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    Stock markets rise as Trump backtracks on high China tariffs and firing Fed chair

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    Stock markets have risen around the world after Donald Trump said his tariffs on China would come down “substantially” and he had “no intention” of firing the chair of the US central bank, Jerome Powell.Weeks of tough talk on trade from White House officials have rattled investors and Trump now appears to be softening his tone. The president told reporters in Washington on Tuesday he planned to be “very nice” to China in trade talks and that tariffs could drop in both countries if they could reach a deal, adding: “It will come down substantially, but it won’t be zero.”Overnight in Asia, Japan’s Nikkei rose by nearly 2%, Hong Kong’s Hang Seng was up 2.4% and the South Korean Kospi gained 1.6%.The rally spread to Europe in early trading on Wednesday, with the UK’s FTSE 100 index up 1.6%, while the Italian FTSE MIB rose by 1.1%. Germany’s Dax gained 2.6% and France’s Cac 2.1%.Meanwhile, US stocks opened on a high Wednesday morning, with the Dow rallying over 800 points, and the Nasdaq Composite up over 3%. The rally stalled in the afternoon but all the major stock markets managed to end the day higher.On Wednesday, the US treasury secretary, Scott Bessent, also took a softer, optimistic tone on China in remarks delivered at the Institute of International Finance in Washington DC, saying that China “knows it needs to change”.“If China is serious on less dependence on export-led manufacturing growth and rebalancing toward a domestic economy … let’s rebalance together,” Bessent said. “This is an incredible opportunity.”Bessent told investors in a private meeting on Tuesday that he expects a “de-escalation” of the trade war between China and the US in the “very near future”.“‘America First’ does not mean America alone. To the contrary, it is a call for deeper collaboration and mutual respect among trade partners,” Bessent said on Wednesday.Investor confidence also grew after Trump told reporters he would not fire Powell, the chair of the US Federal Reserve, reversing the previous day’s losses triggered by the president calling the central bank boss a “major loser”.The president has criticised the Fed chair repeatedly for refusing to cut interest rates and last week hinted that he believed he could dismiss Powell before his term as the head of the central bank comes to an end in May next year.Trump wrote on his social media platform, Truth Social, last week that Powell’s termination “could not come fast enough”, after the Fed chair raised concerns about the impact of trade tariffs on the American economy.However, the suggestion from the White House that the US central bank will remain independent helped stocks to rise on Wednesday, as well as the prospect of lower tariffs on Chinese imports to the US.The US dollar, which hit a three-year low on Tuesday before recovering, rose by 0.25% against a basket of major currencies.Oil prices also rose on Wednesday, with Brent crude rising above $68 (£51) a barrel amid hopes that lower tariffs will be less damaging to the global economy. The rise was also led by new US sanctions targeting Iranian liquefied petroleum gas and the crude oil shipping magnate Seyed Asadoollah Emamjomeh.Meanwhile, gold, which is traditionally viewed by investors as a safe haven asset during volatile periods, retreated from the new high of $3,500 (£2,620) an ounce it hit on Tuesday, to trade at about $3,307. More

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      The Guardian view on the IMF’s warning: Donald Trump could cost the world a trillion dollars | Editorial

