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The Star
20-05-2025
- Business
- The Star
U.S. stocks close lower amid doubts from tariffs, inflation optimism
NEW YORK, May 20 (Xinhua) -- U.S. stocks closed lower on Tuesday, as investor confidence wavered amid fresh warnings that optimism surrounding easing trade tensions and slowing inflation may be premature. The Dow Jones Industrial Average declined 114.83 points, or 0.27 percent, to end at 42,677.24. The S&P 500 lost 23.14 points, or 0.39 percent, closing at 5,940.46, snapping a six-day winning streak. The Nasdaq Composite slipped 72.75 points, or 0.38 percent, to 19,142.71. Eight of the eleven S&P 500 sectors ended in red, with energy and communication services leading losses, down 0.99 percent and 0.77 percent, respectively. Utilities and health care were the day's top performers, edging up 0.29 percent and 0.27 percent, respectively. Concerns resurfaced after St. Louis Fed President Alberto Musalem cautioned that tariffs could still have a "significant" economic impact, despite the recent trade truce between the United States and China. "The range of possible economic outcomes for the next few quarters is wide," Musalem said. "Economic policy uncertainty is unusually high." The White House has continued to pressure the Federal Reserve to treat recent price increases as temporary and to begin lowering interest rates, with U.S. President Donald Trump urging the central bank to ease policy. However, many Fed officials remain divided, expressing uncertainty about the direction of the economy and the appropriate next steps for monetary policy. Meanwhile, Trump's sweeping tax bill continued to face political resistance in the House. On Tuesday, the U.S. president visited Capitol Hill in an attempt to rally support from both fiscal conservatives and a group of blue-state Republicans seeking changes to the state and local tax deduction cap. On the corporate front, Home Depot was down 0.61 percent after it reported mixed earnings results, reflecting caution among consumers amid ongoing tariff uncertainty. The home improvement retailer posted a 9.4 percent year-over-year revenue increase to 39.86 billion U.S. dollars in the fiscal quarter ending May 4, slightly above expectations. However, earnings per share fell 3 percent to 3.56, missing the consensus forecast of 3.59 U.S. dollars. "We project it to take multiple quarters and into next year before the growth becomes more solid and flows through to earnings, as near-term macro pressures continue, particularly with uncertainty amidst new tariff policies," Telsey Advisory Group's Joe Feldman wrote in a note prior to earnings. Mega-cap tech stocks, which have led much of the recent market rebound, saw broad weakness. Nvidia, Apple, Amazon, and Alphabet all declined, while Microsoft and Meta also lost ground. Tesla rose 0.51 percent, extending a multi-week rally, and Broadcom added 0.46 percent.
RTHK
20-05-2025
- Business
- RTHK
US Fed official warns of tariff-linked price pressures
US Fed official warns of tariff-linked price pressures St Louis Fed President Alberto Musalem says the tariffs that Donald Trump rolled out last month were "substantially larger" than many people had anticipated. Photo: AFP US President Donald Trump's tariff plans are likely to push prices higher despite recent attempts at de-escalating his trade wars, a senior Federal Reserve official said on Tuesday. Trump's on-again, off-again tariff rollout since his return to office in January has unnerved investors and rocked financial markets. Recent deals to reduce tariffs on China and Britain suggest the administration is serious about wanting to negotiate deals to lower trade barriers and calm global markets. But it may not be sufficient to stop businesses from raising prices, St Louis Fed President Alberto Musalem told the Economic Club of Minnesota, according to prepared remarks. "Looking ahead, price pressures appear to be building," said Musalem, a voting member of the Fed's rate-setting committee this year. "Anecdotally, I've heard from business contacts that many firms are imposing price surcharges to recoup the costs of higher tariffs," he said. Musalem added that recent survey data pointed to more businesses planning to raise prices over the next six months, and to consumers raising their inflation expectations despite market-based measures of expected price increases remaining broadly in check. The tariffs that Trump rolled out last month were "substantially larger" than many people had anticipated, Musalem said. "Even after the de-escalation of May 12, they seem likely to have a significant impact on the near-term economic outlook," he noted, referring to the recent US-China deal to cut new US tariff rates down from 145 percent to 30 percent for 90 days. Despite these concerns, "the underlying strength" of the US economy, a resilient labour market, and inflation stuck above the Fed's long-term target of two percent suggest the current level of interest rates is appropriate for the task at hand, Musalem said. (AFP)
Yahoo
27-03-2025
- Business
- Yahoo
Fed's Musalem Wary of Threat of Persistent Tariff Inflation
