Federal Reserve System

Subterms

    Latest story

    75 Shares46 Views

    What is Trump’s Crypto Reserve Plan?

    by

    The prospect of using taxpayer money to stockpile cryptocurrencies in a national reserve has drawn criticism from lawmakers and investors.The crypto market gives and takes: After President Trump’s plan for a national crypto reserve drew backlash from both Republicans and investors, the prices of digital tokens that would be involved soared higher — and then tumbled. (Bitcoin was trading at about $83,800 early on Tuesday, down nearly $10,000 from a day ago.)The plan has spurred a lot of questions about how it would work and the risks that would be involved.How would a national reserve work?Mr. Trump campaigned last summer on creating a federal Bitcoin stockpile and appointed the venture capitalist David Sacks as his crypto czar. Advisers have suggested holding on to any Bitcoin the government has already seized from criminals, recently estimated at about $17 billion.A bill proposed by Senator Cynthia Lummis, Republican of Wyoming, would direct the government to buy about 200,000 Bitcoin a year over five years, for a value of about $90 billion. (To help pay for that, the bill proposes taking $4.4 billion out of the Federal Reserve’s surplus, cutting into the Treasury Department’s coffers.) Of course, the digital token’s prices would probably rise in anticipation of those federal purchases.One unknown is whether Mr. Trump, in the face of divisions among Republican lawmakers on the idea of a reserve, would seek to test legal limits on his authority and create one unilaterally.Would taxpayer money be involved?That prospect drew the most criticism. Joe Lonsdale, a financier and Trump supporter, said it was “wrong to tax me for crypto bro schemes.” Another investor called the proposal an “unforced error” that would “enrich the insiders and creators of these coins at the expense of the U.S. taxpayer.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

    More stories

    • 63 Shares60 Views

      in Elections

      Trump’s Tariffs Hit Stock Markets

      by

      Global leaders are retaliating and investors have sold off stocks in Asia and Europe.Nowhere to hide as a new wave of U.S. tariffs sinks global stock markets.Franck Robichon/EPA, via ShutterstockNot just tough talk President Trump wasn’t bluffing, after all.Global markets plunged on Tuesday after U.S. tariffs went into effect on roughly $1.5 trillion worth of imports from Canada, Mexico and China, with another, and even broader, wave set to kick in as soon as next week.China and Canada have already responded, with Beijing targeting the American heartland with sweeping levies on imported food and halting log and soybean shipments from select U.S. companies. Mexico is expected to retaliate, too.The escalation has global business leaders increasingly worried about what will come next, as economists warn that consumers and companies will soon see higher prices. Warren Buffett offered a reminder of what the global economy is facing. “Tariffs,” the billionaire investor said this week, “are an act of war, to some degree.”Here’s the latest:Stocks in much of Asia and Europe fell on Tuesday, after the S&P 500 yesterday suffered its worst one-day decline this year. U.S. stock futures were down slightly on Tuesday.Hit especially hard on Tuesday were the shares of European automakers, including Volkswagen, BMW, and Daimler Truck. Levies could slam the sector, which is highly dependent on a complex cross-border supply chain.The CBOE volatility index, Wall Street’s so-called fear gauge popularly known as the VIX, jumped, posting its biggest one-day spike this year, according to Deutsche Bank.The sell-off also extended to cryptocurrencies (more on that below), and, in a new twist, the dollar.If global investors weren’t spooked before, they seem to be now. “The market finally took the Trump administration at its word, and the realization that the tariff talk wasn’t just a negotiating tactic is starting to sink in,” Chris Zaccarelli, an investment strategist for Northlight Asset Management, said in a research note yesterday evening.How long will the trade battle last? Analysts see reason for cautious optimism — at least on China. “We view Beijing’s responses as still strategic and restrained,” Xiangrong Yu, Citigroup’s chief China economist, said in a research note on Tuesday. He said a trade deal was still “plausible.”The Shanghai composite index closed slightly higher on Tuesday.Market watchers warn of deep repercussions should the trade war drag on. Trump seems to be digging in, telling reporters yesterday that there is “no room left for Mexico or for Canada.” A protracted fight could dent global growth and accelerate inflation, all of which could “hamstring the Fed,” Mark Haefele, the chief investment officer at UBS Global Wealth Management, told Bloomberg Television on Tuesday.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