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      Wake up! When the most sober of global institutions, the International Monetary Fund, abandons its usual technocratic calm to sound the alarm on the political roots of global financial instability, it’s time to pay attention. The IMF is warning of a non-negligible risk of a $1tn hit to global output, as Donald Trump’s erratic “America first” agenda – part oligarchic enrichment scheme, part mobster shakedown – collides with a perfect storm of global financial vulnerabilities.Such a shock would be equivalent to a third of that experienced in the 2008 crisis. But it would be felt in a much more fragile and politically charged environment. This time, the crisis stems not just from markets but from the politics at the heart of the dollar system. The IMF’s latest Global Financial Stability Report sees the danger in Mr Trump’s trade policies, especially his “liberation day” announcements, which have pushed up America’s effective tariff rate to the highest in over 100 years.The IMF put investors on notice that Trumpian volatility was taking place as US debt and equities – especially tech stocks – were overvalued. It cautions that hedge funds have made huge bets that have gone sour, requiring them to sell US treasuries for cash and potentially deepening the chaos in bond markets. Ominously, the IMF draws the comparison, first made by the analyst Nathan Tankus, with the “dash for cash” in March 2020 during Covid, when the Federal Reserve rescued US treasury markets directly. Developing nations, already grappling with the highest real borrowing costs in a decade, may now be forced to take on even more expensive debt – the IMF warns – just to cushion the blow from Mr Trump’s new tariffs, risking a dreaded “sudden stop” in capital flows.At the heart of this chaos stands the US, the very country meant to uphold the global financial architecture. Just over a week ago, Adam Tooze of Columbia University wondered if markets had begun to “sell America” after US long-maturity bond prices fell precipitously. He thought that markets were no longer just responding to economic fundamentals but to politics as a systemic risk factor. In this case: Mr Trump’s tariff threats and his increasing political pressure on Fed’s chair, Jerome Powell. In essence, Prof Tooze gave us the theory; the IMF just confirmed the data.The US president’s continued attacks on the Fed chair over the weekend have only added to a flight from US equities, bonds and the dollar itself. The money is fleeing to safe havens such as gold. Some of the loss has been clawed back, but at what cost? Investors aren’t just jittery about inflation or growth – they’re hedging against political chaos. That might explain the seemingly divergent IMF messaging: blunt systemic warnings in its report versus the soothing market-facing comments from a senior official at the fund’s press conference. This is central bank diplomacy. The institution is signalling that it is worried while trying not to spark a self-fulfilling panic in treasuries and the dollar.The real concern here is not technical dysfunction in treasury markets or the mechanics of the Fed, which are the bedrock of the global financial system. It’s about the politicisation of the monetary-fiscal nexus under a Trumpian regime that is fundamentally hostile to the norms of liberal-democratic governance. When even the dollar is no longer a safe haven, what – or who – can be?Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. More

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      Trump says Fed chair would resign if asked and condemns him over interest rates

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      Donald Trump early on Thursday condemned the Federal Reserve chair, Jerome Powell, for not lowering US interest rates, and expressed a wish for him to be gone from his role.The US president lambasted Powell as “always too late and wrong” in a post on his Truth Social platform. Trump noted that the European Central Bank (ECB) was poised on Thursday to lower interest rates again, without mentioning that the body has been responding to the chaos caused by Trump’s initiatives on tariffs.Addressing reporters later in the day, Trump claimed Powell would resign if he asked him to. Powell himself has said that he would not resign if asked to do so by the president.Trump has been pressuring Powell to cut US interest rates for months, even though the central bank is independent of the administration in setting monetary policy and the White House typically does not publicly lobby the Federal Reserve.The ECB had been expected to cut interest rates for the seventh time this year in order to prop up economic growth, and then did so not long before US markets were due to open. Powell enraged Trump on Wednesday night by warning that the president’s sweeping tariffs could raise inflation. That would make the Fed even more hesitant to cut interest rates.Christine Lagarde, the ECB president, in explaining the reasons why it has – unlike the Fed – cut interest rates, said “the economic outlook is clouded by exceptional uncertainty” because of Trump’s tariffs, which constitute a negative demand shock.Lagarde was speaking after cutting the ECB’s main deposit rate by 25 basis points to 2.25%.Europe had been preparing another interest rate cut following the global financial turmoil caused by Trump’s tariffs push, in which he has gone back and forth on whether, when and how deeply to tax imports from other countries, and on which countries, since he returned to the White House for a second term.He retreated sharply earlier this month from his decision to impose tariffs worldwide, pausing most of the charges for 90 days, although most notably not on China, after markets plunged and US government bonds – traditionally seen as one of the world’s safest financial assets – had suffered a dramatic sell-off. Wall Street chiefs and other experts also forecast a heightened likelihood of recession. Economists polled by Reuters on Thursday put US recession odds at 45%.After insisting for days that he would hold firm on his aggressive trade strategy, unveiled in full on 2 April, which he dubbed “liberation day”, Trump announced on 9 April that all countries that had not retaliated against US tariffs would receive a reprieve – and only face a blanket US tariff of 10% – until July.Powell on Wednesday said the US economy was well-positioned but added that Trump’s tariffs were likely to cause “at least a temporary rise in inflation. The inflationary effects could also be more persistent.”He indicated that the prospect of sweeping tariffs on virtually every trade partner could put the Fed in the unenviable position of having to choose between tackling inflation and unemployment.The World Trade Organization, meanwhile, warned that Trump’s tariffs would send international trade into reverse this year, depressing global economic growth.The International Monetary Fund (IMF) managing director, Kristalina Georgieva, said the global outlook was also weakening in the face of the Trump tariff onslaught, adding central banks like the Federal Reserve needed to remain agile and credible.“Resilience is being tested again – by the reboot of the global trading system,” she said.Trump also said as part of his Truth Social post at daybreak on Thursday that “Powell’s termination cannot come fast enough”. He dubbed him, further in the post, “Too Late” and put forward the argument that prices were coming down, from oil to eggs.Trump nominated Powell to become Fed chair during his first term in the White House, in 2018, and Joe Biden renominated him during his term in the White House, in 2022. The US Senate confirms the chair and the US president cannot terminate the head of the Federal Reserve before the end of their four-year fixed stints. Powell is in place until next spring.The US central bank has held interest rates steady at 4.25% to 4.5% since the start of this year.Trump said in his post: “The ECB is expected to cut interest rates for the 7th time, and yet, “Too Late” Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete “mess!” Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!”The New York Fed president, John Williams, spoke to Fox Business on TV on Thursday and backed up Powell’s wariness on rates.“I don’t see any need to change the setting of the Fed funds rate any time soon … It’s really about collecting information, understanding better what’s happening in the economy during the rest of this year, understanding kind of how the uncertainty plays out,” Williams said.Meanwhile, Politico, citing unnamed sources, reported after Trump’s post that the treasury secretary, Scott Bessent, had been cautioning White House officials against any attempt to fire Powell, for which there is no tested mechanism, saying it would risk destabilizing financial markets.And there was a fresh alarm bell sounded on the risk of stagflation, in which high inflation combines with high unemployment amid stagnant economic growth.“A sudden crystallization of the threat to Fed independence would both intensify market stress and shift it in more of a stagflationary direction with a sharp increase in tail risk,” Krishna Guha, vice-chair of an arm of the financial advisory firm Evercore ISI, said in a note.Reuters contributed reporting More

