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Tag: Jerome Powell

  • The Fed may have reassured Powell that it’s safe to leave the board early when a new chair takes over. ‘I think he’s done with this job’ | Fortune

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    After enduring a string of attacks on the Federal Reserve, Jerome Powell may now feel confident that the central bank is in good enough hands to step away completely when a new chair takes over.

    Earlier this month, the Fed reappointed its regional bank presidents a bit earlier than usual, surprising Wall Street and easing concerns about its independence in the face of President Donald Trump’s continued demands for steeper rate cuts.

    It came after recent suggestions from the Trump administration that new conditions ought to be placed on the Fed presidents, raising fears it was eyeing a purge. That fit a pattern of extreme pressure on policymakers. Trump has relentlessly insulted Powell for not easing more, considered firing him, threatened to sue over cost overruns on the Fed’s headquarters renovation, and is still attempting to oust Governor Lisa Cook.

    Given Powell’s commitment to Fed independence, there were doubts that he would leave the board of governors when his replacement as chair comes in, bucking tradition, in order to retain a vote on the rate-setting Federal Open Market Committee and help ensure policy stays apolitical. His term as chair expires on May 15, 2026, but his term as a governor extends to January 2028. 

    But with the regional presidents re-upped, that adds some stability to the FOMC, which is comprised of governors and presidents, potentially letting him ride off into the sunset.

    “I don’t think Powell wants to stay. I think he’s done with this job, and I don’t blame him,” Christopher Hodge, chief U.S. economist at Natixis CIB Americas, told Fortune. 

    He put a high probability on Powell leaving the board, but a few uncertainties remain. One is Trump’s pick to be the new Fed chair. The current names under consideration—Kevin Hassett, Kevin Warsh, and Chis Waller—would be palatable, but an unserious candidate from left field would give Powell pause, according to Hodge, who previously served as principal economist at the New York Fed.

    Another unknown is how the Supreme Court will rule in Trump’s effort to fire Cook over mortgage fraud claims, which she had denied. If the justices determine the White House can easily dismiss governors, then Powell might stay on.

    “But ultimately, I think this reappointment of these regional Fed presidents is a barrier that he wanted to get over, and I think that certainly helped clear the way for him stepping down after the meeting in May,” Hodge said.

    He added, “as long as Powell is fairly certain that the guardrails are staying in place, and that the Fed is in a long-run position to stay credible, then I think he’s going to step down” from the board of governors. 

    Robert Kaplan, vice chairman at Goldman Sachs and former president of the Dallas Fed, said the reappointment of the Fed presidents was big news that didn’t get much attention.

    He told CNBC last week there was some concern that a reshuffling on the board of governors would lead to changes in the Fed presidents, who must be approved by the governors.

    “I think it’s possible that that won’t happen. And that means the next Fed chair will have to get seven votes through persuasion and debate and getting a consensus. You won’t come in with seven votes wired,” Kaplan added, referring to the votes need for a majority on the 12-member FOMC.

    He also urged Powell to not remain on the board when his term as chairman expires. If Powell hangs on, he might be seen as a thorn in the side of the new chair, Kaplan explained.

    “In the same way a CEO would leave and leave it to their successor, I think that’s the gracious thing to do,” he said. “I think Jay is a gracious person, and I think it’s the right thing for him to do.”

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    Jason Ma

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  • Federal Reserve cuts key rate, sees healthier economy next year

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    WASHINGTON (AP) — The Federal Reserve reduced its key interest rate by a quarter-point for the third time in a row Wednesday but signaled that it may leave rates unchanged in the coming months.

    The cut decreased the Fed’s rate to about 3.6%, the lowest it has been in nearly three years. Lower rates from the Fed can bring down borrowing costs for mortgages, auto loans, and credit cards over time, though market forces can also affect those rates.

    Chair Jerome Powell suggested at a news conference that after six rate cuts in the past two years, the central bank can step back and see how hiring and inflation develop. In a set of quarterly economic projections, Fed officials signaled they expect to lower rates just once next year.

    Fed officials “will carefully evaluate the incoming data,” Powell said, adding that the Fed is “well positioned to wait to see how the economy evolves.”

    The chair also said that the Fed’s key rate was close to a level that neither restricts nor stimulates the economy, a significant shift from earlier this year, when he described the rate as high enough to slow the economy and quell inflation. With rates closer to a more neutral level, the bar for further rate cuts is likely higher that it was this fall.

    “We believe the labor market will have to noticeably weaken to warrant another rate cut soon,” Ryan Sweet, global chief economist at Oxford Economics, said.

    Three Fed officials dissented from the move, the most dissents in six years and a sign of deep divisions on a committee that traditionally works by consensus. Two officials voted to keep the Fed’s rate unchanged: Jeffrey Schmid, president of the Kansas City Fed, and Austan Goolsbee, president of the Chicago Fed. Stephen Miran, whom Trump appointed in September, voted for a half point cut.

    December’s meeting could usher in a more contentious period for the Fed. Officials are split between those who support reducing rates to bolster hiring and those who’d prefer to keep rates unchanged because inflation remains above the central bank’s 2% target. Unless inflation shows clear signs of coming fully under control, or unemployment worsens, those divisions will likely remain.

    “What you see is some people feel we should stop here and we’re in the right place and should wait, and some people think we should cut more next year,” Powell said.

    A stark sign of the Fed’s divisions was the wide range of cuts that the 19 members of the Fed’s rate-setting committee penciled in for 2026. Seven projected no cuts next year, while eight forecast that the central bank would implement two or more reductions. Four supported just one. Only 12 out of 19 members vote on rate decisions.

    President Donald Trump on Wednesday criticized the cut as too small, and said he would have preferred “at least double.” Trump could name a new Fed chair as soon as later this month to replace Powell when his term ends in May. Trump’s new chair is likely to push for sharper rate cuts than many officials will support.

    Stocks jumped in response to the Fed’s move, in part because some Wall Street investors expected Powell to be more forceful in shutting down the possibility of future cuts. The broad S&P 500 stock index rose 0.7% and closed near an all-time high reached in October.

    Powell was also optimistic about the economy’s growth next year, and said that consumer spending remains resilient while companies are still investing in artificial intelligence infrastructure. He also suggested growing worker efficiency could contribute to faster growth without more inflation.

    Still, Powell said the committee reduced borrowing costs out of concern that the job market is even weaker than it appears. While government data shows that the economy has added just 40,000 jobs a month since April, Powell said that figure could be revised lower by as much as 60,000, which would mean employers have actually been shedding an average of 20,000 jobs a month since the spring.

    “It’s a labor market that seems to have significant downside risks,” Powell told reporters. “People care about that. That’s their jobs.”

    The Fed met against the backdrop of elevated inflation that has frustrated many Americans, with prices higher for groceries, rents, and utilities. Consumer prices have jumped 25% in the five years since COVID.

    “We hear loud and clear how people are experiencing really high costs,” Powell said Wednesday. “A lot of that isn’t the current rate of inflation, a lot of that is e mbedded high costs due to higher inflations in 2022-2023.”

    Powell said inflation could move higher early next year, as more companies pass tariff costs to consumers as they reset prices to start the year. Inflation should decline after that, he added, but it’s not guaranteed.

    “We just came off an experience where inflation turned out to be much more persistent than anyone expected,” he said, referring to the spike in 2022. “Is that going to happen now? That’s the risk.”

    The Fed’s policy meeting took place as the Trump administration moves toward picking a new Fed chair to replace Powell when his term finishes in May. Trump’s nominee is likely to push for sharper rate cuts than many officials may support.

    Trump has hinted that he will likely pick Kevin Hassett, his top economic adviser. But on Wednesday, Trump said he would meet with Kevin Warsh, a former Fed governor who has also been on the short list to replace Powell.

    Trump added that he wants someone who will lower interest rates. “Our rates should be the lowest rates in the world,” he said.

    A government report last week showed that overall and core prices rose 2.8% in September from a year earlier, according to the Fed’s preferred measure. That is far below the spikes in inflation three years ago but still painful for many households after the big run-up since 2020.

    Adding to the Fed’s challenges, job gains have slowed sharply this year and the unemployment rate has risen for three straight months to 4.4%. While that is still a low rate historically, it is the highest in four years. Layoffs are also muted, so far, as part of what many economists call a “low hire, low fire” job market.

    The Fed typically keeps its key rate elevated to combat inflation, while it often reduces borrowing costs when unemployment worsens to spur more spending and hiring.

    Powell will preside over only three more Fed meetings before he steps down. On Wednesday, he was asked about his legacy.

    “I really want to turn this job over to whoever replaces me with the economy in really good shape,” he said. “I want inflation to be under control, coming back down to 2%, and I want the labor market to be strong.”

    ___

    Associated Press Writers Collin Binkley and Alex Veiga in Los Angeles contributed to this report.

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  • Video: Trump Attacks Fed Governors Ahead of Key Interest Rate Meeting

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    new video loaded: Trump Attacks Fed Governors Ahead of Key Interest Rate Meeting

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    Trump Attacks Fed Governors Ahead of Key Interest Rate Meeting

    During a speech in Pennsylvania focused on the economy, President Trump criticized the Fed chair, Jerome Powell, and four other members. The attack came as the Fed prepares to reveal new interest rates.

