Latest news with #HowardSchneider
Yahoo
28-05-2025
- Business
- Yahoo
Fed minutes saw rising inflation, jobless risks as of May meeting
By Howard Schneider WASHINGTON (Reuters) -U.S. Federal Reserve officials at their last meeting acknowledged they could face "difficult tradeoffs" in coming months in the form of rising inflation alongside rising unemployment, an outlook buttressed by Fed staff projections of increased risks of a recession, according to newly released minutes of the May 6-7 session. The combination of inflation and unemployment rising in tandem would leave central bank officials forced to decide whether to prioritize fighting inflation with tighter monetary policy or cutting interest rates to support growth and employment. "Almost all participants commented on the risk that inflation could prove to be more persistent than expected," as the economy adapted to higher import taxes proposed by the Trump administration. "Participants noted that the (Federal Open Market) Committee might face difficult tradeoffs if inflation proves to be more persistent while the outlooks for growth and employment weaken," the minutes said. "Participants agreed that uncertainty about the economic outlook had increased further, making it appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer." The prospect of rising unemployment and higher inflation was outlined in staff briefings that projected a "markedly" higher inflation rate this year due to the impact of tariffs and a job market "expected to weaken substantially" with the unemployment rate rising above long-run estimates of full employment by the end of this year and remaining there for two years. The results of the May meeting and the more detailed account of it reflected in the minutes have since been overtaken by U.S. President Donald Trump's decision to delay the most aggressive tariffs, in particular the 145% levy on Chinese imports that threatened to grind a large share of global commerce to a halt. The shift caused many analysts to lower recessions risks that Fed staff as of early May had considered "almost as likely as the baseline" of slowing but continued growth. But in theory those stiff tariffs are only on hold until July pending negotiations over final tax rates that have kept Fed officials and business executives in the dark about the economic landscape they may face in the next few months. The uncertainty still felt today was also the watchword at the meeting in early May, when the Fed decided to hold the benchmark policy rate steady in the 4.25% to 4.5% range. In a press conference after the meeting, Fed Chair Jerome Powell indicated the central bank was effectively sidelined until the Trump administration finalizes its tariff plans and the impact on the economy becomes clearer, a view reiterated by Powell and other Fed policymakers in the weeks since. As of early May officials also noted that volatility in bond markets in the weeks before the meeting "warranted monitoring," and noted that a change in the U.S. dollar's safe-haven status, along with rising Treasury bond yields, "could have long-lasting implications for the economy." The Fed next meets on June 17-18, when the central bank will release new projections from policymakers about their outlook for inflation, employment and economic growth in coming months and years, and the projected interest rate they feel would be appropriate. At their March meeting the median projection among policymakers was for two quarter point interest rate cuts by the end of 2025. Sign in to access your portfolio
Yahoo
28-05-2025
- Business
- Yahoo
Most US households say finances all right even as inflation still bites, Fed survey shows
By Howard Schneider WASHINGTON (Reuters) -U.S. households reported little change in their economic well-being last year, with the cost of living remaining a top concern but nearly three-quarters of adults saying they were "doing OK or living comfortably," the Federal Reserve reported in an annual survey of people's attitudes about the economy. The poll of 12,295 respondents was fielded in October, capturing the economic mood in the closing weeks of a presidential campaign that returned Republican Donald Trump to the White House. The poll found 73% of respondents at least doing OK economically versus 72% in the year before and below the recent high of 78% in 2021, when federal pandemic income support programs were running full steam. That overall finding, though, masked significant divisions among varying demographic groups. Among those with a college degree, 87% said they were doing OK, unchanged from the year before, but just 47% of those with less than a high school diploma said the same. In contrast to views about their personal circumstances, however, only 29% considered the economy as a whole to be "good" or "excellent," higher than the 22% reading in 2023 but well below the 50% who held that view in 2019, before the pandemic. Though inflation had moderated by late last year, prices remained a top concern with 60% of adults saying rising prices from one year to the next had worsened their finances and 79% changing their shopping and spending habits as a result. In 2023, 65% of those surveyed had felt inflation was making their financial life worse. One closely followed topline question about cash available for emergency spending showed no change, with 63% of adults saying they would cover an unexpected $400 expense "using cash or its equivalent," the same as in the past two years but down from 68% in 2021. The survey also showed the fading effects of the "Great Resignation" in the job market, a pandemic-triggered reshuffling of the workforce. The share of people who reported starting a new job or quitting an old one fell slightly to 14% and 9%, respectively, compared to recent peaks of 15% and 11% in 2022. Among those workers who changed jobs, the share who felt it was better than their old one fell to 62% from 67% in 2023 and 72% in 2022. The survey also found relatively low usage of cryptocurrencies, with just 8% reporting having either invested in them or used them for making transactions, up one point from 2023 but down from 12% in 2021 when the Fed first asked the question. 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
