Ray Dalio Cites 1930s Germany to Assess Unfolding Trade War
Dalio was speaking at a CNBC conference in Singapore on Wednesday, when he was asked what will ultimately happen as a result of the escalating conflicts over rising tariffs.
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Yahoo
12 minutes ago
- Yahoo
Tariff, Inflation Fears Led Fed To Avoid Rate Cut In July, Meeting Minutes Show
Key Takeaways Members of the Federal Open Market Committee considered inflation driven by tariffs to be a bigger threat to the economy than joblessness, according to minutes of a July meeting released Wednesday. Tariff-related inflation concerns dominated the discussion before the FOMC's decision to keep the central bank's key interest rate steady. The thinking of FOMC members may have shifted after a shocking decline in job creation was reported days later. Behind closed doors, officials at the Federal Reserve said much the same as they've said in public: that concerns over tariffs stoking inflation led them to keep the central bank's interest rate flat in July instead of cutting it. That's according to minutes of the July meeting released Wednesday. The minutes showed members of the central bank's policy committee were divided over whether inflation or joblessness is the biggest threat to the minutes shed some light on how Fed officials are thinking about how they should use monetary policy to pursue their "dual mandate" of keeping inflation low and employment high. The minutes echoed public statements Fed officials have made recently, but are outdated since they were made before the surprise slowdown in the job market was revealed in an Aug. 1 hiring of tariffs dominated the discussion. Members of the Federal Open Market Committee debated how much the tariffs are likely to push up prices, how long it will take for those price hikes to make their way through supply chains to store shelves, and whether those higher prices will set off a self-reinforcing cycle of price hikes and wage increases."With regard to the outlook for inflation, participants generally expected inflation to increase in the near term," the minutes said. "Participants judged that considerable uncertainty remained about the timing, magnitude, and persistence of the effects of this year's increase in tariffs."At several points, the minutes referred to "a couple" of committee members who argued that the weakening job market was more worrisome than tariff-driven inflation. Although the meeting minutes did not name names, that could reference Fed governors Michelle Bowman and Christopher Waller, who voted for a rate cut but were outnumbered."Most participants judged the upside risk to inflation as the greater of these two risks, while several participants viewed the two risks as roughly balanced, and a couple of participants considered downside risk to employment as the more salient risk," Ryan Sweet, chief U.S. economist at Oxford Economics, wrote in a commentary. "It's unclear if the July employment report and the revisions to prior months, released after the July meeting, alter some views of the balance of risks."Financial markets currently are pricing in about an 81% chance the Fed will cut interest rates in September to bolster the job market, according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data. Read the original article on Investopedia 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
CNBC
15 minutes ago
- CNBC
Santoli's Wednesday market wrap-up: Highest-momentum stocks remain under pressure
(These are the market notes on today's action by Mike Santoli, CNBC's Senior Markets Commentator. See today's video update from Mike above.) Another flurry of treacherous rotation roiled the tape, though by the closing hour the swirling currents were showing signs of slowing. The highest-momentum, most-expensive, most-crowded stocks — the sort that drove the Nasdaq-100 up 40% and the S & P 500 High Beta ETF (SPHB) up 60% over four months – remained under pressure, peaking at midmorning. While largely mechanical and tactical, the action coincides with a moment of broad reconsideration of the trajectory of the AI-investment theme and the assumptions underlying it. Meta Platforms is now down nearly 5% on the week, as it again is said to be reorienting its AI efforts. Chat GPT5 has been deemed largely underwhelming. Perhaps most relevant, though, the AI trade became pretty crowded. Strategas here shows flows into AI-specific ETFs having shot higher in recent weeks. For now, the reallocation is relatively orderly, and has not undercut the stability of consumer cyclicals, financial stocks or industrials, and thus would seem to be saying little about the macroeconomic setup. This is largely how the market tries to relieve extremes in concentrated positioning, rapidly racing from leaders to laggards, the crowded to the neglected. Several similar episodes in recent years were sometimes hazardous but only a minority of the time resulted in a sizable, broad index correction. VIX flat today suggest little real stress. Minutes from the Fed's July meeting were somewhat hawkish, though the bond market quickly moved on given that meeting was before the jarring Aug. 1 payroll report that caused odds of a September rate cut to soar above 80%. The market is holding this stance, though presumably Fed Chair Powell on Friday in Jackson Hole will stop short of fully endorsing any September move, not wishing to front-run another jobs report in early September. It remains debatable whether the economy "needs" a rate cut, but the market would gladly take one. Big picture, stocks are near highs, valuations full, credit spreads tight, market-based yields and oil prices unchallenging. A rate cut into such conditions is typically more than investors would dare ask for, although the cadence of the recent economic and monetary cycles has been unusual. So far this week, the equal-weighted S & P 500 is up 0.5% with the market-cap-weighted version down 0.8%. A small measure of "broadening" that so many seem to root for, even if it comes with a bumpier ride along the way.
