The Bureau of Labor Statistics reported a 3% annual consumer price growth in September, slightly exceeding August’s 2.9%. While the monthly rate fell from 0.3% to 0.2%, key categories experienced increases. This report, released despite the government shutdown, has implications for the Federal Reserve, which is expected to lower its benchmark rate. Though the inflation rate remains a concern, experts predict fewer interest rate cuts in the future than initially anticipated.
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The Federal Reserve lowered its key interest rate by a quarter-point, projecting two more cuts this year due to concerns about the labor market’s health. This move, the first since December, reflects a shift from focusing on inflation to employment, as hiring slows. While the Fed aims to boost growth and hiring, the decision faced dissent from a newly appointed policymaker favoring a larger cut. Despite some internal differences, officials still anticipate further rate reductions, although less than Wall Street had anticipated. The Fed faces the challenges of a weakening economy and external pressures on its independence, particularly regarding the attempt to remove a Fed governor.
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On Wednesday, the Bank of Canada reduced its key interest rate by 25 basis points to 2.5 per cent, marking its first cut since March. This decision was made due to a weakening economy, softening job market, and reduced inflation risks, which the central bank believes are now more “contained”. The U.S. trade war continues to impact the Canadian economy, specifically in tariff-exposed industries. Despite a stronger-than-expected consumer spending in the second quarter, the central bank decided that a rate cut was still appropriate to better balance the risks going forward.
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Former President Donald Trump announced on Truth Social that he is considering a major lawsuit against Federal Reserve Chair Jerome Powell, citing the rising costs of the Fed’s building renovation project, which Trump claims is grossly mismanaged. The Fed attributes the project’s higher-than-expected costs to necessary redesigns and unforeseen issues like asbestos and soil contamination. Trump’s post also reiterated his demand for Powell to cut interest rates following the latest inflation data, as headline CPI inflation held steady while core inflation accelerated. Market expectations have shifted toward a September rate cut, although some experts express concerns about the trend of rising core inflation.
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During a tour of the Federal Reserve headquarters renovation, former President Trump cited a significantly inflated cost of $3.1 billion, which was immediately refuted by Fed Chair Jerome Powell, who clarified the included figure encompassed an unrelated building. The visit occurred amidst Trump’s ongoing criticism of Powell and his interest rate policies, with the former president previously considering Powell’s dismissal. Despite the friction, Trump suggested he was now unlikely to fire Powell but maintained his desire for lower interest rates, while Powell reaffirmed the Fed’s independence and highlighted the renovation’s necessity.
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During a tour of the Federal Reserve’s headquarters renovation project, President Trump criticized the project’s rising costs, but was corrected by Chairman Powell. Trump, who had previously attacked Powell, claimed the cost had increased to $3.1 billion, but Powell clarified that the president was including a previously completed building in his calculations. This exchange occurred amidst Trump’s ongoing public criticism of Powell and the Federal Reserve, particularly regarding interest rates and the renovation project’s budget. Despite his public attacks, Trump refrained from direct confrontation during the visit, joking about wanting lower interest rates.
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Despite reports of an imminent dismissal, former President Donald Trump denied plans to fire Federal Reserve Chair Jerome Powell, although he did acknowledge discussing the possibility with House Republicans, who largely supported the move. Trump, who appointed Powell during his presidency, has criticized him for not lowering interest rates quickly enough and has also expressed the view that there is no inflation. While the president expressed his discontent with Powell’s performance, he did not rule out the possibility of firing him, but said the chances were “highly unlikely.”
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Federal Reserve Chair Jerome Powell testified that the central bank would have eased monetary policy if not for President Trump’s tariff plan. Powell stated that the Fed’s decision to hold rates steady was influenced by the increased inflation forecasts resulting from the tariffs. Despite pressure from the White House, the Fed has held the key borrowing rate steady, and Powell acknowledged the potential for future rate adjustments depending on economic data. He also stated that he could not comment on the likelihood of a rate cut in July.
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The Russian economy is facing a deteriorating outlook, with potential risks extending beyond public acknowledgments. Banking officials express growing concern regarding the level of bad debt within their financial institutions. These concerns are primarily fueled by the increasing number of corporate and retail clients failing to meet their loan obligations. High interest rates are significantly contributing to these payment defaults, raising the risk of a potential systemic banking crisis within the next year.
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The Federal Reserve held interest rates steady at 4.25 to 4.5 percent, citing continued economic expansion, low unemployment, and elevated inflation as justification. This decision comes despite pressure from President Trump, who criticized Chair Jerome Powell and even suggested appointing himself to the position. The FOMC stated its commitment to maximum employment and 2 percent inflation, maintaining the current rate to support these goals. Powell defended the decision, emphasizing the FOMC’s aim for a strong economy with price stability, while acknowledging ongoing monitoring of economic data.
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John Q. Hosedrinker