Yahoo
27-05-2025
- Business
- Yahoo
Trump's tariff blitz prompts 'firefighting' response from Fed researchers
By Howard Schneider, Ann Saphir WASHINGTON/SAN FRANCISCO (Reuters) -U.S. Federal Reserve staffers have scrambled since January to decipher what Trump administration trade policies will mean for the economy, with published tallies of potential income losses, inflation estimates running as much as 2 percentage points higher, and breakdowns showing state-by-state winners and losers. The research papers and notes, at least a dozen and counting, have taken different approaches to estimate the implications of the still evolving trade war, which has pushed U.S. import taxes to levels not seen in decades and, at times, to their highest since the Great Depression. Given the shifting administration announcements, with some of the stiffest tariffs now on hold, none stands out as a definitive take. But the research effort has been systemwide and steady, reflecting the overarching role of trade policy in the national economic debate and in Fed deliberations over monetary policy. The Fed held its policy interest rate steady in the 4.25% to 4.5% range at its last meeting, with officials saying they are reluctant to change it until they know which way inflation and jobs will pivot. Minutes of that meeting will be released on Wednesday and may provide more detail about how Fed staff and policymakers perceive the impact of the tariffs imposed so far. Fed governor Christopher Waller said in a May 14 speech the central bank is in "firefighting" mode to understand what he has called "one of the biggest shocks to affect the U.S. economy in many decades" -- an all hands effort to analyze a potential rewrite of the global trading system after decades of closer economic integration among nations. After Trump's April 2 tariff announcements proved larger and more extensive than anticipated, "questions were asked of staff around the Federal Reserve system such as, 'What will this do to the U.S. economy? What will happen to inflation and unemployment?,'" Waller said "The answers to these questions are obviously time sensitive." The ongoing research, Fed officials say, will be particularly useful once the final tariff rates and any retaliatory steps by other nations are in place. But staff's initial findings and analysis may already be influencing the debate, generally undergirding Fed officials' topline conclusion that tariffs will raise prices paid by U.S. households and lower purchasing power. Administration officials argue that the tariffs and trade details they will impose or negotiate will raise money for the U.S. Treasury and boost U.S. manufacturing jobs without sparking higher inflation. INFLATION IN FOCUS Fed researchers have been particularly keen to understand how import taxes influence prices, a complex process that depends on things that shift in reaction to each other, like the willingness of producers or retailers to offset tariffs with lower profits, and the ability of consumers to pay more for imported goods, change what they buy, or forego some purchases altogether. A May note by Fed board economists estimated that the tariffs imposed on China in February and March had already added about a third of a percentage point to goods prices excluding food and energy in the first months of the year, and that but for the tariffs those prices would have fallen -- a conclusion that helps explain why policymakers are reluctant to cut interest rates until they know more about inflation that may be in the pipeline. Larger tariffs have been put in place since that study was done, and even bigger ones are threatened. "Once we start to get some clearer contours, I think that's the time to really start to use these models more robustly, " Atlanta Fed president Raphael Bostic said in comments to reporters on May 20 in Florida. A Boston Fed study in February of general inflation and an Atlanta Fed study released the same month looking at everyday consumer items both saw prices moving higher, with the estimates depending on the tariffs used to make the estimates. The fact that the final level of tariffs remains in such flux is another factor keeping Fed officials on the sidelines. Trump has said there will be a baseline tariff of 10% on imports, but some of the paused tariffs exceed 100%, and unexpectedly on Friday the president said there would be a 50% tariff on all imports from the European Union and a 25% levy on all imported iPhones. CONSUMPTION AND INCOME Along with rising prices Fed officials are concerned about how changes in trade policy may influence U.S. economic growth if consumers, for example, are left with less purchasing power. The Dallas Fed in May highlighted one of the hurdles to sorting that out. The outcomes for the U.S. economy depend heavily on whether other countries respond to Trump's tariffs with retaliatory levies on U.S. exports. A 25% across-the-board tariff without retaliation could actually boost U.S. consumption by around 0.5%, assuming that proceeds from the tariffs were funneled back to consumers, perhaps through tax cuts. The same tariffs with retaliation lead to an overall 