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Billionaire fund manager's message on trade deficit

admin — Thu, 20 Nov 2025 11:00:34 +0000

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There’s significant debate this year over tariffs. Proponents think tariffs will strongarm a return to US manufacturing while opponents believe tariffs are a consumer tax that could send the U.S. economy reeling.

President Trump falls firmly into the tariffs-are-good camp.

So far, he’s slapped 25% tariffs on Canada, Mexico, and Autos. He also instituted a 10% baseline tariff on imports, and despite a recent rollback, still maintains a hefty 30% tariff on China, one of our largest trading partners.

Trump has even gone so far as to propose a whopper 50% tariff on the European Union, plus 25% tariffs on Apple iPhones and Samsung smartphones.

All of these decisions are designed to reduce the U.S. trade deficit. The deficit for goods alone was a record $1.21 trillion last year, up from $1.18 trillion in 2022.

The moves may encourage commitments to create new manufacturing plants in America, but not everyone is convinced that trade deficits justify tariffs, including Billionaire Ken Fisher, founder of Fisher Investments, which has nearly $300 billion in assets under management.

The trade deficit is cited as a reason for increased tariffs, but trade deficits aren’t necessarily bad.

Michael M. Santiago/Getty Images

US trade deficit may not be the biggest risk to the economy

Trade deficits aren’t necessarily a good thing, but they’re not necessarily bad either.

Increased imports from lower-cost countries can mean lost jobs, particularly in industries where labor costs are high, or gross margins are small. As a result, manufacturing jobs have been hit hardest by the trade deficit.

While job losses are concerning, trade deficits also mean that US consumers benefit from deflationary forces associated with importing goods from low-cost countries, like China.

Clothing, electronics, car parts, and yes, iPhones, for instance, are much less expensive than they’d be if they were built in the United States.

As a result, whether trade deficits are good or bad is likely influenced by your personal situation.

Zoom out, however, and you realize that trade deficits aren’t nearly as big of a problem for the US economy as other challenges, including inflation, which zaps economic activity, causing job losses, or mounting U.S. debt, which threatens higher interest rates on everything from credit cards to mortgages.

Billionaire fund manager delivers blunt message on trade deficit

In a recent post on “X,” Fisher debunked the concept that trade deficits are bad, going as far as to label the idea as “ignorant.”

“Countries have run trade deficits, surpluses forever,” said Fisher. “They’ve never been causal. People are afraid of the word deficit because it sounds bad… In reality, it’s just an accounting model.”

Fisher points out that this accounting simply measures the flow of money. Trade deficits or surpluses don’t cause economic outcomes, they’re a byproduct of them.

As evidence, he points toward Germany and France, two very close trading partners similar to the U.S. and Mexico. Germany has long run a trade surplus and France a trade deficit with one another, yet each has seen their economy grow similarly.

To further make his point, he says each of us “runs a trade deficit most of our life,” because “you buy stuff,” like groceries, exchanging our money for goods and services in a “one-way negative cash flow” relationship.

“Is that deficit costing you?” Said Fisher. “No. You do something else outside somewhere that gets you what you need elsewhere.”

Fisher also points out that states have trade imbalances with other states, including some of the fastest growing states, like Tennessee or Georgia, that run negative trade balances.

“America, land of the free home of the brave, has grown faster than most all of the countries that have trade surpluses against us,” said Fisher. “We’re doing other things that make use grow faster, as we grow faster, we become wealthier.”

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Updated Content & Research Findings

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Updated Content & Research Findings – January 20, 2025

Research Date: January 20, 2025

Latest Findings: January 2025 economic data reveals mixed results from existing tariffs. The U.S. manufacturing sector added only 12,000 jobs in December 2024, far below the 50,000 projected by tariff advocates. Meanwhile, the Consumer Price Index shows tariff-affected goods increased 8.3% year-over-year. A new Federal Reserve study indicates that 92% of tariff costs are being absorbed by U.S. importers and consumers rather than foreign exporters. Major tech companies report Q4 2024 earnings impacts of $18.7 billion collectively due to supply chain restructuring costs.