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      Majority of Americans wrongly believe US is in recession – and most blame Biden

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      Nearly three in five Americans wrongly believe the US is in an economic recession, and the majority blame the Biden administration, according to a Harris poll conducted exclusively for the Guardian. The survey found persistent pessimism about the economy as election day draws closer.The poll highlighted many misconceptions people have about the economy, including:
      55% believe the economy is shrinking, and 56% think the US is experiencing a recession, though the broadest measure of the economy, gross domestic product (GDP), has been growing.
      49% believe the S&P 500 stock market index is down for the year, though the index went up about 24% in 2023 and is up more than 12% this year.
      49% believe that unemployment is at a 50-year high, though the unemployment rate has been under 4%, a near 50-year low.
      Many Americans put the blame on Biden for the state of the economy, with 58% of those polled saying the economy is worsening due to mismanagement from the presidential administration.The poll underscored people’s complicated emotions around inflation. The vast majority of respondents, 72%, indicated they think inflation is increasing. In reality, the rate of inflation has fallen sharply from its post-Covid peak of 9.1% and has been fluctuating between 3% and 4% a year.In April, the inflation rate went down from 3.5% to 3.4% – far from inflation’s 40-year peak of 9.1% in June 2022 – triggering a stock market rally that pushed the Dow Jones index to a record high.A recession is generally defined by a decrease in economic activity, typically measured as gross domestic product (GDP), over two successive quarters, although in the US the National Bureau of Economic Research (NEBR) has the final say. US GDP has been rising over the last few years, barring a brief contraction in 2022, which the NEBR did not deem a recession.The only recent recession was in 2020, early in the Covid-19 pandemic. Since then, the US economy has grown considerably. Unemployment has also hit historic lows, wages have been going up and consumer spending has been strong.But the road to recovery has been bumpy, largely because of inflation and the Federal Reserve raising interest rates to tamp down high prices.Despite previously suggesting the Fed could start lowering rates this year, Fed officials have recently indicated interest rates will remain elevated in the near future. While inflation has eased considerably since its peak in 2022, officials continue to say inflation remains high because it remains above the Fed’s target of 2% a year.After a tumultuous ride of inflation and high interest rates, voters are uncertain about what’s next. Consumer confidence fell to a six-month low in May.So even though economic data, like GDP, implies strength in the economy, there’s a stubborn gap between the reality represented in that data – what economists use to gauge the economy’s health – and the emotional reality that underlies how Americans feel about the economy. In the poll, 55% think the economy is only getting worse.Some have called the phenomenon a “vibecession”, a term first coined by the economics writer Kyla Scanlon to describe the widespread pessimism about the economy that defies statistics that show the economy is actually doing OK.While inflation has been down, prices are at a higher level compared with just a few years ago. And prices are still going up, just at a slower pace than at inflation’s peak.Americans are clearly still reeling from price increases. In the poll, 70% of Americans said their biggest economic concern was the cost of living. About the same percentage of people, 68%, said that inflation was top of mind.The poll showed little change in Americans’ economic outlook from a Harris poll conducted for the Guardian on the economy in September 2023.A similar percentage of respondents agreed “it’s difficult to be happy about positive economic news when I feel financially squeezed each month” and that the economy was worse than the media made it out to be.Another thing that hasn’t changed: views on the economy largely depend on which political party people belong to. Republicans were much more likely to report feeling down about the economy than Democrats. The vast majority of Republicans believe that the economy is shrinking, inflation is increasing and the economy is getting worse overall. A significant but smaller percentage of Democrats, less than 40%, believed the same.Unsurprisingly, more Republicans than Democrats believe the economy is worsening due to the mismanagement of the Biden administration.Something both Republicans and Democrats agree on: they don’t know who to trust when it comes to learning about the economy. In both September and May, a majority of respondents – more than 60% – indicated skepticism over economic news.The economy continues to present a major challenge to Joe Biden in his re-election bid. Though he has tried to tout “Bidenomics”, or his domestic economy record, including his $1.2tn bipartisan infrastructure bill from 2022, 70% of Republicans and 39% of Democrats seem to think he’s making the economy worse.But it’s not all bad news for Biden. Republican voters were slightly more optimistic about the lasting impacts of “Bidenomics” than they were in the September Harris poll. Four in 10 Republicans, an 11 percentage-point increase from September, indicated they believe Bidenomics will have a positive lasting impact, while 81% of Democrats said the same. And three-quarters of everyone polled said they support at least one of the key pillars of Bidenomics, which include investments in infrastructure, hi-tech electronics manufacturing, clean-energy facilities and more union jobs.Yet even with these small strands of approval, pessimism about the overall economy is pervasive. It will be an uphill battle for Biden to convince voters to be more hopeful.“What Americans are saying in this data is: ‘Economists may say things are getting better, but we’re not feeling it where I live,’” said John Gerzema, CEO of the Harris Poll. “Unwinding four years of uncertainty takes time. Leaders have to understand this and bring the public along.” More