    “We have a bad head of the Fed. You know who ‘too late’ is? ‘Too late’ Powell? Jerome ‘too late’ — he’s too late with his interest rates for a reason. He’s a bad guy. He’s not a smart guy, but he’s a bad guy. Well, this is a nice crowd.” “I think the risk of of higher, more persistent inflation has declined.” “I just heard it could be that all four commissioners in the Fed signed by Biden — I hear that the autopen… … They put people there that are not authorized to be there.”

    During a speech in Pennsylvania focused on the economy, President Trump criticized the Fed chair, Jerome Powell, and four other members. The attack came as the Fed prepares to reveal new interest rates.

    By Shawn Paik

    December 10, 2025

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    Shawn Paik

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  • Stocks climb on hopes for lower interest rates as Dow rallies 660 points

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    NEW YORK (AP) — The U.S. stock market climbed again Tuesday on hopes for a coming cut to interest rates.

    The S&P 500 rose 0.9% after breaking out of a morning lull and is back within 1.8% of its all-time high. The Dow Jones Industrial Average rallied 664 points, or 1.4%, and the Nasdaq composite gained 0.7%.

    Stocks got a boost from easing yields in the bond market. Lower interest rates can cover up many sins in financial markets, including prices going too high, and hopes are strong that the Federal Reserve will cut its main interest rate at its next meeting to juice the economy further.

    A raft of mixed economic data on Tuesday left traders betting on a nearly 83% probability that the Fed will cut in December, according to data from CME Group. That’s roughly the same as a day before and up sharply from the coin flip’s chance that they saw just a week ago.

    One of Tuesday’s reports said that shoppers bought less at U.S. retailers in September than economists expected. Another said confidence among U.S. consumers worsened by more in November than expected, a second signal that the economy could potentially use the help of lower interest rates.

    Easier rates can boost the economy by encouraging households and companies to borrow more and investors to pay higher prices for investments than they would otherwise.

    A third report, meanwhile, said inflation at the wholesale level was a touch worse in September than economists expected, but a closely tracked underlying trend was slightly better. That’s important because lower interest rates can make inflation worse, and high inflation is the main deterrent that could keep the Fed from cutting rates.

    After taking all the data together, economists suggested the Fed and its chair, Jerome Powell, could be leaning toward cutting rates on Dec. 10. The Fed has already cut rates twice this year in hopes of shoring up the slowing job market.

    “Taking a pause on rate cuts would probably do more damage to sentiment than a cut would help,” according to Brian Jacobsen, chief economist at Annex Wealth Management, who also said “Powell doesn’t need to be the Grinch that stole Christmas.”

    Easier interest rates can give particularly big boosts to smaller companies, because many of them need to borrow to grow. The Russell 2000 index of the smallest U.S. stocks jumped 2.1% to lead the market.

    Elsewhere on Wall Street, several retailers leaped after delivering stronger profits for the summer than analysts expected.

    Abercrombie & Fitch soared 37.5% after the apparel seller reported a better profit than expected. It also raised the bottom end of its forecasted range for revenue and profit over the full year.

    Kohl’s surged 42.5% after reporting a profit for the latest quarter, when analysts were expecting a loss. Best Buy rose 5.3% after boosting its profit forecast for the full year following a better-than-expected third quarter, citing strength across computing, gaming and mobile phones.

    Dick’s Sporting Goods erased an early drop of 4% to add 0.2%. It raised its forecast for results at its Dick’s stores, though its purchase of Foot Locker is requiring some work. Executive Chairman Ed Stack said the company is “cleaning out the garage” at Foot Locker by clearing inventory, closing poorly performing stores and making other moves.

    Swings also continued in the artificial-intelligence industry, which has battled concerns that too many dollars are pouring into data centers and may not produce the revolution of bigger profits and productivity that proponents are predicting.

    Alphabet rose another 1.5%, continuing a strong run on excitement about its recently released Gemini AI model. Chinese giant Alibaba, meanwhile, saw its stock that trades in the United States fall 2.3% after losing an early gain. It reported stronger revenue than analysts expected for the latest quarter thanks in part to the AI boom, but its overall profit fell short of forecasts.

    Some chip companies dropped sharply following a report from The Information that Meta Platforms is in talks to spend billions of dollars on AI chips from Alphabet instead of them. Nvidia sank 2.6% and Advanced Micro Devices dropped 4.1%.

    All told, the S&P 500 rose 60.76 points to 6,765.88. The Dow Jones Industrial Average rallied 664.18 to 47,112.45, and the Nasdaq composite gained 153.59 to 23,025.59.

    In the bond market, the yield on the 10-year Treasury eased to 4.00% from 4.04% late Monday.

    In stock markets abroad, indexes rose across Europe and Asia. Germany’s DAX returned 1%, and stocks in Shanghai climbed 0.9% for two of the world’s bigger moves.

    ___

    AP Business Writer Elaine Kurtenbach contributed.

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  • Wall Street is on tenterhooks about the Fed’s ‘rare, genuinely suspenseful’ December meeting, because the committee itself doesn’t know what to make of the data—or of each other | Fortune

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    If the market doesn’t seem sure whether or not to expect a base interest rate cut next month, it’s not alone—members of the Federal Open Market Committee (FOMC) themselves may have little clue which way the vote is going to go.

    In the run-up to this week, the mood was one of disappointment that the FOMC wouldn’t deliver a final cut for 2025, an action many analysts had priced in since this summer. A week ago, investors hedged their bets at a 50/50 likelihood of a base rate cut to 3.75 to 4%, from its current position at 4 to 4.25%.

    But the tides changed quickly, based on both data and comments from members of the FOMC, and at the time of writing, CME’s FedWatch barometer places an 81% probability of a cut early next month.

    A key part of the shift came after comments from the New York Fed’s John Williams, who joined voices like Trump appointee Stephen Miran and Governor Chris Waller in advocating for a cut. This, analysts warned this morning, may need to be taken with a pinch of salt: Members will be asking whether their peers are truly dovish, or are ruffling feathers in order to catch the eye of President Trump and secure a nomination for Fed Chairman next year.

    Data isn’t making the path much clearer. The first payroll report after the end of the government shutdown painted a pallid picture of the jobs market. Powell called it a “low hire, low fire” environment. The unemployment rate remained relatively stable at 4.4%, and the jobs market added a relatively small 119,000 roles in September.

    Offsetting the tepid employment outlook, which forms one part of the Fed’s mandate, is the inflation question. Members of the FOMC are mindful that inflation remains comfortably ahead of its 2% target, a trend that is likely to come into even greater focus during a period of high consumer spending.

    This combination means holiday spending data holds more levity than usual; in fact, it is “crucial,” wrote Professor Jeremy Siegel, Emeritus Professor of finance at The Wharton School of the University of Pennsylvania.

    Writing for WisdomTree yesterday, where he is senior economist, Professor Siegel added: “Real-time credit-card reads and retail commentary will reveal far more about underlying consumer momentum than backward-looking payroll reports that remain distorted by the shutdown. Strong spending will tilt the Fed toward a December pause; soft spending makes the December meeting genuinely live.”

    As such, “this is the most uncertain FOMC meeting in years because the committee itself doesn’t yet know the answer,” added Professor Siegel, “Powell prefers to signal decisions well in advance, but the data simply is not speaking loudly enough.”

    Williams signalling an openness to a cut is “groundwork” from the dovish camp, the professor added, while hawks are insisting the data is not strong enough either way to prompt action: “It sets up a rare, genuinely suspenseful meeting—one where investors should expect volatility around both the statement and the new dot plot.”

    A question of motivation

    Goldman Sachs’s chief economist Jan Hatzius shares the opinion of President Williams, arguing that the payroll data for September is weak enough to motivate a cut. In a note released Sunday, Hatzius wrote: “His view is likely consistent with that of Chair Powell—who almost certainly wrote down three cuts in the September dot plot—and a majority of the 12 voting FOMC members, though not necessarily a majority of all 19 FOMC participants.

    “With the next jobs report now scheduled for December 16 and CPI for December 18, there is little on the calendar to derail a cut on December 10.”

    However, with Chair Powell due to step down next year—much to the joy of President Trump, who has repeatedly criticised him for refusing to cut the base rate—it may be hard to separate the through doves from those auditioning for the role.

    As UBS chief economist Paul Donovan said this morning: “U.S. Federal Reserve Governor Waller, who President Trump is considering as a candidate for Fed Chair, supported Trump’s calls for more rate cuts yesterday. Waller advocated a December rate cut, which got markets somewhat excited, although Waller justified this with suggestions that the U.S. labor market might perhaps be in trouble.”

    Donovan countered that a higher inflation rate is being accommodated by U.S. households saving less, suggesting a level of confidence in the jobs market. “If Waller is right,” Donovan added, “the U.S. economy is at quite significant risk, and this should be a major concern for financial markets.

    “If, however, this call is merely a subtly-disguised cry of ‘Pick me! Pick me!’ aimed at Trump, then markets will focus on the benefits of monetary accommodation and not the mooted risks it is purportedly offsetting.”