    • 100 Shares93 Views

      in Elections

      PCE Report Showed Inflation Eased Slightly in January

      by

      But consumer spending unexpectedly slowed, complicating the central bank’s plans for interest rates.Getting inflation under control since the worst surge in decades has been a bumpy process in recent months. New data on Friday showed a little progress, but also an unexpected pullback in consumer spending, complicating the path forward for the Federal Reserve as it debates when to restart interest rate cuts.The central bank’s preferred inflation measure, released on Friday, climbed 2.5 percent in January from a year earlier, slightly lower than the previous reading of 2.6 percent but still well above the central bank’s 2 percent target. On a monthly basis, prices increased 0.3 percent, in line with December’s pace.The “core” personal consumption expenditures price index, which strips out volatile food and energy costs and is closely watched as a gauge for underlying inflation, rose another 0.3 percent in January. Compared to the same time last year, it is up 2.6 percent, data from the Commerce Department showed. In December, it rose at an annual pace of 2.8 percent.The inflation figures were in line with what economists had expected and underscored the Fed’s decision to proceed cautiously with interest rate cuts after making adjustments in the second half of last year. The interest rate set by the Fed stands at 4.25 percent to 4.5 percent.Spending fell 0.2 percent in January, led by a drop in spending on cars and other goods. Economists had expected a 0.2 percent increase overall, following a 0.8 percent increase in December. Once adjusted for inflation, spending dropped by 0.5 percentage points, which is the sharpest monthly drop in almost four years.Thomas Ryan, an economist at Capital Economics, attributed the decline in part to “unseasonably severe winter weather,” but warned that the Fed’s job will become “trickier if January’s sharp decline in consumption was a sign of consumer strength buckling.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

    • 113 Shares74 Views

      in Elections

      Citigroup Makes (and Then Fixes) an $81 Trillion Mistake

      by

      The bank temporarily credited a customer’s account with trillions of dollars, adding to scrutiny of risk management systems after a series of errors.We all make mistakes on the job. But rarely do they involve moving funds that dwarf the gross domestic product of every country in the world.Citigroup accidentally credited a client’s account with $81 trillion when it meant to send only $280, the latest mistake at a bank that is struggling to repair its reputation after a string of errors in recent years.The massive transfer, which occurred last April and far exceeds Citi’s stock market value of about $150 billion, was initially missed by two employees and was caught 90 minutes after it was posted, The Financial Times first reported. No funds left the bank, and Citi told the Federal Reserve and Office of the Comptroller of the Currency about the error, calling it a “near miss.”The mistake was the latest in a string of glitches at the bank. In 2022, a Citi employee caused a crash in Europe by accidentally adding a zero to a trade, igniting a sell-off that at one point erased 300 billion euros, or about $322 billion, from European stocks. Last year, British regulators fined Citi 62 million pounds, about $78 million, for the incident.In 2020, Citigroup accidentally wired $900 million to a group of lenders locked in a bitter fight with Revlon, the beauty company.That year, U.S. regulators also fined Citi $400 million, saying the bank had failed to address issues in its risk management procedures and internal controls.Citi’s problems with technology and internal systems contributed to the departure of Michael Corbat as chief executive of the bank in 2021. Jane Fraser, who succeeded Mr. Corbat, has said improving risk and controls is a priority, but regulators fined Citi $136 million last year for not making enough progress in fixing its data-management issues.Citi said in a statement that its systems prevented the transfer from actually being made. “Despite the fact that a payment of this size could not actually have been executed, our detective controls promptly identified the inputting error between two Citi ledger accounts and we reversed the entry,” the company said.Isabella Kwai More

    • 100 Shares121 Views

      in Elections

      Can the Federal Reserve Look Past Trump’s Tariffs?