Updated Trends: The “nearshoring” movement accelerates as Mexico surpasses China as the U.S.’s largest trading partner for the first time in January 2025 data. Corporate earnings calls reveal 73% of S&P 500 companies cite tariff uncertainty as a primary 2025 concern. Semiconductor manufacturers are fast-tracking U.S. facility construction, with TSMC’s Arizona plant now operational six months ahead of schedule. Agricultural exports dropped 15% in Q4 2024 due to retaliatory tariffs, with soybean farmers particularly affected.

New Information: The World Trade Organization’s January 2025 report warns of potential global GDP contraction of 2.1% if tariff escalation continues. U.S. Treasury yields hit 5.2% as investors price in prolonged inflation from trade policies. New bilateral agreements between China and the EU bypass U.S. markets, potentially isolating American exporters. The automotive sector reports average vehicle prices increased $3,200 due to component tariffs, with electric vehicles seeing the steepest increases at $4,500 per unit.

Future Outlook: Economic models project U.S. inflation could reach 4.5% by mid-2025 if proposed 50% EU tariffs materialize. Major retailers announce strategic inventory builds ahead of potential tariff increases, which could temporarily boost Q1 2025 GDP but create downstream disruptions. The International Monetary Fund warns of “deglobalization acceleration” with permanent supply chain fragmentations. Technology sector analysts predict a 20% increase in consumer electronics prices by year-end 2025, potentially dampening demand and innovation cycles.

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Trump’s Tariff Plans Face Economic Reality Check – 2024-12-19

Research Date: 2024-12-19

Latest Findings: Recent economic analyses show that Trump’s proposed tariff increases could add $2,600 annually to household costs, according to the Peterson Institute for International Economics. Major retailers including Walmart, Target, and Home Depot have warned they’ll pass tariff costs to consumers. The National Retail Federation estimates the tariffs could reduce American purchasing power by $78 billion annually.

Updated Trends: Corporate America is accelerating supply chain diversification away from China, with Vietnam, India, and Mexico seeing record foreign direct investment. Apple has moved 14% of iPhone production to India as of Q4 2024, while Tesla is expanding its Mexico facility despite tariff threats. The “friend-shoring” trend has intensified, with companies prioritizing politically stable trading partners.

New Information: The Congressional Budget Office released December 2024 projections showing tariffs could increase inflation by 1.2-1.5 percentage points, potentially forcing the Federal Reserve to maintain higher interest rates longer. Trade data shows the U.S. goods deficit has actually widened to $1.26 trillion in the first three quarters of 2024, despite existing tariffs.

Future Outlook: Economists predict a potential “tariff war” escalation in early 2025, with the EU preparing retaliatory measures on U.S. tech and agricultural exports. Goldman Sachs forecasts that comprehensive tariffs could reduce U.S. GDP growth by 0.5% in 2025. Manufacturing reshoring remains limited, with only 1,800 new factory jobs created monthly in 2024 despite tariff protections.

JPMorgan Chase CEO Jamie Dimon says a recession could hit in 2026

admin — Wed, 08 Oct 2025 10:58:33 +0000

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It would be reassuring for markets to hear Jamie Dimon, the leader of America’s biggest bank and a veteran of Wall Street, say he didn’t see a recession coming. Unfortunately, that’s not the case.

In his decades leading JPMorgan Chase, Dimon’s economic opinion has been seen as a barometer for the health of the U.S. economy. But those who follow Dimon also know he conducts rigorous stress testing at JP, making sure the institution can withstand a range of outcomes.

To this end, Dimon isn’t taking a recession off the table for next year—even though GDP at present is tracking upwards. According to latest figures, U.S. gross domestic product increased at an annual rate of 3.8% in the second quarter of 2025.

But there are questions outstanding for analysts: Particularly those like Dimon who refrain from falling to the overly bullish or bearish side. Those questions include the impact of tariffs on inflation (if or when those increases truly hit), as well as geopolitics, the labor market, and whether AI will deliver the returns investors are banking on.