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    Eleanor Pringle

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  • After Shutting His Hedge Fund, Michael Burry Launches a Substack to Speak ‘Freely’ on the A.I. Bubble

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    Michael Burry attends “The Big Short” New York screening at the Ziegfeld Theater on Nov. 23, 2015 in New York City. Astrid Stawiarz/Getty Images

    Michael Burry, the famed “Big Short” investor who predicted the 2008 housing crash, is once again warning of an emerging market bubble. Nearly two decades later, the hedge fund manager is now sounding alarms about the sky-high valuations of A.I. companies and is voicing them on a modern forum: Substack.

    Yesterday (Nov. 23), Burry launched a newsletter on the platform that will focus on his bearish views on the technology, among other topics. “The current market environment is contentious and running hot. Lots to talk about,” he wrote in the description accompanying his new Substack, which has already amassed more than 35,000 subscribers. Access costs $379 annually or $39 per month.

    One of his first posts draws parallels between the lead-up to the dot-com crash of the early 2000s and today’s A.I. boom. Burry compared Nvidia—which recently became the first company to reach $5 trillion in market cap—to Cisco, the tech company whose stock soared and then collapsed during the dot-com era.

    In an X post announcing his Substack, Burry expanded on the idea that the A.I. market may be echoing past bubbles. He cited former Federal Reserve chair Alan Greenspan, who assured investors in 2005 that a housing bubble “does not appear likely.” Burry then pointed out that Jerome Powell, the Fed’s current chair, has described A.I. companies as “profitable” and “different” from previous speculative manias.

    Michael Burry’s mixed track record

    Burry rose to prominence after spotting the warning signs of the subprime mortgage crisis—a bet that made him $100 million personally and earned more than $700 million for his clients. His prescient move was immortalized in Michael Lewis’ The Big Short and the subsequent film starring Christian Bale. After the global financial crisis, Warren Buffett told Congress that Burry was acting as a “Cassandra,” referring to the Trojan princess cursed to deliver true prophecies no one believed. His new newsletter pays homage to this feat through its name, “Cassandra Unchained.”

    In recent years, Burry has made several market calls that didn’t pan out, but his latest warnings about A.I. have sparked fresh attention online. The buzz began in October, when he returned to X after a two-year hiatus to post: “Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play.”

    Soon after, his hedge fund, Scion Asset Management, disclosed in regulatory filings that it had a short bet worth more than $1 billion against Nvidia and Palantir, another hot A.I. stock. Burry closed his hedge fund a few days later and returned capital to investors.

    In his Substack description, Burry said Scion’s closure was partially motivated by a desire to share investment ideas more freely. “Running money professionally came with regulatory and compliance restrictions that effectively muzzled my ability to communicate,” he wrote. “These constraints meant I could only share cryptic fragments publicly, if at all.”

    Burry told readers to expect one to two posts a week, along with occasional Q&As, videos and guest contributions. Rather than placing bets, he’ll be breaking down markets.

    “I am not retired,” said Burry. “There is still nothing I enjoy more than analyzing companies and markets each and every day.”

    After Shutting His Hedge Fund, Michael Burry Launches a Substack to Speak ‘Freely’ on the A.I. Bubble

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    Alexandra Tremayne-Pengelly

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  • Fed won’t get key inflation data before next rate decision as BLS cancels October CPI release

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    The U.S. Bureau of Labor Statistics is the principal Federal agency responsible for measuring labor market activity, working conditions, and price changes in the economy.

    Bill Clark | Getty Images

    The Bureau of Labor Statistics said it was canceling the release of the October consumer price index, leaving the Federal Reserve without a key piece of inflation data to ponder when it next decides on interest rates on Dec. 10.

    The CPI data, previously scheduled to be released on Nov. 7, was canceled because the government shutdown made it impossible for the BLS to “retroactively collect” certain parts of survey data, the agency said on its website.

    November’s CPI data, previously scheduled to be released on Dec. 10, will now be released on Dec. 18 after the Fed decision, the BLS said.

    Bureau data collectors compile the index through several methods, including personal visits and phone calls that were not possible during the shutdown. The BLS also uses online data and household surveys that also would make it difficult to retroactively collect information.

    In addition to the Fed announcement, the Commerce Department’s Bureau of Economic Analysis said another key inflation measure, the personal consumption expenditures price index, “is to be rescheduled” though no firm date has been announced. The Fed uses the PCE price index as its main inflation forecasting tool. The gauge had been set for release Nov. 26.

    Fed officials have voiced concerns about being in a data fog as they try to formulate monetary policy. The central bank’s Federal Open Market Committee approved a quarter percentage point rate cut in late October, but minutes from the meeting reflected worries over getting an incomplete picture.

    “This is a temporary state of affairs. And we’re going to do our jobs, we’re going to collect every scrap of data we can find, evaluate it, and think carefully about it,” Fed Chair Jerome Powell said after the October meeting. “What do you do if you’re driving in the fog? You slow down. … There’s a possibility that it would make sense to be more cautious about moving.”

    However, New York Fed President John Williams said Friday he thinks the Fed probably has “room for a further adjustment in the near term,” implying the likelihood of a cut sometime soon.

    Other Fed officials, such as Governor Christopher Waller, have said policymakers still have enough information to make informed decisions, even with the data drought from the shutdown.

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  • Sharp disagreements over economy threaten Federal Reserve interest rate cut

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    WASHINGTON (AP) — What was once seen as a near-certain cut in interest rates next month now looks more like a coin flip as Federal Reserve officials sharply disagree over the economy’s health and whether stubborn inflation or weak hiring represent a bigger threat.

    In several speeches in the past week, some policymakers have registered greater concern over persistent inflation in an echo of the “affordability” concerns that played a large role in elections earlier this month.

    At the same time, another camp is much more concerned about meager hiring and the threat that the “low-hire, low-fire“ job market could worsen into one where layoffs become more widespread.

    The turmoil on the Fed’s 19-member interest-rate setting committee reflects a deeply uncertain economic outlook brought about by multiple factors, including tariffs, artificial intelligence, and changes in immigration and tax policies.

    “It’s reflective of a ton of uncertainty,” said Luke Tilley, chief economist at M&T Bank. “It’s not surprising at all that there’s a wide divergence of opinions.”

    Fewer rate cuts by the Fed could leave borrowing costs for homes and cars elevated. More expensive mortgages and auto loans contribute to the widespread view, according to polls, that the cost of living is too high.

    Some Fed watchers say that an unusually high number of dissents are possible at the December 9-10 meeting, regardless of whether the central bank reduces rates or not. Krishna Guha, an analyst at Evercore ISI, said a decision to cut could lead to as many as four or five dissents, while a decision to keep rates unchanged could produce three.

    Four dissenting votes would be highly unusual, given the Fed’s history of seeking consensus. The last time four officials dissented was in 1992, under then-Chair Alan Greenspan.

    Fed governor Christopher Waller on Monday noted that critics of the Fed often accuse it of “group think,” since many of its decisions are made unanimously.

    “People who are accusing us of this, get ready,” Waller said Monday in remarks in London. “You might see the least group think you’ve seen … in a long time.”

    The differences have been exacerbated by the government shutdown’s interruption of economic data, a particular challenge for a Fed that Chair Jerome Powell has often described as “data dependent.” The government’s last jobs report was for August, and inflation for September.

    September jobs data will finally be published Thursday, and are expected to show a small gain of 50,000 jobs that month and an unchanged unemployment rate at a still-low 4.3%.

    For now, Wall Street investors put the odds of a December rate cut at 50-50, according to CME Fedwatch, down sharply from nearly 94% a month ago. The decline has contributed to the stock market’s drops this week.

    After cutting their key rate in September for the first time this year, Fed policymakers signaled they expected to cut twice more, in October and December.

    But after implementing a second reduction Oct. 29, Powell poured cold water on the prospects of another cut, describing it as “not a foregone conclusion — far from it.”

    And speeches last week by a raft of regional Fed officials pushed the market odds of a December cut even lower. Susan Collins, president of the Federal Reserve Bank of Boston, said, “in all of my conversations with contacts across New England, I hear concerns about elevated prices.”

    Collins said that keeping the Fed’s key rate at its current level of about 3.9% would help bring inflation down. The economy “has been holding up quite well” even with interest rates where they are, she added.

    Several other regional presidents voiced similar concerns, including Raphael Bostic of the Atlanta Fed, Alberto Musalem of the St. Louis Fed, and Jeffrey Schmid at the Kansas City Fed. Musalem, Collins, and Schmid are among the 12 officials who vote on policy this year. Schmid dissented in October in favor of keeping rates unchanged.

    “When I talk to contacts in my district, I hear continued concern over the pace of price increases,” Schmid said Friday. “Some of this has to do with the effect of tariffs on input prices, but it is not just tariffs — or even primarily tariffs — that has people worried. I hear concerns about rising health care costs and insurance premiums, and I hear a lot about electricity.”

    On Monday, however, Waller argued that sluggish hiring is a bigger concern, and renewed his call for a rate cut next month.

