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Tag: U.S. Economy

  • Trump is obsessed with tariffs despite legal setbacks. There’s a reason for it | Opinion

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    President Donald Trump delivered his State of the Union address to Congress in Washington on Feb. 24, 2026.

    President Donald Trump delivered his State of the Union address to Congress in Washington on Feb. 24, 2026.


    Andrew Harnik

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    The most baffling part of President Trump’s State of the Union speech was his fixation on tariffs that have already been declared unconstitutional by the Supreme Court and have failed to boost the U.S. economy. But you don’t need a Ph.D. in economics to understand why he’s so obsessed with them.

    Before we get into that, let’s look at what his import duties have accomplished so far.

    When he announced the tariffs on his so-called “Liberation Day” nearly a year ago, Trump promised that they would reduce the U.S. trade deficit, bring back factories from China and Mexico, and spark a manufacturing boom in America.

    None of that has happened. Instead, the manufacturing renaissance Trump had promised — and touted again in his State of the Union speech — failed to materialize: the number of U.S. factory jobs fell by 103,000 jobs last year, according to the Bureau of Labor Statistics.

    The reason is simple: it’s still much cheaper for multinationals to make goods in Asia, Mexico or Canada than in America, and that’s unlikely to change anytime soon.

    As for the trade deficit, it remained virtually unchanged last year, according to the Bureau of Economic Analysis. Despite Trump’s massive tariffs on foreign goods, it shrank by a paltry 0.2% — almost nothing.

    What makes Trump’s tariff push more puzzling is how unpopular it is. A new CNN poll shows 62% of Americans disapprove of his tariffs, while only 37% support them. A Fox News poll found even bigger opposition to the tariffs: 63% of Americans dislike them, while 37% like them.

    Most Americans feel those tariffs are simply passed on by importers to consumers who end up paying more for toys, TV sets, coffee and other imported goods.

    So why is Trump pushing so hard with his tariffs, if they are hurting his popularity and not producing economic gains?

    The answer is power. Trump wants to be at the center of the world stage, wielding a kind of power no recent U.S. president has used — the power to turn trade into a tool to punish enemies and reward friends.

    Tariffs also give Trump leverage over U.S. companies and have raised more than $200 billion in revenue, money he can redirect to programs he favors.

    Among them: a $12 billion bailout for farmers, a $2,000 “dividend” rebate check for low- and middle-income Americans and an increase in military spending. It’s not clear what will happen with these and other promises now.

    Trump has made no bones about his use of tariffs as a political weapon in foreign affairs. In his State of the Union address, he said he uses these tariffs “to make great deals for our country, both economically and on a national security basis.”

    Trump recently threatened to impose higher import duties on eight European countries if they didn’t help him negotiate a U.S. purchase or annexation of Greenland.

    Earlier, he slapped huge tariffs on Brazil, saying the country’s leftist government was carrying out a “witch hunt” against former President Jair Bolsonaro, a close ally who faced trial for attempting a coup. Trump also publicly threatened higher tariffs on Mexico if it didn’t do more to reduce illegal immigration and fentanyl smuggling.

    Marcelo Giugale, a Georgetown University economics professor and former top World Bank official, told me tariffs have been an “extraordinary power tool” for Trump.

    “Internationally, he’s used them left and right, for whatever reasons he wanted, in whatever amounts he wanted, to the countries he wanted. And most countries bend the knee,” he said.

    “Domestically, they force American producers to line up at the White House and plead, ‘Please protect me, place a tariff on my foreign competitors,’ or conversely, ‘Please exempt me from the tariff I’ll have to pay.’”

    Trump made it clear in his address to Congress that tariffs aren’t just a temporary tactic but will remain a central pillar of his agenda. He said he will find new ways to bypass the Supreme Court ruling, and that his trade barriers will “remain in place under fully approved and tested alternative legal statutes.”

    Trump admitted that his proposed new avenues to reinstate tariffs “are a little more complex” but claimed they will result in a solution that will be “even stronger than before.” Legal experts dispute his optimism, noting that it will take more than six months to set in motion a new policy and that Trump’s negotiating power could be greatly diminished if — as current polls suggest — his party loses its grip on Congress in the November midterm elections.

    One way or the other, Trump should not be taken lightly when he vows to stick with massive tariffs, despite their unpopularity at home and abroad. In his view, these aren’t just taxes — they are a political weapon to exert power, even if they do more harm than good to the economy.

    Don’t miss the “Oppenheimer Presenta” TV show on Sundays at 9 pm E.T. on CNN en Español or on YouTube’s “Oppenheimer Presenta” channel. Blog: andresoppenheimer.com

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    Andres Oppenheimer

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  • The ‘alternative scenario’ of an even bigger national debt disaster is in play after the Supreme Court ruled Trump’s tariffs illegal | Fortune

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    The Supreme Court ruled Friday that President Donald Trump’s extensive use of tariffs during his first year back in office were illegal. The court responded to escalating protests from small businesses saddled with higher costs and a large portion of Americans who are skeptical as to the benefits of Trump’s tariff regime. But by striking down part of Trump’s trade agenda, the judges might send America’s ever-widening deficit soaring even higher.

    The national fiscal outlook is already on an unsustainable trajectory. As the Congressional Budget Office projected earlier this month, federal debt is set to reach 120% of GDP by 2036, but that forecast assumes current policies will remain in place. A perfect storm of other factors could align to send debt climbing to even greater heights.

    One of those forces is the fate of Trump’s tariffs. The severity of America’s fiscal path has been somewhat “mitigated” in part by tariff-driven revenue, according to a report published Thursday by the nonpartisan Committee for a Responsible Federal Budget (CRFB). Removing this revenue stream would contribute to an “alternative scenario,” one with an even steeper debt burden than the one projected by the CBO. 

    Assuming Trump’s tariffs are not replaced, and certain government spending programs are either made permanent or revived, the deficit would reach nearly $4 trillion, debt could climb to 131% of GDP in 2036, and the additional interest burden would hit $820 billion, according to the report. 

    The mechanism by which vanishing tariff revenues fuel the deficit is straightforward but massive in scale. Currently, the CBO’s baseline fiscal projections are softened by the assumption that significant revenue from tariffs unilaterally imposed by the Trump administration will continue to flow into the Treasury. But the administration’s legal foundation for these collections crumbled before the court. Most of these tariffs were authorized under the International Emergency Economic Powers Act, a tool that has never before been used to implement tariffs and that the U.S. Court of International Trade already ruled illegal last year. 

    If the administration fails to replace the revenue with other taxes or offsets, the CRFB estimates that federal revenue would fall by $1.9 trillion through 2036. This loss represents roughly 0.5% of the nation’s total GDP over the next decade. While the administration could theoretically attempt to use alternative trade maneuvers to replicate the tariffs, there is no guarantee such a transition would be seamless or legally bulletproof.

    That lost revenue would presumably be evident immediately. The government is now on the hook to refund $175 billion of its tariff revenue, according to recent analysis by  the University of Pennsylvania’s Penn-Wharton Budget Model. But the costs would be even greater over the long run. Losing $1.9 trillion in expected income does more than just widen the immediate gap between spending and revenue; it triggers a compounding interest effect that worsens the overall debt. 

    When the government loses a primary revenue stream like tariffs, it must borrow more to cover its existing obligations. Under the report’s alternative scenario, this loss of revenue, combined with the permanent extension of temporary tax provisions from Trump’s One Big Beautiful Bill Act and a potential revival of enhanced Affordable Care Act subsidies, which expired earlier this year, would raise the deficit by $4.2 trillion over the next decade. This deficit, worsened by higher interest costs, could risk crowding out other forms of essential spending as the federal government becomes increasingly consumed by its own debt burden.

    “The alternative scenario does not account for dynamic effects on interest rates and the economy, which could worsen the fiscal outlook by pushing the economy further into a debt spiral,” CRFB researchers wrote in the report.

    The report outlines a more upbeat scenario, where debt rises more slowly than in the CBO’s forecast. In this version, lawmakers would either allow temporary tax policies to expire or fully offset their costs, while also ensuring that tariff revenues are either preserved by the courts or replaced by new legislative measures. Coupled with reforms to stabilize trust funds like Social Security, this path could see debt stabilize at a much lower 111% of GDP by 2036. 

    For now, however, the nation’s fiscal health remains on a deteriorating path. Removing Trump’s tariffs might be greeted favorably abroad and by most Americans, given that up to 90% of tariff costs are now paid for by American companies and consumers, according to a recent New York Fed report. But striking down the tariffs without replacements could come with hidden costs further down the road, as the alternative scenario of an even greater debt burden gets closer to becoming the new reality.

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    Tristan Bove

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  • AI is everywhere except in the data, suggesting it will enhance labor in some sectors rather than replace workers in all sectors, top economist says | Fortune

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    Despite hopes for unlocking a new era soaring growth and abundance, AI has yet to manifest itself clearly in macro data, according to Apollo Chief Economic Torsten Slok.

    In a note on Saturday, he recalled economist Robert Solow’s quip from the 1980s as PCs were transforming the economy: “You can see the computer age everywhere but in the productivity statistics.”

    The same thing can be said today about AI, Slok wrote, noting that data on employment, productivity and inflation are still not showing signs of the new technology. Profit margins and earnings forecasts for S&P 500 companies outside of the “Magnificent 7” also lack evidence of AI at work.

    “AI is everywhere except in the incoming macroeconomic data,” he said.

    To be sure, investors are not waiting for AI to upend business models, and their fears have laid waste to the stock market recently.

    As increasingly capable chatbots roll out, shares with exposure to wealth managers, insurance brokerages, tax preparation, accounting services, professional data, legal research, trucking, and logistics have sold off hard. 

    Meanwhile, AI evangelists see stunning economic gains. Anthropic CEO Dario Amodei said at the World Economic Forum last month that AI could boost GDP growth to 5%-10%.

    And Elon Musk, cofounder of xAI, predicted AI will create so much wealth that working will be optional in the not-too-distant future.

    But Slok is not yet convinced.

    “Maybe there is a J‑curve effect for AI, where it takes time for AI to show up in the macro data. Maybe not,” he wrote on Saturday.