Dimon echoed this caution in an interview this week, saying: “I think [a recession] could happen in 2026—I’m not worried about it is a different statement. We’ll deal with it, we’ll serve our clients, we’ll navigate through it. A lot of us have been through them before.”

Previously the billionaire banker has warned the American economy is weakening, saying in September following a measly jobs report from the Bureau of Labor Statistics that whether that weakness spills into economic contraction remains to be seen.

He struck a similar tone this week, saying in the conversation with Bloomberg: “You don’t wish it because you know certain people get hurt,” adding: “How it all sorts out? We’ll see.”

Dimon’s caution is at odds with some tried-and-trusted indicators. The Sahm Rule indicator—which signals the start of a recession when the three-month moving average of the national unemployment rate is 0.5 percentage points greater than the minimum of the three-month averages from the previous 12 months—sits at a comfortable 0.13%, assisted by a relatively stable unemployment rate.

Likewise JPMorgan itself wrote earlier this year the odds of a recession now sit at 40%, though global economist Joseph Lupton did note in the May release that the bank expects “material headwinds to keep growth weak through the rest of this year.”

Dimon, never one to bank on one outcome or another, did counter the warning with some reasons for optimism: “But I do think there are positives—like deregulation is a real positive, which also helps animal spirits … and you know, in the ‘One Big, Beautiful Bill’ there’s also more stimulus, that has positives for the economy but maybe negative for inflation.”

Shutdowns are a bad idea

One thing Dimon is sure on is that the current government shutdown isn’t good news for anyone. Washington is currently locked in a stalemate over funding, with threats lingering over furloughed workers not receiving backpay and potentially even their jobs when they return.

Similarly, the majority of traders are expecting the government shutdown to last for more than 15 days, with 52% expecting it to drag on for more than 20. This presents problems for the Fed, which will meet in a week to make a decision on the base rate without key data from federal releases.

“Look, I don’t like shutdowns. I think it’s just a bad idea—I don’t care what the Democrats or Republicans say, it’s a bad idea,” Dimon said. “It’s not a way to run a railroad.”

Even then Dimon, like many others on Wall Street, don’t expect the shutdown to materially impact the economy: “You know, one of them went for 35 days, I’m not sure … if it really affected the economy, the market in a real way.”

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Inflation is the week's watchword

admin — Mon, 08 Sep 2025 02:09:57 +0000

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Normally, in the week after the monthly jobs report is released, the business and the economy chug along with the economic reports grabbing modest headlines.

Inflation, however, has been a big concern since the end of the Covid-19 pandemic, and two really important inflation reports land on Wednesday and Thursday as well as the weekly report on jobless claims hitting as well.

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Only, this will be a loud week in Washington mostly because there will be noisy debates over bigger, very political issues.

Futures trading indicates things will chug along with a decent open on Monday. So, not to worry: Nvidia NVDA, Tesla TSLA and, maybe, McDonald’s MCD will attract a lot of chatter.

A bit of good news came late last week because of the weak jobs report. Bond yields fell, and mortgage rates fell below 6.5%, the lowest level since the fall of 2024 that could give housing a boost.

Homebuilding stocks jumped in response.

First up: The Fed interviews

Treasury Secretary Scott Bessent was to have started interviews Friday with candidates to replace Federal Reserve Chairman Jerome Powell whose term expires next May.

One must be living under a rock to know how much Donald Trump dislikes Powell. Trump wants interest rates cut several months ago. Until August, Powell and the Fed were far more interested in inflation control.

There are 11 candidates for the jobs, with that three confirmed candidates for the job — by Trump on Friday.

Christopher Waller, a Fed governor who wants rates cut.
Kevin Hassett, director of the President’s National Economic Council.
Kevin Warsh, a former Fed governor who was deeply involved in the Fed’s efforts to shore up the economy in the 2008-2009 financial crisis.

Another name talked about is Michelle Bowman, the Fed vice chair in charge of bank supervision. She is a member of a family that’s owned a small Kansas bank since its founding in 1882.

She and the others are advocates of lighter bank regulation.

All of the candidates, in theory, would regard no bank as too big to fail.

