Latest news with #economicforecasts
Wall Street Journal
10 hours ago
- Business
- Wall Street Journal
The Fed Gets a Tariff Jolt
The Federal Open Market Committee offered no policy surprises Wednesday, but it did offer a new note of caution in its economic forecasts: President Trump's tariffs are producing a mild stagflation. The policy decisions were to leave the target Fed funds rate unchanged at 4.25-4.5% and maintain the current pace of quantitative tightening. But all eyes were on the latest batch of quarterly economic projections—the famous dot plots—to see where policy makers think the economy may be headed. In short, they think growth will be slower and inflation higher.
The Independent
03-06-2025
- Business
- The Independent
Blue chips edge higher amid gains on Wall Street
London's FTSE 100 posted modest gains on Tuesday as US markets rose after encouraging US jobs data, helping offset weak mining stocks and lower growth forecasts from the OECD. The FTSE 100 index closed up 12.76 points, 0.2%, at 8,787.02. The FTSE 250 ended down 11.19 points, 0.1%, at 21,017.78, and the AIM All-Share closed up 5.38 points, 0.7%, at 753.51. In London, mining stocks eased after figures from S&P Global showed China's manufacturing activity contracted in May, contrasting with expectations. The Caixin China general manufacturing purchasing managers' index fell to 48.3 in May, down from 50.4 in April and below the FXStreet-cited consensus forecast of 50.6. Stephen Innes at SPI Asset Management said the data 'isn't just a weak print – it's a body blow to the backbone of China's economy.' He noted small and mid-sized exporters are now caught in a 'brutal vice grip' between 'faltering global demand and a Washington-led tariff regime that's more carrot-and-stick diplomacy than ceasefire'. But Duncan Wrigley at Pantheon Macroeconomics does not expect a 'knee-jerk' reaction from Chinese policymakers. 'We think additional targeted support is likely, but a mega stimulus won't be needed,' he said. Rio Tinto, also hit by a downgrade to 'hold' by Jefferies, fell 1.2%, Anglo American eased 1.8% and Antofagasta slipped 0.6%. In European equities on Tuesday, the CAC 40 in Paris rose 0.3%, while the DAX 40 in Frankfurt firmed 0.7%. UK economic forecasts have been downgraded for the next two years as trade tensions linked to US President Donald Trump's tariff plans hit the global economy, according to a report. The Organisation of Economic Co-operation & Development also cut its projections for global growth in 2025 and 2026. Economists from the organisation cautioned that the global outlook is 'becoming increasingly challenging'. After 3.3% growth last year, the world economy is now expected to expand by a 'modest' 2.9% in 2025 and 2026, the Paris-based OECD said. In its previous report in March, the OECD had forecast growth of 3.1% for 2025 and 3.0% for 2026. In the UK, the economy is expected to grow by 1.3% this year, with the OECD cutting its previous forecast of 1.4%. It also reduced its prediction for 2026 from 1.2% in its March report to 1%, blaming the cuts to forecasts on 'heightened trade tensions, tighter financial conditions, and elevated uncertainty'. The US economy is now expected to grow by just 1.6% this year, down from 2.2% in the previous outlook, and slow further to 1.5% in 2026, the OECD said. Europe will also be severely impacted by the trade war, with sharp downgrades across the board and the euro area as a whole now set to see growth of just 1% in 2025, down from 1.3% previously forecast, the OECD said. Investors also weighed eurozone inflation data. Inflation in the eurozone eased to 1.9% in May, falling below the European Central Bank's 2% target for the first time since September, figures on Tuesday showed. According to a flash estimate from Eurostat, annual consumer price inflation is estimated to have been 1.9% in May, down from 2.2% in April. The deceleration, mainly driven by slower growth in services prices and ongoing energy deflation, came