    “The labor market is still weak and near stall speed,” he said. “Inflation through September continued to show relatively small effects from tariffs and support the hypothesis that tariffs … are not a persistent source of inflation.”

    Waller also dismissed the concern — voiced by Schmid and others — that the Fed should keep rates elevated because inflation has topped the Fed’s 2% target for five years. So far that hasn’t led the public to worry that inflation will stay elevated for an extended period, Waller noted.

    “You can’t just sort of say it’s been above target for five years, so I’m not going to cut,” he added. “You got to give us better answers than that.”

    There could be consensus for an interest rate cut if, say, new data for October and November show the economy shedding jobs, according to Esther George, the former president of the Kansas City Fed.

    It’s also worth noting that many economists had expected multiple dissents in September, but instead only Stephen Miran, a governor appointed that month by President Donald Trump, voted against the rate cut decision, in favor of an even bigger reduction.

    “Registering a dissent is a hard decision, and I think you’re going to find people that are speaking today that wouldn’t follow through with a vote in that direction,” she said. “I think you’re going to find enough consensus, whichever way they go.”

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  • Trump is ramping up a new effort to convince a skeptical public he can fix affordability worries

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    WASHINGTON (AP) — President Donald Trump is adjusting his messaging strategy to win over voters who are worried about the cost of living with plans to emphasize new tax breaks and show progress on fighting inflation.

    The messaging is centered around affordability, and the push comes after inflation emerged as a major vulnerability for Trump and Republicans in Tuesday’s elections, in which voters overwhelmingly said the economy was their biggest concern.

    Democrats took advantage of concerns about affordability to run up huge margins in the New Jersey and Virginia governor races, flipping what had been a strength for Trump in the 2024 presidential election into a vulnerability going into next year’s midterm elections.

    White House officials and others familiar with their thinking requested anonymity to speak for this article in order to not get ahead of the president’s actions. They stressed that affordability has always been a priority for Trump, but the president plans to talk about it more, as he did Thursday when he announced that Eli Lilly and Novo Nordisk would reduce the price of their anti-obesity drugs.

    “We are the ones that have done a great job on affordability, not the Democrats,” Trump said at an event in the Oval Office to announce the deal. “We just lost an election, they said, based on affordability. It’s a con job by the Democrats.”

    The White House is keeping up a steady drumbeat of posts on social media about prices and deals for Thanksgiving dinner staples at retailers such as Walmart, Lidl, Aldi and Target.

    “I don’t want to hear about the affordability, because right now, we’re much less,” Trump told reporters Thursday, arguing that things are much better for Americans with his party in charge.

    “The only problem is the Republicans don’t talk about it,” he said.

    The outlook for inflation is unclear

    As of now, the inflation outlook has worsened under Trump. Consumer prices in September increased at an annual rate of 3%, up from 2.3% in April, when the president first began to roll out substantial tariff hikes that suddenly burdened the economy with uncertainty. The AP Voter Poll showed the economy was the leading issue in Tuesday’s elections in New Jersey, Virginia, New York City and California.

    Grocery prices continue to climb, and recently, electricity bills have emerged as a new worry. At the same time, the pace of job gains has slowed, plunging 23% from the pace a year ago.

    The White House maintains a list of talking points about the economy, noting that the stock market has hit record highs multiple times and that the president is attracting foreign investment. Trump has emphasized that gasoline prices are coming down, and maintained that gasoline is averaging $2 a gallon, but AAA reported Thursday that the national average was $3.08, about two cents lower than a year ago.

    “Americans are paying less for essentials like gas and eggs, and today the Administration inked yet another drug pricing deal to deliver unprecedented health care savings for everyday Americans,” said White House spokesman Kush Desai.

    Trump gets briefed about the economy by Treasury Secretary Scott Bessent and other officials at least once a week and there are often daily discussions on tariffs, a senior White House official said, noting Trump is expected to do more domestic travel next year to make his case that he’s fixing affordability.

    But critics say it will be hard for Trump to turn around public perceptions on affordability.

    “He’s in real trouble and I think it’s bigger than just cost of living,” said Lindsay Owens, executive director of Groundwork Collaborative, a liberal economic advocacy group.

    Owens noted that Trump has “lost his strength” as voters are increasingly doubtful about Trump’s economic leadership compared to Democrats, adding that the president doesn’t have the time to turn around public perceptions of him as he continues to pursue broad tariffs.

    New hype about income tax cuts ahead of April

    There will be new policies rolled out on affordability, a person familiar with the White House thinking said, declining to comment on what those would be. Trump on Thursday indicated there will be more deals coming on drug prices. Two other White House officials said messaging would change — but not policy.

    A big part of the administration’s response on affordability will be educating people ahead of tax season about the role of Trump’s income tax cuts in any refunds they receive in April, the person familiar with planning said. Those cuts were part of the sprawling bill Republicans muscled through Congress in July.

    This individual stressed that the key challenge is bringing prices down while simultaneously having wages increase, so that people can feel and see any progress.

    There’s also a bet that the economy will be in a healthier place in six months. With Federal Reserve Chair Jerome Powell’s term ending in May, the White House anticipates the start of consistent cuts to the Fed’s benchmark interest rate. They expect inflation rates to cool and declines in the federal budget deficit to boost sentiment in the financial markets.

    But the U.S. economy seldom cooperates with a president’s intentions, a lesson learned most recently by Trump’s predecessor, Democrat Joe Biden, who saw his popularity slump after inflation spiked to a four-decade high in June 2022.

    The Trump administration maintains it’s simply working through an inflation challenge inherited from Biden, but new economic research indicates Trump has created his own inflation challenge through tariffs.

    Since April, Harvard University economist Alberto Cavallo and his colleagues, Northwestern University’s Paola Llamas and Universidad de San Andres’ Franco Vazquez, have been tracking the impact of the import taxes on consumer prices.

    In an October paper, the economists found that the inflation rate would have been drastically lower at 2.2%, had it not been for Trump’s tariffs.

    The administration maintains that tariffs have not contributed to inflation. They plan to make the case that the import taxes are helping the economy and dismiss criticisms of the import taxes as contributing to inflation as Democratic talking points.

    The fate of Trump’s country-by-country tariffs is currently being decided by the Supreme Court, where justices at a Wednesday hearing seemed dubious over the administration’s claims that tariffs were essentially regulations and could be levied by a president without congressional approval. Trump has maintained at times that foreign countries pay the tariffs and not U.S. citizens, a claim he backed away from slightly Thursday.

    “They might be paying something,” he said. “But when you take the overall impact, the Americans are gaining tremendously.”

    _____

    Associated Press writers Will Weissert and Michelle L. Price contributed to this report.

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  • What is a ‘K-shaped’ economy, and what’s causing the divide?

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    The “K-shaped” economy, widely touted in the financial press, is the latest expression of wealth inequality. The U.S. economy is experiencing a growing gap between the highest earners and the richest corporations, who are spending and expanding their wealth, and the lowest-income households and mom-and-pop companies, who struggle to pay their bills day to day.

    Following the second short-term interest rate cut on Oct. 29, Federal Reserve Chairman Jerome Powell said, “A further reduction in the policy rate at the December meeting is not a forgone conclusion — far from it.”

    He cited the Fed’s ongoing concerns regarding inflation, employment, rising defaults in subprime credit, layoffs, and a “bifurcated economy.”

    “If you listen to the earnings calls or the reports of big, public, consumer-facing companies, many, many of them are saying that there’s a bifurcated economy there and that consumers at the lower end are struggling and buying less and shifting to lower cost products, but that at the top, people are spending at the higher income and wealth,” Powell said.

    That, in a nutshell, is the K-shaped economy.

    Can a divided U.S. economy avoid a recession? And how can an economy that’s running hot on one end and cold on the other meet the needs of the millions in the middle?

    Read more: The ‘K-shaped’ economy is showing up in credit scores

    The K-shaped economy is characterized by robust growth, expanding wealth, and a vibrant economy in the arms at the top of the K.

    The legs of the K are where lower-income earners and small businesses continue to struggle.

    Cristian deRitis, senior director and deputy chief economist at Moody’s Analytics, said the separation between the two is growing.

    “The top 10% of households by income account for about half of all the spending in the U.S. economy, so it’s kind of illustrating the inequality, not only of income, but of spending that’s going on in the economy,” deRitis told Yahoo Finance.

    In 2019, the share of spending by the top 10% households was 44.6%. However, the wealth gap goes beyond consumer spending.

    “When we think about businesses and the stock market or we think about the labor market, some industries are hiring, others are laying off,” deRitis added. “So, I see that K-shape not only in the consumer — I think that’s where it gets a lot of attention — but it’s actually in a lot of different parts of the economy where you can see that kind of bifurcation of activity.”

    DeRitis believes the widening separation between the haves and have-nots goes back to the stimulus relief of the pandemic.

    “Households at the bottom in particular got quite a bit of support that helped them to get their finances back in order,” deRitis said. “Delinquency rates went way down. But now that money has run out because inflation has been high, the labor market is slowing — so you don’t have as much wage growth.”

    Meanwhile, the top of the K, the wealthiest households and corporations, have benefitted from a rising stock market and asset price appreciation, including housing and crypto.