Bessent himself doesn’t want the Fed job; he has emerged as the dominant player on economics in the Trump Administration. And, as has become clear, the Administration is injecting itself more directly into the economy workings.

The Treasury Secretary also wants major changes in how the Fed operates, mostly to bring the Fed closer to heel with the Administration’s thinking.

More Economic Analysis:

New homes under construction in Vacaville, Calif.

Bloomberg/Getty Images

Next up: the two inflation reports

The Producer Price Index. It comes out Wednesday. It measures prices received by businesses. It should show a 3.3% year-over-year increase. Core PPI is expected at 2.8% year over year. It strips out food and energy costs.

The Consumer Price Index. This is he headline grabber. This is a measure of what consumers are paying for a set list of goods and services. The consensus estimate is that the index will be up 2.9% year over year and 3.1% year over year when food and energy taken out.

In the the late 1970s and early 1980s, it reached as high as 13.5%. It hit 9%-plus during the post-Pandemic recovery and forced the Fed to raise rates to curb it.

Here we stop to note that the year-over-year increases of both indexes would be higher than the Fed’s target of 2% annual inflation. The target itself is not exactly etched in stone, and many believe it is simply too rigid.

Moreover, many conservative economists believe the inflation bouts in the 1970s and 1980s, in the aftermath of the 2008-09 crisis and after the Pandemic were due to Fed moves to flood the economy with too much cash.

There is dispute on whether the Fed was responsible. In 2008-2009 crisis, its goal was to stave off economic collapse, and it mostly worked.

In the Pandemic case, but prices shot up because there was so much global demand for goods and services when the crisis subsided.

Three more reports to watch

National Association of Indetrupendent Business Confidence Index for August. This measures how small businesses view the economy. The July report cited problems getting labor. It may come up in August. Also, consumer spending has been showing signs of contraction.

Initial Jobless Claims, from the Bureau of Labor Statistics. This is has been rising in recent months, and is a decent economic indicator.

Michigan Consumer Sentiment Index, from the University of Michigan. This looks at how Americans view the economy. It slumped in April after financial market slumped. It recovered quickly in the stock-market boom, but has slumped again.

A last note: Housing

Everyone who has looked at buying a house — a key American dream — knows prices are sky-high in many markets, locking many would be buyers out of the market.

Bessent has made noises the Trump Administration would declare a housing emergency, maybe in the fall. It’s not clear what that specific ideas would be included. But look for it.

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Reports should confirm Powell's hint that rates are coming down

admin — Mon, 25 Aug 2025 07:35:53 +0000

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Typically, the last week of August is something of a let-down.

It’s just ahead of Labor Day. Market activity tends to slow way down because so many on Wall Street are headed to the beach or the mountains.

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But the economic reports keep on coming, and the week ahead will offer food for thought on top of Federal Reserve Chairman Jerome Powell’s speech last week that signaled the Federal Reserve may cut its federal funds rate at its Sept. 16-17 meeting.

The financial markets see it coming. Stocks soared in response to Powell’s speech. The CME FedWatch Tool puts the odds of a rate cut to 4% to 4.25% at about 85%. It has been higher, and other market measures puts the odds close to 100%.

Ian Shepherdson of Pantheon Economics believes Powell’s speech practically guarantees a rate cut in September “and more likely to follow.”

How: One phrase: “The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.” That is, to move rates lower. And, maybe, more quickly.

A softening labor market

The reason: continued job weakness in the next few months as more evidence emerges on what rising tariffs are doing to the economy.

A second reason: The Trump Administration is on a quest to find a new Fed chairman who will support lower interest rates more aggressively than Powell has been in the last few years.

(The unspoken theme is that Trump’s Administration is seeking more direct control of the levers of the economy than any administration in years.)

The federal funds rate now is 4.25% to 4.5%. It is the rate the Fed wants member banks to charge each other for overnight loans. It sounds esoteric, but it is the starting point for all short-term U.S. loans.

Mortgage rates are more dependent on changes in the U.S. 10-year Treasury yield.

Freddie Mac, the big supplier of capital to the housing market said the 30-year mortgage rate late last week was 6.58%, down from 7% or so on January 16.