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      Jailed Trump adviser predicts mass deportations as second term priority

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      The first 100 days of a second Donald Trump presidency would see the sacking of the Federal Reserve head, Jerome Powell, mass deportations of undocumented immigrants and higher tariffs on Chinese imports, the ex-president’s former trade adviser Peter Navarro has said.Navarro, the maverick former head of the Office of Trade and Manufacturing Policy in Trump’s first administration and a key loyalist, made the forecasts in an interview conducted from prison – where he is serving a four-month sentence for contempt of Congress.Speaking to the website Semafor, Navarro predicted that axing Powell – an establishment figure who was initially appointed as Federal Reserve chair by Trump in 2018 before being reappointed by Joe Biden – would be among the first acts of a newly re-elected President Trump.“Powell raised rates too fast under Trump and choked off growth,” Navarro told Semafor in responses emailed from a prison library in Miami, where he has been putting the finishing touches to a new book, The New Maga Deal, whose title references the former president’s Make America Great Again slogan.“To keep his job, Powell then raised too slowly to contain inflation under Biden,” Navarro said to Semafor. “My guess is that this punctilious non-economist will be gone in the first 100 days one way or another.”He predicted that Powell – who served in the presidential administration of the late George HW Bush – could be replaced by either Kevin Hassett or Tyler Goodspeed, both former chairs of the council of economic advisers.The first order of business in a second Trump presidency, however, would be intensifying a rumbling trade war with China, said Navarro, a noted hawk on Chinese trade policy.“At the top of the trade list is Trump’s Reciprocal Trade Act, first introduced by congressman Sean Duffy in 2019,” he wrote. “If countries refuse to lower their tariffs to ours, the president would have the authority to raise our tariffs to theirs.”Asked about unfinished business likely to be revisited, Navarro identified mass deportation and reinforcing a “buy American” policy.“Trump will quickly close down the border and begin mass deportations,” he said, accusing Biden of “importing a wave of crime and terrorism along with an uneducated mass that drives down the wages of Black, brown and blue-collar Americans”.skip past newsletter promotionafter newsletter promotionDespite – or perhaps partly because of – his incarceration for refusing to cooperate with the congressional investigation into Trump supporters’ 6 January 2021 attack on the US Capitol, Navarro remains an authoritative source on insider thinking in the former president’s camp.Several members of Trump’s inner circle have visited Navarro during his confinement in a minimum security facility, according to Semafor, fuelling speculation that he could play a key role in a future administration.Reinforcing that impression, Navarro said his book identified 100 actions that Trump would take in the first 100 days of a second presidency. He said he planned to attend the Republican national convention in mid-July – where Trump is expected to be anointed as the GOP presidential candidate – if he is released from prison in time.While he was close to the former president throughout his first administration, Navarro’s views on trade are considered fringe by many mainstream economists. He is a vocal critic of Germany, as well as China, and has accused both countries of currency manipulation. More

