Latest news with #Jerome Powell
Yahoo
13 hours ago
- Business
- Yahoo
Gold Holds Gains With Focus on US Trade Progress and Fed Rates
(Bloomberg) -- Gold held a three-day advance, as US President Donald Trump announced a highly-anticipated trade deal with Japan, signaling progress on fraught talks ahead of his Aug. 1 tariff deadline. Trump Awards $1.26 Billion Contract to Build Biggest Immigrant Detention Center in US Why the Federal Reserve's Building Renovation Costs $2.5 Billion Salt Lake City Turns Winter Olympic Bid Into Statewide Bond Boom Milan Corruption Probe Casts Shadow Over Property Boom How San Jose's Mayor Is Working to Build an AI Capital Bullion traded near $3,430 an ounce — up 2.5% so far this week — as Trump announced it would impose 15% and 19% tariffs on goods from Japan and the Philippines, a strategic geopolitical ally. With several countries racing to secure trade deals, investors are seeking clarity specifically on progress with China. Treasury Secretary Scott Bessent said he will meet his Chinese counterparts in Stockholm next week for their third round of talks aimed at extending a tariff truce and widening the discussions. Traders were also monitoring an easing dollar and falling Treasury yields after Bessent offered support for Federal Reserve Chair Jerome Powell, who has found himself in the line of Trump's fire for holding interest rates steady while waiting to see if duties impact inflation. Lower yields and a weaker greenback tend to benefit the precious metal, as it doesn't pay interest and is priced in the currency. Gold has climbed about a third this year, as uncertainty around Trump's aggressive attempts to reshape global trade and conflicts in Ukraine and the Middle East sparked flight to havens. The precious metal has consolidated within a tight range over the past few months, though this week's gains have pushed prices to trade about $70 short of April's record high above $3,500 an ounce. Meanwhile, with few major US economic data releases due in the coming days and Fed speakers in a blackout period ahead of next week's policy meeting, traders will be watching for a dovish signal from officials when they gather in Washington from July 29-30. Spot gold was little changed at $3,430.75 an ounce at 8:39 a.m. in Singapore. The Bloomberg Dollar Spot Index was up 0.1%, after a loss of 0.4% in the previous session. Silver was steady, while platinum and palladium fell. Elon Musk's Empire Is Creaking Under the Strain of Elon Musk Burning Man Is Burning Through Cash A Rebel Army Is Building a Rare-Earth Empire on China's Border Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All ©2025 Bloomberg L.P. 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
4 days ago
- Business
- Yahoo
What if the Fed cut rates to just 1% like Trump wants? An analyst says it's ‘ludicrous' and may scare businesses
The federal funds rate currently sits at 4.25%-4.50%, but President Donald Trump has said it should go down to just 1%. A rate that low would boost inflation expectations and send long-term Treasury yields higher, but also send a signal that something extreme may be developing in the economy, according to a Wall Street analyst. Amid the White House's unrelenting pressure campaign on Federal Reserve Chairman Jerome Powell, President Donald Trump has not only demanded that the central bank to cut rates but to lower them all the way to 1%. The federal funds rate currently sits at 4.25%-4.50%, meaning a reduction of that magnitude would require a drastic move that goes well beyond the Fed's typical increments of a quarter point at a time (though it last cut by half a point in September). It's so extreme, Wall Street doubts it would actually happen, as it would trigger immense turmoil in financial markets and the economy. 'I don't think this needs to be taken too seriously, because it's so ludicrous, and in some ways cutting rates too low, too prematurely, too early would do exactly what you don't want to happen,' Jeffrey Roach, chief economist at LPL Financial, told Fortune. That's because long-term Treasury yields would spike as bond investors price in higher expectations for inflation that a 1% rate would stoke, raising borrowing costs for consumers and businesses. In addition, a rate that low is usually associated with an economic emergency like the COVID-19 pandemic or the Great Financial Crisis. So 1% may actually shock businesses into wondering if another calamity is lurking around the corner, prompting them to hunker down and wait rather than expand, Roach warned. 'As a big business owner looking at rates at 1% or 2%, I'm definitely saying, 'what do you know that I don't?'' he said. 'Hence I'm not going to respond by increasing capex and increasing operations to the company. I'm going to be even more concerned with what that signals.' A White House spokesman pointed to Trump's previous comments that the Fed always can and should raise rates again if inflation spikes after cutting them. For his part, Roach thinks there's probably room for rates to eventually drop to about 3.5% by the end of 2026, if inflation stays under control, and said Powell didn't raise rates soon enough when inflation was surged after the pandemic. Similarly, Infrastructure Capital Advisors CEO Jay Hatfield accused Powell of gross incompetence by being too late to raise rates but also blasted the idea of the Fed slashing rates to 1%. Treasury yields would initially drop in the immediate aftermath of a cut to 1%. But once inflation indicators start pointing higher, the fed funds rate would go back up to 4% to shrink the money supply, sending the 10-year yield to about 5%. After a mini-recession or a big pullback, the yield would end up around 3.75%. 'So it's horrible economic policy to do that,' he told Fortune. A fed funds rate around 2.75%-3% wouldn't stoke inflation or send the economy into a downturn, but keeping rates where they are now would trigger a recession, Hatfield added. A 1% rate, however, would require a massive expansion in the money supply. 'It's absolutely a ridiculous idea and will cause double-digit inflation,' he warned. This story was originally featured on Sign in to access your portfolio
