David Zervos on next Fed chair: Candidates will all be welcomed by markets and Fed
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Miami Herald
an hour ago
- Miami Herald
JPMorgan revamps strong forecast on Federal Reserve rate cuts
Buzzy rumblings are escalating that the Federal Reserve is on the cusp of a dovish pivot to lower interest rates in your wallet and household budget. JPMorgan has revised its outlook as to when the Federal Reserve will cut interest rates. Don't miss the move: Subscribe to TheStreet's free daily newsletter JPMorgan cited mounting uncertainty around President Donald Trump's temporary Fed appointee, plus growing signs of weakness in the labor market. Economists and market watchers are concerned over what is perceived as the president's efforts to politicize the independent central bank's monetary policymaking. Related: Trump makes surprise decision on Federal Reserve There's also uncertainty around the impact of President Trump's tariffs on inflation. In addition, many worry the Trump's administration's aggressive immigration campaign is decimating the low-wage and blue-collar work force, while the AI revolution wipes out entry-level roles for many new college graduates. "This is an unusual administration to say the least,'' Kevin O'Leary of "Shark Tank" told CNN. Image source: Watson/Getty Images President Trump announced on Aug. 7 that he was nominating Council of Economic Advisers Chair Stephen Miran to temporarily fill a vacant Federal Reserve Board seat. Miran, a Trump loyalist, has joined the president and Treasury Secretary Scott Bessent in heavily criticizing the Fed and Chair Jerome Powell over interest rates. Miran, if confirmed by the Senate this fall, will serve in an interim appointment lasting until Jan. 31, 2026. The Harvard-educated labor economist advocates stronger control over the Fed by the executive branch, shorter terms for the Board of Governors and nationalizing regional Federal Reserve banks. Analysts warned that his proximity to the president's aggressive stance on interest rates may increase a growing internal divide within the Federal Open Market Committee, the Fed's policymaking panel that sets benchmark interest rates. Related: A divided Federal Reserve mulls interest rate cut after wild week Danske Bank's chief strategist Frederik Romedahl told Bloomberg that Miran's appointment "adds some uncertainty," even if it's not a total game-changer. Market watchers like Andrew Brenner have deemed Miran controversial and questioned his business experience. Others say the Miran appointment is unlikely to affect the expected pace of rate cuts in the short term because of the macroeconomic dynamics rippling through the economy. Long term, the president could gain two appointees to the Fed board in 2025. First, he needs a permanent replacement for Miran's role (which very well could be Miran, depending on the president's whims). Second, Powell's term as chair ends in May, and he has said he hasn't decided if he plans to serve out the rest of his term into 2028. Historically, Fed chairs leave the board when their chair terms expire. Theoretically, that would give President Trump four seats on the seven-member board. Fed Governors Michelle Bowman and Christopher Waller are both Trump appointees from his first administration. Waller is considered the current top candidate to replace Powell next year. The Federal Reserve's dual congressional mandate requires monetary policy that balances low unemployment and low inflation using interest rates as the benchmark tool. Higher interest rates lower inflation but increase job losses. Lower interest rates decrease unemployment but increase inflation. More Federal Reserve: GOP plan to remove Fed Chair Powell escalatesTrump deflects reports on firing Fed Chair Powell 'soon'Former Federal Reserve official sends bold message on 'regime change' The president's personal and professional attacks on Powell have escalated since the FOMC voted in July to hold the benchmark Federal Funds Rate steady at 4.25% to 4.50%. The vote was noteworthy because Waller and Bowman both dissented, saying that emerging weakness in the labor market justified a .25 percentage-point rate cut. That was the first dissenting FOMC vote since 1993. The last rate cut was in December 2024. President Trump wants a 3-point cut, saying it is necessary to curb recession fears, ease the stagnant housing market with lower mortgages, and reduce the interest on the federal deficit. Economists and markets must consider not only data but also volatile political dynamics now swirling around the Fed. JPMorgan had originally forecast one .25 percentage-point rate cut in December 2025. It pulled that forward, forecasting a .25 cut at the Sept. 17 Fed meeting, Reuters reported. JPMorgan added three additional .25 cuts before the Fed pauses. The note did not give a firm timeline for those cuts. Analyst Michael Feroli wrote that "the risk-management considerations at the next meeting may go beyond balancing employment and inflation risks." Meanwhile, market odds for a September cut have surged, with the CME Group's FedWatch tool forecasting the likelihood at 88.9%. Related: Consumers fear inflation as tariffs hit home: Federal Reserve report The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