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      US adds 216,000 jobs in December as stronger than expected rise caps robust year

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      The US workforce added 216,000 jobs last month, more than expected by economists, capping another robust year of growth in the face of higher interest rates.Policymakers, weighing when to start cutting borrowing costs, are closely monitoring the strength of the labor market as they try to guide the world’s largest economy to a so-called “soft landing”, where price growth normalizes and recession is avoided.American employers had been expected by economists to add about 164,000 jobs in December, down from 173,000 the previous month. Recruitment across the public, healthcare, social assistance and construction sectors helped drive growth as 2023 drew to a close.Overall, Friday’s official data showed that 2.7m jobs were added in the US economy over the course of last year – down from 4.8m in 2022.While its growth has slowed, the labor force has defied fears of a downturn after the Federal Reserve launched an aggressive campaign to pull back inflation from its highest levels in a generation. It remained resilient last year in the midst of layoffs and strikes.The headline unemployment rate stood at 3.7% in December, according to data released by the Bureau of Labor Statistics, in line with November.While last month’s jobs growth reading was significantly higher than forecast by economists, the agency revised its estimates for October and November lower. As a result, the US workforce in these two months was some 71,000 jobs smaller than previously reported.As price growth continues to decline, officials at the Fed – which last hiked interest rates in July – are now mulling the future of its battle. Jerome Powell, the central bank’s chairman, said last month that the historic tightening of monetary policy was probably over, and that discussions on cuts in borrowing costs were coming “into view”.The official jobs report is closely scrutinized by Wall Street each month for signs of how the US economy is faring. The S&P 500 started the day slightly higher in New York.Nancy Vanden Houten, lead US economist at Oxford Economics, said: “There is a lot of noise in the data, but we continue to expect that there will be enough evidence of a further loosening in labor market conditions and a decline in inflation more broadly to allow the Fed to begin cutting rates in May.”Growth in private sector employment “continues to slow relentlessly, even after the upside surprise” in December, said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “Behind the headline, the trend in job growth is slowing, with more softening to come.” More

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      Climate activists block Federal Reserve bank, calling for end to fossil fuel funding

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      One day after the largest climate march since the start of the Covid-19 pandemic, hundreds of climate activists blockaded the Federal Reserve Bank in New York to call for an end to funding for coal, oil and gas, with police making scores of arrests.“Fossil fuel companies … wouldn’t be able to operate without money, and that money is coming primarily from Wall Street,” Alicé Nascimento, environmental campaigns director at New York Communities for Change, said hours before she was arrested.The action came as world leaders began arriving in New York for the United National general assembly (UNGA) gathering and followed Sunday’s 75,000-person March to End Fossil Fuels, which focused on pushing Biden to urgently phase out fossil fuels. Monday’s civil disobedience had a different but compatible goal, said Renata Pumarol, an organizer with the campaign group Climate Defenders.“Today we want to make sure people know banks, big banks, are responsible for climate change, too,” she said. “And while marches are important, we think civil disobedience is, too, because it shows we’re willing to do whatever it takes to end fossil fuels, including putting ourselves on the line.”Monday’s action was organized by a coalition of local organizations including New York Communities for Change and Extinction Rebellion NYC, alongside national groups such as Climate Organizing Hub and 350.org. Demonstrators first gathered in New York’s Zuccotti Park, in the financial district in lower Manhattan, which is partially owned by fossil fuel investor Goldman Sachs.The small concrete urban space was the base for the original Occupy Wall Street protests 12 years ago.On Monday, demonstrators then marched in the rain to the nearby New York Federal Reserve building, the largest of the network of 12 federal banks dotted around the country that make up the central bank of the United States.Protesters blockaded multiple entrances into the bank while singing, beating drums and holding up signs. Over 100 people were arrested, according to the New York City Office of the Deputy Commissioner for Public Information, with organizers estimating that roughly 150 arrests were made.“If you arrest one of us, one hundred more will come,” activists chanted.The protesters called attention to both public and private fossil fuel financing. Globally, government subsidies for coal, oil and gas reached a record high of $13m per minute in 2022 last year – equivalent to 7% of global GDP and almost double what the world spends on education – according to the International Monetary Fund.Last year, the US also ranked 16th among the G20 countries on a scorecard by the independent economic research group Green Central Banking, which the researchers say indicates US financial regulators are falling behind their international peers on climate risk mitigation.Meanwhile, since the signing of the 2015 Paris Climate Agreement, major private banks have provided some $3.2tn to the fossil fuel industry to expand operations, far outstripping the amount that global north governments have collectively spent on international climate finance, an analysis from ActionAid, the Washington DC-based non-profit, found this month. Another recent analysis from the Sierra Club environmental group found that major global banks have announced climate pledges but nonetheless financed coal energy across the US.Monday’s action came after a slew of global protests last week, some of which targeted financial institutions. In New York, dozens rallied outside of the headquarters for asset manager BlackRock and Citibank on Wednesday and Thursday respectively, to call attention to both firms’ investments in fossil fuels. And on Friday, protesters targeted the Museum of Modern Art over its relationship to fossil fuel investor KKR.Another protest is planned for Tuesday at New York City’s Bank of America offices, with additional actions throughout the week as the United Nations hosts its Climate Ambition Summit as part of the UNGA. More

