that we haven't seen here yet. I'll just say lastly, that since April 2nd, we've had less bad news than we had on April 2nd. And so I think to some extent the markets are relieved that Trump at least responded to the big sell off that hit the market in the spring. And that's a good sign, because it means he won't be completely impervious to the dangerous and the destructive results of his tariff deals. Paul Gigot: Well, he backed down from those. And notably, short order after his April 2nd Liberation Day tariffs. And the market reaction, both in the bond markets and in equities against those tariffs, he turned around then he imposed a blanket 10% tariff on most countries. And said he'd negotiate 90 deals in 90 days. He's not going to get there, in terms of all those deals. We are going to take another break. And when we come back, we'll talk about the macroeconomic impact of the tariffs and why we haven't seen some of the damage that economists predicted. When we come back. Don't forget, you can reach the latest episode of Potomac Watch anytime. Just ask your smart speaker, play the Opinion: Potomac Watch podcast. That is play the Opinion: Potomac Watch podcast. Narrator: From the opinion pages of The Wall Street Journal, this is Potomac Watch. Paul Gigot: Welcome back. I'm Paul Gigot, here on Potomac Watch with Joe Sternberg and Mary Anastasia O'Grady. Mary, I can tell you why the EU did the deal. One of the things they thought, well, rather why they thought they got out of it was 15% on cars to the US as opposed to 25%. They just didn't want to get hit with a 25%. I think they're also hoping to prevent much worse. And that's been the watchword joke as these tariff deals unfold, "Well, could have been worse. Would've been worse." So we get a sigh of relief. Japan, 15%. South Korea, 15%. The UK is getting only 10%. The truce with China is down to 30 plus the 25 that were already in place from the first term, but that's down from 145%. So just from a macroeconomic impact, the average tariff rate in the United States when Donald Trump took office, was 2.4% for the second term. At the end of this, it's going to be somewhere between 15 and 20, probably. 17, 18% average tariff. Now that is a big, big increase in a relatively short period of time here, seven, eight months. If that's where it shakes up after August 1st. Now, there's still some other deals that have to be struck. President today gave Mexico another 90-day reprieve, but that's a big increase in that average tariff rate. Now, foreign trade is only about what, 13% of the US GDP. So that does have the broad-based effect that you would if you raised, say, income taxes by a comparable amount. But it's still got to have some negative impact. Joe Sternberg: Well, it has a broader impact than the projected tariff revenue figure might suggest. Because remember, although trade is a smaller share of US GDP than we tend to think it is given all of this political attention on the issue right now. One of the purposes of the tariffs is to allow America's domestic producers to increase their prices. And in fact, I'm starting to wonder if that's one of the reasons that so many foreign governments are making their peace with this 15% tariff as long as they can get things like the reduction or break on autos, which goes to the standard 15% instead of 25 plus. It's because they're realizing maybe this doesn't put them at as steep disadvantage as some of these foreign producers were worried about. Partly, because the nature of modern global trade is that a lot of items that cross borders are not easily substituted. So if you need a piece of machine equipment for your factory in Topeka that only Siemens in Germany manufactures, you're going to have to buy it from them and suck up the tariff. So I think that there's a realization that some of these countries might be a bit more protected than they thought when this discussion started. And they're also discovering that they might not be at so much of a price disadvantage if American producers are going to be increasing their prices to take advantage of the protection afforded by the tariffs. And so from the perspective of a government like the European Commission, which negotiates trade deals from the European Union, they can look at this and they can say, "Well, okay. The economic burden for us economic isn't as bad as we thought it would if we can at least get that 15% rate instead of anything higher. "And meanwhile, if we sign this deal, that means that we blunt some of the domestic political pressure we face to implement retaliatory measures against the US," that might actually have been damaging for the European economy. Retaliation involves shooting yourself in the foot and then hoping the bullet ricochets into the person you're trying to retaliate against. So I think that Europe is discovering now, that they don't have quite as much political pressure for that. A lot of these are turning out to not be terrible deals for the foreign countries, despite what Trump is trying to present about these amazing negotiating victories that he's racked up for the US. Paul Gigot: I think one of the more striking facts about this trade war, period, Mary, since the president unveiled his tariffs, is that there hasn't been much retaliation. That was my big fear. You get a 1930s spiral downward in trade. US and post-Smoot-Hawley, other countries retaliate that it's tit-for-tat and tit-for-tat. And you get a spiral down and a larger global downturn. Very few countries have retaliated. There's been threats of retaliation. Europe talked about it. In the end, decided not to do it. Canada, I can't remember if they've done it or not, I think maybe a little bit. But they're all holding back. The one exception is China, which did withhold the rare earth minerals for a while, and the president then came back and said, "Okay, let's get a truce." But that is a surprise, and I think that's one of the reasons we haven't had a bigger economic damage from the