Federal Reserve set to cut interest rates – but still Trump won’t be happy
Stocks soared on Friday following the strongest signal yet that US the Federal Reserve is gearing up to start cutting interest rates again this fall.But how long can this celebration last?While Wall Street cheered the biggest headline from the speech by the Fed chair, Jerome Powell, at the annual Jackson Hole symposium in Wyoming, Powell also delivered a reality check on where interest rates could settle in the longer term.“We cannot say for certain where rates will settle out over the longer run, but their neutral level may now be higher than during the 2010s,” said Powell.In other words: even if the Fed does start cutting interest rates again this year, they may not fall back to their pre-pandemic levels.It’s a signal, despite the short-term optimism on potential rate cuts, that the Fed’s long-term outlook is more unstable.
“Markets might be ahead of their skis on how aggressive the Fed is going to be in reducing interest rates, because the neutral rate might be higher than some believe,” Ryan Sweet, an economist at Oxford Economics, said.Higher rates means borrowing money for loans, such as mortgages, will be more expensive.The average 30-year fixed mortgage rate was just under 3% in 2021, when interest rates were near zero.Now the average mortgage rate is closer to 6.7%.
Paired with home prices at near-record highs, elevated mortgages mean many Americans will continue to struggle to purchase a home,Although Trump has been pushing the Fed for months to decrease rates to 1%, claiming that Powell is “hurting the housing industry very badly”, it seems unlikely that rates will return to such a level any time soon,The Fed is trying to achieve a Goldilocks balance,Rates that are too high risk unemployment, while rates that are too low could mean higher inflation,Policymakers are searching for a “neutral” level, where everything is just right.
Many economists believed the central bank was close to achieving this balance before Trump started his second term.In summer 2022, as inflation scaled its highest levels in a generation, the Fed started raising rates, at the risk of hurting the labor market, in an attempt to get inflation down to 2%.Rates rose to about 5.3% in less than two years, but the jobs market remained strong.Unemployment was still at historically low even as inflation came down.
Although some economists had feared rapidly increasing rates would throw the US economy into a recession, instead the Fed appeared to achieve what is known as a “soft landing”.But things were thrown into a tailspin when Trump returned to office, armed with campaign promises to enact a full-blown trade war against the US’s key trading partners.The president has long argued that tariffs would boost American manufacturing and set the stage for better trade deals.“Tariffs don’t cause inflation.They cause success,” Trump declared back in January, acknowledging that there might be “some temporary, short-term disruption”.
But so far, success has been limited,Economists doubt the policies will generate a manufacturing renaissance, and Trump’s trade war has inspired new commercial alliances that exclude the US,All the while, US consumers are starting to see higher prices due to Trump’s tariffs,At Jackson Hole on Friday, Powell said tariffs had started to push some prices up,In June and July, inflation was 2.
7% – up 0,4 percentage points since April, when Trump first announced the bulk of his tariffs,This is still only a modest increase in price growth, but the bulk of the White House’s highest tariffs only went into effect in early August,Fed policymakers are waiting to see whether Trump’s aggressive trade strategy will cause a one-time shift in price levels – or if the effects will continue,The once strong labor market has grown sluggish.
Though there are fewer job openings, there are also fewer people looking for jobs.Powell called it “a curious kind of balance” where “both the supply of and demand for workers” have slowed.He noted that the balance was unstable and could eventually tip over, prompting more layoffs and a rise in unemployment.This instability in the labor market has made Fed officials more open to a rate cut.Powell pointed to a slacking in consumer spending and weaker gross domestic product (GDP), which suggests an overall slowdown in economic activity.
Although it set the stage for a rate cut as soon as next month, Powell’s speech was far from optimistic.“In this environment, distinguishing cyclical developments from trends, or structural developments is difficult,” he said.“Monetary policy can work to stabilise cyclical fluctuations but can do little to alter structural changes.”From Powell, who is typically diplomatic and reserved in his public statements, this seemed to be a careful warning: when executive policies destabilise the economy, the Fed can only do so much to limit the damage.