    That will depend on the value creation from AI, Slok explained. So far, it’s playing out differently than the computer revolution did in the 1980s.

    Instead of early innovators reaping monopoly pricing power until rivals erode that lead, fierce competition among large language model developers has driven their prices toward zero for end-users. 

    But from a macro perspective, the value AI creates is derived from how it’s used in the economy, not from a specific product, Slok said. So far, economists don’t foresee much impact, pointing for several studies.

    The Penn Wharton Budget Model, for example, sees an annual gain in total factor productivity from AI amounting to just 0.1-0.2 percentage point, translating to a cumulative boost of 1.5% by 2035.

    Apollo Global

    “After three years with ChatGPT and still no signs of AI in the incoming data, it looks like AI will likely be labor enhancing in some sectors rather than labor replacing in all sectors,” Slok said.

    Similarly, the Congressional Budget Office has penciled in a relatively conservative view, estimating AI will add just 0.1 percentage point a year to total factor productivity growth and eventually boost output by 1 percentage point by 2036.

    But that also came as the Labor Department revised its reading on 2025 job gains to just 181,000, down from an initial print of 584,000 and from 2024’s gain of 1.46 million.

    Given that the economy continued to expand at a healthy pace while adding so few workers last year, productivity should surge and raise questions about what, if any, effect AI had.

    “The widespread adoption of the generative AI applications currently in production is expected to improve business efficiency and the organization of work and thus to lift TFP growth modestly over the next decade,” CBO said in its latest projections.

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    Jason Ma

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  • The US is taking control of Venezuela and targeting Greenland. The Dow could still hit 50,000

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    (CNN) — The United States attacked Venezuela and President Donald Trump is threatening to take Greenland “the hard way.” All the while, the US has an uncertain economic outlook and a weak jobs report.

    But the Dow Jones Industrial Average could still hit a record 50,000 points on Monday.

    The Dow, which consists of large companies that are thought to be representative of the market, usually reflects broader American sentiment. When tensions are high or people are gloomy, the Dow tends to drop; when people sing a more positive tune, the Dow trends upward.

    Now, Americans are facing a stark political divide: strikes in Venezuela, protests against ICE following the fatal shooting of a Minneapolis mother, the economy capping off 2025 with weak job gains and intentions to “do something on Greenland, whether they like it or not.”

    That should mean the Dow is suffering, not nearing a record high. So, why is it contradicting history?

    Economic impact over big headlines

    Wall Street is more concerned with the economic impact of Trump’s political moves, such as whether strikes in Venezuela could disrupt the flow of oil.

    But Trump has proposed that the US will invest in Venezuela’s oil infrastructure, potentially tapping into the country’s crude — which amounts to about a fifth of the world’s global reserves, according to the US Energy Information Administration.

    It could increase defense spending, but not enough to spook the market, said Jay Hatfield, chief executive at Infrastructure Capital Advisors.

    “It’s really critical to focus on the economic drivers of the stock market and recognize that the political and international affairs issues are just that, unless they’re extreme,” he said.

    No official deals have been reached, Energy Secretary Chris Wright told CNN’s Kristen Holmes, but there was “tremendous interest” from major oil companies after Friday’s meeting between administration officials and executives.

    Opening up the flow of oil would boost the economy, noted Hatfield, which is a more optimistic outlook for investors.

    The index continued to post gains throughout the week as America’s tensions shifted inward. On Friday, the Dow gained another 237 points.

    There’s a few reasons for optimism: Trump ordered his “representatives” to buy $200 billion in mortgage bonds to drive down housing costs, investors are looking forward to AI adoption and there haven’t been mass layoffs, Hatfield said.

    The University of Michigan’s latest consumer survey showed that sentiment increased in January for the second consecutive month, to a preliminary reading of 54, up from December’s 52.9. Most people were surveyed before the capture of Nicolás Maduro.

    Americans have a more sour outlook on Trump’s economy due to concerns about more expensive groceries and services. But it’s not translating to consumer spending, which has continued to support the economy.

    US retail sales on Black Friday, for instance, climbed 4.1% compared with last year, according to Mastercard SpendingPulse data.

    It’s largely due to the K-shaped economy, where wealthier Americans continue to spend as their wallets are bolstered by the strong stock market, wage gains and higher home values. Meanwhile, lower income households pull back on spending because of the slowing job market, high debt and inflation.

    “They’re a little bit cautious that jobs aren’t being created, but they’re not losing jobs either,” said Paul Christopher, the head of Wells Fargo Investment Institute’s global investment strategy. And this year is expected to have strong job growth, he said.

    Interest rate cut optimism

    Investors are still optimistic about the Federal Reserve slashing interest rates, after three back-to-back rate cuts in 2025, noted Hatfield.

    There could be more volatility in the coming weeks, though, because of earnings season and the Bureau of Labor Statistics’ December Consumer Price Index report releases, according to Christopher.

    The “no-hire no-fire” jobs report gives the Fed a green light to cut rates, he said.

    “The markets look through the other stuff, the political stuff, and they’re going to focus on what’s going to be, we think, a pretty strong economy in 2026. So whether we hit Dow (50,000) on Monday or Tuesday or Wednesday, we’ll sort of look at the larger picture here,” Christopher said.

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    Auzinea Bacon and CNN

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  • US economy added 50,000 jobs in December, capping off one of the weakest years of job gains in decades

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    (CNN) — Hiring slowed more than expected in December, a sluggish end to what was one of the weakest years of job growth in decades, a dynamic that further amplified America’s affordability crisis.

    The US economy added an estimated 50,000 jobs last month, slowing from a downwardly revised 56,000 jobs added in November, according to Bureau of Labor Statistics data released Friday.

    Still, the unemployment rate edged lower to 4.4% from a revised 4.5% in November.

    Economists were expecting a net gain of 55,000 jobs in December and an unemployment rate of 4.5%, according to FactSet consensus estimates.

    With December’s estimated job gains, which are subject to revision, the US economy added just 584,000 jobs last year. Outside of recession years, that’s the weakest annual job growth seen since 2003, BLS data shows.

    And those meager gains were driven almost entirely by a couple of industries.

    “The United States is in a jobless boom,” Heather Long, chief economist at Navy Federal Credit Union, said in an interview with CNN. “There was almost no hiring in 2025 … we would be talking about job losses in 2025, if it weren’t for health care and social assistance.”

    Unemployment becoming a ‘permanent state’

    In addition to the tepid gains recorded for December, October and November’s payroll estimates were revised lower by a combined 76,000 jobs.

    Even still, the meager pace of employment growth is actually even weaker than the December report shows – something that will become clearer in the January jobs report.

    That’s when the BLS will release the results of its annual benchmarking process that squares up the more real-time survey-drawn monthly estimates with the heavily lagged (but more accurate) payroll figures from employers’ quarterly tax filings. The preliminary estimate, released in August, was that 911,000 fewer jobs were likely added for the year ended in March 2025.

    “With these revisions, the story of payroll employment in 2025 will convert, ex post facto, from ‘snail-like growth’ to ‘recessionary-like conditions,’” Brian Bethune, a financial economist and professor at Boston College, wrote in commentary on Friday.

    This low-hire, low-fire labor market has resulted in more people on the outside looking in. In December, the share of people who were unemployed for 27 weeks or more rose to 26%.

    That indicates “unemployment is increasingly becoming a permanent state rather than a temporary transition,” Nicole Bachaud, ZipRecruiter’s labor economist, wrote in a note on Friday.

    Still, Friday’s report did have a couple of bright spots, which included stronger-than-expected wage gains. Average hourly earnings rose 0.3% for the month and picked up to 3.8% for the year – a modest gain over inflation.

    A deep hiring chill since April

    The labor market was already slowing, heading into 2025, as it continued to normalize following the seismic economic impacts of the Covid-19 pandemic.

    However, the gradual cooling turned sharply into a freeze by the spring. About 85% of the year’s job gains occurred in the first four months of the year, Long noted.

    In April, President Donald Trump made his “Liberation Day” announcement of a massive suite of broad and steep tariffs on many of the goods imported into the country.

    That and other dramatic policy shifts sent uncertainty surging higher and tossed an ice bath on sentiment in the process.

    Tariffs, and the uncertainty surrounding them, were one of three big factors that contributed to the “hiring recession” that engulfed pretty much all industries last year, Long said in an interview with CNN.

    In addition to tariffs, jobs continued to be scaled back in industries that over-hired during the pandemic. Additionally, the rise of artificial intelligence played a role as well, she said.

    “What happened with AI is firms needed to use their cash to invest in AI, and so they pulled back on hiring in order to free up that cash,” she said. “It wasn’t so much like, ‘I’m going to use the robot to replace the human.’ It was, ‘I need the dollars to go to tech investment instead of human investment.’”

    What resulted were muted employment gains – or even outright losses –across most industries.

    The lone exceptions were health care – an industry growing as a result of an aging population – and leisure and hospitality, which has reaped some of the spoils from an increasingly bifurcated economy, where well-heeled Americans see continued wealth gains while a larger share of middle- and lower-income households are experiencing increased strain.

    That was again indeed the case in December.

    Leisure and hospitality businesses saw net job gains of 47,000, while health care and social assistance added 38,500 jobs, BLS data showed. Jobs were shed across goods-producing businesses, particularly those in manufacturing, as well as retail trade (where seasonal hiring wasn’t as flush as in years past)

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    Alicia Wallace and CNN

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  • Americans are feeling worse about the economy as government shutdown drags on

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    (CNN) — The record-breaking government shutdown has left Americans feeling worse about the economic outlook. That’s according to the latest University of Michigan consumer sentiment survey, which showed the index falling to 50.3 this month from 53.6 in October.

    It’s the lowest level since June 2022, which marked the lowest reading on record since the survey’s inception in the 1950s.

    “With the federal government shutdown dragging on for over a month, consumers are now expressing worries about potential negative consequences for the economy,” Joanne Hsu, director of surveys of consumers at the University of Michigan, said in a statement.