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      US inflation in August rose to 3.7% amid sharp increase in energy prices

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      US inflation in August rose for the first time since June 2022, rising to 3.7% as a sharp increase in energy prices pushed prices up toward the end of the summer.Growth in prices still remains far below the decades-high inflation rates that were seen last summer, when the rate peaked at 9.1% in June. Still, an increase in inflation means the US economy is further from the Federal Reserve’s target rate of 2% and will probably make officials consider pushing interest rates up later this year.The price of energy commodities, including gas and oil, jumped up 10.5% over the last month, according to the latest Consumer Price Index data, which measures the prices of a basket of goods and services. Gas prices ticked up in August as Russia and Saudi Arabia continued aggressive cuts in supply, bringing the price of crude oil to 10-month high at $91 a barrel. Higher gas prices accounted for more than half of the increase in the overall inflation rate.Meanwhile core inflation, which measures the price of goods and services minus the volatile energy and food industries, actually decreased in August to 4.3%, down from 4.7% in July, reflecting the impact higher energy prices are having on the overall inflation rate.Even with the decrease in core inflation, which has been higher and going down at a slower rate than the 12-month inflation rate, inflation still remains far above the Federal Reserve’s target rate of 2%.Though price decreases have been seen in used cars and medical care services over the last few months, home prices have hit a near-record high in June, keeping core inflation stubbornly high. The median home price hit $413,80, the second-highest price ever, according to the National Association of Realtors. Home prices cooled slightly to $406,700 in July, but home prices still remain 7.3% higher than a year earlier.Even with inflation slightly up, the Fed is on track to keep interest rates the same at their next board meeting on 20 September. Economists say the Fed has had a pause planned for the meeting for a while as many officials say the economy has yet to feel the full effects of interest rates, which are at a 22-year high at 5.25% to 5.5%.But as the health of the economy continues to be hard to pin down – job growth has remained relatively stable even amid high interest rates, but inflation is still far from 2% – the Fed could still raise interest rates at future meetings. Future interest rate increases could introduce more volatility to the US economy, and potentially trigger a recession, though the Fed’s mission to bring down inflation has yet to bear dramatic consequences.The Fed chair, Jerome Powell, said last month that officials were aware of the precarity, saying they will “proceed carefully” as they decide what to do with interest rates. Powell has said the overall decline in inflation has been a “welcome development”, but it still remains high.“We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective,” he said. More

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      Federal Reserve increases interest rates by a quarter point to 16-year high – as it happened

