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Stephen Miran made his presence felt at his first Fed rate-setting meeting. President Trump’s new appointee to the U.S. central bank cast the only dissenting vote over a quarter-percentage-point rate cut, seeking instead a half-point reduction.
The near-unanimous decision comes amid unprecedented political drama and a lot of economic uncertainty. The next time, it might not be so easy for Chair Jerome Powell to achieve consensus.
New projections show Fed policymakers are still split on the outlook for rates, and while Powell is focusing on a weakening labor market, inflation remains above target and the U.S. economy is growing at more than 3%.
Reuters columnist Mike Dolan points out that the Fed may end up stimulating an economy that doesn’t need more juice. The trouble in the jobs market may be more about supply than demand, and the same could be said for the housing market. High mortgage rates and rents, which weigh on consumer spending, could be a legacy of homeowners loath to sell while they sit on extraordinary low mortgage rates locked in during the COVID-19 pandemic.
With so many difficult trade-offs to consider, the Fed stopped short of endorsing market expectations for a clear string of rate cuts, emphasizing a meeting-by-meeting, data-dependent approach instead.
But the Fed’s resumption of easing does put it on a different path to many of its peers, and that can make life tricky for investors.
Rates futures markets are currently pricing in around 150 basis points of Fed rate cuts by the end of next year, far more than is expected in the rest of the developed world.
The Bank of England and China’s central bank both left rates unchanged on Thursday but as columnist Jamie McGeever points out, if the Fed keeps cutting, domestic currency strength could complicate things for many other central banks around the world.
It’s not just the Fed that is engulfed in political drama. America’s corporate boardrooms are reeling from recent interventionist moves by President Trump. We look at what it all means for American capitalism in this week’s Reuters Econ World podcast. Listen here.
Teachers, train drivers, pharmacists and hospital staff are going on strike in France today, part of a day of protests against looming budget cuts.
One of the things that unions are calling for is a tax on the rich. If it is included in Prime Minister Sébastien Lecornu’s budget, the so-called "Zucman tax" would likely reshape France's approach to wealth inequality and reignite fears about capital flight.
The tax's brainchild, economist Gabriel Zucman, hopes it will spark similar debates across Europe.
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