below the 2.0% FXStreet-cited market consensus. Prices for services rose 3.2% annually in May, slowing from 4.0% in April. Energy prices continued to fall, down 3.6% year-on-year for a second consecutive month. However, food, alcohol and tobacco prices rose 3.3%, accelerating from 3.0% the previous month. Core inflation, which excludes energy, unprocessed food, alcohol and tobacco, eased to 2.3% in May from 2.7% in April. On Thursday, the ECB announces its interest rate decision, with markets widely expecting a 25 basis point cut. The pound was quoted down at 1.3499 dollars late on Tuesday afternoon in London, compared with 1.3546 dollars at the equities close on Monday. The euro stood lower at 1.1385 dollars against 1.1429 dollars. Against the yen, the dollar was trading higher at 143.24 yen compared with 142.75 yen. The yield on the US 10-year Treasury was steady at 4.46% on Tuesday. The yield on the US 30-year Treasury narrowed to 4.97% from 5.00%. In New York, the Dow Jones Industrial Average was up 0.4% at the time of the London equities close on Tuesday. The S&P 500 was also 0.4% higher and the Nasdaq Composite rose 0.7%. US job openings unexpectedly rose in April, indicating demand for workers remains healthy despite heightened economic uncertainty, a report on Tuesday showed. Available positions increased to 7.39 million from a revised 7.20 million reading in March, according to Bureau of Labour Statistics data. The median estimate in a Bloomberg survey of economists called for 7.10 million openings. Wells Fargo said the report shows labour demand is 'far from collapsing in the wake of policy uncertainty, but the modest gain still leaves openings declining on trend'. But Samuel Tombs at Pantheon Macroeconomics suggested the report is an 'aberration', given the ongoing decline in Indeed's measure of postings throughout April and May, as well as the drop in the hiring intentions indexes of the regional Fed surveys. In London, housebuilders fell back after a profit warning from MJ Gleeson. The Sheffield, England-based housebuilder warned that annual operating profit will be below market expectations, reflecting lower gross margin at Gleeson Homes and fewer land sales than hoped. MJ Gleeson said it expects operating profit at Gleeson Homes for the financial year ending June 30 to be around 15% to 20% below current expectations. RBC Capital Markets said Visible Alpha consensus for operating profit at Gleeson Homes is £28.1 million. MJ Gleeson slumped 22%, while housebuilding peer Persimmon fell 2.0%, Vistry fell 6.2% and Taylor Wimpey fell 1.9%. GSK fell 2.1% after Berenberg downgraded the pharmaceuticals firm to 'buy' from 'hold', while Pearson slipped 6.6% after a weak update from IDP Education, the owner of the IELTS language test in Australia. IDP warned of a sharp fall in testing volumes owing to tighter immigration policies in its key markets. Pearson counts English Language Learning among its five divisions and competes with IDP in that sector. IDP notably said the UK is facing 'heightened uncertainty' following the recent immigration white paper published in the country. The price of gold fell to 3,349.93 dollars an ounce on Tuesday against 3,371.47 dollars on Monday. Brent oil was higher at 65.73 dollars a barrel at the time of the London equities close on Tuesday, compared with 64.58 dollars on Monday. The biggest risers on the FTSE 100 were Centrica, up 6.8 pence at 164.0p, Airtel Africa, up 5.6p at 183.4p, Rolls-Royce, up 25.4p at 894.2p, Melrose Industries, up 12.6p at 473.5p and Ashtead Group, up 107.0p at 4,265.0p. The biggest fallers on the FTSE 100 were Pearson, down 77.0p at 1,085.5p, Rentokil Initial, down 12.3p at 350.9p, Severn Trent, down 67.0p at 2,655.0p, Haleon, down 9.3p at 405.1p, and GSK, down 32.0p at 1,485.0p. Wednesday's UK corporate calendar has a trading statement from WH Smith. The global economic calendar on Wednesday has an interest rate decision in Canada, and composite PMI readings in the UK, US and eurozone.