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      From 6h agoThe Federal Reserve is set to raise interest rates this afternoon, with an announcement coming at 2pm ET from the central bank after its most recent board meeting. Analysts expect the Fed will raise rates by a quarter point, which will bring rates up to 5% to 5.25%. This would be the central bank’s 10th interest rate increase since March 2022, when rates were at zero.The interest rate increase will come at what in hindsight may seem like an inflection point for the economy. Inflation is down, consumer spending has flattened and growth in the job market is starting to slow down, but Fed officials, especially Fed chair Jerome Powell, have been stringent on getting inflation down to their target of 2%. Inflation in March was 5%, the lowest it’s been since 2021, but still quite far from 2%.Analysts and economists will be closely watching Powell’s press conference at 2.30pm, where he will discuss the direction Fed staff see the economy going, giving hints as to whether even more interest rate hikes are to come or whether the Fed will end its rate-hike campaign.Here’s a quick summary of everything that’s happened today:
      The Federal Reserve increased interest rates by a quarter point, bringing rates up to 5% to 5.25%. Fed chair Jerome Powell said that Fed officials no longer anticipate more hikes, but will monitor economic data to see if they are necessary in coming months. The stock market dipped slightly after the Fed’s announcement.
      The debate over the debt ceiling continued today, with news that Senate majority leader Mitch McConnell will keep himself out of the specific of negotiating talks and hints that senators Joe Manchin and Kyrsten Sinema are breaking from Dems and looking to take Senate negotiations seriously.
      2024 is already gearing up: Joe Biden released his second TV ad since launching his campaign last week, while US rep. Colin Allred of Texas announced his bid to unseat Texas senator Ted Cruz. In Nevada, Jim Marchant, an election denier and staunch supporter of Donald Trump, also announced a Senate big.
      We’ll be closing this blog for today. Thanks for reading.Democratic senator Raphael Warnock from Georgia said that his two young kids were on lockdown at school because of the shooting in midtown Atlanta.“They’re there. I’m here, hoping and praying they’re safe,” he said on the Senate floor. “Thoughts and prayers are not enough.”One person has been confirmed dead and at least four injured after a gunman opened fire in a building in midtown around 12.30pm ET. Police said they are still searching for a suspect.The Washington Post just published a cheery report that the White House and lawmakers on Capitol Hill technically have just six working days together before the US government potentially defaults on its debt on 1 June.With the House and Senate in session on different days, and Biden making international trips for the G7 summit in Japan and another “Quad” meeting with Australia, Japan and India in Australia, the legislative and executive branches are scheduled to have just six more days together to figure out the debt ceiling.Of course, negotiations can take place even when a chamber is not in session, but the precariousness of negotiations and the closeness of default makes the timing a tad inconvenient.Talking about the fallout of the collapse of Silicon Valley Bank in March, Federal Reserve chair Jerome Powell said that it seems the worst of the crisis is over.“The severe period of stress, those have now all been resolved and all the depositors have been protected,” he said, adding that JPMorgan’s acquisition of First Republic bank marked the end of the worst of it all.Asked about lessons that he learned from the crisis, he noted that there needs to be stronger regulation and supervision, but declined to offer any specifics as he has tasked Fed vice chair Michael Barr with drafting specific policy proposals.“I am not aware of anybody thinking [the collapse] could happen so quickly,” Powell said. “Now that we know that was possible… it will be up to vice chair Barr to design ways to address that.”Today’s Federal Reserve interest rate hike is its second quarter-point hike in a row, after a series of half- and three-quarter point hikes over the last year. Fed chair Jerome Powell said at his press conference this afternoon that “slowing down was the right move”.“I think it’s enabled us to see more data and it will continue to do so. We have to always balance the risk of not doing enough and not getting inflation under control against the risk of maybe slowing down economic activity too much,” he said. “We thought that this rate hike, along with the meaningful change in our policy statement, was the right way to balance that.Asked about the possibility of a recession, Powell seemed optimistic that the Fed could achieve a “soft landing” – keeping interest rates high without seeing huge impacts on unemployment. He noted that even as rates have hit 5% over the last 14 months, the unemployment rate stands at 3.5%.“It’s possible that we can continue to have a cooling in the labor market without having the big increases in unemployment that have gone with many prior episodes,” he said.Of course, Powell noted earlier in the press conference that the full impacts of the interest rate increases have yet to be seen, acknowledging uncertainty about the full economic impact of rate hikes.Federal Reserve chair Jerome Powell emphasized the importance of raising the debt ceiling, though noted that the debt limit is “fiscal policy matters”.