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Business Recorder
2 days ago
- Business
- Business Recorder
A 100bps cut in policy rate on the cards?
Following a recent visit to the Federal Reserve to inspect a renovation project, the tension between US President Donald Trump and Fed Chairman Jerome Powell was apparent. The future of Powell's position remains uncertain, as both appeared tense during their media presentation. When questioned about the Federal Reserve's renovation exceeding its budget, Trump remarked he would dismiss an employee over it but saw no need to fire the Fed Chairman. Despite a friction between them, the US dollar strengthened, buoyed by the market's confidence following Trump's assurance that Powell would not be let go. Meanwhile, June's durable goods data was disappointing due to weak orders for transportation equipment; it still exceeded expectations, contributing to Dollar's recovery. This weakness primarily stems from tariff pressures rather than other factors. Last week, both existing and new home sales figures fell short of market predictions, placing builders, buyers, and sellers under pressure in a housing market that plays a crucial role in the US economic cycle. Additionally, flash manufacturing PMI readings were weaker than anticipated. The Beige Book indicated that most Federal Reserve districts are experiencing modest growth in lending. Although there were some slight downward revisions, the overall situation remains tense due to persistent inflationary pressures and tariffs. The Federal Reserve's meeting on Tuesday and Wednesday is expected to maintain its current policy stance. It appears that the Fed may be gradually moving toward a rate-cutting cycle. Importantly, the looming August 1 deadline cannot be overlooked. Many of the analysts are predicting that the passing of tariff costs will soon impact consumers due to lag effects, potentially also affecting the labour market. However, there is a possibility for compromise between the US administration and the Federal Reserve. As the tariff situation stabilizes, Powell might hint at a data-driven rate cut in September as a conciliatory measure. As expected last week, the European Central Bank decided to keep its interest rate steady at 2%. With the pause in rate adjustments continuing, the ECB reiterated that its decisions will remain data-driven, making it clear that any future changes in interest rate policy will only be determined during meetings, without early commitments to a particular direction. This week is filled with significant economic reports from around the globe. Key US indicators to monitor include the 2nd quarter GDP, Personal Income and Spending (PCE), Non-Farm Payroll, and Consumer Confidence. In the meantime, the market is gearing up for a crucial week as six Central Banks prepare to announce their interest rate decisions. The State Bank of Pakistan (SBP) will share its policy rate on Wednesday. Except for the SBP, all the other banks are expected to keep their rates unchanged. GOLD @ $ 3337.50— This week, market is expected to see volatility. To move higher, gold must surpass $ 3360 to reach $ 3388 or potentially more. However, if it falls below $ 3302, it could decline to $ 3258 or even $ 3226. EURO @ 1.1742— Euro has strong support at 1.1610 and is expected to remain above this level. If it breaks through 1.1820, it may make a move toward 1.1895. Or else 1.1550. GBP @ 1.3439— Pound Sterling will continue to face pressure unless it surpasses 1.3570 to reach 1.3620. The risk of decline will rise if it breaks below 1.3280. JPY @ 147.67— There may still be some losses, but the USD needs to hold 146.20 to make some recovery. If it can break above 148.90, it will pave the way for testing the 150 levels. If not, watch for a drop to 145.40. SBP meeting today Last week, there was a notable change in the Pakistani foreign exchange market, a rarity in recent times, as the Rupee strengthened against the US Dollar. On Monday, it was around 285 to 1 USD, but by Friday, the SBP closed at 283.4539. It is said that administrative measures helped PKR to gain some strength. The future trend continues to be uncertain. Analyzing the data, it appears that Pakistan's economy is on an upswing. This can be supported by various metrics, for instance, the country's debt and deficit ratios indicate a stronger economic position compared to some emerging and advanced economies. The region's challenges, however, play a significant role. For comparative purposes, consider certain European nations that may hold their credit ratings despite underlying risks. Pakistan's geographical context and lack of diversity similar to weaker European economies further differentiate its situation. Additionally, geopolitical conditions have shifted considerably. After three years of struggles, Pakistan's overall foreign exchange reserves are nearing $ 20 billion, with SBP's FX Reserves at $ 14.46 billion. The current account balance and the payments position are consistently positive, with remittances steadily increasing. The International Reserve and Foreign Currency position (Derivatives) stands at $ 2.6 billion, while the CDS has sharply fallen by over 1200 basis points. Pakistan's international Euro and Dollar bonds are recovering from previous lows, and last week's credit rating improvement by S & P to B- reaffirms the progress in the economy. Nevertheless, the primary challenge lies in sustaining and enhancing these economic gains. This can be achieved by energizing economic activity and boosting liquidity via the banking sector, significantly increasing credit availability to the private sector. However, this alone may not be enough unless the tax-to-GDP ratio needs to be raised significantly. Despite these encouraging signs and with oil prices around $ 70 per barrel, the Pakistani Rupee should not have depreciated and should have remained stable. A stable PKR will assist the administration and monetary authorities in keeping inflation low, enabling the monetary policy committee to potentially lower the policy rate in alignment with inflation trends. Given these considerations, policymakers on Monday July 28, might think about reducing the interest rates by nearly 100 basis points. Copyright Business Recorder, 2025