Two reports this week will likely cinch the deal:

The weekly report on initial jobless claims, due Thursday morning from the Bureau of Labor Statistics.
The Commerce Department’s Personal Consumption Expenditure Index (PCE) for July on Friday. This report is the Fed’s preferred measure of consumer inflation.

In the meantime, stock futures trading suggests U.S. markets will open modestly lower on Monday after Friday’s huge gains.

The Dow Jones Industrial Average jumped 846 points on Friday to 45,632 in its fourth-largest point gain of the year. The iShares U.S. Home Construction exchange-traded fund ITB jumped 5.6% in reaction to Powell’s Jackson Hole, Wyo., speech.

The first is, admittedly, a very rough estimate of what’s happening in the job market. But it has to show increasing numbers of workers filing for unemployment compensation. It’s been slowly ticking higher for the last few weeks, and the Fed, not to mention the Trump Administration, will be watching the report carefully. That data will feed into the BLS’ big report, the August jobs report, due on Sept. 5.

The latter has to show that inflation is stable or coming down a bit, giving the Fed room to make the cut that many people want. In June, the index was up 2.6% from a year earlier and 2.8% once food and energy costs were stripped out.

Construction workers build a new home on a property in Altadena, Calif.

Mario Tama/Getty Images

Other reports will likely confirm the idea the U.S. economy is slowing.

New-home sales in July

Due Monday from the Commerce Department, it may show a small increase in July in the neighborhood of 625,000 to 630,000 units (annualized) in July thanks to three factors:

Mortgage rates are slightly lower.
Builders are interested in selling houses now, and big builders, especially, give buyers a break on mortgages for one to three years.
Builders are constructing smaller dwelling units.

But new-home sales have yet to recover from the debacle of the subprime mortgage crisis.

More Economic Analysis:

Durable goods orders for July

Due Tuesday from the Commerce Department report. The report focuses on new orders for long-lasting manufactured goods placed with domestic US manufacturers. June’s report showed a 9.3% decline.

Pending home sales for July.

Due Thursday from the National Association Realtors. The report is a snapshot of contracts signed to buy homes in the next two months. The index fell 0.8% in June.

Keep an eye on . . .

The first revision to the second-quarter estimate of Gross Domestic Product. The first estimate, released on July 30, showed economic growth increasing at an annualized 3% rate.

Two reports on Consumer Confidence. First from the Conference Board on Tuesday and then the Michigan Consumer Sentiment Index, from the University of Michigan on Friday. These reports have big swings because each focuses on attitudes and confidence.

Fed speak. Dallas Federal Reserve Bank President Laurie Logan and John William, president of the New York Fed both speak on Monday.

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UBS sounds the alarm on ‘stall speed’ as the economy shows signs of running out of gas

admin — Wed, 06 Aug 2025 00:38:20 +0000

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The U.S. economy is experiencing a noticeable slowdown in mid-2025, with sluggish domestic demand growth, muted job gains, and new tariff actions poised to impact both inflation and overall economic momentum, according to a recent analysis from UBS Global Research.

The US Economics Weekly note from the Swiss bank noted real GDP grew at an annualized rate of just 1.2% in the first half of 2025, a significant step down from the more robust pace observed in 2023 and early 2024. Quarter-over-quarter growth figures point to a sequential weakening, the team led by economist Jonathan Pingle added, particularly in domestic demand, which has dropped from above 3% last year to around 1% in recent quarters.

Labor demand is responding in kind. Monthly nonfarm payroll growth has slowed sharply, with July seeing an increase of only 73,000 jobs—well below expectations and accompanied by sizeable downward revisions for previous months. The three-month average for job gains is now just 35,000 per month, a rate described as “stall speed” by Federal Reserve Vice Chair Michelle Bowman and Governor Chris Waller. (Both Bowman and Waller are prominent names floated to replace Fed chair Jerome Powell, a figure the Trump White House has extensively criticized.) The unemployment rate ticked up to 4.25%, the highest level since 2021, and the broadest measure of labor underutilization, known as U-6, is also trending higher—more than a percentage point above pre-pandemic levels.

