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New Indian Express
17 minutes ago
- New Indian Express
US Fed set to hold firm against Trump pressure
WASHINGTON: The US central bank is expected to defy political pressure and keep interest rates unchanged Wednesday at the end of a two-day policy meeting, as the effects of President Donald Trump's tariffs emerge. The Federal Reserve's decision, due to be announced at 2:00 pm US eastern time (1800 GMT), comes amid a flurry of data releases this week, including an early estimate of second quarter economic growth. "It's a high-wire act for the Fed, because they're balancing a lot of risks without a net," KPMG chief economist Diane Swonk told AFP. "Some of the most tariff-sensitive sectors have begun to show price increases, but the bulk of any inflation bump due to tariffs is still ahead of us," Swonk added in a recent note. Meanwhile, there are cracks in the foundation when it comes to the labor market, she said, adding that "it doesn't take much of a pick-up in layoffs to have a bigger effect on demand." Analysts broadly expect the Fed to hold interest rates steady at a range between 4.25 percent and 4.50 percent. Its last reduction was in December. The outcome could vex Trump, who has lashed out repeatedly at independent Fed Chair Jerome Powell for not lowering rates sooner -- calling him "too late," a "numbskull" and "moron." JP Morgan chief US economist Michael Feroli said in a note that Powell will likely sidestep questions at a press conference Wednesday on issues like Trump's threats to fire him or speculation over a possible early retirement. Powell's term as Fed Chair ends in May 2026. - 'Hyper-politicized' - But the central bank could well see renewed criticism from Trump after unveiling its decision, particularly as the outcome may show internal disagreements. Economists anticipate potentially two dissents among Fed policymakers, given that a couple of officials have signaled willingness to reduce rates as soon as in July. This month, Fed governor Christopher Waller flagged that indicators do not point to a particularly healthy private sector jobs market. While he did not commit to a decision, he has made the case for a July rate cut and stressed that policymakers need to respond to real-time data. Analysts said it is not too unusual to see a couple of dissents when the Fed unveils its decision, and financial markets would already have braced for this possibility given officials' recent remarks. But Swonk warned: "What I worry about is how, in this hyper-politicized environment, that's perceived." "Multiple dissents by governors, who are closest to the Chair, could signal an unintended view that they have lost confidence in the chairman," Swonk noted. Already, Trump has called for interest rates to be dropped by as much as three percentage points. - Cruel summer - Swonk of KPMG said: "it's going to get tougher over the summer." "Tariff-induced price pressures are starting to filter through the economy," said EY chief economist Gregory Daco in a note. Companies are citing weaker earnings and higher input costs, while elevated consumer prices are beginning to weigh on retail sales. "More demand erosion is likely in the months ahead," Daco said. He expects Powell to "strike a tone of cautious patience" in his press conference after the rate decision. Powell would likely reiterate that policy remains data-dependent, and that the Fed can adjust this as conditions evolve, Daco added. Looking ahead, Swonk said, "the real issue will be, what does he say at Jackson Hole now?" Powell typically addresses an annual central banking conference in Jackson Hole, Wyoming, and it takes place this year in late August. "The next shoe to drop is: Will there be enough data by the time we get to Jackson Hole to open the door to a September rate cut?" Swonk said.
Mint
2 hours ago
- Mint
Rupee slips past 87-mark against US dollar, hits lowest level in over 4 months. What's behind the weakness?
The Indian rupee weakened past the 87 level against the US dollar on Wednesday, hitting its lowest level since mid-March, amid uncertainty over the proposed India-US trade deal and a surge in global crude oil prices. Analysts also attributed the decline to month-end dollar demand from importers and continued foreign fund outflows. Rupee opened on a weaker note and depreciated by 24 paise from its previous close, touching an early low of 87.15 against the greenback. In the previous session, the rupee had already slipped to an over four-month low, ending 21 paise lower at 86.91. The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.11% to 98.77. US President Donald Trump said Indian exports to the US would likely see 20% - 25% tariffs, a move that could squeeze export margins, widen the current account deficit, and keep the rupee under pressure. 'A possible 20–25% tariff on Indian exports, suggested by US political rhetoric, has intensified pressure. Delays in concluding a bilateral trade deal, with a deadline looming August 1, are denting investor confidence. A surging US dollar index, partly due to euro weakness after a US–EU trade deal, is applying headwinds to the INR,' said Jigar Trivedi, Senior Research Analyst at Reliance Securities. Meanwhile, Reuters reported that India is holding off on fresh trade concessions ahead of the August 1 deadline and instead aims to wrap up a comprehensive bilateral deal by September or October. 'The rupee slipped to a fresh four-month low, caught in a crossfire of delayed trade progress, surging oil prices, and global risk repricing. With no breakthrough on the India-US trade front and crude rising sharply, the rupee had little choice but to retreat,' said Amit Pabari, MD, CR Forex Advisors. On the domestic front, focus will be on the Reserve Bank of India's (RBI) monetary policy next week. 'While rates are expected to remain unchanged, the stance will be crucial — a more cautious and assertive tone could support the rupee, whereas a lenient or accommodative approach may weigh on it further,' Pabari said. Jigar Trivedi believes if US-India trade negotiations escalate, or if tariff threats materialize, USD/INR could temporarily breach 87.20 and 87.60 levels in August. Amit Pabari expects the pressure on rupee is likely to persist in the near term. 'Continued dollar strength and trade uncertainty could push it further toward the 87.20 – 87.35 zone. The 87 mark remains a critical level, as heightened volatility around it may trigger RBI intervention. On the downside, support is seen between 86.20 and 86.50,' Pabari said. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Economic Times
2 hours ago
- Economic Times
Rupee's fall past 87/USD on tariff worries prompts likely intervention
The Indian rupee weakened to its lowest level since mid-March, reaching 86.23 against the U.S. dollar, amid concerns over potential U.S. tariffs on Indian exports. President Trump suggested tariffs of 20%-25%, adding pressure from ongoing foreign portfolio outflows. While the Reserve Bank of India's intervention limited losses, uncertainty persists. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The Indian rupee fell to its weakest level since mid-March on Wednesday, hurt by worries over the U.S. potentially imposing a steep tariff rate on Indian exports, though likely intervention by the Reserve Bank of India helped limit the currency's rupee was down nearly 0.5% on the day to 86.23 against the U.S. dollar as of 10:10 a.m. IST.U.S. President Donald Trump said Indian exports to the U.S. would likely see 20%-25% tariffs while speaking to reporters on Tuesday, compounding pressure on the currency from sustained portfolio is holding off on fresh trade concessions ahead of the August 1 deadline and instead aims to wrap up a comprehensive bilateral deal by September or October, a government official told developments come as other nations including Indonesia and Japan have finalised trade deals with the U.S. over the last few the rupee seemed poised for steeper losses on Wednesday, the central bank's likely intervention helped it avert those, an FX salesperson at a large foreign bank the near-term, "expect RBI to continue smoothening volatility while chances of firm intervention to lift the currency are low due to the uncertain environment," the salesperson the day, Asian currencies were mostly rangebound while the dollar index eased slightly to long as the dollar-rupee pair "stays above 86.62, the trend looks positive and buying on dips is favorable," said Ritesh Bhansali, deputy chief executive at FX advisory firm Mecklai addition to uncertainty on trade, foreign portfolio outflows have been a persistent drag for the rupee. Overseas investors have net sold over $1.5 billion worth of local stocks over July. (Reporting by Jaspreet Kalra; Editing by Ronojoy Mazumdar)