    The drop this month represents a 6.2% decline from October and a 29.9% decline compared to last November. Meanwhile, economists polled by FactSet had been anticipating a slight improvement this month.

    The increased level of pessimism was “widespread” across different ages, income levels and political affiliations, Hsu noted. The one notable exception was consumers who are heavily invested in the stock market. They reported an 11% improvement in sentiment as the stock market hangs near record highs.

    This story is developing and will be updated.

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    Elisabeth Buchwald and CNN

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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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  • A look at what happened in the US government this week

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    Two federal judges ruled that the Trump administration must use emergency funds to keep SNAP afloat during the shutdown. President Donald Trump visited Asia, striking a trade deal with China. Speculation about a Trump third term heated up again, despite its near impossibility. And judges made consequential rulings regarding federal workers and voter registration.Here are the top stories involving the U.S. government this past week.SNAP crisis as shutdown drags onTwo federal judges ruled nearly simultaneously on Friday that President Donald Trump’s administration must continue to fund the Supplemental Nutrition Assistance Program (SNAP), the nation’s biggest food aid program, using contingency funds during the government shutdown.One out of 8 households in the United States receives SNAP benefits. Here’s a closer look at the data.Pop-up food drives and “grocery buddies” are emerging around the country as SNAP hangs in the balance.Instacart, DoorDash, and Gopuff are among the companies offering discounts to SNAP recipients right now.Video below: Wisconsin bakery offers free bread to support locals facing food benefit lossTrump reaches deal with China while visiting AsiaTrump revealed plans to reduce tariffs on China and announced new trade agreements following a meeting with Chinese President Xi Jinping.Here are some takeaways from the agreement.China also said it will work with the U.S. to resolve issues related to TikTok, potentially finalizing a new ownership deal for the app. While in Asia, Trump met with Japan’s new prime minister, Sanae Takaichi, and announced roughly $500 billion in Japanese investments in the U.S.During his visit to Japan, Trump bragged about the state of the U.S. economy. However, experts say the reality for millions of Americans is not as rosy.Trump announced on social media Thursday, after meeting with the South Korean President Lee Jae Myung, that the U.S. will begin sharing nuclear submarine technology with the Asian country.Video below: President Trump delivers remarks at Yokosuka Naval Base aboard the USS George WashingtonIn other newsTrump is urging Republicans to eliminate the Senate filibuster to reopen the government, but GOP leadership is resisting the move.What is a filibuster and why does Trump want to get rid of it during the shutdown?Could Trump legally run for a third term? Experts say it’s nearly impossible. Here’s why.A federal judge in San Francisco on Tuesday indefinitely barred the Trump administration from firing federal employees during the government shutdown.A judge in D.C. blocked Trump’s proof-of-citizenship mandate for federal voter registration, calling it unconstitutional.Four Republicans joined Democrats in backing a Senate resolution to undo Trump’s tariffs around the globe.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.Trump announced plans to begin testing nuclear weapons, raising fears of a new arms race as Russia and China respond with warnings.A Senate hearing for Trump’s surgeon general pick, Casey Means, has been postponed because she went into labor.The federal workforce grew 11% in the past decade. Here are the jobs that had the most and least growth.U.N. High Commissioner for Human Rights Volker Türk said that U.S. military strikes against boats on boats allegedly carrying illegal drugs from South America are “unacceptable” and must stop.Video below: What is the nuclear option? President Trump demands GOP end filibuster, Republicans say no

    Two federal judges ruled that the Trump administration must use emergency funds to keep SNAP afloat during the shutdown. President Donald Trump visited Asia, striking a trade deal with China. Speculation about a Trump third term heated up again, despite its near impossibility. And judges made consequential rulings regarding federal workers and voter registration.

    Here are the top stories involving the U.S. government this past week.

    SNAP crisis as shutdown drags on

    Video below: Wisconsin bakery offers free bread to support locals facing food benefit loss

    Trump reaches deal with China while visiting Asia

    • Trump revealed plans to reduce tariffs on China and announced new trade agreements following a meeting with Chinese President Xi Jinping.
    • Here are some takeaways from the agreement.
    • China also said it will work with the U.S. to resolve issues related to TikTok, potentially finalizing a new ownership deal for the app.
    • While in Asia, Trump met with Japan’s new prime minister, Sanae Takaichi, and announced roughly $500 billion in Japanese investments in the U.S.
    • During his visit to Japan, Trump bragged about the state of the U.S. economy. However, experts say the reality for millions of Americans is not as rosy.
    • Trump announced on social media Thursday, after meeting with the South Korean President Lee Jae Myung, that the U.S. will begin sharing nuclear submarine technology with the Asian country.

    Video below: President Trump delivers remarks at Yokosuka Naval Base aboard the USS George Washington

    In other news

    Video below: What is the nuclear option? President Trump demands GOP end filibuster, Republicans say no

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  • ‘Everyone is doing well’: President Trump praises economy amid layoffs, potential SNAP crisis

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    ‘Everyone is doing well’: President Trump praises economy amid layoffs, potential SNAP crisis

    President Trump promotes economic prosperity during his visit to Japan, while layoffs and a federal shutdown threaten millions back in the U.S.

    Updated: 3:03 PM PDT Oct 28, 2025

    Editorial Standards ⓘ


    White House Correspondent

    President Donald Trump is promoting Japanese companies investing $550 billion in the United States while visiting the East Asian country. The president said the funds would be “at my direction” as part of a trade framework secured with Japan. The president also boasted about the U.S. economy, despite contrasting economic challenges.”Well, everyone in our country is now doing well. My first term, we built the greatest economy in the history of the world. We had an economy like nobody has seen before now. We’re doing it again, but this time, actually, it’s going to be much bigger, much stronger,” Trump said.The president highlighted the stock market reaching all-time highs, but economists point to other indicators that tell a different story. Amazon announced it is cutting 14,000 jobs, UPS is eliminating roughly 48,000 positions and closing more than 90 buildings as part of a turnaround plan, and Target, Ford, and GM have also announced layoffs amid slowing demand. Additionally, the federal government shutdown threatens food aid benefits for more than 40 million Americans as soon as Nov. 1, and September’s CPI data showed prices are rising again just as the Federal Reserve has cut interest rates to support the economy.”I don’t really understand the optimism to be perfectly honest, and I’m a very optimistic, very little of a ‘doomer’ person. We’ve had seven months in a row of contractions and manufacturing output. The labor market cooled to such an extent that it forced the Fed to cut rates in September,” said Jai Kedia from the Cato Institute.President Trump is preparing to meet with Chinese President Xi Jinping amid the ongoing U.S.–China trade war. Treasury Secretary Scott Bessent said the two countries have reached a “very successful framework” ahead of their summit, covering tariffs, rare-earth exports and large U.S. agricultural purchases.Meanwhile, 26 states and Washington, D.C., are suing the USDA, arguing the agency has contingency funds that could be used to maintain SNAP benefits during the shutdown. In a memo, the USDA stated that those funds can only be used for a natural disaster or other emergency, not to operate during a shutdown, and placed the blame on Senate Democrats, saying, “We are approaching an inflection point for Senate Democrats. Continue to hold out for the Far-Left wing of the party or reopen the government so mothers, babies, and the most vulnerable among us can receive timely WIC and SNAP allotments.” The states argue the law requires the USDA to issue benefits as long as money is available.It comes after another failed vote occurred today in the Senate. A federal judge in San Francisco has issued a preliminary injunction blocking the Trump administration from firing federal workers during the government shutdown. This move comes as a lawsuit challenges recent job cuts in education, health, and other areas.For more coverage from the Washington News Bureau here:

    WASHINGTON —

    President Donald Trump is promoting Japanese companies investing $550 billion in the United States while visiting the East Asian country. The president said the funds would be “at my direction” as part of a trade framework secured with Japan.

    The president also boasted about the U.S. economy, despite contrasting economic challenges.

    “Well, everyone in our country is now doing well. My first term, we built the greatest economy in the history of the world. We had an economy like nobody has seen before now. We’re doing it again, but this time, actually, it’s going to be much bigger, much stronger,” Trump said.

    The president highlighted the stock market reaching all-time highs, but economists point to other indicators that tell a different story.

    Amazon announced it is cutting 14,000 jobs, UPS is eliminating roughly 48,000 positions and closing more than 90 buildings as part of a turnaround plan, and Target, Ford, and GM have also announced layoffs amid slowing demand.

    Additionally, the federal government shutdown threatens food aid benefits for more than 40 million Americans as soon as Nov. 1, and September’s CPI data showed prices are rising again just as the Federal Reserve has cut interest rates to support the economy.

    “I don’t really understand the optimism to be perfectly honest, and I’m a very optimistic, very little of a ‘doomer’ person. We’ve had seven months in a row of contractions and manufacturing output. The labor market cooled to such an extent that it forced the Fed to cut rates in September,” said Jai Kedia from the Cato Institute.

    President Trump is preparing to meet with Chinese President Xi Jinping amid the ongoing U.S.–China trade war. Treasury Secretary Scott Bessent said the two countries have reached a “very successful framework” ahead of their summit, covering tariffs, rare-earth exports and large U.S. agricultural purchases.

    Meanwhile, 26 states and Washington, D.C., are suing the USDA, arguing the agency has contingency funds that could be used to maintain SNAP benefits during the shutdown.

    In a memo, the USDA stated that those funds can only be used for a natural disaster or other emergency, not to operate during a shutdown, and placed the blame on Senate Democrats, saying, “We are approaching an inflection point for Senate Democrats. Continue to hold out for the Far-Left wing of the party or reopen the government so mothers, babies, and the most vulnerable among us can receive timely WIC and SNAP allotments.”

    The states argue the law requires the USDA to issue benefits as long as money is available.

    It comes after another failed vote occurred today in the Senate. A federal judge in San Francisco has issued a preliminary injunction blocking the Trump administration from firing federal workers during the government shutdown. This move comes as a lawsuit challenges recent job cuts in education, health, and other areas.

    For more coverage from the Washington News Bureau here:

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  • Trump immigration policies would slash workforce estimate by 15.7 million and slow GDP growth by a third over the next decade, study says | Fortune

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    The U.S. immigration crackdown will cause net job losses in the millions and will lower the annual rate of economic growth by almost one-third over the next decade, a new study estimates.