    While the stock market has set record highs recently, it has been on the backs of the largest companies. This is adding to the riches of the very wealthy, who have the biggest individual stake in equities.

    During Ford’s Ford (F) latest earnings call, the company highlighted profit driven by its top-of-the-line models, including the F-150, Bronco, Explorer, and Expedition. “The all-new Expedition is red-hot, gaining over three points of segment share, with 75% of customers choosing high-end trims like Tremor,” the company said.

    Delta Air Lines’ (DAL) premium-priced seating and iPhone 17 Pro smartphones that top $1,000 are other examples.

    Chipotle (CMG) cut its full-year sales outlook for the third straight quarter, with CEO Scott Boatwright citing “persistent macroeconomic pressures” and poorer customers who aren’t eating there as often.

    Read more: The Chipotle indicator: Is the economy teetering on a recession or nah?

    In an analysis, Torsten Sløk, chief economist for Apollo, reveals that earnings expectations for 2026 have soared for the Magnificent 7 stocks and declined for the rest of the S&P 500 (^GSPC). (Disclosure: Yahoo Finance is owned by Apollo Global Management.)

    Anthony Chan, a former economist for the Federal Reserve and JPMorgan Chase, told Yahoo Finance that a K-shaped economic recovery is the latest incarnation of wealth inequality.

    “It is showing you that inequality is becoming so bad that it’s now impacting how the economy proceeds. All you have to do is look at the anecdotal evidence on food pantries. They’re getting more and more people visiting food pantries. Why? Because people at the lower end are struggling.”

    He also cites the popularity of buy now, pay later.

    “I can assure you that the top 1% — the top 10% of the people — are not interested in buy now and pay later. They buy it and they just pay for it and they don’t even think about it. But you’re actually seeing some of the lower-income people buying supermarket groceries with buy now and pay later.”

    Read more: Buy now, pay later vs. credit cards: Which should you use for your next purchase?

    Chan is not quick to predict a recession. He noted that the Atlanta Fed is projecting 4% growth in the third quarter, following the 3.8% gain in the second quarter.

    “I’ve never seen a recession in my entire life where you have 3.8% growth one quarter and 4% in the other quarter,” Chan added. “​​Potential growth is about 2%, maybe a little bit less than that. So, if you’re growth is twice as fast as potential economic growth, I really think it’s almost economic malpractice to say that we’re entering or close to being in a recession.”

    Yet, Chan and deRitis both noted there are wild cards in the economic forecast, and deRitis called out one in particular.

    “I suspect that the investments in artificial intelligence are perhaps getting ahead of themselves, and they may not live up to the extreme expectations that we have,” deRitis said. “There’s likely to be some type of correction in the stock market going forward as investors come to grips with the reality.”

    In an extended bear market scenario, the top tier of wealthy households might cut back on spending, and the handful of big tech firms that have been leading stock gains would suffer.

    “If we have an AI setback, absolutely, it could be a recession,” he added.

    Read more: What is a recession?

    1. Open a high-yield savings account and watch your savings balance grow faster.

    2. Consider a personal loan to pay off debt and get money quickly at the lowest rates.

    3. Use a balance transfer credit card to help pay down debt without accruing more interest.

    4. Open a home equity line of credit (HELOC) if you need money for a large purchase.

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  • Federal Reserve likely to cut key rate Wednesday and may signal another cut to follow

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    WASHINGTON (AP) — The Federal Reserve will almost certainly cut its key interest rate on Wednesday and could signal it expects another cut in December as the central bank seeks to bolster hiring.

    A cut Wednesday would be the second this year and could benefit consumers by bringing down borrowing costs for mortgages and auto loans. Since Fed chair Jerome Powell strongly signaled in late August that rate cuts were likely this year, the average 30-year mortgage rate has fallen to about 6.2% from 6.6%, providing a boost to the otherwise-sluggish housing market.

    Still, the Fed is navigating an unusual period for the U.S. economy and its future moves are harder to anticipate than is typically the case. Hiring has ground nearly to a halt, yet inflation remains elevated, and the economy’s mostly solid growth is heavily dependent on massive investment by leading tech companies in artificial intelligence infrastructure.

    The central bank is assessing these trends without most of the government data it uses to gauge the economy’s health. The release of September’s jobs report has been postponed because of the government shutdown. The White House said last week October’s inflation figure may not even be compiled.

    The shutdown itself may also crimp the economy in the coming months, depending on how long it lasts. Roughly 750,000 federal workers are nearing a month without pay, which could soon start weakening consumer spending, a critical driver of the economy.

    Federal workers laid off by the Trump administration’s Department of Government Efficiency efforts earlier this year may formally show up in jobs data if it is reported next month, which could make the monthly hiring data look even worse.

    Powell has said that the risk of weaker hiring is rising, which makes it as much of a concern as still-elevated inflation. As a result, the central bank needs to move its key rate closer to a level that would neither slow nor stimulate the economy.

    Most Fed officials view the current level of its key rate — 4.1% — as high enough to slow growth and cool inflation, which has been their main goal since price increases spiked to a four-decade high three years ago. The Fed is widely expected to reduce it to about 3.9% Wednesday. WIth job gains at risk, the goal is to move rates to a less-restrictive level.

    Kris Dawsey, head of economic research at D.E. Shaw, an investment bank, said that the lack of data during the shutdown means the Fed will likely stay on the path it sketched out in September, when it forecast cuts this month and in December.

    “Imagine you’re driving in a winter storm and suddenly lose visibility in whiteout conditions,” Dawsey said. “While you slow the car down, you’re going to continue going in the direction you were going versus making an abrupt change once you lose that visibility.”

    In recent remarks, the Fed chair has made clear that the sluggish job market has become a signficant concern.

    “The labor market has actually softened pretty considerably,” Powell said. “The downside risks to employment appear to have risen.”

    Before the government shutdown cut off the flow of data Oct. 1, monthly hiring gains had weakened to an average of just 29,000 a month for the previous three months. The unemployment rate ticked up to a still-low 4.3% in August from 4.2% in July.

    Layoffs also remain low, however, leading Powell and other officials to refer to the “low-hire, low-fire” job market.

    At the same time, last week’s inflation report — released more than a week late because of the shutdown — showed that inflation remain elevated but isn’t accelerating and may not need higher rates to tame it.

    Yet a key question is how long the job market can remain in what Powell has described as a “curious kind of balance.”

    “There have been some worrisome data points in the last few months,” said Stephen Stanley, chief U.S. economist at Santander, an investment bank. “Is that a weakening trend or are we just hitting an air pocket?”

    The uncertainty has prompted some top Fed officials to suggest that they may not necessarily support a cut at its next meeting in December. At its September meeting, the Fed signaled it would cut three times this year, though its policymaking committee is divided. Nine of 19 officials supported two or fewer reductions.

    Christopher Waller, a member of the Fed’s governing board and one of five people being considered by the Trump administration to replace Powell as Fed chair next year, said in a recent speech that while hiring data is weak, other figures suggest the economy is growing at a healthy pace.

    “So, something’s gotta give,” Waller said. “Either economic growth softens to match a soft labor market, or the labor market rebounds to match stronger economic growth.”

    Since it’s unclear how the contradiction will play out, Waller added, “we need to move with care when adjusting the policy rate.”

    Waller said he supported a quarter-point cut this month, “but beyond that point” it will depend on what the economic data says, assuming the shutdown ends.

    Financial markets have put the odds of another cut in December at above 90%, according to CME Fedwatch — and Fed officials have so far said little to defuse that expectation.

    Jonathan Pingle, chief U.S. economist at UBS, said that he will look to see if Powell, at a news conference Wednesday, repeats his assertion that the risks of a weaker job market remain high.

    “If I hear that, I think they’re on track to lowering rates again in December,” he said.

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  • Federal Reserve cuts key rate yet Powell says future reductions are not locked in

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    WASHINGTON (AP) — The Federal Reserve cut its key interest rate Wednesday for a second time this year as it seeks to shore up economic growth and hiring, even as inflation stays elevated.

    But Fed Chair Jerome Powell also cautioned that further rate cuts weren’t guaranteed, citing the government shutdown’s interruption of economic reports and sharp divisions among 19 Fed officials who participate in the central bank’s interest-rate deliberations.

    Speaking to reporters after the Fed announced its rate decision, Powell said there were “strongly differing views about how to proceed in December” at its next meeting and a further reduction in the benchmark rate is not “a foregone conclusion — far from it.”

    The rate cut — a quarter of a point — brings the Fed’s key rate down to about 3.9%, from about 4.1%. The central bank had cranked its rate to roughly 5.3% in 2023 and 2024 to combat the biggest inflation spike in four decades before implementing three cuts last year. Lower rates could, over time, reduce borrowing costs for mortgages, auto loans, and credit cards, as well as for business loans.

    The move comes amid a fraught time for the central bank, with hiring sluggish and yet inflation stuck above the Fed’s 2% target. Compounding its challenges, the central bank is navigating without the economic signposts it typically relies on from the government, including monthly reports on jobs, inflation, and consumer spending, which have been suspended because of the government shutdown.