(Bloomberg) -- Federal Reserve Bank of St. Louis President Alberto Musalem said it's not clear any inflationary impact from tariffs will prove temporary, and he cautioned that secondary effects could prompt officials to hold interest rates steady for longer. They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Why Did the Government Declare War on My Adorable Tiny Truck? How SUVs Are Making Traffic Worse Trump Slashed International Aid. Geneva Is Feeling the Impact. Affordable Housing Developers Stalled by Blocked Federal Funds Musalem said there is a greater risk inflation could stall above the Fed's 2% goal or move higher because of changes to tariffs and other factors, reiterating it's vital for inflation expectations to remain stable. 'I would be wary of assuming that the impact of tariff increases on inflation will be entirely temporary, or that a full 'look-through' strategy will necessarily be appropriate,' Musalem said Wednesday in remarks prepared for an event in Paducah, Kentucky. 'I would be especially vigilant about indirect, second-round effects on inflation.' Musalem differentiated between the direct effect of levies — a one-time price increase — and the second-round effects that could have a more persistent impact on underlying inflation. Last week, Fed Chair Jerome Powell said any inflation effects from President Donald Trump's trade policies are likely to be transitory, though he underscored much is still unclear. The St. Louis Fed chief said he supported the central bank's decision to keep rates steady last week and that a patient approach to policy will help officials evaluate incoming economic data. He laid out the various ways officials may respond, depending on what happens to the labor market and inflation. If the economy remains strong and inflation remains above target, Musalem said the Fed's current policy is appropriate. If the labor market stays healthy and there are 'second-round' effects from tariffs, officials may need to keep rates 'modestly restrictive' for longer, or consider a more restrictive policy stance, he said. And if the job market were to weaken alongside stable or easing inflation, he said 'policy could be eased further.' Inflation Expectations With inflation still above the Fed's 2% goal, it becomes even more important for officials to manage consumers' expectations for future price growth, he said. Should inflation expectations become unmoored, Musalem indicated the Fed would likely need to prioritize its price stability goal compared to the central bank's employment objectives. 'If inflation expectations are threatening to become unanchored or becoming unanchored in the long term, then the balanced approach may not work,' he said in a moderated discussion following his speech. At that point, 'we would have to probably lean into the inflation side of our dual mandate, to make sure inflation expectations and inflation remain anchored.' Musalem highlighted research from his staff estimating that a 10% increase in the 'effective US tariff rate,' in line with the tariff hikes announced so far, could increase inflation by as much as 1.2 percentage points as measured by the Fed's preferred gauge. That includes a 0.5 percentage-point increase from direct tariff effects and a 0.7 percentage-point rise due to indirect tariff effects. Speaking with reporters after the event, Musalem said he now sees inflation reaching the central bank's 2% target in 2027, later than what he forecast in December. He said prices for some domestically-produced goods could rise if they start to see increased demand because tariffs are making imported goods less appealing. However, he clarified that not all of the indirect inflationary effects from tariffs will be persistent. Fed officials are dealing with an unusual level of uncertainty over the direction of government policy under the Trump administration and its potential impact on the US economy. Still, Musalem's base case is that the economy will continue to grow at a moderate pace and the labor market will remain healthy. Fresh projections released after the Fed's latest gathering showed policymakers penciled in the equivalent of two quarter-point rate reductions for this year, according to the median forecast. However, eight of 19 policymakers saw one or no cuts for 2025. (Updates with comments from Musalem's call with reporters in the 10th paragraph.) Business Schools Are Back Google Is Searching for an Answer to ChatGPT The Richest Americans Kept the Economy Booming. What Happens When They Stop Spending? A New 'China Shock' Is Destroying Jobs Around the World How TD Became America's Most Convenient Bank for Money Launderers ©2025 Bloomberg L.P. Sign in to access your portfolio
Yahoo
27-03-2025
- Business
- Yahoo
Trump tariffs could push up inflation: senior Fed official