CBS News
15 minutes ago
- CBS News
4 reasons why the Trump tariffs haven't caused U.S. inflation to soar
Despite a barrage of new tariffs imposed by the Trump administration this year on dozens of U.S. trade partners, the prices of goods and services across the U.S. have defied many economists' expectations and remained relatively stable. Economists caution that just because tariffs have yet to trigger a renewed bout of inflation, there is no guarantee that prices won't surge later this year. They note that recent data shows a modest rise in the cost of items including clothing, home furnishings and appliances. Tariffs — meaning the rate importers must pay at the border for imported goods — also take a long time to seep into the economy. That's because companies often trying to hold off on passing along higher costs to customers to avoid losing market share to rivals. Yet experts acknowledge that tariffs have yet to unleash the kind severe inflationary pressures that could cause prices to spike. For their part, White House officials have consistently maintained that foreign exporters — not American consumers — will bear the brunt of added tariff costs. "Despite the doom-and-gloom predictions of inflation and recession, it's been months since Liberation Day, and inflation is trending towards an annualized rate not seen since President Trump's first term, while a recent [Council of Economic Advisers] analysis found that prices of imported goods are actually declining," White House spokesman Kush Desai said in a statement to CBS MoneyWatch, alluding to the baseline and other tariffs President Trump originally announced on April 2. Here are four reasons economists say explain why inflation isn't jumping despite the highest U.S. tariffs in decades. Despite President Trump's many threats to jack up levies on imports, the actual average tariff rate being charged on U.S. imports is not as high as what has been announced, data shows. The average tariff rate on U.S. imports in June was 9% — well below the 15% that many economists were forecasting earlier this year following Mr. Trump's slew of tariff announcements, according to investment advisory firm Capital Economics. "It's not so much that the reaction to tariffs has been low, it's that the effective tariff rate increase has been relatively limited up until June," Mark Cus, an economist at Barclays, told CBS MoneyWatch. Actual U.S. tariffs remain lower than earlier estimates in part because countries facing steeper levies are sending fewer goods to the U.S., according to Barclays and Capital Economics. By contrast, countries with below average tariff rates are shipping more goods to the U.S. The upshot: Average tariff rates on imports are lower than many economists were projecting earlier this year. Additionally, many goods imported into the U.S. have been exempted from steeper tariffs. Of the roughly $258 billion worth of imports that hit the U.S. retail market in June, only 48% were subject to tariffs, Barclays data shows. For example, pharmaceuticals, some electronics, and many imports from Canada and Mexico are exempt from any new tariffs. "While dutiable goods face elevated tariff rates, a substantial portion of U.S. imports remains duty-free," Barclays analysts said in a recent report. "This is a major contributor to the low effective tariff rate." U.S. retailers built up their inventories earlier this year in expectation that the Trump administration would hike tariffs on imported products and parts. Many retailers are still selling those non-tariffed products, allowing them to delay price hikes, experts said. For example, "There was a big jump in imports of goods from Canada that would later be tariffed before the tariffs kicked in, and perhaps imports of those goods in May and June were relatively low, and that shows up as a smaller amount of dutiable goods," Barclays' Cus told CBS MoneyWatch. Eventually, experts warn, retailers will exhaust those lower-cost goods imported earlier in the year, which could lead to higher prices down the road. For now, many retailers are eating the additional tariff costs. Businesses "have been willing to absorb the initial hit via lower margins, although we suspect that was mostly a temporary development as those firms waited for more clarity on where tariff rates would settle," analysts with investment adviser Capital Economics said in a recent report. "We doubt that is a sustainable outcome over the longer term, however. As the uncertainty over tariff levels eases over the next couple of weeks, giving retailers more clarity on rates over the next year or two, we would expect more firms to raise prices," they said. Tariffs typically take many months to seep into company supply chains and and show up in the prices consumers pay at the store. The full impact of tariffs plays out not immediately but over an extended period of time, peaking roughly a year after they take effect, a June Federal Reserve Bank of Dallas report noted. That means any U.S. tariffs imposed this year could would be unlikely to have much of an impact on inflation until later this year and into 2026. "Up to now there has been only limited passthrough from tariffs into final consumer prices, but we still expect the impact to gradually mount in the second half of this year," Capital Economics analysts said in a report. A final possibility is that the fears that the Trump administration's turn toward protectionist trade policies would trigger another severe bout of inflation are overblown. The White House has maintained that such a shift will protect jobs, and make the U.S. more competitive globally. "The Administration has consistently maintained that the cost of tariffs will be paid by foreign exporters who rely on access to the American economy, the world's best and biggest consumer market," the White House's Desai said in a statement.