Michael Sheen says prospects for actors from poorer backgrounds ‘quite scary’
Michael Sheen has warned the pathways that helped him break into acting have all but collapsed, as he said the “bank of mum and dad” would be unable to support aspiring actors from poorer communities.The Good Omens star, who grew up in the working class community of Port Talbot, said he had benefited from school support, youth theatres and grants that have since come under financial pressure or been abolished entirely.He said his journey was also aided by a supportive family and the knowledge that his home town had already produced acting royalty in Richard Burton and Sir Anthony Hopkins. However, he said the prospect for actors from underprivileged backgrounds now looked “quite scary”.“Having those school plays where the drama was happening in my school – then there was a youth theatre that was funded through the education department of the council, and then I got a grant to go to drama school,” said Sheen, who was speaking at an event opening the Edinburgh TV festival
Aubrey Plaza talks about her husband’s suicide: ‘A daily struggle, obviously’
The actor Aubrey Plaza has opened up about the suicide of her husband, director Jeff Baena, who died in January.The White Lotus and Parks and Recreation star was speaking to Amy Poehler for her podcast Good Hang when she was asked how she was doing during “a terrible, terrible, tragic year”.“Right in this very, very present moment, I feel happy to be with you,” Plaza said. “Overall, I’m here and I’m functioning. I feel really grateful to be moving through the world
Met chief rejects calls to scrap live facial recognition at Notting Hill carnival
The Metropolitan police commissioner has hit back at demands to drop the use of live facial recognition cameras at this weekend’s Notting Hill carnival over concerns of racial bias and an impending legal challenge.Mark Rowley wrote in a letter that the instant face-matching technology would be used at Europe’s biggest street carnival “in a non-discriminatory way” using an algorithm that “does not perform in a way which exhibits bias”.He was responding to a letter from 11 anti-racist and civil liberty organisations, disclosed in the Guardian, that urged the Met to scrap the use of the technology at an event that celebrates the African-Caribbean community.The Runnymede Trust, Liberty, Big Brother Watch, Race on the Agenda, and Human Rights Watch were among those who claimed in the letter to Rowley on Saturday that the technology “will only exacerbate concerns about abuses of state power and racial discrimination within your force”.Campaigners claim the police have been allowed to “self-regulate” their use of the technology because of the lack of a legal framework and deploy the technology’s algorithm at lower settings that are biased against ethnic minorities and women
Broadcast News: a romcom set in a TV studio that manages to make integrity sexy
“I am concerned about the garbage that is masquerading as television these days,” the legendary US news anchor Walter Cronkite declared in 1989. “Most of it is real scandal tabloid journalism … absolutely, totally useless stuff.”Two years earlier Broadcast News was writing this on the wall. The decline of journalistic standards isn’t a conventional backdrop for a romcom (His Girl Friday being another key exception) but it was a matter close to the heart of James L Brooks, who had come up through CBS as a news writer before his prolific TV career (via The Mary Tyler Moore Show and, later, The Simpsons). In the wake of the thunderous success of his film Terms of Endearment, Brooks returned to CBS for a period of rigorous research and latched on to the decorated news producer Susan Zirinsky – the main inspiration for his next film’s indomitable heroine
Police officers warned against dancing with revellers at Notting Hill carnival
For George Michael, it was guilty feet that left him unable to dance. For Eddy Grant, a world full of problems left him rooted to the spot as the music played.But for police officers amid the sound systems at this weekend’s Notting Hill carnival, it is orders from on high that dictate that no matter how the beat moves them, they are banned from dancing with revellers.Down the decades the scenes of officers strutting their stuff was seen as a cheesy but welcome attempt at repairing strained community relations.But in a statement on Monday, the Metropolitan police made it clear they feel a twerk or rhythmic shake of the hips may distract or slow down the 7,000 officers deployed to the carnival from responding to outbreaks of crime
‘It’s like having a button that makes the audience go nuts’: Deep Purple on Smoke on the Water
‘We went to see Frank Zappa at Montreux casino. But someone fired a flare gun into the ceiling and – whoosh! The whole building went up in flames’We wanted a more exciting sound than we had been getting in conventional recording studios, so hired the Rolling Stones’ mobile studio for three weeks to record in the Montreux casino. It was 1971 and the night before we were due to begin, we went to see Frank Zappa and the Mothers of Invention play in the casino as part of the Montreux jazz festival, but – as the song puts it – “some stupid with a flare gun” fired into the ceiling.Sparks came down and everyone had to get out. I became separated from the band so went back inside to find them
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