Latest news with #RyanSweet
Daily Mail
10 hours ago
- Business
- Daily Mail
Early Fed chief nomination could rattle markets
Published: Updated: Trump has said he will soon name the next head of the Federal Reserve chief in a move that could rattle financial markets. Such a move would be highly controversial since there is nearly a year left in current chairman Jerome Powell's term. The independence of the Fed — which sets benchmark interest rates that influence everything from mortgage costs to stock prices — is seen by Wall Street as vital for market stability. An early pick could create a 'shadow' chair alongside Powell, blurring the Fed's message and direction. 'It's coming out very soon,' Trump said of his nomination earlier this month. Confusion about what those might be could upend market Markets respond not just to official Fed decisions, but also to hints about future moves — meaning mixed signals could cause turmoil. 'You're going to have two people trying to steer the ship: One that's actually steering it, and one that's the backseat driver,' Ryan Sweet, chief US economist at Oxford Economics told Reuters. Trump has long criticized Powell for not cutting interest rates aggressively enough, even threatening to fire him during his presidency. While the president has since reneged on that threat , Wall Street has been unnerved by the President's willingness to push the boundaries of the Fed's independence from the White House. A new Fed chair seen as under Trump's influence would also concern Wall Street. 'Whomever is appointed, the key thing to monitor is whether they are perceived as being a political appointee,' Eric Winograd, chief U.S. economist at AllianceBernstein told Reuters. 'And by that, I mean someone whose views change with the whims of the president.' Callie Cox, chief market strategist at Ritholtz Wealth Management agreed that the next Fed chair will be crucial. 'Any Wall Street manager would tell you that Fed independence is the golden rule of markets,' Cox told the publication. 'To move away from that can introduce a whole host of issues.' A wildcard choice for the next chair could also discombobulate the markets. The top candidates are currently White House economic adviser Kevin Hassett; former Fed Governor Kevin Warsh; former Fed board nominee Judy Shelton and Treasury Secretary Scott Bessent, according to Polymarket. The Fed's 'dual mandate' is to keep inflation low while maintaining a healthy labor market. Economists have warned that Trump's tariffs will raise prices , something that will require interest rates to stay elevated. However, a slowdown in the job market will pressure the central bank's monetary policymaking committee to make a cut.
Yahoo
2 days ago
- Business
- Yahoo
One way a prolonged Israel-Iran conflict could accelerate Fed rate cuts
A prolonged conflict between Israel and Iran may do more than rattle energy markets. One argument on Wall Street is that it could push the Federal Reserve to cut interest rates sooner than expected. "A sustained rise in oil prices could cause the Fed to strike a more dovish tone," Oxford Economics chief US economist Ryan Sweet wrote in a recent note to clients, arguing that an extended oil shock could dent demand and potentially spill over into an otherwise resilient labor market. That's because historically, sudden spikes in oil prices tend to cause only a temporary rise in inflation that the Fed usually overlooks. But with the economy already softening, a persistent surge could pose a bigger threat to growth and jobs than to inflation itself. "The economy has slowed and is vulnerable to anything else going wrong, including a sudden and persistent increase in oil prices," Sweet said. "If the Fed views the hit to the economy and the labor market as greater than the temporary boost to inflation, the central bank could signal that it's open to cutting interest rates sooner." On Monday, the Wall Street Journal reported that tensions between Iran and Israel had eased, sparking a rally in US equities and stabilizing crude oil prices to around $70 a barrel following last week's biggest price surge in three years. Still, Sweet, whose baseline forecast is that the Fed will deliver its first rate cut in December, noted it may take weeks before markets gain a clearer sense of the direction of oil prices. Read more: How jobs, inflation, and the Fed are all related While the Fed can afford to be patient, Sweet said, "a significant and sustained increase in oil prices could bring forward the rate cut by a meeting because of the damage it will do to the economy, which is harder to fix than waiting out the temporary acceleration in headline inflation." "This is a potential hot topic at a future Federal Open Market Committee meeting, but not next week's," Sweet added, echoing others on Wall Street who firmly believe the Fed will remain on pause for the foreseeable future. That said, the inflationary impact is the other side of the coin. Wall Street analysts have warned that a prolonged conflict and the potential closure of the critical Strait of Hormuz could drive oil prices as high as $130 a barrel, pushing US inflation back toward 