      by

      Top officials are grappling with how to handle potential price increases caused by the administration’s policies.As President Trump’s efforts to restructure the global trade system with expansive tariffs begin to take shape, one question continues to dog officials at the Federal Reserve: How will these policies impact the central bank’s plans to lower interest rates?One influential Fed governor made clear on Monday that he did not expect Mr. Trump’s policies to derail the Fed’s efforts to get inflation under control, suggesting instead that fresh interest rate cuts are still in play this year.“My baseline view is that any imposition of tariffs will only modestly increase prices and in a nonpersistent manner,” Christopher J. Waller, the official, said in remarks at an event in Australia Monday evening. “So I favor looking through these effects when setting monetary policy to the best of our ability.”Economists are concerned that tariffs, which are essentially taxes on American consumers, will increase prices in the United States, at least temporarily, and over time slow economic growth.Mr. Waller acknowledged that the economic impact of the tariffs could be larger than anticipated depending on how they are structured and later put in place. But he suggested that any uptick in prices from tariffs could be blunted by other policies, which could have “positive supply effects and put downward pressure on inflation.”Mr. Waller’s views matter given that he is one of the seven officials who make up the Board of Governors and votes at every policy meeting.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

    • 88 Shares156 Views

      in Elections

      Which Interest Rate Should You Care About?

      by

      The Fed’s short-term rates matter, but the main action now is in the 10-year Treasury market, which influences mortgages, credit cards and much more, our columnist says.Watch out for interest rates.Not the short-term rates controlled by the Federal Reserve. Barring an unforeseen financial crisis, they’re not going anywhere, especially not after the jump in inflation reported by the government on Wednesday.Instead, pay attention to the 10-year Treasury yield, which has been bouncing around since the election from about 4.8 to 4.2 percent. That’s not an unreasonable level over the last century or so.But it’s much higher than the 2.9 percent average of the last 20 years, according to FactSet data. At its upper range, that 10-year yield may be high enough to dampen the enthusiasm of many entrepreneurs and stock investors and to restrain the stock market and the economy.That’s a problem for the Trump administration. So the new Treasury secretary, Scott Bessent, has stated outright what is becoming an increasingly evident reality. “The president wants lower rates,” Mr. Bessent said in an interview with Fox Business. “He and I are focused on the 10-year Treasury.”Treasuries are the safe and steady core of many investment portfolios. They influence mortgages, credit cards, corporate debt and the exchange rate for the dollar. They are also the standard by which commercial, municipal and sovereign bonds around the world are priced.What’s moving those Treasury rates now is bond traders’ assessments of the economy — including the Trump administration’s on-again, off-again policies on tariffs, as well as its actions on immigration, taxes, spending and much more.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

    • 63 Shares128 Views

      in Elections

      Donald Trump’s Chicken-and-Egg Inflation Problem

      by

      A surge in egg prices underscores how persistent inflation is spooking the markets and could check the president’s boldest economic policies.Egg prices are on an epic run, part of an inflation surge that could but the brakes on President Trump’s economic plans.Frederic J. Brown/Agence France-Presse — Getty ImagesJust in: Lawyers for Elon Musk said he’d withdraw his $97.4 billion bid for control of OpenAI if the company halted its efforts to become a for-profit enterprise. More below.Separately: You might recall that several years ago I wrote a series of columns, following a raft of mass shootings, that inspired the creation of a “merchant category code” for gun retailers so credit card companies could better identify suspicious activity the way they already did to help prevent money laundering and sex trafficking.Well, this week Representative Riley Moore, Republican of West Virginia, introduced a bill to make it illegal for credit card companies to require “merchant category codes that distinguish a firearms retailer from general-merchandise retailer.” That means gun retailers would be able to mask what they sell. What do you think of what’s happening?Scrambling Trump’s economic plans President Trump inherited a strong economy with booming labor and stock markets. But one economic holdover could tie his hands: stubbornly strong inflation.Investors are already getting antsy, with stock markets briefly plunging and the bond market suffering its worst day of the year so far after unexpectedly worrying revelations in the latest Consumer Price Index report. It raises questions about what options the White House and Fed would have to maneuver if prices continued to rise.The latest: The C.P.I. data showed headline prices over the past three months running at an annualized pace of 4.5 percent — well above the central bank’s 2 percent target.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

