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Fox News
10 hours ago
- Fox News
WATCH: Tomi Lahren breaks down the truth about America's aviation issues
All times eastern Making Money with Charles Payne FOX News Radio Live Channel Coverage WATCH: Tomi Lahren breaks down the truth about America's aviation issues
Miami Herald
a day ago
- Miami Herald
Bank of America resets interest rate forecast after inflation, jobs reports
If you're hunting for a home, hoping for mortgage rates to fall anytime soon, I wouldn't hold your breath. The housing market has been dealt a double-whammy from skyrocketing home prices and high mortgage rates, making affordability a big question that's sparked considerable debate over the Fed's interest rate policy. While the Fed doesn't directly set mortgage rates, changes to its Fed Funds Rate do influence Treasury bond yields, and those yields are key to determining how much banks charge in mortgage interest. Related: Billionaire fund manager sends strong message on Fed Chair Powell's future Those who argue interest rates are too high, including President Trump, believe the Federal Reserve should cut rates immediately to reduce the risks of a recession. Others, including Fed Chairman Jerome Powell, believe patience is prudent, given that cutting rates too much could fuel inflation. Before cutting rates, the Fed wants to see more jobs and inflation data. The Fed got updated insight into inflation and unemployment this past week from the Bureau of Labor Statistics, prompting Bank of America analysts to reset their forecast. Image source:The Federal Reserve's monetary policy is designed to encourage low inflation and unemployment. Unfortunately, that's easier said than done. Raising interest rates, like in 2022 and 2023, lowers inflation, but it increases unemployment, while cutting rates lowers unemployment but increases inflation. Related: CPI inflation report resets interest rate cut bets The situation is particularly tough this year because of tariff uncertainty. President Trump has placed 25% tariffs on Canada, Mexico, and autos. He's also increased China tariffs to about 55% and instituted a blanket 10% baseline tariff on imports. The import taxes impact almost everything from cars to clothing, leading most to believe that inflation is likely to increase. Tariff uncertainty has put the Fed in a box. If it cuts rates too much, it risks fanning inflationary fires even as prices increase because of tariffs. If it doesn't cut rates, it risks falling behind the curve if unemployment worsens. The latest jobs and inflation data aren't making the Fed's decision easier. Consumer Price Index showed that inflation edged up 2.4% year over year in May from 2.3% in April, leaving it unchanged from last September. Meanwhile, layoffs continue to rise compared to last year even as the unemployment rate clocks in at 4.2%, up from 3.4% in 2023. Companies announced 696,309 lay-offs year to date through May, an increase of 80% from the same period in 2024. The inflation situation isn't all bad. The 0.1% month over month increase was below the 0.2% expected, and 2.4% inflation isn't overly concerning, except that it remains above the Fed's 2% target. Related: Fed official revamps interest-rate cut forecast for rest of this year Similarly, the jobs market isn't terrible. Yes, unemployment is up and layoffs aren't encouraging, but 4.2% is still a historically low unemployment rate. The combination may make it reasonable for the Fed to remain on pause, despite the negative impact on homebuyers and other borrowers, especially given the tariff uncertainty. "The impact of tariffs was smaller than expected in May," wrote Bank of America analysts in a note to clients. "We expect to see it more clearly starting next remain of the view that the bulk of the impact is still in the pipeline." That pipeline of inflation pressure doesn't make it likely that the Fed will reduce interest rates. However, the tame inflation reading may reduce the risk that the US economy is heading for stagflation, a period of high inflation and low or no GDP growth. More Economic Analysis: Hedge-fund manager sees U.S. becoming GreeceA critical industry is slamming the economyReports may show whether the economy is toughing out the tariffs "The benign May CPI print trims the tails of the Fed policy path distribution. Combined with the solid May jobs report, the CPI data reduce the chances of a nasty bout of stagflation," wrote the analysts. "That means a lower risk of "bad" cuts (due to a collapse in the labor market) but increased probability of "good" cuts (solid labor market and slowing inflation)." Overall, Bank of America targets inflation rising from here, keeping the Fed in the wait-and-see camp. It expects the Fed to be "on hold this year." The one bit of good news is that 2026 could be a different story. The analysts expect "100bp [ 1%] of "good" cuts next year." Related: Veteran fund manager who predicted April rally updates S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
a day ago
- Yahoo
Trump ‘may have to force' Fed on interest rates
Donald Trump said he 'may have to force' the US Federal Reserve to change interest rates after labelling its chair Jerome Powell a 'numbskull'. In his latest attack on the central bank, the president said Mr Powell, who the US leader has repeatedly criticised, should slash rates by a whole percentage point and blamed him for keeping America's debt costs high after better than expected inflation data. 'We are going to spend $600bn (£441bn) a year because of one numbskull that sits there, [saying] 'I don't see enough reason to cut the rates',' he said. 'I may have to force something.' Mr Trump's criticism of the Fed chair has previously knocked investor confidence. Since then, the president has been careful to signal that he is not preparing to sack Mr Powell despite the criticism. On Thursday, Mr Trump said: 'The fake news is saying, 'Oh, if you fired him, it would be so bad. It would be so bad.' I don't know why it would be so bad, but I'm not going to fire him.' Earlier this spring, Mr Trump sent markets into turmoil when he lashed out aggressively at the Fed chair and threatened to sack him for not cutting interest rates quickly enough. In April, he wrote on his Truth Social platform: 'Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete 'mess!' … Powell's termination cannot come fast enough!' The post was a major escalation in a long-running attack that extended back to Mr Trump's first term, when he accused Mr Powell of being the 'biggest threat' to his economic agenda after he raised interest rates. His threats earlier this year triggered a rise in yields on US Treasuries as bond investors were spooked over threats to the Fed's independence - forcing Mr Trump to dial down his rhetoric. The Fed will meet next Wednesday to make a fresh decision on interest rates. It voted to hold interest rates at 4.5pc at its last meeting after halting a series of interest rate cuts that it began last year. Mr Powell has adopted a 'wait and see' approach on rates, citing major economic uncertainty in the wake of Mr Trump's trade war. Mr Trump's aggressive tariffs are widely expected to drive up inflation as they will dramatically increase the costs of imported goods. However, the impact is yet to show up in the trade data. Official figures released on Wednesday showed inflation climbed to 2.4pc in May, up from 2.3pc in April but lower than the 2.5pc that economists had expected. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. 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