Yahoo
4 days ago
- Business
- Yahoo
Trump says Powell is costing the US a fortune by not lowering rates. But firing the Fed chair may not fix the issue
As part of his campaign to get rid of Jerome Powell, President Donald Trump has blamed the Federal Reserve chair for costing the country 'hundreds of billions of dollars' by not slashing interest rates. 'You have cost the USA a fortune and continue to do so,' Trump wrote in a handwritten note to Powell that he posted on Truth Social last month. 'You should lower that rate by a lot. Hundreds of billions of dollars are being lost.' In the same post, Trump blamed the Fed board, saying, 'If they were doing their job properly, our Country would be saving Trillions of Dollars in Interest Cost … We should be paying 1% Interest, or better!' Trump's focus on interest costs comes at a time of renewed attention on the nation's skyrocketing interest payments on its ever-growing federal debt. Interest payments this fiscal year are nearing $1 trillion for the first time in the nation's history. The president just signed the 'big, beautiful bill,' which is expected to add more than $3 trillion to the deficit over the next decade and push interest rates even higher. And Moody's recently downgraded the US debt in part because of the increase in government debt and interest payment ratios. But even if Trump succeeds in pressuring the Fed to reduce rates, it may not significantly lighten the nation's interest payment burden, experts said. The federal funds rate is only one of the factors that influences the interest rates on the federal debt, which is made up of a mix of short-term, medium-length and longer-duration Treasury securities. 'It seems to be an easier lever to pull for those who want to impact either interest costs on the federal debt or economic growth,' said Shai Akabas, vice president of economic policy at the Bipartisan Policy Center. 'But it doesn't mean that action by the Fed will result in the outcome the president or others may want.' What's indisputable is that America's interest costs have soared in recent years, in part because of the nation's growing debt and in part because interest rates rose after a period of super-low rates as the nation combatted high inflation earlier in the decade. The US shelled out $346 billion in interest payments in fiscal 2020. That figure has jumped to a projected $952 billion for the current fiscal year and is expected to exceed $1 trillion in the coming year, according to the Congressional Budget Office. Interest payments are now the second-largest spending category in the federal budget, surpassing Medicare and defense in fiscal year 2024 and trailing only Social Security. Currently, roughly 18 cents of every dollar in tax revenue goes to paying interest on the debt, Akabas said. By the end of the next decade, that figure will jump to about 25 cents. While cutting the federal funds rate may lower rates on shorter-term securities, it may not reduce rates on 10-year or 30-year Treasury bonds. In fact, a sharp cut may increase longer-term rates for several reasons, including that a steep rate cut could spur inflation or could prompt investors to shift to longer-term securities to lock in higher rates, said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget. 'The Federal Reserve only has so much power to lower those interest rates,' he said of the rates on longer duration Treasury bonds. 'There's no guarantee that the Fed cutting rates will reduce interest payments at all.' If Trump were truly interested in reducing interest payments, there is a more efficient way to do that, experts said. He could work to lower the annual deficit — though that would likely involve some politically unpalatable changes to taxes and spending, they said. While Trump's agenda package will make historic reductions to federal spending on the nation's safety net, its hefty tax cuts far surpass the savings and widen the annual deficit. 'If your concern is the hundreds of billions of dollars we're adding to the deficit from higher interest costs, the solution is to enact policies that are deficit reducing, not deficit increasing' Goldwein said. 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
CNN
4 days ago
- Business
- CNN
Trump says Powell is costing the US a fortune by not lowering rates. But firing the Fed chair may not fix the issue
As part of his campaign to get rid of Jerome Powell, President Donald Trump has blamed the Federal Reserve chair for costing the country 'hundreds of billions of dollars' by not slashing interest rates. 'You have cost the USA a fortune and continue to do so,' Trump wrote in a handwritten note to Powell that he posted on Truth Social last month. 'You should lower that rate by a lot. Hundreds of billions of dollars are being lost.' In the same post, Trump blamed the Fed board, saying, 'If they were doing their job properly, our Country would be saving Trillions of Dollars in Interest Cost … We should be paying 1% Interest, or better!' Trump's focus on interest costs comes at a time of renewed attention on the nation's skyrocketing interest payments on its ever-growing federal debt. Interest payments this fiscal year are nearing $1 trillion for the first time in the nation's history. The president just signed the 'big, beautiful bill,' which is expected to add more than $3 trillion to the deficit over the next decade and push interest rates even higher. And Moody's recently downgraded the US debt in part because of the increase in government debt and interest payment ratios. But even if Trump succeeds in pressuring the Fed to reduce rates, it may not significantly lighten the nation's interest payment burden, experts said. The federal funds rate is only one of the factors that influences the interest rates on the federal debt, which is made up of a mix of short-term, medium-length and longer-duration Treasury securities. 