    • 100 Shares118 Views

      in Elections

      Stocks Drop After Hotter Than Expected Inflation Reading

      by

      Investors are now betting that the Federal Reserve will cut interest rates just once more this year, a drastic shift in expectations since late 2024.Stocks on Wall Street slumped at the start of trading on Wednesday, dragged lower by data that showed consumer prices rose more than expected in January, leaving the Federal Reserve little cause to lower interest rates again soon.The S&P 500 fell roughly 1 percent as trading got underway. The Nasdaq Composite index, which is chock-full of tech stocks that have come under pressure recently from rising global competition to develop the chips that will power the development of artificial intelligence, also fell around 1 percent.Fresh inflation data from the Bureau of Labor Statistics on Wednesday showed that prices rose 3 percent for the year through January, up from 2.9 percent in December. The “core” Consumer Price Index, which excludes volatile food and energy prices, rose 3.3 percent year-over-year.Signs of continuing price pressure is likely to encourage the Fed to refrain from further interest rate cuts in the coming months. For stock investors, higher interest rates means slower business activity, which can weigh on companies’ earnings and stock prices.The uptick in inflation in January “does not derail the longer-term downward trend in inflation,” said Kyle Chapman, a foreign exchange market analyst at Ballinger Group. But, he said, “it does reaffirm the consensus that cuts are going to come much more slowly than we had thought towards the end of last year.”Investors are now betting that the Federal Reserve will keep interest rates at their current level until December. It’s a drastic shift in expectations since last year, when traders were expecting as many as four cuts for 2025, and even just a few weeks ago investors expected the next cut in rates as soon as June.The two year Treasury yield, which is sensitive to changes in investors’ interest rate expectations, rose sharply after the inflation report, up 0.1 percentage points to 4.36 percent, close to its highest level of the year.Wednesday’s drop comes after a bumpy three weeks for traders, with whipsaw swings in stock prices reflecting investors’ struggle to parse the flurry of executive actions taken by President Trump since he returned to the White House for a second term.The S&P 500 has risen roughly 3 percent since the start of the year and has nudged up 1.2 percent since inauguration day, despite the volatility.Impending tariffs are adding to concern about an acceleration in inflation. On Monday, Mr. Trump announced tariffs on foreign steel and aluminum. He has already imposed a 10 percent tariff on Chinese goods, and broad 25 percent tariffs on Canada and Mexico are set to take effect in March, after being delayed for a month.“Rising prices already appear to be a headwind, and the prospect of new trade barriers have the potential to further fuel inflationary pressures by increasing costs for businesses and consumers,” said Jason Pride, chief of investment strategy and research at Glenmede, a wealth management firm. More

    • 113 Shares159 Views

      in Elections

      PCE, a Key Inflation Measure, Sped Up in October

      by

      Inflation has been stubborn in recent months. Now, President-elect Donald J. Trump’s tariffs loom as a potential risk.The Federal Reserve’s preferred inflation measure sped up in October, a development that is likely to keep central bankers wary as they contemplate the path ahead for interest rates.The Personal Consumption Expenditures index climbed 2.3 percent from a year earlier, quicker than 2.1 percent in September.After stripping out volatile food and fuel costs to get a better sense of the underlying trend in prices, a “core” index climbed 2.8 percent from a year earlier. That was up from 2.7 percent previously.Looking at how much prices climbed over just the past month, the overall index rose 0.2 percent from September, and the core index increased 0.3 percent. Both changes were in line with their previous readings and with economist expectations. Policymakers sometimes look at monthly price changes to get an up-to-date sense of how inflation is evolving.The upshot from the report is that inflation is proving sticky after months of steady progress. Price increases remain much cooler than they were at their peak in 2022, which topped out at about 7 percent for the overall index. But they remain slightly faster than the 2 percent pace that the Fed targets.That is preventing officials from declaring victory over inflation, although policymakers still expect price increases to continue to cool toward their goal.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More