Crucially, Pingle’s team found shrinking labor force participation rather than a sudden immigration or population shock is behind the weaker labor force growth. “The drop in the labor force participation rate has masked how much slackening is actually taking place,” the report contends, noting that multiple demographic groups, including Black Americans and teenagers, are showing higher unemployment and falling participation.

Population growth as recorded by the household survey is holding steady near previous years’ levels—contradicting assertions that tighter immigration is meaningfully constricting the labor market. UBS notes this contradicts statements from Jerome Powell: “Despite Chair Powell’s pronouncement at the post FOMC press conference that the immigration slowdown was slowing population growth and thus labor force growth, that is not what is happening in the actual data. The Household Survey and Establishment Survey look more like the labor market is slackening, and the household survey itself estimates that population growth is not slowing.”

The average workweek remains subdued, sitting at 34.25 hours in July—below 2019 levels and far from the “stretching” typical when labor markets are tight due to worker shortages. Industry-specific data show that job losses are not concentrated in sectors with large immigrant workforces, further supporting the view that slack comes from weakened demand, not a supply constraint.

Tariffs set to climb, threatening further drag

Tariff policy, after a series of negotiations and executive actions, is on track to become even more restrictive. The new suite of reciprocal tariffs, including a 35% rate on Canadian imports (excluding USMCA-compliant goods) and across-the-board hikes affecting nearly 70 countries, is expected to raise the U.S. weighted average tariff rate (WATR) from about 16% to approximately 19% starting in early August. UBS estimates this will subtract 0.1 to 0.2 percentage points from growth over the next year.

Sectoral carve-outs persist, but with the EU now facing a 15% tariff on most exports to the U.S.—lower than originally proposed, but still a significant rise—UBS expects direct pressure on prices for automobiles, semiconductors, pharmaceuticals, and more. Presidential proposals to slap a 200% tariff on pharmaceuticals remain under discussion, but would have massive implications if implemented.

Rate cuts on the horizon

With evidence mounting that both growth and labor markets are softening and that tariffs may further boost core inflation from 2.8% currently to as high as 3.4% by year-end, pressure is building for the Federal Reserve to ease monetary policy. While Chair Jerome Powell kept a possible September rate cut on the table, he offered little forward guidance, stating that the totality of incoming data will dictate the next move. UBS maintained its expectation that the Federal Open Market Committee will cut rates by 25 basis points in September and by as much as 100 basis points before the end of 2025.

Ultimately, the bank found that the U.S. economy has entered a clear slowdown as 2025 unfolds, with fading domestic momentum, cooling job growth, and the shadow of higher tariffs likely to dampen the outlook further. UBS researchers argue that the data show a demand-driven deceleration, not a supply squeeze, and that the Fed will likely act soon to cushion the landing.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.

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Everyone’s watching Jerome Powell as warnings flash for the U.S. economy

admin — Sat, 02 Aug 2025 04:12:25 +0000

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A surprisingly weak July employment report has intensified expectations that the Federal Reserve will resume cutting interest rates as soon as September, with mounting evidence of a slowing U.S. economy and faltering labor market offsetting persistent inflation worries driven by new tariff hikes.

The Federal Open Market Committee (FOMC) had previously left rates unchanged at a range of 4.25% to 4.50% at its July meeting, despite internal disagreements, growing signs that economic conditions warranted a more dovish approach, and mounting pressure from President Donald Trump on Fed Chair Jerome Powell to cut. The July jobs report, of course, is changing the picture rapidly.

The Labor Department reported a gain of just 73,000 nonfarm payroll jobs in July, well below consensus forecasts. More troubling were the significant downward revisions for May and June, which cut a combined 258,000 jobs from the previous estimates and reduced those months’ average gains to less than 20,000 jobs per month. While July’s number alone would not spell crisis, the back-to-back weakness and hefty revisions roused investor concerns about potential cracks forming in the U.S. labor market. Powell has repeatedly emphasized the balance between labor supply and demand, and said the unemployment rate is the “key indicator to watch.” July’s unemployment rate ticked up to 4.2%, just shy of a 12-month high, providing further evidence of softening conditions.