CNBC
an hour ago
- CNBC
Here are the 3 big things we're watching in the market in the week ahead
Earnings season is winding down, and the market has held up relatively well through the onslaught of quarterly results and the implementation of tariffs. Wall Street's next test this week: Inflation data. The pair of reports measuring price pressures in the U.S. economy carries implications for the Federal Reserve's next interest rate move and likely the stock market's. It's too soon for President Donald Trump 's newest tariff rates to show up in the numbers just yet, but we'll be watching for any inflation signs from the levies already in place. The S & P 500 is coming off a positive week, its third in the past four, and sits just shy of a fresh record-closing high. The Nasdaq ended last week at a record. There are a few other economic reports on this week's schedule. Within the portfolio, it's mostly quiet on the earnings front — save for our newest holding. Here's a closer look at what we're watching for. 1. Inflation data: The consumer price index (CPI) and the wholesale inflation gauge, known as the producer price index (PPI), are slated to be released Tuesday and Thursday morning, respectively. The overarching theme for both inflation releases: What do they mean for the Fed rate policy at its upcoming September meeting and beyond? The CPI and PPI arrive after a weak July jobs report — and the accompanying downward revisions to the prior two-month totals — that caused investors to dramatically reconsider the health of the U.S. labor market. Nurturing maximum employment is one part of the Fed's dual mandate; fostering price stability is the other. Traders went from betting the Fed will keep rates steady again in September — thanks to Fed Chairman Jerome Powell throwing cold water on the idea at the Fed's July meeting — to overwhelmingly pricing in a quarter-point cut, according to the CME FedWatch tool. Now comes the CPI and PPI, which shine a light on the price-stability piece of the Fed's mandate and, in particular, the impact that Trump's tariffs are having on the rate of inflation. In the June CPI report, inflation picked up to 2.7% overall and 2.9%, when excluding the more volatile food and energy prices, from the May rates of 2.4% and 2.8%, respectively. Tariff-sensitive categories like furniture and apparel showed increases in the June CPI, and Wall Street will once again look closely at those areas in the July data. If inflation comes in really hot, will the market recalibrate its expectations for September once again? "We see the biggest risk to markets in the [second half of the year] from a reacceleration in both goods and service inflation, leading the Fed to remain on hold and putting upward pressure on interest rates," strategists at Wolfe Research said in a note to clients Friday. Economists expect the July CPI to show a 0.2% increase on a monthly basis and a 2.8% increase annually, according to Dow Jones. Excluding food and energy, the so-called core CPI is projected to rise 0.3% month over month and 3.1% on a 12-month basis; that would be an acceleration from 0.2% and 2.9%, respectively, in June. For the PPI, which is seen as a leading indicator for the CPI because it measures what companies pay for their own inputs like steel, the consensus is for a 0.2% monthly gain after being flat in June, according to Dow Jones. On a core basis, PPI is expected up 0.3% month over month. Core PPI also was flat in June. Central bankers say the reason they haven't lowered rates yet this year is uncertainty around the inflationary impact of the tariffs. While it's good to get another month's worth of data, the CPI and PPI for July won't answer that question entirely, in part because tariff levels are still evolving, and in part because businesses that may eventually raise prices are still working through inventory accumulated before duty rates went up. However, at least for Minneapolis Fed President Neel Kashkari, he told CNBC last week that he's getting more comfortable with the idea of cutting rates without knowing the full effect of tariffs. Kashkari is an alternate member of the Fed's policymaking arm this year and a voting member in 2026, so his comments are notable. At the July meeting, two central bankers did vote for a cut. "There's a bunch of data