1% decline in consumption, unevenly distributed across states with effects ranging from a 2.9% decline in Washington state to a 2.6% boost in Wyoming. As with any tax, tariff impacts vary from location to location based on the structure of the local company, with states that are exposed to global supply chains or whose citizens consume more imported goods likely to be hit harder than others. San Francisco Fed researchers, meanwhile, published a working paper in May that showed high tariffs and retaliation from other countries would lower inflation-adjusted income by 1% nationally, with the biggest hits felt in California, Texas, and the important political swing state of Michigan. RAISE PRICES OR FIRE WORKERS? Along with quantitative studies, the Fed has fielded surveys to ask businesses how they may respond to rising tariffs, a staple issue also in conversations officials and staff are holding around the country to sense whether firms are primed to raise prices or fire workers. Boston Fed researchers, in a survey of small business tariff-related expectations conducted just before Trump took office, found that firms on average anticipated less-aggressive tariffs than actually seen, with 20% tariffs seen imposed on China, 15% on Mexico and non-Asian countries, 14% on Europe, and 13% on Canada. The firms indicated they would pass cost increases to consumers over two years; non-importers felt tariffs would have little impact on prices and potentially lower their costs. The Cleveland Fed in April published results of a February survey of regional businesses. The firms largely expected that while tariffs would lead to higher input costs, higher selling prices, and lower demand, there would be no effect on employment -- a finding that also buttresses U.S. policymakers' willingness to keep interest rates on hold given a still, relatively strong, job market. 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
Yahoo
27-05-2025
- Business
- Yahoo
Trump's tariff blitz prompts 'firefighting' response from Fed researchers
By Howard Schneider, Ann Saphir WASHINGTON/SAN FRANCISCO (Reuters) -U.S. Federal Reserve staffers have scrambled since January to decipher what Trump administration trade policies will mean for the economy, with published tallies of potential income losses, inflation estimates running as much as 2 percentage points higher, and breakdowns showing state-by-state winners and losers. The research papers and notes, at least a dozen and counting, have taken different approaches to estimate the implications of the still evolving trade war, which has pushed U.S. import taxes to levels not seen in decades and, at times, to their highest since the Great Depression. Given the shifting administration announcements, with some of the stiffest tariffs now on hold, none stands out as a definitive take. But the research effort has been systemwide and steady, reflecting the overarching role of trade policy in the national economic debate and in Fed deliberations over monetary policy. The Fed held its policy interest rate steady in the 4.25% to 4.5% range at its last meeting, with officials saying they are reluctant to change it until they know which way inflation and jobs will pivot. Minutes of that meeting will be released on Wednesday and may provide more detail about how Fed staff and policymakers perceive the impact of the tariffs imposed so far. Fed governor Christopher Waller said in a May 14 speech the central bank is in "firefighting" mode to understand what he has called "one of the biggest shocks to affect the U.S. economy in many decades" -- an all hands effort to analyze a potential rewrite of the global trading system after decades of closer economic integration among nations. After Trump's April 2 tariff announcements proved larger and more extensive than anticipated, "questions were asked of staff around the Federal Reserve system such as, 'What will this do to the U.S. economy? What will happen to inflation and unemployment?,'" Waller said "The answers to these questions are obviously time sensitive." The ongoing research, Fed officials say, will be particularly useful once the final tariff rates and any retaliatory steps by other nations are in place. But staff's initial findings and analysis may already be influencing the debate, generally undergirding Fed officials' topline conclusion that tariffs will raise prices paid by U.S. households and lower purchasing power. Administration officials argue that the tariffs and trade details they will impose or negotiate will raise money for the U.S. Treasury and boost U.S. manufacturing jobs without sparking higher inflation. INFLATION IN FOCUS Fed researchers have been particularly keen to understand how import taxes influence prices, a complex process that depends on things that shift in reaction to each other, like the willingness of producers or retailers to offset tariffs with lower profits, and the ability of consumers to pay more for imported goods, change what they buy, or forego some purchases altogether. A May note by Fed board economists estimated that the tariffs imposed on China in February and March had already added about a third of a percentage point to goods prices excluding food and energy in the first months of the year, and that but for the tariffs those prices would have fallen -- a conclusion that helps explain why policymakers are reluctant to cut interest rates until they know more about inflation that may be in the pipeline. Larger tariffs have been put in place since that study was done, and even bigger ones are threatened. "Once we start to get some clearer contours, I think that's the time to really start to use these models more robustly, " Atlanta Fed