    The Trump administration’s policies aimed at legal and illegal immigration would reduce the projected number of workers by 6.8 million by 2028 and 15.7 million by 2035, the National Foundation for American Policy’s study released Friday found. People entering the workforce won’t fully make up for the job losses, leading to a net reduction in the labor force by a projected 4 million workers by 2028 and 11 million in 2035. 

    “With the U.S.-born population aging and growing at a slower rate, immigrants have become an essential part of American labor force growth,” the think tank, which focuses on trade and immigration, said.

    In fact, immigrant workers were responsible for 84.7% of the labor force growth in America between 2019 and 2024, according to the report. 

    The study takes into account many of Trump’s far-reaching immigration policies for those eligible to work in the country, including reducing and suspending refugee admissions, a travel ban on 19 countries, ending Temporary Protected Status, and prohibiting international students from working on Optional Practical Training and STEM OPT after completing their coursework. The analysis does not account for a new policy that requires U.S. companies to shell out $100,000 in one-time fees for new H-1B visas.

    Labor reduction

    Trump’s immigration crackdown is already having an impact on the labor force.

    The Bureau of Labor Statistics household survey shows a decline of 1.1 million foreign-born workers since the start of the Trump administration in January through August, according to the report.

    And of the 6.8 million fewer projected workers in the U.S. labor force by 2028, 2.8 million would be due to changes in legal immigration policies, while 4 million would result from policies on illegal immigration, the study said

    At the same time, it doesn’t look as though U.S.-born workers are entering the workforce en masse as foreign-born workers exit, the report said. Instead, the labor force participation rate for U.S.-born workers aged 16 and older has ticked lower to 61.6% in August from 61.7% last year, according to the report.

    Labor economist and senior fellow at NFAP Mark Regets, said in the report it’s “wrong” to assume a decline in immigration helps U.S. workers when job growth slows.

    “Immigrants both create demand for the goods and services produced by U.S.-born workers and work alongside them in ways that increase productivity for both groups,” Regrets said. “While it is just one factor, we shouldn’t be surprised that opportunities for U.S.-born workers are falling at the same time an estimated one million fewer immigrants may be in the labor force.”

    But the White House says there’s a large pool of available U.S.-born workers.

    “Over one in ten young adults in America are neither employed, in higher education, nor pursuing some sort of vocational training.” White House spokeswoman Abigail Jackson told Fortune in a statement, referencing a July 2024 CNBC article. “There is no shortage of American minds and hands to grow our labor force, and President Trump’s agenda to create jobs for American workers represents this Administration’s commitment to capitalizing on that untapped potential while delivering on our mandate to enforce our immigration laws.”

    Economic fallout

    Previous reports have warned Trumps’ immigration policies also threaten negative economic consequences.

    In September, the Congressional Budget Office projected 290,000 immigrants will be removed from the country between 2026 and 2029, which may create a labor shortage and drive up inflation.

    And according to the NFAP study, Trump’s immigration policies will lower the projected average annual economic growth rate to 1.3% from 1.8% between fiscal year 2025 to fiscal year 2035. 

    There are also ramifications for the agriculture industry and food production. The Labor Department admitted earlier this month in a filing in the Federal Register that Trump’s immigration crackdown risked a “labor shortage exacerbated by the near total cessation of the inflow of illegal aliens.”

    That’s not the only sector feeling the talent squeeze.

    The $100,000 one-time fee for workers applying for new H-1B visas is expected to disrupt companies including Amazon, Microsoft and Meta, since they heavily recruit workers under this status. 

    And the policies are projected to have far-ranging effects on most areas of business, including a potential loss of hundreds of thousands of immigrant workers in sectors like information and educational and health services.

    In addition, individuals affected by Trump’s travel ban on 19 different countries represent a significant part of the economy, the American Immigration Council, a nonprofit research organization and advocacy group, has estimated.

    Households led by the recent arrivals from the countries earned $3.2 billion in household income, paid $715.6 million in federal, state and local taxes and held $2.5 billion in spending power, according to AIC.

    “These nationals made important contributions in U.S. industries that are facing labor shortages and rely on foreign-born workers,” like hospitality, construction, retail trade and manufacturing, the report said.

    But the White House said Trump will continue “growing our economy, creating opportunity for American workers, and ensuring all sectors have the workforce they need to be successful.”

    Nan Wu, research director at AIC told Fortune the recent NFAP study may not even fully capture the broader impact of the Trump administration’s immigration enforcement efforts. 

    “Given the unprecedented scale of these actions, it’s difficult to quantify the chilling effect they may have on immigrants who might otherwise choose to move to or remain in the United States,” Wu said. “For instance, international students—who are a critical source of high-skilled talent—may increasingly opt to pursue education or career opportunities in other countries. This shift could significantly disrupt the U.S. talent pipeline, particularly in sectors that rely heavily on STEM expertise and innovation.”

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  • Retailers delay holiday hiring amid tariffs, slowdown | Long Island Business News

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    In Brief:
    • Retailers are delaying or reducing seasonal hiring due to and .
    • Analysts predict holiday job gains may fall to the lowest level since 2009.
    • Major chains like Bath & Body Works and Radial are scaling back seasonal hires.
    • Experts forecast smaller holiday spending growth compared to last year.

    Uncertainty over the economy and tariffs is forcing retailers to pull back or delay plans to hire who pack orders at distribution centers, serve shoppers at stores and build holiday displays during the most important selling season of the year.

    American Christmas LLC, which creates elaborate holiday installations for commercial properties such as New York’s Rockefeller Center and Radio City Music Hall, plans to hire 220 temporary workers and is ramping up recruitment nearly two months later than usual, CEO Dan Casterella said. Last year, it took on 300 people during its busy period.

    The main reason? The company wants to offset its tariff bill, which Casterella expects to be as big as $1.5 million this year, more than double last year’s $600,000.

    “The issue is if you overstaff and then you underperform, it’s too late,” Casterella said. ”I think everyone’s more mindful now than ever. ”

    could fall to 2009 levels

    Online behemoth Inc. said Monday it intends to hire 250,000 full-, part-time and seasonal workers for the crucial shopping period, the same level as a year ago.

    But job placement firm Challenger, Gray & Christmas forecasts overall holiday hiring for the last three months of the year will likely fall under 500,000 positions. That’s fewer than last year’s 543,000 level and also marks the smallest seasonal gain in 16 years when retailers hired 495,800 temporary workers, the firm said.

    Among other companies cutting holiday payrolls: Radial, an e-commerce company that powers deliveries for roughly 120 companies like Lands’ End and Cole Haan and operates 20 fulfillment sites. It plans to hire 6,500 workers, fewer than last year’s 7,000, and is waiting to the last minute to ramp up hiring for some of its clients, chief human resources officer Sabrina Wnorowski, said.

    Bath & Body Works, based in Reynoldsburg, Ohio, said it plans to hire 32,000 workers, below the 32,700 a year ago.

    “We saw real strong signals that there’s been a cooling in the , even beyond what our expectations were in the first nine months of the year,” Challenger’s senior vice president Andy Challenger said.

    Challenger also noted companies are using artificial intelligence bots to replace some workers, particularly those working in call centers. And he’s also seeing companies hiring workers closer to when they need them.

    Meanwhile, the list of companies staying mum about their specific holiday hiring goals keeps growing. Target Corp., UPS and Macy’s are declining to offer figures, a departure from years past.

    Holiday hiring: the first clues to what’s in store for spending

    Retailers’ hiring plans mark the first clues to what’s in store for the U.S. season and come as the U.S. job market has lost momentum this year, partly because Trump’s trade wars have created uncertainty that’s paralyzing managers trying to make hiring decisions.

    The Labor Department reported in early September that U.S. employers — companies, government agencies and nonprofits — added just 22,000 jobs in August, down from 79,000 in July and well below the 80,000 that economists had expected.

    The government shutdown, which started Oct. 1 and has delayed the release of economic reports, could worsen the job picture.

    In an attempt to exert more pressure on Democratic lawmakers as the government shutdown continues, the White House budget office said Friday mass firings of federal workers have started.

    Analysts will be closely monitoring the shutdown’s impact on spending. For now, many retailers say that consumers, while resilient, are selective. Analysts will also be watching how shoppers will react to price increases as a result of high tariff costs in the next few months, experts said.

    Given an economic slowdown, holiday spending growth is expected to be smaller than a year ago, according to several forecasts.

    Mastercard SpendingPulse, which tracks spending across all payment methods including cash, predicts that holiday sales will be up 3.6% from Nov. 1 through Dec. 24. That compares with a 4.1% increase last year.

    Deloitte Services LP forecasts holiday sales to be up between 2.9% to 3.4% from Nov. 1 through Jan. 31. That’s compares with 4.2% last year.

    And Adobe expects U.S. online sales to hit $253.4 billion from Nov. 1 to Dec. 31, representing a 5.3% growth. That’s smaller than last year’s 8.7% growth.

    A more flexible approach

    Companies are increasingly wanting to hire workers closer to when they need them, experts said.

    “In today’s environment, brands are really looking for us to be agile,” Radial’s Wnorowski said.

    So for some of its clients, Radial will now be hiring two weeks before Thanksgiving weekend, the traditional start for the season, instead of four weeks before the kickoff. Radial is also training holiday hires faster with new technology that’s simplifying their tasks. It used to take a couple of days to train a worker, but now it only takes a couple of hours, she said.

    Meanwhile, Target will offer current workers additional hours and then will tap into a separate pool of workers— 43,000— who pick up shifts. The Minneapolis-based company also hires seasonal workers across its nearly 2,000 stores and more than 60 distribution facilities to meet demand, it said.

    For the past few years, Walmart, the largest private employer, has been offering its workers extra hours available during the holidays, a Walmart spokesperson said, noting it’s worked well and the feedback from customers and workers has been “overwhelmingly positive.”

    The Bentonville, Arkansas-based retailer said there may be some seasonal hiring on a store-by-store basis, but most locations will dole out those hours to current workers.