tariffs. Looking forward, do you see, Mary, any chance? What chance do you see that after August 1st, when this is the president's deadline, we're going to have more certainty about trade policy so that businesses can finally say, "Okay. I got 15% more to pay for this good or that good. But now I know what my costs will be. And I know how I can adjust my supply chains and now I'll be able to invest with more confidence." Mary O'Grady: I think businesses will try to operate as if they had certainty on whatever Trump says is the policy today. But I do think that long-term investment will be harmed. Companies are either going to think about whether they should wait out Trump until the end of his term, hoping that the next president will be more of a free trader. They also might just think that ... Joe talked about the price of things, whether they'll go up or not. If domestic producers will raise prices. We haven't seen really those price hits yet. And when that happens, cars for example, coming from Mexico. They're either going to be fewer of them, which is going to cause price increases. Or there's going to be the price increases themselves. In other words, you're either going to have scarcity or you're going to have much higher prices. And when that happens, I think that from a political standpoint, there'll be push back against Trump. I think that one of the reasons why he delayed for 90 days, the Mexico discussion, is because Mexico is now our largest trading partner. And he was talking about going to 30% on anything imported that's not USMCA. And he's got this 25% tariff on final assemble autos in Mexico, which is effectively 15% because 40% of the content has to be made in the US. So it's effectively a 15% tariff. That's a huge hit to General Motors, Stellantis Ford, which make a lot of their cars in Mexico. Or final assembly in Mexico. So I think they say they're going to start building plants in the US. They're going to have trouble if they need human beings to work in them. If they do them robotically, I guess maybe they can do it. But I don't see a lot of big investment in long-term projects because I think the pressure on Trump to introduce more reasonable trade policy. And the fact that he's term limited, will make a lot of investors want to wait. Paul Gigot: So we can finish up here, Joe, but I want to look forward a little bit towards the next six months. What we can expect. Scott Bessent, the Treasury Secretary, said today, I think it was on CNBC, that he expects capital expenditures, business investment, to really take off because of the new expensing provisions. 100% expensing immediately in the Big Beautiful Bill. And because of essentially, the tariffs rates will be set, and most of the trade interruptions we've had in the last weeks will be done. What do you think about that prospect? Joe Sternberg: I hope he's right. I certainly think that having extended those business tax provisions permanently, that was one of the greatest successes of Trump's first term. The 2017 tax cut in Jobs Act for the tax reform that they passed. So kudos to the administration and Congress for having taken the prospect of a multi-trillion dollar tax increase off the table if those 2017 policies has been allowed to expire. But I think it's always really important to remember that government policy can impose barriers to investment. But conversely, you can't really create investment through what the government does. So the expensing provisions in the tax law remove one barrier that might've blocked the business investment that the economy needs. But there are still others in the form of the trade policy. And I think that some businesses will find that now that they hopefully will have greater certainty, they can move forward. But we have to worry that there might be some other businesses that are going to discover that their business model is not economically viable if they have to factor in some of the additional component or input costs that they will now have to bear as a result of the tariffs. And it might also be the case that a certain amount of the investment that you see is really just trying to rebuild supply chains in light of the trade policy when there wasn't a problem there before. So you're basically, investing to stay in place instead of investing to boost future productivity growth. So I certainly hope that we are going to see more investment. And that we are going to see more productive investment that really does improve people's standard of living, create new jobs, create new opportunities for entrepreneurs and workers. But I think that there's a lot more getting out of the way that the Trump administration is going to have to do in order to make sure that that comes to fruition. Paul Gigot: As you look at the policy mix, as I look at the policy mix here, going forward, I think the tailwinds for the economy are this Big Beautiful Bill being done. And I think there are new incentives for business investment. I think that's a big one. Also, the deregulatory agenda across the board on energy and other things is going to be helpful to the economy and to removing bottlenecks. But the two big barriers, I think are trade policy and the uncertainty that has brought if unless the president can calm that down. And then something we haven't talked about today, but I think is also out there is the mass deportation. And the impact it's having on the workforce in removing workers from the labor force. And I'm really going to be looking to see Friday in the Labor Jobs report for July, what further impact that may have had on the job markets. We've had some months here recently where something like 700,000 people, fewer workers, were in the workforce, according to one of the surveys. And that may be in large part immigration. And you need labor to have a growing economy. So thank you Mary O'Grady. Thank you Joe Sternberg. Thank you all for listening. We are here every day on Potomac Watch. Hope you'll be with us tomorrow.