6%. This would likely lead to higher gas prices, which have been a key factor in the disinflationary trend over the past several months. According to the latest May CPI report, gas prices have fallen 12% over the past year. The government's energy index declined 1% month over month in the most recent reading. If those trends reverse, economists warn that a sharp inflation surge could delay rate cuts until early 2026 as the central bank balances its dual mandate of price stability and maximum employment. While the Fed tends to focus on inflation metrics that exclude volatile categories like energy, there's concern that higher energy costs could cause ripple effects through the supply chain and result in price increases for other goods and services. "You're looking at a potentially more 'stagflationary' scenario out of that," Bank of America senior US economist Stephen Juneau told Yahoo Finance on Monday. "Of course, this has to persist. We're still at a point where oil prices are relatively low compared to a year ago, so we'll just have to see how things unfold from here. I think it's too early to say." Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at 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
5 days ago
- Business
- Yahoo
What Israel-Iran Fighting Could Mean for Oil Prices and Inflation
Oil futures soared on Friday after Israel attacked Iranian nuclear facilities and Iran retaliated. The violence raised concerns that a larger conflict could disrupt global oil supplies. Gasoline prices were down 12% year-over-year in May, one of the primary reasons inflation ran just slightly above the Federal Reserve's 2% target. Analysts say an escalation that meaningfully disrupts oil trade—like Iran closing the Strait of Hormuz or Israel targeting Iran's oil infrastructure—is unlikely, and oil prices could settle once tensions prices soared on Friday as tensions in the Middle East flared following Israel's attack on Iranian military and nuclear targets and Iran's response. West Texas Intermediate (WTI) crude oil futures, the U.S. benchmark, were up about 7.5% at $73.12 a barrel in recent trading Friday, after soaring as much as 14% overnight, crude's biggest intraday jump in years. Brent crude futures, the global benchmark, were also more than 7% higher at $74.38. Analysts at JPMorgan warned earlier this week that an all-out conflict between Israel and Iran, one of the world's largest oil producers, could send oil prices above $100 for the first time since Russia's invasion of Ukraine disrupted global supply in 2022. That, in turn, might aggravate inflation at a time when economists are already watching for a tariff-driven resurgence. Ryan Sweet, chief U.S. economist at Oxford Economics, estimates every $10 increase in oil prices would translate into a half-percentage-point increase in the inflation rate, The Wall Street Journal reported Friday. Low oil prices have been instrumental in keeping inflation in check this year. The Consumer Price Index (CPI) rose 2.4% year-over-year in May. Inflation would have run further above the Federal Reserve's 2% target if gas prices hadn't fallen 12% over the last year. JPMorgan estimates that oil prices at $120 a barrel could push CPI up to 5%. However, most analysts say the worst-case scenario is unlikely. "The primary market concern lies with Iran potentially closing the Strait of Hormuz," through which about one-fifth of the world's oil supply transits, said Kristian Kerr, Head of Macro Strategy at LPL Financial. "We think this is unlikely for now given Iran's need to maintain oil sales to China," Kerr added. There is also the risk that either Israel or Iran targets regional oil infrastructure to escalate the conflict. That would have a meaningful impact on global oil supply and, thus, gas prices. Barring such an escalation, experts predict oil prices will settle after Friday's surge. Goldman Sachs analysts on Friday acknowledged that the conflict would boost oil's risk premium in the near term, but maintained their prediction that WTI will trade around $55 a barrel at the end of the year. This article has been updated since it was first published to reflect new market 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
Wall Street Journal
6 days ago
- Business
- Wall Street Journal
Oil-Price Surge Could Complicate U.S. Inflation Fight
A sustained surge in oil prices is likely to complicate the U.S. fight against inflation. A $10-a-barrel increase would boost year-over-year growth in the Consumer Price Index by 0.5 percentage points, cutting into consumer spending and GDP growth, said Ryan Sweet, chief U.S. economist at Oxford Economics. Such an increase 'would reduce the level of U.S. real GDP in Q4 of this year by 0.1% to 0.2% as the hit to consumer spending is larger than the boost to US domestic investment in mining, shafts and wells as [oil] production,' Sweet said. U.S. benchmark crude rose by more than $5 a barrel, or 8%, Friday morning. Inflation has come down markedly from 40-year highs in 2022. It remained tame in the latest May reading, defying fears that the impact of President Trump's tariffs would start to show a rise in prices.