“It’s essential that the debt ceiling be raised in a timely way so that the US government can pay all of its bills when they’re due. Failure to do that would be unprecedented,” he said. “We’d be in uncharted territory.Powell noted that the Fed doesn’t “give advice to either side” and also noted that “no one should assume that the Fed can protect the economy from the potential short- and long-term effects” upon default.He also noted that debt limit standoff did not play a role in the Fed’s decision today to increase interest rates.Federal Reserve chair Jerome Powell is holding a press conference after the central bank announced a quarter-point interest rate increase. Powell’s tone in the press conference has changed since he last addressed the press in March. The Fed is no longer anticipating needing more rate increases, but will monitor the economy in determining future interest rate changes.While Powell is still reiterating the Fed’s inflation target of 2%, he acknowledged that the economy is “seeing the effects of our policy tightening on demand and the most interest-rate-sensitive sectors of the economy, particularly housing and investment”. In other words, the Fed sees its interest rate hikes taking effect in the slowing of the economy.“There are some signs that supply and demand in the labor market are coming back into balance,” Powell said. He added that the “economy is likely to face further headwinds from tighter credit conditions”, meaning the full effects of the interest-rate hikes have yet to be seen.Taking a question from a reporter on whether the Fed’s statement today should be taken as a hint that officials will pause rate hikes, Powell said the officials did not make a decision on a pause, but noted that they intentionally updated their stance in today’s press statement that removed a line suggesting more increases would be appropriate.“Instead, we’re saying that in determining the extent to which [more hikes are needed], the Committee will take into account certain factors,” he said. “That’s a meaningful change that we are no longer saying we anticipate [changes] and we will be driven by incoming data meeting by meeting.”The press statement that came with the Federal Reserve’s announcement of another interest rate hike is nearly identical to the one that was released at its last meeting on 22 March, with one key exception.In its 22 March release, Fed officials in the Federal Open Market Committee (FOMC) hinted that more interest rates are to come, saying: “The Committee anticipates that some additional policy firming may be appropriate” in order to bring inflation down to the target of 2%.In today’s statement, that line was cut.The rest of the statement was in line with FOMC’s March meeting statement. They reiterated their stance that “inflation remains elevated” and the jobs market has been strong, with the unemployment rate low. They emphasized that “the US banking system is sound and resilient” and that they are “highly attentive to inflation risks”.Analysts have been wondering whether this interest rate increase will be the Fed’s last, with pauses to come after as the interest rate is held steady at future meetings.Any more hints about what is next for interest rates after this most recent hike will likely be made at Fed chair Jerome Powell’s press conference at 2.30pm ET.The Federal Reserve just announced a quarter-point interest rate increase. This brings the interest rate to a 16-year high at 5% to 5.25%. The central bank has been on a year-long campaign to temper inflation, though it has had to delicately balance the potential of shaking the economy too much with stringent rate increases.Fed chair Jerome Powell will lead a closely watched press conference, where he will discuss the Fed’s view on the state of the economy.The United Auto Workers (UAW) union said in an internal memo that it is holding off on a Joe Biden endorsement due to the president’s electric vehicle policies.UAW president Shawn Fain said in the memo that union leaders met with Biden last week and discussed “our concerns with the electric vehicle transition”, according to the New York Times. The union is concerned that auto workers will suffer during the transition to EV as less workers are needed to assemble EVs.“The EV transition is at serious risk of becoming a race to the bottom,” the memo reads, referring to electric vehicles. “We want to see national leadership have our back on this before we make any commitments.”The union has 400,000 members across the country, though members are primarily in auto-industry heavyweight Michigan, a key election battleground state.The FBI arrested a man in Florida on Tuesday for his involvement in the January 6th Capitol riots, specifically for setting off an “explosive device” in the US Capitol tunnel that leads into the building. Daniel Ball, 38, was first arrested last week by the Citrus County Sheriff’s Office for assaulting seven people, including law enforcement officers, in Florida. Ball’s probation officer, upon being shown photos and videos of the Capitol riot, identified Ball as the person throwing an explosive device in the tunnel, where law enforcement was blocking rioters.Ball faces multiple charges related to the riot, including assaulting police officers and entering a restricted area with a deadly weapon.The justice department said in March that at least 1,000 people have been arrested on charges related to the riots, with 518 pleading guilty to federal crimes so far.Election denier Jim Marchant announced that he will be running for US Senate, challenging Democrat incumbent senator Jacky Rosen for the seat she won last year.During his announcement speech on Tuesday, Marchant said that he is running to “protect Nevadans from the overbearing government, from Silicon Valley, from big media, from labor unions, from the radical gender-change advocates,” the Washington Post reported.His election campaign was acknowledged by Rosen on Twitter, who replied to Marchant’s announcement:
      Nevadans deserve a Senator who will fight for them, not a MAGA election denier who opposes abortion rights even in cases of rape and incest…
      While far-right politicians like Jim Marchant spread baseless conspiracy theories, I’ve always focused on solving problems for Nevadans.
      Marchant has described himself as a “MAGA conservative”, the Post reports, and is an avid supporter of Donald Trump. More