Reuters
22-05-2025
- Business
- Reuters
Plan to beef up Fed forecasts hits hurdle among its regional presidents
AMELIA ISLAND, Florida, May 22 (Reuters) - A proposal for the U.S. Federal Reserve to release detailed economic forecasts after some of its meetings to anchor the discussion of monetary policy is drawing fire from the heads of its regional banks who worry it will be hard to agree on a common outlook and risks further confusing the public. Fed Chair Jerome Powell flagged the need for improved communications in remarks to a central bank strategy conference last week, and former Fed Chair Ben Bernanke presented a plan for staff-generated economic reports and forecasts that would be released after policy meetings four times a year. In his May 16 presentation, Bernanke said releasing a "transparent, complete and comprehensive macro forecast" would help people better understand Fed decisions and what was likely to follow, while highlighting alternative scenarios would give policymakers more flexibility to change course if the outlook changed - such as when inflation veered higher in 2021. It would also bring the Fed in line with what many of its peers are doing. Atlanta Fed President Raphael Bostic, in comments on Tuesday to reporters at a conference in Florida, called Bernanke's proposal "thoughtful and provocative," but questioned the added value of releasing a staff forecast in real time. Staff forecasts are presented internally at the Federal Open Market Committee's eight policy meetings each year, short descriptions are included in the minutes of each meeting released to the public three weeks later, and the full documentation is published five years later along with meeting transcripts. If the staff forecast is issued in real time, "would this be seen as ... the basis upon which the committee makes decisions? I struggle with that because I don't think it would," Bostic said. Among policymakers "there are 19 views, and if we add the staff report, that would be 20." "There's a hunger out there for something more. And the question I'm wrestling with my team is sort of, what's the way to satisfy that hunger? Is there a way to do it that would not lead to perhaps misleading inferences," Bostic said. Others weighed in at a joint appearance with the Atlanta Fed president and at Bernanke's presentation. "I'm always open to ideas about how we can be more transparent," Cleveland Fed President Beth Hammack said. "Practically, getting the committee to agree on one consensus forecast or even a couple of different scenarios is really challenging, and I do worry that just putting out lots more information might not actually guide the public in the right way ... It may actually leave them more confused." One aim of more detailed forecasts would be to deflect some attention from the quarterly "dot plot" chart of policymaker interest rate projections, a public communications tool that has become something of an annoyance for policymakers across the Fed system. A collection of individual submissions by up to 19 policymakers, the quarterly Summary of Economic Projections and rate projections are not aggregated into a shared outlook. Yet financial markets and the public, Fed officials say, still treat each quarterly release as a policy roadmap with undue weight placed on the median of an often wide distribution of numbers. Analysts complain it also leaves unclear what the Fed is reacting to when the rate outlook changes; whether higher rates, for example, stem from higher expected inflation, different perceptions of risk, or changes in more underlying economic forces. But Bernanke's proposal, so far, has largely just revived a battle he fought unsuccessfully when the Fed was revising its policy approach in 2012. A similar idea then was also criticized by regional Fed bank presidents who have their own technical staff, take varying approaches to modeling the economy, and would be cautious in signing off on any new product meant to shape public expectations. Limiting confusion about the Fed's plans - making clear the basis of rate decisions and the economic factors that cause them to change - is a central theme of policymaker discussions right now. Clear communications are considered important to making monetary policy effective by helping markets trade in more informed ways, decreasing volatility around policy decisions, and helping keep broader public expectations in line with the Fed's 2% inflation target. The existing approach to policy, adopted in 2020 when concerns about the COVID-19 pandemic and related high unemployment were dominant, is likely in for extensive revision driven by a common theme: Simpler is better. Changes made to the Fed's approach five years ago included a promise to use higher inflation to offset periods of lower inflation, to not use a low unemployment rate as a sign in itself of future rises in inflation, and a characterization of maximum employment as a "broad and inclusive" goal. The phrase was meant as a statement of fact about the benefits of maximum employment, and echoed the 1970s law that added a jobs "mandate" to the Fed's responsibilities, but was often construed publicly as the central bank delving into issues of economic equity that it could not really resolve. There's broad agreement inside and outside the Fed that the current approach is too complex and needs to be pared down. "A framework should be robust to a broad range of conditions," Powell said last week, warning, for example, that supply shocks and inflation spikes could become more frequent. "If the objective is to communicate to the public what the Fed is trying to do, what it's looking at, then it needs to be simpler," said Carl Walsh, an economics professor at the University of California, Santa Cruz, who dissected the Fed's 2020 framework in a paper that urged it to be clearer in its framework that maintaining stable inflation was one of the preconditions for achieving its employment goal. Officials continue to debate replacement language for the framework, which is likely to be announced in August at the central bank's annual Jackson Hole symposium in Wyoming. The discussion of what additional material to provide around the Fed's policy meetings is a separate debate being carried out in parallel. Powell last week indicated he wants change, but may face a challenge building consensus over what to do. "A common observation is the need for clear communications as complex events unfold," Powell said. "Clear communication is an issue even in relatively placid times."
Reuters
06-05-2025
- Business
- Reuters
Bank of England to delay Thursday interest rate announcement by two minutes
LONDON, May 6 (Reuters) - The Bank of England will delay the announcement of its latest interest rate decision by two minutes on Thursday, publishing the decision at 1102 GMT rather than 1100 GMT, the bank said on Tuesday. The slightly later timing of the release is due to a national two-minute silence being held to commemorate the 80th anniversary of Victory in Europe (VE) Day. here. The latest central bank's quarterly economic forecasts and minutes of the Monetary Policy Committee's interest rate discussion will also be released two minutes later at 1102 GMT.