The Herald Scotland
14-05-2025
- Business
- The Herald Scotland
CPI report April 2025: Inflation eased to 4-year low
That's the lowest annual increase since February 2021 but still leaves inflation moderately above the Federal Reserve's 2% goal. On a monthly basis, costs rose 0.2% after dipping 0.1% in March. Prices for groceries, used cars and airfares all fell sharply, while medical services and auto insurance and repairs continued to drift higher. The report provides a snapshot of consumer prices just as Trump's reciprocal tariffs were kicking in, capturing the economic uncertainty they spawned but only partly reflecting the projected jump in costs. Further blurring the picture: the Trump administration announced a 90-day pause on the highest import fees for dozens of countries in early April and a similar truce with China on Monday that allows the two sides negotiate further. Some forecasters hailed the reprieve but others said the levies will still push inflation sharply higher within months. What is core inflation? Core inflation, which excludes volatile food and energy items and is watched closely by the Fed because it reflects more sustainable trends, increased 0.2% after inching up 0.1% in March. ,That kept the annual increase at 2.8%, lowest in four years. Do tariffs affect inflation? Economists were split over whether the tariffs nudged inflation higher last month. Barclays said it was too early for the fees to filter into prices. Wells Fargo said "the reality of tariffs will likely have started to influence pricing decisions" but business' efforts to avoid alienating customers and confusion over Trump's shifting policies likely meant just a modest uptick in costs. Goldman Sachs anticipated some effects on items "particularly exposed" to duties on Chinese goods, such as clothing and cellphones. For now, tariffs have raised recession fears and heightened uncertainty. In March, such jitters softened consumer demand and lowered costs for items such as gasoline and travel services, said economist Ryan Sweet of Oxford Economics. What is the agreement between the US and China? Meanwhile, the U.S. said Monday it was reducing tariffs on Chinese imports to 30% from 145% while China lowered its duties on U.S. shipments to 10% from 125%, igniting a huge stock market rally. Nationwide Chief Economist Kathy Bostjancic estimated the 30% fee on China and 10% charge on other countries would still drive inflation to 3.4% by year's end, though that's down from her prior 4% estimate. Manufacturers and retailers are expected to pass most of the fees to consumers through higher prices, sapping household buying power. In a research note, economist Michael Reid of RBC Capital Markets said the average U.S. tariff rate is now 13%, down from 24% before Monday's news of the truce with China. But he added the deal "does little to help get inflation's path back to 2% as a 13% effective tariff rate is still nearly 5 times higher than the 2.4% rate seen in 2024." How soon will the Fed lower interest rates? While the pause on duties for Chinese imports could soften the potential inflation surge, it also could mean a somewhat stronger economy that dodges recession, giving the Fed leeway to wait longer to gauge the effects of the fees. Fed fund futures markets have pushed back their forecast for the Fed to resume its market-friendly interest rate cuts from July to September. Capital Economics believes the the central bank will hold off on rate cuts until next year. Why are gasoline prices dropping now? Gasoline prices dipped 0.1%, the third straight monthly decline, and are down 11.8% over the past year. Regular unleaded averaged $3.14 a gallon Monday, down from $3.20 a month ago, according to AAA. Oil prices have declined sharply this year on worries that the trade war will hobble the global economy, putting downward pressure on gas prices. Also, OPEC countries agreed to increase oil production starting in April.
