Live updates: Trump to deliver remarks on AI plans; White House scrambles to finish tariff deals
The Debt Ceiling Reform Act, led by Rep. Brendan Boyle, D-Pa., and Sen. Jeff Merkley, D-Ore., would allow the treasury secretary to suspend the debt limit for two years. That can take effect 46 calendar days after notifying Congress — unless Congress passes a law to prevent it during that window.
Republicans raised the debt limit by $5 trillion in Trump's megabill, likely resolving it through the 2026 midterm election.
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Reuters
3 hours ago
- Reuters
Trump's interest rate demands put 'fiscal dominance' in market spotlight
NEW YORK, Aug 19 (Reuters) - As U.S. debt swells and the White House leans on the Federal Reserve to cut interest rates, investors are weighing the risk of "fiscal dominance," a scenario where keeping government financing cheap eclipses the fight against inflation. A budget bill passed last month by the Republican-controlled Congress is set to pile trillions onto the swelling U.S. debt load - raising the cost of servicing that debt. U.S. President Donald Trump has meanwhile made explicit calls for the Fed to cut rates, in part to lower the U.S. government's interest costs. The White House's pressure campaign has raised concerns that the administration wants the Fed to return to a bygone era when it kept rates low in order to allow for lower-cost borrowing. "(Fiscal dominance) is a concern ... There are risks on the horizon, both from the perspective of increasing debt loads and the probability for higher structural inflation, or at minimum, more volatility of inflation," said Nate Thooft, chief investment officer for equity and multi-asset solutions at Manulife Investment Management. "The reason why the Trump administration and politicians in general ... would like to see lower rates, is because it actually requires lower rates to be able to afford the debt levels that we have outstanding," he said. The U.S. experienced fiscal dominance during and shortly after World War Two, when the Fed was required to keep interest rates low for the war borrowing effort. The inflation spike that followed led to the 1951 Treasury-Fed accord that restored central bank independence. High long-term Treasury yields and a sliding dollar already reflect that economic setup, some analysts say, as investors require more compensation to hold U.S. assets that could lose value if inflation rises. "The administration wants to outgrow the debt ... but the other way to deal with the debt is to inflate it away," said Kelly Kowalski, head of investment strategy at MassMutual, who sees the dollar continuing to weaken. Higher inflation would mean the real value of government debt shrinks. Trump said last month that the Fed's benchmark interest rate should be three percentage points lower than the current 4.25%-4.50% range, arguing that such a reduction would save $1 trillion per year. He separately said the central bank could raise rates again if inflation rose. In the 12 months through June, inflation as measured by the Personal Consumption Expenditures Price Index advanced 2.6% - still above the Fed's 2% target. Fed Chair Jerome Powell, however, has explicitly said that the U.S. central bank does not consider managing government debt when setting its monetary policy. Some investors argue fiscal dominance lies on an uncertain horizon, with rising debt yet to trigger unsustainable interest rates, while others see it already seeping into markets as long-term yields remain elevated even amid expectations of Fed rate cuts. White House spokesperson Kush Desai said the Trump administration respects the Fed's independence, but that, with inflation having come down significantly from its highs in recent years, Trump believes it's time to reduce rates. The U.S. central bank so far has resisted those demands, though it is expected to lower borrowing costs at its September 16-17 meeting. It declined to comment on this story. The dollar is down about 10% this year against a basket of major currencies while Treasury term premiums - the extra compensation investors demand for holding long-term debt - are high, even as yields have recently dipped amid slowing economic growth. "It's difficult to be bullish (on) long bonds in this environment," said Oliver Shale, an investment specialist at Ruffer, citing government spending that could keep inflation elevated and erode bond values. "If you have an economy that's running above its natural output, that's going to result in inflation or have important implications for inflation, interest rates, and probably the currency," he said. Thooft at Manulife said he was bearish on long-dated Treasuries as higher inflation would require higher term premiums. Despite years of economic growth, U.S. deficits have continued to balloon. Debt now stands at more than 120% of GDP, higher than after World War Two. The Fed normally manages inflation while Congress maintains fiscal discipline. That balance inverts under the fiscal dominance scenario, with inflation driven by fiscal policies and a Fed trying to manage the debt burden, said Eric Leeper, an economics professor at the University of Virginia. "The Fed cannot control inflation and keep interest payments on the debt low. Those are in conflict," Leeper said. One red flag for investors is the narrowing gap between interest rates and economic growth. Benchmark 10-year yields have hovered around 4.3% in recent weeks, while nominal GDP grew at an annual rate of 5.02% in the second quarter. When interest rates exceed the growth rate, debt as a percentage of gross domestic product typically rises even without new borrowing, making the debt increasingly unsustainable. "Risks to Fed independence stemming from fiscal dominance are high," Deutsche Bank analysts said in a recent note, citing high deficits and long-term rates close to nominal GDP growth. History offers cautionary tales. Extreme fiscal dominance triggered hyperinflation in Germany in the early 1920s and in Argentina in the late 1980s and early 2000s. More recently in Turkey, pressure on the central bank to keep interest rates low undermined policy credibility and fueled a currency crisis. A majority of economists polled by Reuters last month said they were worried the Fed's independence was under threat. Despite a barrage of criticism from Trump and administration officials, Powell has vowed to remain Fed chief until his term expires in May 2026. "It seems relatively clear that whoever is nominated for the seat, regardless of whatever views they've espoused in the past, is likely to articulate a dovish bias in order to be nominated," said Amar Reganti, a fixed income strategist at Hartford Funds and former Treasury official. Lower interest rates, however, might only be a temporary fix. The administration may be hoping to "juice nominal growth," despite the risk of creating higher inflation, to get to a place where real growth makes the debt trajectory sustainable, said Brij Khurana, a fixed income portfolio manager at Wellington. "The problem they have is ... the central bank is saying: 'I don't want to make that bet with you.'"