    Financial markets largely expected another rate reduction in December, and stock prices dropped after Powell’s comments, with the S&P 500 nearly unchanged and the Dow Jones Industrial Average closing slightly lower.

    “Powell poured cold water on the idea that the Fed was on autopilot for a December cut,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities. “Instead, they’ll have to wait for economic data to confirm that a rate cut is actually needed.”

    Powell was asked about the impact of the government shutdown, which began on Oct. 1 and has interrupted the distribution of economic data. Powell said the Fed does have access to some data that give it “a picture of what’s going on.” He added that, “If there were a significant or material change in the economy, one way or another, I think we’d pick that up through this.”

    But the Fed chair did acknowledge that the limited data could cause officials to proceed more cautiously heading into its next meeting in mid-December.

    “There’s a possibility that it would make sense to be more cautious about moving (on rates). I’m not committing to that, I’m just saying it’s certainly a possibility that you would say ‘we really can’t see, so let’s slow down.’”

    The Fed typically raises its short term rate to combat inflation, while it cuts rates to encourage borrowing and spending and shore up hiring. Right now it sees risks of both slowing hiring and rising inflation, so it is reducing borrowing costs to support the job market, while still keeping rates high enough to avoid stimulating the economy so much that it worsens inflation.

    Yet Powell suggested the Fed increasingly sees inflation as less of a threat. He noted that excluding the impact of President Donald Trump’s tariffs, inflation is “not so far from our 2% goal.” Inflation has slowed in apartment rents and for many services, such as car insurance. A report released last week showed that inflation remains elevated but isn’t accelerating.

    The government recalled employees to produce the report, despite the shutdown, because it was used to calculate the cost of living adjustment for Social Security.

    At the same time, the economy could be rebounding from a sluggish first half, which could improve job growth in the coming months, Powell said. That would make rate cuts less necessary.

    “For some part of the committee, it’s time to maybe take a step back and see if whether there really are downside risks to the labor market,” Powell said. “Or see whether in fact that the stronger growth that we’re seeing is real.”

    Two of the 12 officials who vote on the Fed’s rate decisions dissented Wednesday, but in different directions. Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, voted against the move because he preferred no change to the Fed’s rate. Schmid has previously expressed concern that inflation remains too high.

    Fed governor Stephen Miran dissented for the second straight meeting in favor of a half-point cut. Miran was appointed by President Donald Trump just before the central bank’s last meeting in September.

    Trump has repeatedly attacked Powell for not reducing borrowing costs more quickly. In South Korea early Wednesday he repeated his criticisms of the Fed chair.

    “He’s out of there in another couple of months,” Trump said. Powell’s term ends in May. On Monday, Treasury Secretary Scott Bessent confirmed the administration is considering five people to replace Powell, and will decide by the end of this year.

    The Fed also said Wednesday that it would stop reducing the size of its massive securities holdings, which it accumulated during the pandemic and after the 2008-2009 Great Recession. The change, to take effect Dec. 1, could over time slightly reduce longer-term interest rates on things like mortgages but won’t have much overall impact on consumer borrowing costs.

    Without government data, the economy is harder to track, Powell said. September’s jobs report, scheduled to be released three weeks ago, is still postponed. This month’s hiring figures, to be released Nov. 7, will likely be delayed and may be less comprehensive when finally released. And the White House said last week that October’s inflation report may never be issued at all.

    Before the government shutdown cut off the flow of data, monthly hiring gains had weakened to an average of just 29,000 a month for the previous three months, according to the Labor Department’s data. The unemployment rate ticked up to a still-low 4.3% in August from 4.2% in July.

    More recently, several large corporations have announced sweeping layoffs, including UPS, Amazon, and Target, which threatens to boost the unemployment rate if it continues. Powell said the Fed is watching the layoff announcements “very carefully.”

    ___

    Associated Press Writer Alex Veiga in Los Angeles contributed to this report.

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  • Video: Fed Cuts Interest Rates for Second Time This Year

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    new video loaded: Fed Cuts Interest Rates for Second Time This Year

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    Fed Cuts Interest Rates for Second Time This Year

    Fed Chair Jerome Powell announced that the Federal Reserve would cut interest rates by another quarter point on Wednesday, the second cut this year. Interest rates set by the Fed are now below 4 percent for the first time since late 2022. Mr. Powell noted that officials were divided on the cut, and said that another cut at the December meeting was not a “foregone conclusion.”

    My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people. Although some important federal government data have been delayed due to the shutdown, the public and private sector data that have remained available suggests that the outlook for employment and inflation has not changed much since our meeting in September. You can argue these positions since it can’t be directly observed. Division, then, you’re talking about going forward. In the near term, risks to inflation are tilted to the upside and risks to employment to the downside. A challenging situation. There is no risk-free path for policy as we navigate this tension between our employment and inflation goals. Our framework calls for us to take a balanced approach in promoting both sides of our dual mandate.

    Fed Chair Jerome Powell announced that the Federal Reserve would cut interest rates by another quarter point on Wednesday, the second cut this year. Interest rates set by the Fed are now below 4 percent for the first time since late 2022. Mr. Powell noted that officials were divided on the cut, and said that another cut at the December meeting was not a “foregone conclusion.”

    By Jamie Leventhal

    October 29, 2025

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    Jamie Leventhal

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  • Former BLS chief warns Powell is “flying blind” at a pivotal time for the Fed | Fortune

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    The Federal Reserve faces an unprecedented challenge as it prepares to set interest rates next week—making its decision with almost no economic data available.

    The government shutdown has halted the release of most U.S. economic statistics, including the monthly jobs report. However, the Fed also recently lost access to one of its main private sources of backup data. 

    Payroll-processing giant ADP quietly stopped sharing its internal data with the central bank in late August, leaving Fed economists without a real-time measure that had covered about one-fifth of the nation’s private workforce. For years, the feed had served as a real-time check on job-market conditions between the Bureau of Labor Statistics’ monthly reports. Its sudden disappearance, first reported by the Wall Street Journal, could leave the Fed “flying blind,” former Bureau of Labor Statistics commissioner Erica Groshen said.

    Groshen told Fortune that, in her decades working at the BLS and inside the Fed, the loss of ADP data is “very concerning for monetary policy.”

    The economist warned that at a moment when policymakers are already navigating a fragile economy—Fed Chair Jerome Powell has said multiple times that there is no current “risk-free path” to avoid recession or stagflation—the data blackout raises the risk of serious missteps. 

    “The Fed could overtighten or under-tighten,” Groshen said. “Those actions are often taken too little and too late, but with less information, they’d be even more likely to be taken too little too late.” 

    Rupture after years of collaboration

    Since at least 2018, ADP has provided anonymized payroll and earnings data to the Fed for free, allowing staff economists to construct a weekly measure of employment trends. The partnership is well-known to both Fed insiders and casual market watchers. However, according to The American Prospect, ADP suspended access shortly after Fed Governor Christopher Waller cited the data in an Aug. 28 speech about the cooling labor market.

    Powell has since asked ADP to restore the arrangement, according to The American Prospect. 

    Representatives at ADP did not respond to Fortune’s request for comment. The Fed declined to comment.

    Groshen said there are several plausible reasons why ADP might have pulled the plug. One possibility, she said, is that the company found a methodological issue in its data and wanted to fix it before continuing to share information used in monetary policy. 

    “That would actually be a responsible decision,” she told Fortune, noting that private firms have more flexibility than federal agencies but less institutional obligation to be transparent about errors.

    Another explanation, Groshen said, could be internal or reputational pressure. After Waller mentioned the collaboration publicly, ADP may have worried about how it looked to clients or shareholders. 

    “You could imagine investors saying, ‘Why are we giving this away for free? The Fed has money,’” she said. The company might also have wanted to avoid being seen as influencing central-bank decisions, especially in a politically charged environment.

    Whatever the motivation, Groshen said the episode underscores how fragile public-private data relationships remain. Without clear frameworks or long-term agreements, companies can withdraw at any time.

    “If policymakers build systems around data that can vanish overnight,” she said, “that’s a real vulnerability for economic governance.”

    A data blackout at a critical moment

    The timing could hardly be worse. 

    On Thursday next week, the Federal Open Market Committee meets to decide whether to lower interest rates again, following a long-awaited quarter-point cut in September. With the BLS pausing most releases under its shutdown contingency plan, official figures on employment, joblessness, and wages have been delayed—starting with the September report and possibly extending into October.

    In the absence of real-time data, Fed economists are relying on a patchwork of alternatives: state unemployment filings, regional bank surveys, and anecdotal reports from business contacts. Groshen called those “useful but incomplete,” adding that the lack of consistent statistical baselines makes monetary policy far more error-prone.

    She advocated for the BLS to receive “multiyear funding” from Congress so that it could stay open even during government shutdowns. 

    “I hope that one silver lining to all these difficulties will be a realization on the part of all the stakeholders, including Congress and the public, that our statistical system is essential infrastructure that needs some loving care at the moment,” Groshen said.

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  • Fed Is Expected To Cut Rates Again—but Uncertainty Grows Over Lack of Jobs Data During Shutdown

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    The Federal Reserve is widely expected to lower interest rates by a quarter of a percentage point when policymakers meet next week, but concerns are mounting over the lack of reliable employment figures.  