Yahoo
an hour ago
- Yahoo
Bogner Sells Majority Stake to Katjes International to Drive Global Expansion
Bogner, the Munich-based lifestyle and luxury fashion company, has found a new majority investor in Katjes International. The Bogner family will sell 60 percent of its shares in Willy Bogner GmbH to Katjes International GmbH & Co. Katjes, based in Emmerich, Germany and part of the Katjes Group, which invests primarily in companies with established brands in the consumer goods sector. More from WWD Gucci Reveals 2025 Recipients of the North America Scholarship, Impact Fund and Creative Fellows Program Curve New York Returns to Javits Center With Global Brands, Exclusive Events and Industry Panels Jeremey Tahari Introduces His First Elie Tahari Collection as CEO and Creative Director The Bogner family will remain invested in Bogner for the long term with 40 percent of the company shares and will continue to be involved in the strategic direction of the company. The transaction is expected to be completed in September. It is subject to antitrust approvals. The price of the acquisition wasn't disclosed. Florinda Bogner, daughter of Willy Bogner Jr., said, 'We are delighted about our strong new partner. In Katjes International, we gained a family-owned company that shares our values and is committed to investing in the future of Bogner alongside us. Together, we will continue writing the success story of our richly traditional brand.' Tobias Bachmüller, managing shareholder of Katjes International, said, 'With our success in the personal care sector — with Bübchen, Theramed and Shirin Beauty — we have proven that we can profitably develop brands outside our core business. The further development of brands in the consumer goods segment in Europe is our strength and is in line with our long-term strategy. With Bogner, we are expanding our brand portfolio into the luxury goods segment and further enhancing its value.' Katjes International's investment gives Bogner the opportunity to continue growing in the future with an experienced partner and with a strong capital structure. Both family-owned businesses, the partners intend to invest jointly in the expansion and further internationalization of the brand. Arndt Geiwitz, chairman of the advisory board of Bogner, said, 'Bogner has successfully transformed itself in the past few years and is now well positioned as a leading player in the lifestyle and luxury sports fashion sector. With Katjes International as a strong investor, Bogner is ideally equipped for the future.' The company's headquarters will remain in Munich, and Bogner will continue to operate as a legally and organizationally independent company. The company is known for its upscale sportswear and luxe snow sports attire. Bogner posted record-breaking results for the 2023-24 fiscal year, with revenue climbing 7 percent to 187.6 million euros. Daniel Hiendlmeier, managing director and chief brand officer of Bogner noted that Katjes' investment is a milestone for the future of both the Bogner and Fire + Ice brands. 'Katjes International shares our vision of innovation and brand management and brings a deep understanding of our identity. The partnership opens up great opportunities for the brand, our employees and partners,' he said. Frank Wiesner, managing director and chief financial officer of Bogner, added, 'The transaction strengthens our capital base and creates an excellent foundation for driving our international growth and expanding global customer relations. The move confirms the appeal of the Bogner brand and the success of our strategy in recent years.' As reported last August, Bogner said it was looking for a partner to invest in its international expansion. The company said at the time it would part ways with its chief executive officer Gerrit Schneider, who had accepted a new post, at the end of 2024. At the time, the company said it had achieved the highest sales in its history in the last fiscal year. Willy Bogner Jr., whose father Willy Sr. started the namesake company in 1932, is its primary owner with daughter Florinda. They serve on the company's board, but aren't active in its day-to-day operations. Willy Bogner Sr., an Olympic skier, started Bogner as an import business for skis, equipment and Norwegian knitwear. The company specialized in skiwear and evolved into other areas. His wife, Maria, was credited with creating the modern skiwear look, overseeing design and serving as the company's lead model. Following Willy Sr.'s death in 1977, Willy Jr. and his wife Sonia, a model-turned-designer, expanded into other categories, introduced the Sônia Bogner label and the snowboard-inspired Fire + Ice brand, and opened freestanding stores. The husband-and-wife team built up and modernized the family business in the '80s, '90s and 2000s. In 2017, Sonia Bogner died after a long illness. Willy Jr. retired from the daily business in 2019. Best of WWD Catering to the Luxury Customer, Michael Kors Has Created a Juggernaut Brand Since 1981: A Company History and Timeline How Tommy Hilfiger Has Kept the Momentum Going for Nearly 40 Years: A History and Timeline Calvin Klein: A History and Timeline Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