Scottish Sun
3 hours ago
- Scottish Sun
Trump team releasing ‘largely uncensored' Epstein files to Congress in DAYS as fight over ‘missing client list' drags on
TRUMP'S team has agreed to hand over the largely uncensored Epstein files to congress as it tries to bury theories about a missing client list. Busting open the Epstein files was one of Trump's election promises, but since coming to power he has refused and tried to divert attention from the issue. 7 Ghislaine was found guilty of sex trafficking young girls for Epstein to abuse Credit: PA The President has come under intense pressure - including from voices within his own camp - who argue that if there is nothing to hide then the information should be set free. Some are convinced the files contain a "client list" which could incriminate public figures - and link this with conspiracy theories surrounding Epstein's suicide. Now, the campaigners have secured a major win with the administration agreeing to turning over most of the material held on the disgraced paedophile financier by the end of the week. The government's hand has been forced by Congress's House Oversight Committee, which this month issued a subpoena for "all documents and communications relating or referring to" Epstein and his former girlfriend Ghislaine Maxwell. This was a rare sign of pushback against the President by Congress. Tuesday was set as the initial deadline, but chairman of the committee James Comer announced he would delay it until Friday in recognition of the Justice Department's cooperation. The Republican representative said: 'Officials with the department of justice have informed us that the department will begin to provide Epstein-related records to the oversight committee this week on Friday." 'There are many records in DoJ's custody, and it will take the department time to produce all the records and ensure the identification of victims and any child sexual abuse material are redacted.' Comer added: 'I appreciate the Trump administration's commitment to transparency and efforts to provide the American people with information about this matter.' The order, seen by US media, requests that the files are uncensored other than material which could identify Epstein's victims, shows child sex abuse or is otherwise redacted by law. EPSMystery orange figure is seen near Epstein's cell night before his death - as police video expert gives bombshell theory Epstein was in prison awaiting a major trial over sex-trafficking charges after decades of sick activity with minors, facilitated by Ghislaine. He was found hanged in his cell in August 2019, but the case has never shaken off speculation that others were involved in his death. Last month, an FBI probe concluded that Epstein committed suicide, and that the much-hyped "client list" does not exist - but even this did not quell the calls for the files to be released. In an effort to put the speculation to bed, the Justice Department released around 11 hours of CCTV footage from inside the facility where Epstein died, including the point his body was discovered. 7 James Comer, Chairman of the House Oversight and Accountability Committee, said the Department of Justice is cooperating with the subpoena Credit: Getty Images - Getty But a mysterious "lost minute" was noticed in the video soon after release, when the clock ticked from 11:58:58 straight to midnight - skipping out 62 seconds. Attorney General Pam Bondi explained this was caused by a glitch in the prison's outdated system - and claimed the same minute is missing from footage every night. Then it was revealed that the video was actually made of two clips stitched together - debunking the claim it was the "full raw" file. Further analysis showed that one clip had been trimmed before release - and the data the first clip was actively cut at the 11:58:58 mark. The FBI's conclusion that the client list is fictional directly rails against what administration officials have previously said. 7 Prince Andrew was accused of having sex with Virginia Giuffre, then 17, facilitated by Epstein Credit: PA 7 The CCTV footage of Epstein's final hours was in fact missing almost three minutes Credit: US Department of Justice In an interview on Fox News in February, Pam Bondi herself said the client list was "sitting on my desk right now to review." She later attempted to clarify that she had meant the Epstein file in its entirety. Many within Trump's MAGA movement allege that the files about the paedophile's crimes have been withheld to protect big names. US House Speaker Mike Johnson said he supported the release of the files. Speaking on a podcast with Benny Johnson, the Republican said: "It's a very delicate subject, but we should put everything out there and let the people decide it. "I'm for transparency," he added. 7 7 Other conservative figures have since demanded to see all the documents related to Epstein's crimes. Lauren Boebert, another conservative Republican said a special counsel should be appointed to investigate the financier's crimes if more Epstein files were not released. And Senator John Kennedy of Louisiana said the voters expect more accountability. Even Trump's daughter-in-law, Lara Trump, a Fox News host, has called for "more transparency" from the administration. All the while, Trump has rejected the suggestion the files contain anything of note. He said last month: "I don't understand why the Jeffrey Epstein case would be of interest to anybody. It's pretty boring stuff."