    Since the start of the federal government shutdown three weeks ago, the central bank has been cut off from vital economic data that the Fed typically relies on to guide its policy decisions. Analysts have compared the situation to a pilot attempting to land a plane blind.  

    Financial markets are all but certain that the Fed’s Board of Governors will lower its benchmark rate to the 3.75%–4% range during the Federal Open Market Committee meeting scheduled for Oct. 28-29. 

    Fed Gov. Stephen Miran, recently appointed to the board by President Donald Trump, has been advocating for a larger half-point cut, echoing the president’s calls for more aggressive action.

    But Fed Chair Jerome Powell so far has taken a more moderate approach, referring to reductions as “risk management” measures.

    Looking ahead, opinions are divided on what the central bank will do come December. 

    A recent poll of 117 economists conducted by Reuters found that fewer than three-quarters expect another cut before the end of the year.  

    Fed faces jobs data blackout

    The Federal Reserve has a dual congressional mandate to promote maximum employment and keep inflation as close to its 2% target as possible.

    But since the nonessential parts of the federal government ceased operations on Oct. 1, official jobs numbers from the U.S. Bureau of Labor Statistics have not been released since early September, leaving the Fed with a murky view of economic risks.

    The latest available data indicates that the labor market has softened over the summer, with just 22,000 jobs added in August and the unemployment rate ticking up to 4.3% from 4.2% the previous month.

    Figures coming out of the private sector suggest that the job market remains mostly in a holding pattern, with no major fluctuations in either layoffs or hiring. 

    New inflation report on the way

    Meanwhile, the Bureau of Labor Statistics is scheduled to release the consumer price index for September on Thursday, after some furloughed staffers were ordered back to work to compile the latest inflation data. 

    Economists polled by Reuters expect the report to show that consumer inflation inched up to 3.1% in September from 2.9% in August, injecting uncertainty into the prospect of an additional Fed rate cut at the end of 2025.

    Typically, if the Fed observes a sharp slowdown in hiring, it would be inclined to cut the federal funds rate, while rising inflation would make it more likely to delay another rate reduction.

    What it means for the housing market

    It’s important to remember that the Fed does not directly set mortgage rates, but rather influences them in a more roundabout way by setting the federal funds rate.

    However, the information vacuum created by the government shutdown that’s clouding the Fed’s decision-making process could negatively influence the housing market in different ways.

    Jobs data informs Fed policy decisions, which anchor the 10-year Treasury and, by extension, mortgage rates. Without that benchmark, it is harder to predict exactly what the central bank will do during its upcoming meetings.

    Additionally, not knowing the true state of the labor market compounds the uncertainty already weighing on would-be homebuyers and sapping demand.

     

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  • Slowdown in US hiring suggests economy still needs rate cuts, Fed’s Powell says

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    WASHINGTON (AP) — A sharp slowdown in hiring poses a growing risk to the U.S. economy, Federal Reserve Chair Jerome Powell said Tuesday, a sign that the Fed will likely cut its key interest rate twice more this year.

    Powell said in a speech in Philadelphia that despite the federal government shutdown cutting off official economic data, “the outlook for employment and inflation does not appear to have changed much since our September meeting,” when the Fed reduced its key rate for the first time this year.

    Fed officials at that meeting also forecast that the central bank would reduce its rate twice more this year and once in 2026. Lower rates from the Fed could reduce borrowing costs for mortgages, car loans, and business loans. Powell spoke before a meeting of the National Association of Business Economics.

    Powell reiterated a message he first delivered after the September meeting, when he signaled that the Fed is slightly more worried about the job market than its other congressional mandate, which is to keep prices stable. Tariffs have lifted the Fed’s preferred measure of inflation to 2.9%, he said, but outside the duties there aren’t “broader inflationary pressures” that will keep prices high.

    “Rising downside risks to employment have shifted our assessment of the balance of risks,” he said.

    Economists said Powell’s remarks solidified expectations for further rate cuts, starting at its next meeting Oct. 28-29.

    “While there was little doubt the (Fed) was angled to cut rates at its next meeting, today’s remarks were strong confirmation of that expectation,” Michael Feroli, chief U.S. economist at JPMorgan Chase, said in a note to clients.

    Powell also said that the central bank may soon stop shrinking its roughly $6.6 trillion balance sheet. The Fed has been allowing roughly $40 billion of Treasuries and mortgage-backed securities to mature each month without replacing them.

    “We may approach that point in coming months,” Powell said.

    The shift could slightly lower borrowing costs over time. Economists at BMO Capital Markets estimated that the yields on Treasury securities ticked down slightly after Powell’s remarks.

    Separately, Powell spent most of his speech defending the Fed’s practice of buying longer-term Treasury bonds and mortgage-backed securities in 2020 and 2021, which were intended to lower longer-term interest rates and support the economy during the pandemic.

    Yet those purchases have come under a torrent of criticism from Treasury Secretary Scott Bessent, as well as some of the candidates floated by the Trump administration to replace Powell when his term as Chair ends next May.

    Bessent said in an extended critique published earlier this year that the huge purchases of bonds during the pandemic worsened inequality by boosting the stock market, without providing noticeable benefits to the economy.

    Other critics have long argued that the Fed kept implementing the purchases for too long, keeping interest rates low even as inflation began to spike in late 2021. The Fed beginning in 2021 stopped the purchases and then sharply boosted borrowing costs to combat inflation.

    “With the clarity of hindsight, we could have—and perhaps should have—stopped asset purchases sooner,” Powell said. “Our real-time decisions were intended to serve as insurance against downside risk.”

    Yet Powell said that moving earlier would not have prevented the COVID-era inflation spike: “Stopping sooner could have made some difference, but not likely enough to fundamentally alter the trajectory of the economy.”

    Powell also said the purchases were intended to avoid a breakdown in the market for Treasury securities, which could have sent interest rates much higher.

    The Fed chair also addressed a move by a bipartisan group of senators to stop the central bank from paying interest on the cash reserves banks park at the Fed. A measure to prevent the Fed from doing so was defeated in the Senate last week by the lopsided vote of 83-14.

    Still, it garnered support from both parties, including Republican senators Rand Paul from Kentucky and Ted Cruz from Texas, as well as Massachusetts Democratic Sen. Elizabeth Warren.

    Powell said that without the ability to pay interest on reserves, the Fed “would lose control over rates” and wouldn’t be able to carry out its mission. The Fed lifts the short-term interest rate it controls when it wants to cool borrowing and spending and slow inflation, while it cuts the rate to encourage borrowing, growth, and hiring.

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  • China’s retaliation cements a bitcoin reset

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    This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:

    Not even Fed Chair Jerome Powell could lift bitcoin out of the red.

    Following historic losses, triggered by escalating trade tensions between the US and China, cryptocurrency investors have tried to regain their footing. But it’s been a rough slog.

    Riding on the winds of a booming stock market and the prevailing sense that more rate cuts will fuel an extended rally, bitcoin recently topped the charts and set itself up for a historically strong October. Even accounting for the sharp losses in recent days, the digital currency is up more than 20% for the year, outpacing the gains of the benchmark S&P 500. But geopolitical tensions highlighted how fragile such asset climbs can be.

    Read more: What is bitcoin, and how does it work?

    After months of an upward spiral with higher peaks, investors now confront a reset of speculative bets.

    The back-and-forth between Washington and Beijing forced a pause across an array of bullish markets, rattled investors, and reminded Wall Street that, far from being a settled matter, tariffs are still in play as a political weapon and a powerful destabilizer. But bitcoin and other cryptocurrencies were hit especially hard.

    Part of the plunge in prices has to do with the excitement surrounding crypto investing, which translates to more aggressive wagers using borrowed money. Some investors who wielded leverage on the chance of winning outsized gains were left dangerously exposed when panic selling took hold. A wave of forced liquidations exacerbated the fall.

    Bitcoin shed as much as 5% Tuesday, but pared back the losses as investors reacted to Powell implying that another rate cut is possible at the Fed’s next meeting in two weeks. Still, the weight of unresolved disputes with China, which worsened just before the closing bell, kept investors from doing much even with a bullish catalyst.

    The market-moving influence of a worsening trade conflict makes it harder to declare the sell-off a turning point for crypto or a peak bitcoin moment. If the dispute over critical minerals restrictions leads to a massive escalation in tariffs come Nov. 1, investors — crypto and otherwise — are in for more pain. And bitcoin and its lesser altcoin peers don’t have the corporate earnings to cushion a deteriorating macroeconomic picture.

    But if trade diplomacy succeeds, then stability could be just around the corner. And the next peak ahead of us.

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  • Fed Chair Powell says hiring slowdown poses economic risks, hinting at more interest rate cuts

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    Federal Reserve Chair Jerome Powell on Tuesday emphasized that a sharp slowdown in hiring poses a growing risk to the U.S. economy, a sign that the central bank will likely cut its key interest rate twice more this year. 