president Raphael Bostic said in comments to reporters on May 20 in Florida. A Boston Fed study in February of general inflation and an Atlanta Fed study released the same month looking at everyday consumer items both saw prices moving higher, with the estimates depending on the tariffs used to make the estimates. The fact that the final level of tariffs remains in such flux is another factor keeping Fed officials on the sidelines. Trump has said there will be a baseline tariff of 10% on imports, but some of the paused tariffs exceed 100%, and unexpectedly on Friday the president said there would be a 50% tariff on all imports from the European Union and a 25% levy on all imported iPhones. CONSUMPTION AND INCOME Along with rising prices Fed officials are concerned about how changes in trade policy may influence U.S. economic growth if consumers, for example, are left with less purchasing power. The Dallas Fed in May highlighted one of the hurdles to sorting that out. The outcomes for the U.S. economy depend heavily on whether other countries respond to Trump's tariffs with retaliatory levies on U.S. exports. A 25% across-the-board tariff without retaliation could actually boost U.S. consumption by around 0.5%, assuming that proceeds from the tariffs were funneled back to consumers, perhaps through tax cuts. The same tariffs with retaliation lead to an overall 1% decline in consumption, unevenly distributed across states with effects ranging from a 2.9% decline in Washington state to a 2.6% boost in Wyoming. As with any tax, tariff impacts vary from location to location based on the structure of the local company, with states that are exposed to global supply chains or whose citizens consume more imported goods likely to be hit harder than others. San Francisco Fed researchers, meanwhile, published a working paper in May that showed high tariffs and retaliation from other countries would lower inflation-adjusted income by 1% nationally, with the biggest hits felt in California, Texas, and the important political swing state of Michigan. RAISE PRICES OR FIRE WORKERS? Along with quantitative studies, the Fed has fielded surveys to ask businesses how they may respond to rising tariffs, a staple issue also in conversations officials and staff are holding around the country to sense whether firms are primed to raise prices or fire workers. Boston Fed researchers, in a survey of small business tariff-related expectations conducted just before Trump took office, found that firms on average anticipated less-aggressive tariffs than actually seen, with 20% tariffs seen imposed on China, 15% on Mexico and non-Asian countries, 14% on Europe, and 13% on Canada. The firms indicated they would pass cost increases to consumers over two years; non-importers felt tariffs would have little impact on prices and potentially lower their costs. The Cleveland Fed in April published results of a February survey of regional businesses. The firms largely expected that while tariffs would lead to higher input costs, higher selling prices, and lower demand, there would be no effect on employment -- a finding that also buttresses U.S. policymakers' willingness to keep interest rates on hold given a still, relatively strong, job market. Sign in to access your portfolio
Yahoo
22-05-2025
- Business
- Yahoo
US real earnings stalled across age, income groups in past year, study shows
By Howard Schneider WASHINGTON (Reuters) -Inflation-adjusted earnings stalled across age and income groups over the past year, while the sometimes rapid wage gains of the COVID-19 era have left workers as a whole little better off five years later, a JPMorganChase Institute study concluded. The study, released on Thursday, said after-tax take-home pay, adjusted for inflation that soared above 9% in 2022, grew more slowly than the economy as a whole from 2019 through 2025, likely leaving workers with a smaller share of annual output. While lower-paid workers have kept the relative wage gains made early in the pandemic, when their pay was rising faster than others, that progress has stalled recently, the study found, with earnings growing about the same across income categories. "While the labor market has been strong, American workers may sense that it could have been even stronger," as the economy continued to grow but wage gains were offset by inflation, the institute said in its study. It used data from about 20 million checking accounts, including 7 million from the 2019-2025 period, to track take-home earnings of individuals by income level and age. The findings are potentially relevant for Federal Reserve officials trying to gauge the resilience of consumer spending should inflation accelerate due to the Trump administration's import tariffs. Retail spending barely grew in April after a surge of buying in March that may have reflected efforts to make purchases before the tariffs on goods from China and other major trading partners took effect. Whether spending rebounds or continues to slow from here will be important to U.S. central bankers trying to understand the impact of trade policy on the economy. Firms like Walmart have warned of future price increases, while Fed officials and economists say households are facing mounting financial challenges, including the restart of student loan repayments and the loss of financial buffers built up from government payments during the pandemic. "Workers can see how their wages are moving, and they can read the paper and understand what is happening" on trade and other issues, Institute President Christopher Wheat said in an interview. "Eventually you'd think that is going to show up in spending, though we've not directly seen that yet."