that I know and that I've got confidence in, and there's data that I don't know and we're not going to know for a while," Kashkari said Wednesday on "Squawk Box." "The data that I think we know is that the economy is slowing. Housing services inflation is gently declining. Non-housing services inflation is coming down. Wage growth is coming down. We've seen the jobs number, and consumer spending cooling. All of that suggests the real underlying economy is slowing." He continued, "The part I don't have confidence in yet is, what are the ultimate effects of tariffs going to be on inflation? And what I'm realizing is we may not know the answer to that for quarters, or a year or more. That tells me, as one policymaker, that I need to start leaning more on the data I've got confidence in. The economy is slowing, and that means in the near term, it may become appropriate to start adjusting the federal funds rate." 2. Other data: While the CPI and PPI are the biggest data points of the week, there are a few other releases that the market will be watching due to the heightened focus on the health of the economy post-jobs report. On Thursday morning, we'll get the weekly initial jobless claims report — a measure of both first-time unemployment insurance filings, which can be used to gauge layoff activity among employers, and so-called continuing claims, which offer insights into how easily people who lose their jobs can find a new gig. On Friday, the July retail sales report is out, courtesy of the Commerce Department, offering a look at the level of consumer spending and where people spent their money. Amazon' s Prime Day was held in July, so a measure of online spending in the report will likely be influenced by that. Also on Friday, the University of Michigan's preliminary consumer sentiment survey for the month of August will be out. After some dour readings as Trump's tariff rhetoric ramped up earlier this year, the sentiment releases have stabilized. The inflation expectations component of the survey — also closely watched — tumbled to below pre-tariff levels in July . 3. Earnings: After a busy stretch of earnings, Cisco Systems is the lone Club name to report quarterly results in the week ahead. It's the first time we'll hear from the networking and security provider since it joined the portfolio on July 17. For its fiscal 2025 fourth quarter, Wall Street expects Cisco to report revenue of $14.62 billion and earnings per share (EPS) of 98 cents, according to estimates compiled by LSEG. Beyond the headline numbers, investors will be keyed into Cisco's orders and commentary around its AI products, along with its guidance for fiscal 2026. Analysts at Morgan Stanley said in a recent note to clients that expectations are for mid-single-digit order growth, "which we expect will continue to drive momentum in the stock." Last quarter, Cisco said it booked more than $600 million in AI infrastructure orders from "webscale" customers, its term for large data center operators often called hyperscalers, such as Club names Amazon and Microsoft . A big part of our thesis is Cisco continuing to make inroads into this lucrative market, so we'll be paying close attention to the latest order figure. As for fiscal 2026 revenue overall, Cisco's initial guidance is likely to come in conservative, "as the environment remains dynamic," Morgan Stanley argued. The current Wall Street consensus for Cisco's fiscal 2026 implies roughly 5% revenue growth on an annual basis, according to FactSet. Week ahead Monday, Aug. 11 Before the bell: Ltd. (MNDY), Village Farms International (VFF), Franco-Nevada Corporation (FNV), MAG Silver Corp. (MAG), Rumble (RUM), WW International, Inc. (WW), Agenus Inc (AGEN), United States Cellular (USM), Kymera Therapeutics (KYMR), Dole (DOLE), Ballard Power Systems (BLDP), EuroDry (EDRY), Barrick Mining Corporation (B) After the bell: (BBAI), Oklo (OKLO), AMC Entertainment Holdings (AMC), AST SpaceMobile (ASTS), Archer Aviation (ACHR), PennantPark Investment Corp. (PNNT) Tuesday, Aug. 12 July consumer price index at 8:30 a.m. ET Before the bell: Circle Internet Group, Inc. (CRCL), Sea Limited (SE), Pony AI Inc. (PONY), Liquidia Technologies, Inc. (LQDA), On Holding AG (ONON), DarioHealth Corp. (DRIO), Paysafe Group Holdings Limited (PSFE), Autolus Therapeutics plc (AUTL), Bitcoin Depot (BTM), Anavex Life Sciences (AVXL), Cardinal Health, Inc. (CAH), Tencent Music Entertainment Group (TME) After the bell: CoreWeave (CRWV), Rigetti Computing (RGTI), Cava Group (CAVA), Rekor Systems, Inc. (REKR), Zevra Therapeutics (ZVRA), DoubleDown Interactive (DDI), H & R Block (HRB) Wednesday, Aug. 13 Before the bell: Arcos Dorados Holdings Inc. (ARCO), Brinker International, Inc. (EAT), Marex Group Plc (MRX), Innoviz Technologies (INVZ), Perspective