The Sun
3 hours ago
- The Sun
Trump team releasing ‘largely uncensored' Epstein files to Congress in DAYS as fight over ‘missing client list' drags on
TRUMP'S team has agreed to hand over the largely uncensored Epstein files to congress as it tries to bury theories about a missing client list. Busting open the Epstein files was one of Trump's election promises, but since coming to power he has refused and tried to divert attention from the issue. The President has come under intense pressure - including from voices within his own camp - who argue that if there is nothing to hide then the information should be set free. Some are convinced the files contain a "client list" which could incriminate public figures - and link this with conspiracy theories surrounding Epstein's suicide. Now, the campaigners have secured a major win with the administration agreeing to turning over most of the material held on the disgraced paedophile financier by the end of the week. The government's hand has been forced by Congress's House Oversight Committee, which this month issued a subpoena for "all documents and communications relating or referring to" Epstein and his former girlfriend Ghislaine Maxwell. This was a rare sign of pushback against the President by Congress. Tuesday was set as the initial deadline, but chairman of the committee James Comer announced he would delay it until Friday in recognition of the Justice Department's cooperation. The Republican representative said: 'Officials with the department of justice have informed us that the department will begin to provide Epstein-related records to the oversight committee this week on Friday." 'There are many records in DoJ's custody, and it will take the department time to produce all the records and ensure the identification of victims and any child sexual abuse material are redacted.' Comer added: 'I appreciate the Trump administration's commitment to transparency and efforts to provide the American people with information about this matter.' The order, seen by US media, requests that the files are uncensored other than material which could identify Epstein's victims, shows child sex abuse or is otherwise redacted by law. EPSMystery orange figure is seen near Epstein's cell night before his death - as police video expert gives bombshell theory Epstein was in prison awaiting a major trial over sex-trafficking charges after decades of sick activity with minors, facilitated by Ghislaine. He was found hanged in his cell in August 2019, but the case has never shaken off speculation that others were involved in his death. Last month, an FBI probe concluded that Epstein committed suicide, and that the much-hyped "client list" does not exist - but even this did not quell the calls for the files to be released. In an effort to put the speculation to bed, the Justice Department released around 11 hours of CCTV footage from inside the facility where Epstein died, including the point his body was discovered. 7 But a mysterious "lost minute" was noticed in the video soon after release, when the clock ticked from 11:58:58 straight to midnight - skipping out 62 seconds. Attorney General Pam Bondi explained this was caused by a glitch in the prison's outdated system - and claimed the same minute is missing from footage every night. Then it was revealed that the video was actually made of two clips stitched together - debunking the claim it was the "full raw" file. Further analysis showed that one clip had been trimmed before release - and the data the first clip was actively cut at the 11:58:58 mark. The FBI's conclusion that the client list is fictional directly rails against what administration officials have previously said. 7 7 In an interview on Fox News in February, Pam Bondi herself said the client list was " sitting on my desk right now to review." She later attempted to clarify that she had meant the Epstein file in its entirety. Many within Trump's MAGA movement allege that the files about the paedophile's crimes have been withheld to protect big names. US House Speaker Mike Johnson said he supported the release of the files. Speaking on a podcast with Benny Johnson, the Republican said: "It's a very delicate subject, but we should put everything out there and let the people decide it. "I'm for transparency," he added. 7 7 Other conservative figures have since demanded to see all the documents related to Epstein's crimes. Lauren Boebert, another conservative Republican said a special counsel should be appointed to investigate the financier's crimes if more Epstein files were not released. And Senator John Kennedy of Louisiana said the voters expect more accountability. Even Trump's daughter-in-law, Lara Trump, a Fox News host, has called for "more transparency" from the administration. All the while, Trump has rejected the suggestion the files contain anything of note. He said last month: "I don't understand why the Jeffrey Epstein case would be of interest to anybody. It's pretty boring stuff." 7