    Powell, who spoke today before the National Association of Business Economics in Philadelphia, said that despite the federal government shutdown cutting off official economic data, “the outlook for employment and inflation does not appear to have changed much since our September meeting,” when the Fed reduced its key rate for the first time this year. 

    Fed officials at the September meeting also forecast that the central bank would reduce its rate twice more this year and once in 2026. Lower rates from the Fed could reduce borrowing costs for consumer and business loans, making it cheaper for businesses to expand operations and hire new workers, and for Americans to buy houses, autos and other items. 

    “Holding rates higher presents risks to the job market. Job creation is below trend given the pace of economic growth,” noted Scott Helfstein, head of investment strategy at investment firm Global X, in an emailed response to Powell’s comments. “The Fed is still likely to cut rates in October and December, but investors should be prepared for a range of outcomes as Powell is trying to leave all options open.”

    The Fed’s next rate decision will be made at its Oct. 29 meeting. Following that, the central bank has one more rate decision meeting scheduled in 2025, set for Dec. 10.

    Powell reiterated a message he first delivered after the September meeting, when he signaled that the Fed is slightly more worried about the job market than its other congressional mandate, which is to keep prices stable. Tariffs have lifted the Fed’s preferred measure of inflation to 2.9%, he said, but outside the duties there aren’t “broader inflationary pressures” that will keep prices high.

    “Rising downside risks to employment have shifted our assessment of the balance of risks,” he said.

    Powell also said that the central bank may soon stop shrinking its roughly $6.6 trillion balance sheet. The Fed has been allowing roughly $40 billion of Treasuries and mortgage-backed securities to mature each month without replacing them. The shift could weigh on longer-term Treasury interest rates.

    Separately, Powell spent most of his speech defending the Fed’s practice of buying longer-term Treasury bonds and mortgage-backed securities in 2020 and 2021, which were intended to lower longer-term interest rates and support the economy during the pandemic.

    Yet those purchases have come under a torrent of criticism from Treasury Secretary Scott Bessent, as well as some of the candidates floated by the Trump administration to replace Powell when his term as Chair ends next May. 

    Bessent said in an extended critique published earlier this year that the huge purchases of bonds during the pandemic worsened inequality by boosting the stock market, without providing noticeable benefits to the economy. 

    Other critics have long argued that the Fed kept implementing the purchases for too long, keeping interest rates low even as inflation began to spike in late 2021. The Fed beginning in 2021 stopped the purchases and then sharply boosted borrowing costs to combat inflation. 

    “With the clarity of hindsight, we could have—and perhaps should have—stopped asset purchases sooner,” Powell said. “Our real-time decisions were intended to serve as insurance against downside risk.”

    Powell also said the purchases were intended to avoid a breakdown in the market for Treasury securities, which could have sent interest rates much higher.

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  • Fed’s Powell says economy on firmer footing, QT end in view

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    NEW YORK (Reuters) -The U.S. labor market remained mired in its low-hiring, low-firing doldrums through September, though the economy overall “may be on a somewhat firmer trajectory than expected,” Federal Reserve Chair Jerome Powell said on Tuesday.

    He noted that at policymakers will take a “meeting-by-meeting” approach to any further interest rate cuts as they balance job market weakness with the fact that inflation remains well above their 2% target.

    Powell also said the end of the central bank’s long-running effort to shrink the size of its holdings, widely known as quantitative tightening, or QT, may be coming into view.

    His comments came from the text of a speech prepared for delivery before a gathering held by National Association for Business Economics in Philadelphia.

    MARKET REACTION:

    STOCKS: U.S. stocks were mixed, with the Dow and S&P 500 up on the day, while the Nasdaq was down.

    BONDS: U.S. Treasury yields extended their fall, with the yield on the benchmark 10-year note slipping to 4.03% and the two-year note down at 4.1%.

    FOREX: The dollar index extended losses, now down 0.3% at 99.03.

    COMMENTS:

    STEVE SOSNICK, CHIEF STRATEGIST, INTERACTIVE BROKERS, GREENWICH, CONNECTICUT:

    “The reason for the sell-off overnight was concerns about the trade war re-accelerating between the US and China. But the markets decided that this isn’t really a problem, at least in the short term.”

    “The market was going up anyway. We were down 10 points before he started speaking so this is just the cherry on top of the cake on today’s rally … but the bulk of the move was unrelated to his comments.”

    ADAM SARHAN, CHIEF EXECUTIVE, 50 PARK INVESTMENTS, NEW YORK: “The fact is the (stock) market was extended. It pulled back to support technically, which is the 50-day moving average… and bounced off of it.”

    “The Fed said nothing has changed. Even if (trade) tensions escalate… the Fed is still going to cut rates with the stock market at all-time highs. So, fundamentally, we have a tremendous tailwind coming into effect in the near future.”

    PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:

    “I don’t think (Powell) is changing his tune whatsoever. He’s saying that the economy is on solid footing, but he’s also saying we have weakness. What he’s doing is he’s preparing the markets for a series of rate cuts, but not necessarily in a sequential order.”

    “He’s saying is he’ll cut (interest rates) by 25 basis points at the end of this month then they’ll assess the situation. And if the labor market continues to weaken and actually loses jobs, then he might be setting us up for a jumbo cut of 50 basis points in December.”

    “He’s preparing the markets for a rate cut, but he also doesn’t want the markets to assume rate cuts are a given. He’s using labor market weakness as a hedge.”

    MICHAEL JAMES, EQUITY SALES TRADER, ROSENBLATT SECURITIES, LOS ANGELES:

    “I don’t think any of these comments from Chairman Powell are going to have any direct impact on the overall market. It continues to be a market of sentiment and positioning. The Trump tariff tweet from Friday, causing all of the decline, seemed to get shrugged off with some of the comments over the weekend. We had a decent rally yesterday and pulling back this morning on some of the China shipping moves but that also was being relatively dismissed. You can see that in the magnitude of the rally that we’ve had from this morning.”

    “The bulls remain fully in charge and until that’s shaken with something more significant than these comments from Chair Powell or anything else, that’s likely to be the case into the start of third-quarter tech earnings next week.”

    “There are bigger factors in place related to positioning and up the start of tech earnings season next week that are going to be far bigger determinants of the market’s direction than these comments from Chair Powell will be.”

    (Reporting by Stephen Culp, Sinead Carew, Caroline Valetkevitch, and Twesha Dikshit)

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  • Stocks see biggest drop in months after Trump threatens more tariffs on China

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    Investors are shuddering on concerns of renewed trade tensions between the world’s two biggest economies. 

    Stocks fell sharply on Friday, with the S&P 500 shedding 183 points, or 2.7%, to close at 6,553 in what was the index’s worst day since April. The Dow Jones Industrial Average fell 879 points, or 1.8%, and the Nasdaq Composite dropped 3.6%. 

    The selloff affected a wide range of stocks, from Big Tech companies like Nvidia and Apple to stocks of smaller companies looking to get past uncertainty about tariffs and trade.

    “Investors still think the tit-for-tat between the U.S. and China these last few days is mostly posturing (the consensus view is that tariffs won’t go up, and that Trump and Xi will still meet in South Korea), but trade-related risks have certainly risen after being dormant for the last several weeks,” Wall Street analyst Adam Crisafulli, head of Vital Knowledge, said in a report. 

    Stocks had been heading for a slight gain in the morning, until Mr. Trump said on his social media platform said he’s considering “a massive increase of tariffs” on Chinese imports. He’s upset at restrictions China has placed on exports of its rare earths, which are materials that are critical for the manufacturing of everything from consumer electronics to jet engines.

    “We have been contacted by other Countries who are extremely angry at this great Trade hostility, which came out of nowhere,” Trump wrote on Truth Social. “Our relationship with China over the past six months has been a very good one, thereby making this move on Trade an even more surprising one. I have always felt that they’ve been lying in wait, and now, as usual, I have been proven right!”

    Mr. Trump also threatened to call off a planned meeting with Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation summit in South Korea later this month. 

    Primed for a slide?

    The market may have been primed for a slide. U.S. stocks were already facing criticism that their prices had shot too high following a nearly relentless 35% run for the S&P 500 from a low in April to record heights.

    Critics say the market looks overpriced after prices rose much faster than corporate profits. Worries are particularly high about companies in the artificial-intelligence industry, where pessimists are making comparisons to to the 2000 dot-com bubble that ultimately imploded. For stocks to look less expensive, either their prices need to fall, or profits need to rise.

    Other factors also weighed on investor sentiment Friday, including the ongoing U.S. government shutdown and fresh data showing that consumers are anxious about the economy. 

    The University of Michigan’s preliminary October sentiment index, released Friday, shows consumer sentiment fell 0.1% on a monthly basis, from 55.1 points in September to 55. While the drop was nominal, it represents the third consecutive month the confidence measure, which is closely watched by investors, has declined. 

    “Pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds,” Joanne Hsu, director of the Surveys of Consumers at the University of Michigan, said in a statement.

    The job market has slowed so much that the Federal Reserve cut its main interest rate last month for the first time this year. Fed officials have penciled in more cuts through next year to give the economy more breathing room. But Chair Jerome Powell has also said they may have to change course if inflation stays high. That’s because lower interest rates can push inflation even higher.

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