Therapeutics, Inc. (CATX), Cae Inc (CAE), Elbit Systems (ESLT) After the bell: Cisco Systems (CSCO), Equinox Gold Corp. (EQX), Avino Silver & Gold Mines (ASM), Electrovaya (ELVA), Red Robin Gourmet Burgers (RRGB), SurgePays (SURG), Alvotech (ALVO), Fidelis Insurance Holdings Limited (FIHL) Thursday, Aug. 14 July producer price index at 8:30 a.m. ET Before the bell: First Majestic Silver Corp. (AG), Deere & Company (DE), Inc. (JD), Amcor plc (AMCR), Advance Auto Parts Inc. (AAP), AEBI SCHMIDT GP (AEBI), Applied Industrial Technologies (AIT), Birkenstock Holding (BIRK), Cellebrite (CLBT) After the bell: Applied Materials (AMAT), Nu Holdings (NU), KULR Technology Group (KULR), Nano Nuclear Energy (NNE), SanDisk (SNDK), Pioneer Power Solutions (PPSI) Friday, Aug. 15 Retail sales at 8:30 a.m. ET The Fed's data on industrial production and capacity utilization at 9:15 a.m. ET University of Michigan's consumer sentiment survey at 10 a.m. ET Before the bell: Flowers Foods (FLO) (Jim Cramer's Charitable Trust is long CSCO, AMZN and MSFT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Forbes
2 hours ago
- Forbes
The Federal Reserve's ‘Interest On Reserves' Doesn't Contain Inflation
The difference between what economists believe and what's true is Pacific Ocean vast. Think the popular view that the Federal Reserve, by paying banks to park reserves at the central bank, is containing inflation. Where to begin? First, inflation is one thing and one thing only: a shrinkage of the exchange medium circulating such that it exchanges for fewer and fewer market goods. In our case, inflation is a shrinkage of the dollar. Except that the dollar's exchange value isn't, nor has it ever been, part of the Fed's policy portfolio. What about interest on reserves? What about it? If we ignore that lending has nothing to do with inflation to begin with, what wasted thought. That's because credit is produced, not decreed or managed by central banks. Individuals, banks, and governments borrow money not to stare lovingly at it, but for what it can be exchanged for. Which is just a comment that credit is an effect of production, nothing else. Economists ascribe an inflationary quality to borrowing which implies impressive market stupidity. Really, what individual, business or government would take on debt just to take it on? Tick tock, tick tock. The answer to the above is what is once again true: credit is produced, which means lending grows alongside production. Looking ahead, and in consideration of the extraordinary production surge that awaits as AI and other labor-saving advances render humans superhuman in terms of their ability to generate endless plenty, credit availability today will be but a tiny fraction of what it is tomorrow. Stop and think about what this means. As credit availability surges, the effect will be a 'cheap revolution' (Rich Karlgaard of Forbes long ago created, popularized the term, or both) that's going to make today appear austere by comparison. Translated, the surest sign of economic growth is falling prices, not rising. Which is important to remember when considering the once again popular (and baseless) view of economists that the Fed is containing prices by paying banks for the right to theoretically sideline the monies entrusted to them. Implied in such a view is the opposite of what's true, that lending is inflationary because lending associates with economic growth that allegedly pushes up prices as prospering individuals buy, and buy, and buy. Let's refer to the latter as fallacy on top of fallacy on top of fallacy. Demand is an effect of production, nothing else. Translated, the more people are producing the more they're demanding. To imagine that demand can outpace supply is to misunderstand how people demand in the first place. Second, what we don't spend as our production grows exists as capital for innovators to be matched with, on the way to even more production of myriad goods and services at prices that continue to decline. At present, hundreds of billions are finding their way to AI and other labor-saving advances that will yet again push down the cost of everything while simultaneously leading buyers to all new wants and needs they never knew they had. Despite this, fallacy-stalked economists just dying to be distracted are focused on the Fed paying interest to banks so that they'll lend less? Forget that the latter has nothing to do with inflation, forget that banks are but a shrinking portion of soaring amounts of global credit, and just remember that a bank lending to the Fed doesn't nor will it have any impact on the growth aspects of the U.S. economy, growth that by its very name will associate with rapidly declining prices. Economists are most effective at being irrelevant. Their focus on interest on reserves helps explain why.