US President Donald Trump's tariff plans could increase inflation by as much as 1.2 percentage points if they are fully implemented, a senior Federal Reserve official said Wednesday. Trump made tackling inflation a key campaign issue in the run-up to the 2024 presidential elections. But tariffs -- his signature economic policy since his return to office -- could have the opposite effect, St. Louis Fed President Alberto Musalem warned during a speech in Kentucky on Wednesday. "New tariffs are expected to have both direct and indirect effects," said Musalem, who is a voting member of the Fed's rate-setting committee this year. Tariffs are likely to cause a direct, time-limited increase on prices, and another indirect -- or second-round -- effect, which could have a "more persistent" impact on inflation, he said. US inflation remains stuck above the Fed's long-term target of two percent, according to its favored personal consumption expenditures (PCE) measure. Staff at the St. Louis Fed estimate that, "if fully implemented, a 10 percent increase in the effective US tariff rate -- roughly the increase that would be associated with tariff hikes announced to date -- could increase the PCE inflation rate by as much as 1.2 percentage points," Musalem said. "The direct and one-time price-level effect is estimated to be on the order of 0.5 percentage points," he said, adding that the indirect effect would likely be around 0.7 percentage points. "From the standpoint of monetary policy, it could be appropriate to 'look through' direct effects of higher tariffs on the price level and at the same time 'lean against' indirect and second-round effects," he said. "I would be wary of assuming that the impact of tariff increases on inflation will be entirely temporary," he continued, adding that a "patient and vigilant approach" to monetary policy was appropriate. Since his return to office, Trump has begun imposing tariffs against top US trading partners including China, Canada and Mexico -- only to then roll some of them back. The stop-start nature of the rollout has increased uncertainty and unnerved investors, with US financial markets plunging since the tariffs first began to take effect. Trump has said he will announce retaliatory tariffs against US trading partners on April 2, which could also take non-tariff measures like value-added taxes, or VAT, into account. The White House confirmed Wednesday that Trump also plans to unveil tariffs against the automotive sector at 4pm local time in Washington (2000 GMT). At the most recent interest rate decision, Fed officials penciled in two rate cuts for this year, while raising their outlook for inflation and downgrading their expectations for economic growth. da/dw Sign in to access your portfolio
Yahoo
27-03-2025
- Business
- Yahoo
Trump tariffs could push up inflation: senior Fed official
US President Donald Trump's tariff plans could increase inflation by as much as 1.2 percentage points if they are fully implemented, a senior Federal Reserve official said Wednesday. Trump made tackling inflation a key campaign issue in the run-up to the 2024 presidential elections. But tariffs -- his signature economic policy since his return to office -- could have the opposite effect, St. Louis Fed President Alberto Musalem warned during a speech in Kentucky on Wednesday. "New tariffs are expected to have both direct and indirect effects," said Musalem, who is a voting member of the Fed's rate-setting committee this year. Tariffs are likely to cause a direct, time-limited increase on prices, and another indirect -- or second-round -- effect, which could have a "more persistent" impact on inflation, he said. US inflation remains stuck above the Fed's long-term target of two percent, according to its favored personal consumption expenditures (PCE) measure. Staff at the St. Louis Fed estimate that, "if fully implemented, a 10 percent increase in the effective US tariff rate -- roughly the increase that would be associated with tariff hikes announced to date -- could increase the PCE inflation rate by as much as 1.2 percentage points," Musalem said. "The direct and one-time price-level effect is estimated to be on the order of 0.5 percentage points," he said, adding that the indirect effect would likely be around 0.7 percentage points. "From the standpoint of monetary policy, it could be appropriate to 'look through' direct effects of higher tariffs on the price level and at the same time 'lean against' indirect and second-round effects," he said. "I would be wary of assuming that the impact of tariff increases on inflation will be entirely temporary," he continued, adding that a "patient and vigilant approach" to monetary policy was appropriate. Since his return to office, Trump has begun imposing tariffs against top US trading partners including China, Canada and Mexico -- only to then roll some of them back. The stop-start nature of the rollout has increased uncertainty and unnerved investors, with US financial markets plunging since the tariffs first began to take effect. Trump has said he will announce retaliatory tariffs against US trading partners on April 2, which could also take non-tariff measures like value-added taxes, or VAT, into account. The White House confirmed Wednesday that Trump also plans to unveil tariffs against the automotive sector at 4pm local time in Washington (2000 GMT). At the most recent interest rate decision, Fed officials penciled in two rate cuts for this year, while raising their outlook for inflation and downgrading their expectations for economic growth. da/dw Sign in to access your portfolio