'It seems to be an easier lever to pull for those who want to impact either interest costs on the federal debt or economic growth,' said Shai Akabas, vice president of economic policy at the Bipartisan Policy Center. 'But it doesn't mean that action by the Fed will result in the outcome the president or others may want.' What's indisputable is that America's interest costs have soared in recent years, in part because of the nation's growing debt and in part because interest rates rose after a period of super-low rates as the nation combatted high inflation earlier in the decade. The US shelled out $346 billion in interest payments in fiscal 2020. That figure has jumped to a projected $952 billion for the current fiscal year and is expected to exceed $1 trillion in the coming year, according to the Congressional Budget Office. Interest payments are now the second-largest spending category in the federal budget, surpassing Medicare and defense in fiscal year 2024 and trailing only Social Security. Currently, roughly 18 cents of every dollar in tax revenue goes to paying interest on the debt, Akabas said. By the end of the next decade, that figure will jump to about 25 cents. While cutting the federal funds rate may lower rates on shorter-term securities, it may not reduce rates on 10-year or 30-year Treasury bonds. In fact, a sharp cut may increase longer-term rates for several reasons, including that a steep rate cut could spur inflation or could prompt investors to shift to longer-term securities to lock in higher rates, said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget. 'The Federal Reserve only has so much power to lower those interest rates,' he said of the rates on longer duration Treasury bonds. 'There's no guarantee that the Fed cutting rates will reduce interest payments at all.' If Trump were truly interested in reducing interest payments, there is a more efficient way to do that, experts said. He could work to lower the annual deficit — though that would likely involve some politically unpalatable changes to taxes and spending, they said. While Trump's agenda package will make historic reductions to federal spending on the nation's safety net, its hefty tax cuts far surpass the savings and widen the annual deficit. 'If your concern is the hundreds of billions of dollars we're adding to the deficit from higher interest costs, the solution is to enact policies that are deficit reducing, not deficit increasing' Goldwein said.
Zawya
5 days ago
- Business
- Zawya
G20 finance chiefs back central banks' independence as they seal communique
Finance chiefs from the Group of 20 countries stressed the importance of central bank independence in a communique issued on Friday following a two-day meeting in South Africa's coastal city of Durban. The ministers and central bankers pledged to boost cooperation as they sealed their first communique since October 2024, a month before President Donald Trump's election victory and subsequent tariff war. The issue of central bank independence hung heavily over the meeting following Trump's repeated berating of U.S. Federal Reserve Chair Jerome Powell for not cutting interest rates, attacks that have roiled global financial markets. The communique was reached in the absence of U.S. Treasury Secretary Scott Bessent from the two-day meeting, though Washington was represented by Michael Kaplan, acting under secretary of the Treasury for international affairs. Bessent also skipped the previous G20 finance chiefs' gathering in Cape Town in February, even though Washington is due to assume the G20's rotating presidency in December. "Central banks are strongly committed to ensuring price stability, consistent with their respective mandates, and will continue to adjust their policies in a data-dependent manner. Central bank independence is crucial to achieving this goal," the communique said. South Africa's deputy finance minister David Masondo told reporters that the meeting outcomes contained in the communique were "consented to by all members" and centred on "strategic macroeconomic issues". The communique also recognised "the importance of the World Trade Organisation to advance trade issues", while adding the body needed reform. The agreement is seen as an achievement even though communiques issued by the G20, which emerged as a forum for cooperation to combat the 2008 global financial crisis, are non-binding. G20 finance ministers failed to reach a joint stance when they met in February, to the dismay of hosts South Africa. South Africa, under its presidency's motto "Solidarity, Equality, Sustainability", has aimed to promote an African agenda, with topics including the high cost of capital and funding for climate change action. The finance ministers and central bank governors said in Friday's communique that they were committed to addressing debt vulnerabilities in low- and middle-income countries in an effective, comprehensive and systematic manner. (Reporting by Olivia Kumwenda-Mtambo, Kopano Gumbi, Colleen Goko, Philip Blenkinsop, Maria Martinez in Durban and Andrea Shalal in Washington; Writing by Philip Blenkinsop and Emelia Sithole-Matarise; Editing by Rachna Uppal and Joe Bavier)