The Hill
17-07-2025
- Business
- The Hill
Businesses raising prices due to tariffs
The Big Story Higher costs from tariffs were reported by businesses in all of the Federal Reserve's 12 regional districts, and many made the choice to raise prices as a result. © The Associated Press 'Many firms passed on at least a portion of cost increases to consumers through price hikes or surcharges,' the Fed's July Beige Book — an anecdotal survey of domestic economic conditions — reported. Those businesses that didn't push the additional costs through to their customers saw restricted profit margins, the beige book said, noting consumers' 'growing price sensitivity.' Inflation in the Labor Department's consumer price index jumped in June, partly as a result of the tariffs. While President Trump has instituted a 10-percent general tariff, along with China-specific tariffs and targeted tariffs on some individual goods, his country-specific 'reciprocal' tariffs have been paused until Aug. 1 as trade negotiations continue. Import prices advanced by 0.1 percent in June and deflated by 0.2 percent relative to last year, the Labor Department reported Thursday. The number was below economists' expectations and reflected lower energy prices. The Hill's Tobias Burns has more here. Welcome to The Hill's Business & Economy newsletter, I'm Aris Folley — covering the intersection of Wall Street and Pennsylvania Avenue. Did someone forward you this newsletter? Subscribe here. Essential Reads Key business and economic news with implications this week and beyond: Meta investors, Zuckerberg settle Facebook privacy suit Meta investors and Meta CEO Mark Zuckerberg settled an $8 billion lawsuit with shareholders on Thursday. Murkowski: Vought 'disrespects' the government funding process Sen. Lisa Murkowski (R-Alaska) on Thursday said she thinks White House budget chief Russell Vought 'disrespects' Congress's annual funding process after he said it should be 'less bipartisan.' What's the average salary in the US? Median weekly wages for full-time and salaried workers in the U.S. rose nearly 5 percent from last year, according to the latest report from the Bureau of Labor Statistics. The Ticker Upcoming news themes and events we're watching: In Other News Branch out with more stories from the day: Trump administration to subject solar and wind projects to elevated review The Trump administration plans to put solar and wind projects through an elevated review process, saying that moves toward approval will have to be vetted by Interior Secretary Doug Burgum's office. Good to Know Business and economic news we've flagged from other outlets: What People Think Opinions related to business and economic issues submitted to The Hill: You're all caught up. See you tomorrow! Thank you for signing up! Subscribe to more newsletters here
Business Insider
17-07-2025
- Business
- Business Insider
Businesses warn the Fed that prices will likely start rising more rapidly by late summer
Businesses surveyed by the Federal Reserve said in the latest publication of its Beige Book economic report that tariffs have increased their costs either modestly or "pronouncedly." "Contacts in a wide range of industries expected cost pressures to remain elevated in the coming months, increasing the likelihood that consumer prices will start to rise more rapidly by late summer," the Fed wrote. The July report mentioned tariffs 75 times, which is fewer than the 107 and 122 times the word appears in the prior two reports, but well above the 23 and 49 mentions earlier in the year before President Donald Trump kicked off the trade war. While much of the earlier discussion focused on uncertainty around policy and rates, the talk now is of price hikes as tariffs become more entrenched. In particular, manufacturers reported being surcharged by their suppliers, especially for raw materials used in manufacturing and construction. Several consumer packaged goods companies told the St. Louis Fed that their cost increases would begin showing up on grocery shelves in the next 90 days, and a manufacturing company in Memphis said it had raised prices "significantly" to offset the tariff cost on steel and aluminum. Other businesses in the St. Louis district said they were managing costs in other ways, from a packaging company absorbing at least 10% in surcharges to stay competitive with larger manufacturers to a wellness center that started offering new add-on services in order to manage higher costs elsewhere. And while many businesses said they passed along costs to consumers through price hikes, others said they held off due to price-sensitive consumers, which tightened their profit margins. These new costs haven't yet appeared dramatically in the official data: retail sales continued a strong run last month, and prices have generally held steady. The latest consumer price index inched up by a modest 0.3% — far less than some economists were initially worried about. However, prices may not remain stable for much longer as tariffs (and concerns about tariffs) reshape pricing decisions. "It seems that prices have gone up out of fear that prices will go up," a construction materials supplier told the St. Louis Fed. The Trump administration recently sent tariff letters to nearly two dozen trading partners, threatening duties as high as 50% starting from August 1. None of the four existing trade agreements with the UK, China, Vietnam, and Indonesia has yielded tariffs below 10%, suggesting that the baseline tariff imposed on April 2 may be here to stay.