    Economic data blackout could create challenges

    Waiting until the last minute to hire could mean a mad scramble to find talent, but companies say that with the slowing economy, they don’t anticipate having a hard time.

    Meanwhile, the temporary halt of the release of economic reports leaves retailers in the dark about sales forecasts and the workers they may need.

    “Certainly, for our customers not having access to data will put more of a challenge on their ability to forecast,” Wnorowski of Radial said. “But we’ll stay very close to them as we go into peak and we’ll adjust as soon we see things changing.”


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  • Trump, Congress clash triggers government shutdown | Long Island Business News

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    In Brief:
    • About 750,000 face or firings
    • dispute stalls budget negotiations
    • Shutdown could trigger nationwide economic ripple effects
    • Smithsonian museums open briefly, but parks face closures

    Plunged into a , the U.S. is confronting a fresh cycle of uncertainty after President Donald Trump and Congress failed to strike an agreement to keep government programs and services running by Wednesday’s deadline.

    Roughly 750,000 federal workers are expected to be furloughed, some potentially fired by Trump’s Republican administration. Many offices will be shuttered, perhaps permanently, as Trump vows to “do things that are irreversible, that are bad” as retribution. His deportation agenda is expected to run full speed ahead, while education, environmental and other services sputter. The economic fallout is expected to ripple nationwide.

    “We don’t want it to shut down,” Trump said at the White House before the midnight deadline.

    But the president, who met privately with congressional leadership this week, appeared unable to negotiate any deal between Democrats and Republicans to prevent that outcome.

    This is the third time Trump has presided over a federal funding lapse, the first since his return to the White House this year, in a remarkable record that underscores the polarizing divide over budget priorities and a political climate that rewards hard-line positions rather than more traditional compromises.
    Plenty of blame being thrown around

    The Democrats picked this fight, which was unusual for the party that prefers to keep government running, but their voters are eager to challenge the president’s second-term agenda. Democrats are demanding funding for care subsidies that are expiring for millions of people under the Affordable Care Act, spiking the costs of insurance premiums nationwide.

    Republicans have refused to negotiate and have encouraged Trump to steer clear of any talks. After the White House meeting, the president posted a cartoonish fake video mocking the Democratic leadership that was widely viewed as unserious and racist.

    Vice President JD Vance on Wednesday said Republicans want to resolve the health care issues that concern Democrats but will not negotiate until the government reopens.

    Until then, he stressed, people and federal workers will be affected in a variety of ways, and, as examples, he cited people on federal food assistance programs, potential flight delays for air travelers and service members not getting paid while they report for duty.

    “It’s craziness, and people are going to suffer because of this,” Vance said on Fox News Channel’s “Fox & Friends.”

    What neither side has devised is an easy off-ramp to prevent what could become a protracted closure. The ramifications are certain to spread beyond the political arena, upending the lives of Americans who rely on the government for benefit payments, work contracts and the various services being thrown into turmoil.

    “What the government spends money on is a demonstration of our country’s priorities,” said Rachel Snyderman, a former White House budget official who is the managing director of economic policy at the Bipartisan Policy Center, a think tank in Washington.

    Shutdowns, she said, “only inflict economic cost, fear and confusion across the country.”
    Economic fallout expected to ripple nationwide

    An economic jolt could be felt in a matter of days. The government is expected Friday to produce its monthly jobs report, which may or may not be delivered.

    While the financial markets have generally “shrugged” during past shutdowns, according to a Goldman Sachs analysis, this one could be different partly because there are no signs of broader negotiations.

    “There are also few good analogies to this week’s potential shutdown,” the analysis said.

    Across the government, preparations have been underway. Trump’s Office of Management and Budget, headed by Russ Vought, directed agencies to execute plans for not just furloughs, as are typical during a federal funding lapse, but mass firings of federal workers. It’s part of the ‘s mission, including its Department of Government Efficiency, to shrink the federal government.
    What’s staying open and shutting down

    The Medicare and Medicaid health care programs are expected to continue, though staffing shortages could mean delays for some services. The Pentagon would still function. And most employees will stay on the job at the Department of Homeland Security.

    But Trump has warned that the administration could focus on programs that are important to Democrats, “cutting vast numbers of people out, cutting things that they like, cutting programs that they like.”

    As agencies sort out which workers are essential, or not, Smithsonian museums are expected to stay open at least until Monday. A group of former national park superintendents urged the Trump administration to close the parks to visitors, arguing that poorly staffed parks in a shutdown are a danger to the public and put park resources at risk.
    No easy exit as health care costs soar

    Ahead of Wednesday’s start of the fiscal year, House Republicans had approved a temporary funding bill, over opposition from Democrats, to keep government running into mid-November while broader negotiations continue.

    But that bill has failed repeatedly in the Senate, including late Tuesday. It takes a 60-vote threshold for approval, which requires cooperation between the two parties. A Democratic bill also failed. With a 53-47 GOP majority, Democrats are leveraging their votes to demand negotiation.

    Senate Majority Leader John Thune has said Republicans are happy to discuss the health care issue with Democrats — but not as part of talks to keep the government open. More votes are expected Wednesday.

    The standoff is a political test for Senate Democratic leader Chuck Schumer, who has drawn scorn from a restive base of left-flank voters pushing the party to hold firm in its demands for health care funding.

    “Americans are hurting with higher costs,” Schumer said after the failed vote Tuesday.

    House Speaker Mike Johnson sent lawmakers home nearly two weeks ago after having passed the GOP bill, blaming Democrats for the shutdown.

    “They want to fight Trump,” Johnson said Tuesday on CNBC. “A lot of good people are going to be hurt because of this.”

    Trump, during his meeting with the congressional leaders, expressed surprise at the scope of the rising costs of health care, but Democrats left with no path toward talks.

    During Trump’s first term, the nation endured its longest-ever shutdown, 35 days, over his demands for funds Congress refused to provide to build his promised U.S.-Mexico border wall.

    In 2013, the government shut down for 16 days during the Obama presidency over GOP demands to repeal and replace the Affordable Care Act, also known as Obamacare. Other closures date back decades.


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  • Ken Griffin has a warning for Trump and the GOP: ‘I would not underestimate how grating a 3% inflation rate could be’ on Americans | Fortune

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    For Citadel CEO Ken Griffin, the political implications of still-elevated inflation are not lost on him.

    Inflation has come down a lot from 9% in 2022 to 2.9% in the government’s latest CPI report. Core PCE prices, the Fed’s favorite gauge of inflation, rose 2.9% in August, matching July’s climb. 

    But inflation has been sticky as tariffs take hold, and Griffin predicted inflation will continue to be in the mid-2% to 3% range next year, still above the Fed’s 2% target.

    “The American voters have been exhausted of inflation,” he told CNBC on Thursday.

    In 2024, the high cost of living was a focal point in Trump’s reelection campaign, and Biden-era inflation hurt Democrats. They lost the White House and Congress, while Trump won all seven swing states.

    Many voters blamed Democratic policies—including stimulus spending—for sustained, high costs, exit polls found.

    “There’s no doubt that the president and the Republicans came to power on the back of frustration with inflation,” Griffin said. “I would not underestimate how grating a 3% inflation rate could be to tens of millions of American households.”

    Inflation could feature heavily in midterm elections next year, as the Republican Party looks to defend narrow majorities in the House and Senate. And voters are souring on Trump’s economy.

    A recent Reuters/Ipsos poll showed only 28% of respondents approved of Trump’s handling of their cost of living. A YouGov/Economist poll put Trump’s approval rating on the economy at an all-time low of 35%.

    One indicator of affordability has been a thorn in Trump’s side: high mortgage rates. Yet as Trump looks to the Fed for homeowner relief, many worry about political influence over the independent body.

    Trump has been criticized lately for pressuring the Federal Reserve and threatening its independence. Critics argue that his efforts to appoint loyalists to the Fed, public calls to lower interest rates, and attempts to remove a sitting governor represent a clear move to sway monetary policy for political purposes. 

    Griffin advised that continued Fed independence would be in Trump’s interest.

    “If I were the president, I would let the Fed do their job,” he said. “I would let the Fed have as much perceived and real independence as possible, because the Fed often has to make choices that are pretty painful to make.”

    The Federal Open Market Committee cut interest rates by a fourth of a percent earlier this month to buoy a slowing labor market. The move comes after months of continued pressure from the Trump administration on Fed Chair Jerome Powell and other committee members to cut rates.

    Still, President Donald Trump has been vocal about cutting rates further, even though the move likely will risk further price increases. 

    Griffin warned that erosion of Fed independence could lead to Americans conflating the White House and central bank.

    “If the president’s perceived as being in control of the Fed, then what happens when those painful choices have to be made?”

    Fortune Global Forum returns Oct. 26–27, 2025 in Riyadh. CEOs and global leaders will gather for a dynamic, invitation-only event shaping the future of business. Apply for an invitation.

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  • What oil CEOs really think about Trump’s management of the oil sector: ‘Those who can are running for the exits’ | Fortune

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    Oil companies may have President Donald Trump cheering them on from the bully pulpit. But in the oil patch, the mood is anything but celebratory.

    New data on Wednesday from the Dallas Fed Energy Survey,  which polled oil and gas executives at 139 firms across Texas, northern Louisiana and southern New Mexico in mid-September, shows oil and gas activity slipped again in the third quarter of 2025, weighed down by soaring costs, policy uncertainty, and the chaos of new tariffs.

    The survey’s broadest measure of business conditions, the business activity index, came in at –6.5, marking the second consecutive quarter of contraction.

    The outlook was even gloomier. The company outlook index plunged to –17.6 from –6.4, while more than 44% of firms said uncertainty remains elevated. Production of both oil and natural gas ticked lower, while costs for everything from drilling to equipment leasing surged.

    ‘The noise and chaos is deafening‘

    Executives were blunt in the anonymous comments that come out with the survey each quarter.

    “The uncertainty from the administration’s policies has put a damper on all investment in the oilpatch,” one wrote. “Those who can are running for the exits.”

    Another added that “the administration’s tariffs, particularly on steel and aluminum at fifty percent, are increasing our cost of business.”