Business Times
17-07-2025
- Business
- Business Times
US weekly jobless claims fall; job growth appears steady in July
[WASHINGTON] The number of Americans filing new applications for jobless benefits fell last week, pointing to steady job growth in July, though some laid off workers are experiencing long spells of unemployment because of a moderation in hiring. Initial claims for state unemployment benefits dropped 7,000 to a seasonally adjusted 221,000 for the week ended July 12, the Labor Department said on Thursday (Jul 17). Economists polled by Reuters had forecast 235,000 claims for the latest week. Motor vehicle assembly plant closures for reasons including maintenance and annual retooling for new models could be influencing the data. Auto manufacturers typically idle assembly lines in summer, though the timing often varies, which could throw off the model that the government uses to strip out seasonal fluctuations from the data. Layoffs have remained generally low, though economic uncertainty stemming from trade policy has left companies hesitant to increase hiring. President Donald Trump last week announced higher duties would come into effect on August 1 for imports from a range of countries, including Mexico, Japan, Canada and Brazil, and the European Union. Trump in April slapped a 10 per cent duty on nearly all imports, while giving nations a 90-day period to negotiate trade deals. The Federal Reserve's Beige Book report on Wednesday described hiring as having 'remained generally cautious' in early July, attributed by many of the US central bank's contacts to 'ongoing economic and policy uncertainty.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The Fed said while reports of layoffs were limited in all industries, they were 'somewhat more common among manufacturers.' It noted that 'many contacts expected to postpone major hiring and layoff decisions until uncertainty diminished.' The claims report covered the period during which the government surveyed employers for the nonfarm payrolls component of July's employment report. Nonfarm payrolls increased by 147,000 jobs in June, though nearly half of the positions were in the government sector, mostly state education. Tepid hiring is underscored by the growing number of people collecting unemployment checks. The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 2,000 to a seasonally adjusted 1.956 million during the week ending July 5. The start of a new quarter could have influenced the current level of the so-called continuing claims. 'Eligibility for benefits can be affected by calendar-quarter considerations, leading to large swings in the underlying data,' said Lou Crandall, chief economist at Wrightson ICAP. Next week's continuing claims data could offer more clarity on the health of the labour market in July. Economists said the elevated continuing claims reading suggested an increase in the unemployment rate. While the jobless rate fell to 4.1 per cent in June after holding at 4.2 per cent for three straight months, that was mostly because people dropped out of the labour force. REUTERS
Int'l Business Times
17-07-2025
- Business
- Int'l Business Times
Beige Book Flags Growing Pessimism As Tariffs And Labor Shortages Squeeze US Econom
The Federal Reserve's latest Beige Book, released Wednesday, revealed that while U.S. economic activity grew slightly in recent weeks, overall sentiment has turned more cautious. Businesses across multiple sectors reported concerns over persistent cost pressures and a tightening labor market. According to Reuters, nearly all 12 Federal Reserve districts reported modest to moderate growth, yet the tone was decidedly more pessimistic compared to earlier in the year. Many firms indicated that tariffs and labor shortages are weighing on hiring and expansion plans. Tariff Pressures Resurface Businesses in manufacturing, construction, and retail noted a resurgence in input cost increases, driven largely by import tariffs. Companies in the Atlanta, Dallas, and Philadelphia districts reported having to pass higher costs on to customers. In some cases, firms said they were eating the cost increases to remain competitive, putting pressure on profit margins. As explained by Investopedia, firms that rely on imported materials—such as metal parts and electronics—are facing the steepest price hikes. These cost burdens are expected to grow in the second half of the year as renewed tariffs on Chinese goods take effect. Labor Shortages Worsen with Immigration Crackdown A recurring theme across the report was the tight labor market, particularly for low-wage and seasonal workers. Multiple districts attributed the shortages to stricter immigration policies, which have reduced the availability of essential labor in sectors like agriculture, hospitality, and construction. According to Fintel, the St. Louis and Minneapolis districts noted delayed building projects due to a lack of workers. Meanwhile, in the New York region, many small businesses that rely on seasonal immigrant labor have either shortened hours or remained closed entirely. To cope, companies are increasingly turning to automation and AI-based solutions, but these strategies are longer-term and capital-intensive—leaving a short-term gap that could hinder recovery. Inflation Pressures Show Mixed Signals The Beige Book described price growth as "modest to moderate," but highlighted that businesses expect price pressures to accelerate in the coming months. Tariff-related costs, rising wages, and housing expenses were all flagged as potential contributors to a new inflation wave. Economists interviewed by Barron's said the Fed may be facing a "policy catch-22": cut rates too soon and risk feeding inflation; hold rates too long and risk undercutting growth. Fed Holds Steady, But Uncertainty Grows Despite the challenges, the Federal Reserve is expected to keep interest rates unchanged at its next policy meeting. As of now, the benchmark rate remains between 4.25% and 4.50%, with markets pricing in a potential cut by the fall—if inflation continues to ease and labor market strains intensify. Several Fed officials, including those from the Cleveland and Boston districts, have signaled in public comments that they remain cautious, prioritizing inflation control over short-term stimulus. The general tone of the Beige Book suggests a Fed that is data-dependent and hesitant to act prematurely, especially in the face of external political pressure to lower rates—a reference to recent comments from President Trump urging aggressive cuts. What It Means Tariffs are hitting margins again, particularly for import-heavy industries. Labor shortages remain critical, especially where immigration crackdowns have hit hardest. Price pressures could reaccelerate, keeping the Fed in wait-and-see mode. Business sentiment is weakening, a potential sign that growth may stall later this year.