    For exploration and production firms, finding and development costs doubled this quarter, while lease operating expenses also jumped sharply.

    Oilfield services firms reported their margins are still deeply negative, with one describing the sector as “bleeding.”

    The tariffs are cutting deep: operators said higher costs for tubular steel, heavy material, and imported components are making wells uneconomic.

    “Tariffs continue to increase the cost of production. We are suffering from a combination of increased cost due to tariffs and downward pricing pressure from end users,” one services executive said.

    A grim investment climate

    That mix of weak prices and high costs has throttled capital spending. The survey found capital expenditures are falling sharply, with the index dropping to –11.6 from –3.0.

    One operator emphasized that the uncertainty from regulatory policy was putting a damper on the spending.

    “Day-to-day changes to energy policy is no way for us to win as a country,” the operator said. “Investors avoid investing in energy because of the volatility … and the ‘stroke of pen’ risk that the federal government wields.”

    The gloom is reflected in price expectations. Respondents now see West Texas Intermediate crude ending 2025 at just $63 a barrel,  barely above where it traded during the survey period. Two years out, the consensus rises modestly to $69, and to $77 five years from now, levels many independents say are too low to justify new drilling.

    The shale dream frays

    A decade ago, U.S. shale was hailed as the world’s most dynamic energy engine. Now, industry insiders describe it as broken, even as Trump removes tax credits for renewables.

    “The collapse of capital availability has fueled consolidation by the majors, pushing out independents and entrepreneurs who once defined the shale revolution,” one respondent said. “In their place, a handful of giants now dominate but at the cost of enormous job loss and the destruction of the innovative, risk-taking culture that made the U.S. shale industry great.”

    Others warned that the sector is being whipsawed by politics from both parties.

    “The sword being wielded against the renewables industry right now will likely boomerang back in 3.5 years against traditional energy,” one said, pointing to methane penalties and permitting fights that could return with a vengeance.

    While Trump insists domestic drilling will fuel an American energy renaissance, the very policies his administration is pushing are raising costs, curbing investment, and leaving many operators sitting on their hands.

    “The oil industry is once again going to lose valuable employees,” one executive lamented. “Drilling is going to disappear.”

    Fortune Global Forum returns Oct. 26–27, 2025 in Riyadh. CEOs and global leaders will gather for a dynamic, invitation-only event shaping the future of business. Apply for an invitation.

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  • Powell signals Federal Reserve to move slowly on interest rate cuts | Long Island Business News

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    In Brief:
    • Powell warns against cutting rates too aggressively, citing risks
    • Trump appointees Miran and Bowman push for faster, deeper cuts
    • Fed cut its key rate to 4.1% last week, first reduction this year
    • Divisions deepen within Fed as job market softens and inflation lingers

    Chair on Tuesday signaled a cautious approach to future interest rate cuts, in sharp contrast with other Fed officials this week who have called for a more urgent approach.

    In remarks in Providence, Rhode Island, Powell noted that there are risks to both of the Fed’s goals of seeking maximum employment and stable prices. But with the rate rising, he noted, the Fed agreed to cut its key rate last week. Yet he did not signal any further cuts on the horizon.

    If the Fed were to cut rates “too aggressively,” Powell said, “we could leave the inflation job unfinished and need to reverse course later” and raise rates. But if the Fed keeps its rate too high for too long, “the labor market could soften unnecessarily,” he added.

    Powell’s remarks echoed the caution he expressed during a news conference last week, after the Fed announced its first rate cut this year. At that time he said, “it’s challenging to know what to do.”

    The careful approach he outlined is quite different from that of some other members of the Fed’s rate-setting committee, particularly those who were appointed by President Donald Trump, who are pushing for faster cuts. On Monday, said the Fed should quickly reduce its rate to as low as 2% to 2.5%, from its current level of about 4.1%. Miran was appointed by Trump this month and rushed through the Senate, taking his seat just hours before the Fed met last Tuesday. He is also a top adviser in the Trump administration and expects to return to the White House after his term expires in January, though Trump could appoint him to a longer term.

    And earlier Tuesday, Fed governor also said the central bank should cut more quickly. Bowman, who was appointed by Trump in his first term, said inflation appears to be cooling while the job market is stumbling, a combination that would support lower rates.

    When the Fed cuts its key rate, it often over time reduces other borrowing costs for things like mortgages, car loans, and business loans.

    “It is time for the (Fed) to act decisively and proactively to address decreasing labor market dynamism and emerging signs of fragility,” Bowman said in a speech in Asheville, North Carolina. “We are at serious risk of already being behind the curve in addressing deteriorating labor market conditions. Should these conditions continue, I am concerned that we will need to adjust policy at a faster pace and to a larger degree going forward.”

    Yet Powell’s comments showed little sign of such urgency. Other Fed officials have also expressed caution about cutting rates too fast, reflecting deepening divisions on the rate-setting committee.

    On Tuesday, , president of the Federal Reserve’s Chicago branch, said in an interview on CNBC that the Fed should move slowly given that inflation is above its 2% target.

    “With inflation having been over the target for 4 1/2 years in a row, and rising, I think we need to be a little careful with getting overly up-front aggressive,” he said.

    Last week the Fed cut its key rate for the first time this year to about 4.1%, down from about 4.3%, and policymakers signaled they would likely reduce rates twice more. Fed officials said in a statement that their concerns about slower hiring had risen, though they noted that inflation is still above their 2% target.

    In a question and answer session, Powell said that tariffs, so far, have had a fairly limited impact on inflation, though he suggested that could change.

    He said U.S. companies are paying most of the tariffs, which contradicts Trump administration claims that overseas companies are shouldering the payments. But he said that the pass-through of tariff costs to consumers “has been later and less than we expected.”

    He also said the Fed continues to tune out attacks against it and added that the Fed does not consider when making its decisions. Powell and the Fed have been under steady attack from Trump, though Powell did not name him.

    “Whenever we make decisions, we’re never, ever thinking about political things,” Powell said. “Truth is, mostly people who are calling us political, it’s just a cheap shot. … We don’t get into back and forth with external people.”


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  • Citi: time to embrace volatility and take positions off ice

    Citi: time to embrace volatility and take positions off ice

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    Citi Private Bank's Toby Gresham lists sectors set to benefit as the interest rate cut cycle begins.

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  • How a rare type of mortgage is landing homebuyers a 3% rate

    How a rare type of mortgage is landing homebuyers a 3% rate

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    As mortgage rates stagnate around 6%, prospective homebuyers are feeling nostalgic for the 3% interest rates of 2020 and 2021. Google search results for the term “assumable mortgage” spiked in May, following a steady upward trend starting in 2022.

    Mortgage assumptions allow buyers to take over an existing mortgage at its current rate, possibly securing mortgage rates as low as 2% or 3% depending on when the original mortgage was taken out.

    Mortgage assumptions were a popular way to buy a house in the 1970s and 1980s but have largely fallen out of public consciousness. The Garn St.-Germain Act of 1982 allowed private lenders to enforce a due-on-sale clause, requiring payment in full if a property changes hands, making assumable mortgages near obsolete outside of divorce and property inheritance.

    Now a rarer find in the U.S. housing market, a specific subsect of mortgages can still be assumed by outside buyers: Veterans Affairs, Federal Housing Administration, and United States Department of Agriculture mortgages.

    “Twenty percent to 25% of the homes on the market will be fully assumable at one time,” says Raunaq Singh, Roam founder and CEO. But, “the number of assumption transactions that are happening is far fewer than the number of mortgages which can be assumed.”

    Only 4,052 FHA-backed mortgage assumptions were completed in 2023. Still, that’s a 59% increase compared to 2021, according to numbers provided by the FHA. The VA has seen an even larger jump with 713% more mortgage assumptions in 2023 compared to 2021. Both the VA and FHA are already outpacing last year’s assumption totals at more than 5,000 assumption per department so far in 2024.

    Watch the video above to learn more about assumable mortgages, how they work, and why they can come with their own set of hurdles.

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  • Harris and Trump are tested by the Mideast, Helene and the port strike in the campaign’s final weeks

    Harris and Trump are tested by the Mideast, Helene and the port strike in the campaign’s final weeks

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    A trio of new trials — a devastating hurricane, expanding conflict in the Mideast and a dockworkers strike that threatens the U.S. economy — are looming over the final weeks of the presidential campaign and could help shape the public mood as voters decide between Democrat Kamala Harris and Republican Donald Trump.How events shake out — and how the candidates respond — could be decisive as they claw for votes in battleground states.Related video above: Election 2024: What are the key swing states to watch?The sitting president, Joe Biden, is still the steward of a U.S. economy and foreign policy at this tumultuous moment and may well bear ultimate responsibility for how they play out. But how Harris and Trump approach the three disparate issues could have rippling impact on how Americans perceive their two choices this November.”Unfortunately, there are going to be events like this, and this is where you see the leadership of a president show up,” White House press secretary Karine Jean-Pierre told reporters on Tuesday. “I think this should send a message to Americans: It matters. It matters who sits behind the Resolute Desk.”Harris, with Biden’s help, is trying to display steady calm as a flurry of difficult problems arise all at once. She and Biden on Tuesday toggled between directing Hurricane Helene recovery and rescue response work and huddling with aides in the White House Situation Room to watch as the U.S. helped Israel defend against a massive attack by Iran in retaliation for the killing of Tehran-backed leaders of Lebanese Hezbollah.All the while, they were keeping close contact with economic advisers as dockworkers took to the picket line Tuesday, a walkout stretching from ports in Maine to Texas that threatens to snarl supply chains and cause shortages and higher prices if it stretches on for more than a few weeks.Trump, for his part, lashed out at Harris as in over her head, while claiming that this sort of crush of problems never would have happened under his watch.”We have been talking about World War III, and I don’t want to make predictions,” Trump said at a campaign event in Wisconsin. “The whole world is laughing at us. That’s why Israel was under attack just a little while ago. Because they don’t respect our country anymore.”Yet voters cast Trump aside four years ago in large part because of how they viewed his handling of the swirling economic, social and public health challenges that emerged from the COVID-19 pandemic. Biden, in comments to reporters before meeting with aides Tuesday to discuss the ongoing hurricane response, seemed to acknowledge the growing frustration with the federal response to the massive storm.”I’ve been in frequent contact with the governors and other leaders in the impacted areas, and we have to jumpstart this recovery process,” Biden said. He will travel to the Carolinas on Wednesday to get a closer look at the hurricane devastation. He is also expected to visit hurricane-impacted areas in Georgia and Florida later this week. “People are scared to death. People wonder whether they’re going to make it.” Video below: Biden pledges federal aid after touring devastation from HeleneHarris, meanwhile, headed to Georgia on Wednesday and North Carolina in the coming days to do the same. Tuesday’s vice presidential debate offered a sampling of how the two campaigns were reacting to new developments to bolster their own messages and sharpen their attacks on their rivals. Minnesota Gov. Tim Walz promised “steady leadership” under Harris while Ohio Sen. JD Vance pledged a return to “peace through strength” if Trump is returned to the White House.Biden has stayed off the campaign trail since announcing in July that he was ending his reelection effort amid sliding public approval ratings. His conspicuous absence underscores that Democrats see him as more of a liability than an asset in making the case for Harris, said Christopher Borick, director of the Muhlenberg College Institute of Public Opinion in Pennsylvania.But how well Biden deals with the three latest emergency situations could have a big impact in how undecided voters perceive Harris in these final days.”President Biden can’t help Kamala Harris on the stump,” Borick said. “But in a campaign where you are turning over every rock in a few states to get that undecided voter, how he manages these crises over the next several weeks could have an impact.” The Harris campaign understands the risks it faces with multiple crises converging all at once, especially given their varied and unpredictable nature. A prolonged strike, a bungled disaster response or a further expansion of Middle East conflict could raise doubts about Biden’s leadership, and by extension that of his second-in-command.At the same time, Harris campaign aides believe the perilous moment presents an opportunity to demonstrate to voters the stakes of who’s in the job and the seriousness with which they approach it, according to campaign officials who spoke on the condition of anonymity to discuss internal thinking.The former president, in a speech in Waunakee, Wisconsin, and in social media postings Tuesday, offered a mixture of prayer and concern for those impacted by Helene, jabs at Harris for the dockworkers strike, and an aside about the casting of Stanley Kubrick’s film “Full Metal Jacket.””The situation should have never come to this and, had I been president, it would not have,” Trump said in a statement about the strike.Harris aides made a point of having the vice president deliver brief remarks on the Iranian attack Tuesday in between taping interviews for her campaign, aiming to portray her as ready to take command.Late-term tumult has been fixture in American presidential politics, sometimes in the form of scandal and other times with an incumbent hoping to demonstrate that he or his preferred successor would be a steady head at an uncertain time. George W. Bush pushed a rescue package through Congress to stabilize a reeling financial system by creating the Troubled Asset Relief Program amid fears that the economy was on the verge of collapse. The broader economic conditions didn’t help Republican John McCain in the race he lost to Barack Obama. Jimmy Carter’s reelection campaign in 1980 was paralyzed by the Iran hostage crisis. Fifty-two hostages were released on January 20, 1981, soon after his successor, Ronald Reagan, was inaugurated.Lyndon Johnson announced a halting of bombings in North Vietnam days before the 1968 election, a step he hoped would bring the conflict toward a peace settlement. But the South Vietnamese indicated they would not negotiate and Johnson’s vice president, Hubert Humphrey, lost narrowly to Republican Richard Nixon.”The efforts by incumbents to help themselves or their party’s nominee with ‘October surprises’ go back quite a ways,” said Edward Frantz, a University of Indianapolis historian. “In this current climate, I’m not sure how many voters can be persuaded by a candidate this late in the game trying to show competency.”___AP writer Josh Boak contributed to this report.

    WASHINGTON —

    A trio of new trials — a devastating hurricane, expanding conflict in the Mideast and a dockworkers strike that threatens the U.S. economy — are looming over the final weeks of the presidential campaign and could help shape the public mood as voters decide between Democrat Kamala Harris and Republican Donald Trump.

    How events shake out — and how the candidates respond — could be decisive as they claw for votes in battleground states.

    Related video above: Election 2024: What are the key swing states to watch?

    The sitting president, Joe Biden, is still the steward of a U.S. economy and foreign policy at this tumultuous moment and may well bear ultimate responsibility for how they play out. But how Harris and Trump approach the three disparate issues could have rippling impact on how Americans perceive their two choices this November.

    “Unfortunately, there are going to be events like this, and this is where you see the leadership of a president show up,” White House press secretary Karine Jean-Pierre told reporters on Tuesday. “I think this should send a message to Americans: It matters. It matters who sits behind the Resolute Desk.”

    Harris, with Biden’s help, is trying to display steady calm as a flurry of difficult problems arise all at once.

    She and Biden on Tuesday toggled between directing Hurricane Helene recovery and rescue response work and huddling with aides in the White House Situation Room to watch as the U.S. helped Israel defend against a massive attack by Iran in retaliation for the killing of Tehran-backed leaders of Lebanese Hezbollah.

    All the while, they were keeping close contact with economic advisers as dockworkers took to the picket line Tuesday, a walkout stretching from ports in Maine to Texas that threatens to snarl supply chains and cause shortages and higher prices if it stretches on for more than a few weeks.

    Trump, for his part, lashed out at Harris as in over her head, while claiming that this sort of crush of problems never would have happened under his watch.

    “We have been talking about World War III, and I don’t want to make predictions,” Trump said at a campaign event in Wisconsin. “The whole world is laughing at us. That’s why Israel was under attack just a little while ago. Because they don’t respect our country anymore.”

    Yet voters cast Trump aside four years ago in large part because of how they viewed his handling of the swirling economic, social and public health challenges that emerged from the COVID-19 pandemic.

    Biden, in comments to reporters before meeting with aides Tuesday to discuss the ongoing hurricane response, seemed to acknowledge the growing frustration with the federal response to the massive storm.

    “I’ve been in frequent contact with the governors and other leaders in the impacted areas, and we have to jumpstart this recovery process,” Biden said. He will travel to the Carolinas on Wednesday to get a closer look at the hurricane devastation. He is also expected to visit hurricane-impacted areas in Georgia and Florida later this week. “People are scared to death. People wonder whether they’re going to make it.”

    Video below: Biden pledges federal aid after touring devastation from Helene

    Harris, meanwhile, headed to Georgia on Wednesday and North Carolina in the coming days to do the same.

    Tuesday’s vice presidential debate offered a sampling of how the two campaigns were reacting to new developments to bolster their own messages and sharpen their attacks on their rivals. Minnesota Gov. Tim Walz promised “steady leadership” under Harris while Ohio Sen. JD Vance pledged a return to “peace through strength” if Trump is returned to the White House.

    Biden has stayed off the campaign trail since announcing in July that he was ending his reelection effort amid sliding public approval ratings.

    His conspicuous absence underscores that Democrats see him as more of a liability than an asset in making the case for Harris, said Christopher Borick, director of the Muhlenberg College Institute of Public Opinion in Pennsylvania.

    But how well Biden deals with the three latest emergency situations could have a big impact in how undecided voters perceive Harris in these final days.

    “President Biden can’t help Kamala Harris on the stump,” Borick said. “But in a campaign where you are turning over every rock in a few states to get that undecided voter, how he manages these crises over the next several weeks could have an impact.”

    The Harris campaign understands the risks it faces with multiple crises converging all at once, especially given their varied and unpredictable nature. A prolonged strike, a bungled disaster response or a further expansion of Middle East conflict could raise doubts about Biden’s leadership, and by extension that of his second-in-command.

    At the same time, Harris campaign aides believe the perilous moment presents an opportunity to demonstrate to voters the stakes of who’s in the job and the seriousness with which they approach it, according to campaign officials who spoke on the condition of anonymity to discuss internal thinking.

    The former president, in a speech in Waunakee, Wisconsin, and in social media postings Tuesday, offered a mixture of prayer and concern for those impacted by Helene, jabs at Harris for the dockworkers strike, and an aside about the casting of Stanley Kubrick’s film “Full Metal Jacket.”

    “The situation should have never come to this and, had I been president, it would not have,” Trump said in a statement about the strike.

    Harris aides made a point of having the vice president deliver brief remarks on the Iranian attack Tuesday in between taping interviews for her campaign, aiming to portray her as ready to take command.

    Late-term tumult has been fixture in American presidential politics, sometimes in the form of scandal and other times with an incumbent hoping to demonstrate that he or his preferred successor would be a steady head at an uncertain time.

    George W. Bush pushed a rescue package through Congress to stabilize a reeling financial system by creating the Troubled Asset Relief Program amid fears that the economy was on the verge of collapse. The broader economic conditions didn’t help Republican John McCain in the race he lost to Barack Obama.

    Jimmy Carter’s reelection campaign in 1980 was paralyzed by the Iran hostage crisis. Fifty-two hostages were released on January 20, 1981, soon after his successor, Ronald Reagan, was inaugurated.

    Lyndon Johnson announced a halting of bombings in North Vietnam days before the 1968 election, a step he hoped would bring the conflict toward a peace settlement. But the South Vietnamese indicated they would not negotiate and Johnson’s vice president, Hubert Humphrey, lost narrowly to Republican Richard Nixon.

    “The efforts by incumbents to help themselves or their party’s nominee with ‘October surprises’ go back quite a ways,” said Edward Frantz, a University of Indianapolis historian. “In this current climate, I’m not sure how many voters can be persuaded by a candidate this late in the game trying to show competency.”

    ___

    AP writer Josh Boak contributed to this report.

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  • The Federal Reserve just cut interest rates by a half point. Here’s what that means for your wallet

    The Federal Reserve just cut interest rates by a half point. Here’s what that means for your wallet

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    People shop at a grocery store on August 14, 2024 in New York City. 

    Spencer Platt | Getty Images

    The Federal Reserve announced Wednesday it will lower its benchmark rate by a half percentage point, or 50 basis points, paving the way for relief from the high borrowing costs that have hit consumers particularly hard. 

    The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

    Wednesday’s cut sets the federal funds rate at a range of 4.75%-5%.

    A series of interest rate hikes starting in March 2022 took the central bank’s benchmark to its highest in more than 22 years, which caused most consumer borrowing costs to skyrocket — and put many households under pressure.

    Now, with inflation backing down, “there are reasons to be optimistic,” said Greg McBride, chief financial analyst at Bankrate.com.

    However, “one rate cut isn’t a panacea for borrowers grappling with high financing costs and has a minimal impact on the overall household budget,” he said. “What will be more significant is the cumulative effect of a series of interest rate cuts over time.”

    More from Personal Finance:
    The ‘vibecession’ is ending as the economy nails a soft landing
    ‘Recession pop’ is in: How music hits on economic trends
    More Americans are struggling even as inflation cools

    “There are always winners and losers when there is a change in interest rates,” said Stephen Foerster, professor of finance at Ivey Business School in London, Ontario. “In general, lower rates favor borrowers and hurt lenders and savers.”

    “It really depends on whether you are a borrower or saver or whether you currently have locked-in borrowing or savings rates,” he said.

    From credit cards and mortgage rates to auto loans and savings accounts, here’s a look at how a Fed rate cut could affect your finances in the months ahead.

    Credit cards

    Since most credit cards have a variable rate, there’s a direct connection to the Fed’s benchmark. Because of the central bank’s rate hike cycle, the average credit card rate rose from 16.34% in March 2022 to more than 20% today — near an all-time high.

    Going forward, annual percentage rates will start to come down, but even then, they will only ease off extremely high levels. With only a few cuts on deck for 2024, APRs would still be around 19% in the months ahead, according to McBride.

    “Interest rates took the elevator going up, but they’ll be taking the stairs coming down,” he said.

    That makes paying down high-cost credit card debt a top priority since “interest rates won’t fall fast enough to bail you out of a tight situation,” McBride said. “Zero percent balance transfer offers remain a great way to turbocharge your credit card debt repayment efforts.”

    Mortgage rates

    Although 15- and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power in the last two years, partly because of inflation and the Fed’s policy moves.

    But rates are already significantly lower than where they were just a few months ago. Now, the average rate for a 30-year, fixed-rate mortgage is around 6.3%, according to Bankrate.

    Jacob Channel, senior economist at LendingTree, expects mortgage rates will stay somewhere in the 6% to 6.5% range over the coming weeks, with a chance that they’ll even dip below 6%. But it’s unlikely they will return to their pandemic-era lows, he said.

    “Though they are falling, mortgage rates nonetheless remain relatively high compared to where they stood through most of the last decade,” he said. “What’s more, home prices remain at or near record highs in many areas.” Despite the Fed’s move, “there are a lot of people who won’t be able to buy until the market becomes cheaper,” Channel said.

    Auto loans

    Even though auto loans are fixed, higher vehicle prices and high borrowing costs have stretched car buyers “to their financial limits,” according to Jessica Caldwell, Edmunds’ head of insights.

    The average rate on a five-year new car loan is now more than 7%, up from 4% when the Fed started raising rates, according to Edmunds. However, rate cuts from the Fed will take some of the edge off the rising cost of financing a car — likely bringing rates below 7% — helped in part by competition between lenders and more incentives in the market.

    “Many Americans have been holding off on making vehicle purchases in the hopes that prices and interest rates would come down, or that incentives would make a return,” Caldwell said. “A Fed rate cut wouldn’t necessarily drive all those consumers back into showrooms right away, but it would certainly help nudge holdout car buyers back into more of a spending mood.”

    Student loans

    Federal student loan rates are also fixed, so most borrowers won’t be immediately affected by a rate cut. However, if you have a private loan, those loans may be fixed or have a variable rate tied to the Treasury bill or other rates, which means once the Fed starts cutting interest rates, the rates on those private student loans will come down over a one- or three-month period, depending on the benchmark, according to higher education expert Mark Kantrowitz. 

    Eventually, borrowers with existing variable-rate private student loans may be able to refinance into a less expensive fixed-rate loan, he said. But refinancing a federal loan into a private student loan will forgo the safety nets that come with federal loans, such as deferments, forbearances, income-driven repayment and loan forgiveness and discharge options.

    Additionally, extending the term of the loan means you ultimately will pay more interest on the balance.

    Savings rates

    While the central bank has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate.

    As a result of Fed rate hikes, top-yielding online savings account rates have made significant moves and are now paying more than 5% — the most savers have been able to earn in nearly two decades — up from around 1% in 2022, according to Bankrate.

    If you haven’t opened a high-yield savings account or locked in a certificate of deposit yet, you’ve likely already missed the rate peak, according to Matt Schulz, LendingTree’s credit analyst. However, “yields aren’t going to fall off a cliff immediately after the Fed cuts rates,” he said.

    Although those rates have likely maxed out, it is still worth your time to make either of those moves now before rates fall even further, he advised.

    One-year CDs are now averaging 1.78% but top-yielding CD rates pay more than 5%, according to Bankrate, as good as or better than a high-yield savings account.

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  • It’s a big week for central banks around the world, with a slew of rate moves on the table

    It’s a big week for central banks around the world, with a slew of rate moves on the table

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    Federal Reserve Chair Jerome Powell announces interest rates will remain unchanged during a news conference at the Federal Reserves’ William McChesney Martin Building in Washington, D.C., on June 12, 2024.

    Kevin Dietsch | Getty Images

    A flurry of major central banks will hold monetary policy meetings this week, with investors bracing for interest rate moves in either direction.

    The Federal Reserve’s highly anticipated two-day meeting, which gets underway on Tuesday, is poised to take center stage.

    The U.S. central bank is widely expected to join others around the world in starting its own rate-cutting cycle. The only remaining question appears to be by how much the Fed will reduce rates.

    Traders currently see a quarter-point cut as the most likely outcome, although as many as 41% anticipate a half-point move, according to the CME’s FedWatch Tool.

    Elsewhere, Brazil’s central bank is scheduled to hold its next policy meeting across Tuesday and Wednesday. The Bank of England, Norway’s Norges Bank and South Africa’s Reserve Bank will all follow on Thursday.

    A busy week of central bank meetings will be rounded off when the Bank of Japan delivers its latest rate decision at the conclusion of its two-day meeting on Friday.

    “We’re entering a cutting phase,” John Bilton, global head of multi-asset strategy at J.P. Morgan Asset Management, told CNBC’s “Squawk Box Europe” on Thursday.

    Speaking ahead of the European Central Bank’s most recent quarter-point rate cut, Bilton said the Fed was also set to cut interest rates by 25 basis points this week, with the Bank of England “likely getting in on the party” after the U.K. economy stagnated for a second consecutive month in July.

    “We have all the ingredients for the beginning of a fairly extended cutting cycle but one that is probably not associated with a recession — and that’s an unusual set-up,” Bilton told CNBC’s “Squawk Box Europe.”

    “It means that we get a lot of volatility to my mind in terms of price discovery around those who believe that actually the Fed [is] late, the ECB [is] late, this is a recession and those, like me, that believe that we don’t have the imbalances in the economy, and this will actually spur further upside.”

    Fed decision

    Policymakers at the Fed have laid the groundwork for interest rate cuts in recent weeks. Currently, the Fed’s target rate is sitting at 5.25% to 5.5%.

    Some economists have argued the Fed should deliver a 50 basis point rate cut in September, accusing the central bank of having previously gone “too far, too fast” with monetary policy tightening.

    Others have described such a move as one that would be “very dangerous” for markets, pushing instead for the central bank to deliver a 25 basis point rate cut.

    We'd 'love' to see a 50-basis-point cut by the Fed, analyst says — here's why

    “We are more likely 25 but [would] love to see 50,” David Volpe, deputy chief investment officer at Emerald Asset Management, told CNBC’s “Squawk Box Europe” on Friday.

    “And the reason you do 50 next week would be as more or less a safety mechanism. You have seven weeks between next week and … the November meeting, and a lot can happen negatively,” Volpe said.

    “So, it would be more of a method of trying to get in front of things. The Fed is caught on their heels a little bit, so we think that it would be good if they got in front of it, did the 50 now, and then made a decision in terms of November and December. Maybe they do 25 at that point in time,” he added.

    Brazil and UK

    For Brazil’s central bank, which has cut interest rates several times since July last year, stronger-than-anticipated second-quarter economic data is seen as likely to lead to an interest rate hike in September.

    “We expect Banco Central to hike the Selic rate by 25bps next week (to 10.75%) and bring it to 11.50% by end-2024,” Wilson Ferrarezi, an economist at TS Lombard, said in a research note published on Sept. 11.

    “Further rate hikes into 2025 cannot be ruled out and will depend on the strength of domestic activity in Q4/24,” he added.

    Traffic outside the Central Bank of Brazil headquarters in Brasilia, Brazil, on Monday, June 17, 2024.

    Bloomberg | Bloomberg | Getty Images

    In the U.K., an interest rate cut from the Bank of England (BOE) on Thursday is thought to be unlikely. A Reuters poll, published Friday, found that all 65 economists surveyed expected the BOE to hold rates steady at 5%.

    The central bank delivered its first interest rate cut in more than four years at the start of August.

    “We have quarterly cuts from here. We don’t think they are going to move next week, with a 7-2 vote,” Ruben Segura Cayuela, head of European economics at the Bank of America, told CNBC’s “Squawk Box Europe” on Friday.

    He added that the next BOE rate cut is likely to take place in November.

    South Africa, Norway and Japan

    South Africa’s Reserve Bank is expected to cut interest rates on Thursday, according to economists surveyed by Reuters. The move would mark the first time it has done so since the central bank’s response to the coronavirus pandemic four years ago.

    The Norges Bank is poised to hold its next meeting on Thursday. The Norwegian central bank kept its interest rate unchanged at a 16-year high of 4.5% in mid-August and said at the time that the policy rate “will likely be kept at that level for some time ahead.”

    The Bank of Japan, meanwhile, is not expected to raise interest rates at the end of the week, although a majority of economists polled by Reuters expect an increase by year-end.

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