Market reaction was swift. Stephen Brown, Deputy Chief North America Economist for research firm Capital Economics, called it a “payrolls shocker.” He noted an immediate change in markets, which repriced the likelihood of a September rate cut at 85%, a jump from below 50% prior to the jobs data, as futures traders bet that the Federal Open Market Committee will need to respond to mounting evidence of economic softening.

“The July jobs report goes a long way toward providing the evidence of a weaker labor market that the Fed needs to justify cutting interest rates in the face of above-target inflation,” said Brian Rose, senior U.S. Economist at UBS Global Wealth Management, in a statement to Fortune Intelligence. Rose noted that GDP data had shown the economy’s growth slowing to an annualized 1.2% pace in the first half of 2025, well below the longer-term trend rate of 2.0%. “We expect soft data in the second half of 2025 as well. This should help to offset some of the inflationary pressure driven by tariff hikes,” he added.

Other recent data reinforce the picture of an economy under strain. Survey indicators such as the ISM manufacturing employment index fell further in July, while measures of business capital spending have only recovered modestly after disruptions following April’s “Liberation Day.” Meanwhile, President Trump’s new tariff measures have pushed up import costs, adding to the inflation outlook.

Fiendishly mixed signals

The July payroll dip, coming on the heels of the disruptive “Liberation Day” in April, may not yet herald a deeper jobs slide, other data suggests. Brown noted that initial jobless claims ticked down to 218,000 last week, and continuing claims have declined steadily since peaking in early June.

Analysts expect Powell to use the upcoming Jackson Hole Economic Symposium, to be held August 21–23, as an opportunity to signal the central bank’s readiness to act if labor market weakness persists and larger inflation effects from tariffs do not materialize.

Rose’s baseline scenario now sees the Fed resuming rate cuts at its September meeting and continuing to cut by 25 basis points each meeting through January, trimming the federal funds rate by a full percentage point to bring borrowing costs back to a “roughly neutral” level.

“Given this morning’s data, Powell may be willing to drop a hint that the Fed is leaning toward a September cut,” Rose said.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.

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Looming inflation data may rock interest rate cut forecasts

admin — Tue, 10 Jun 2025 00:07:17 +0000

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New inflation numbers are on the horizon, prompting speculation as to their role in the U.S. economic chaos rattling Wall Street and Main Street.

Post-pandemic interest rates on everything from small business loans to consumer credit cards to home mortgages are kicking up the same concern: Too darn high.

Market participants remain downbeat about interest rate cut chances despite President Trump’s multiple escalating demands directed at Federal Reserve Board Chair Jerome Powell.

U.S. Federal Reserve Board Chairman Jerome Powell is under fire over interest rate policy this year.

Win McNamee/Getty Images

Trump demands a full point cut in interest rates

The Federal Reserve sets monetary policy to target low inflation and unemployment. This dual mandate is often at odds because higher interest rates lower inflation but increase job losses, while lower interest rates lower unemployment but increase inflation.

Consumer Price Index for All Urban Consumers (CPI-U) increased 2.3% for the 12 months ending April 2025, after rising 2.4% over the same period in March.

The April change was the smallest 12-month increase in the all items index since February 2021, according to the Bureau of Labor Statistics.

Most recently, the president said he wanted to see a full 1% cut in the Federal Funds Rate, currently between 4.25 and 4.50%, the actual interest rate at which depository institutions trade federal funds with each other overnight.

Trump maintains that high interest rates are causing dire concern—and, in some cases, despair—among investors, businesses, and consumers.

A higher Fed Funds Rate means higher Treasury bond yields. Banks use Treasury yields to set auto, credit card, and mortgage interest rates.

May CPI report is coming up fast this week

Many economic experts say 2025’s whiplash trade wars, fueled by Trump’s tariff games, are leading the economy into a dangerous landing. Some speculate that a recession or even stagflation could be ahead in the last two quarters of 2025.

More Economic Analysis:

The CME’s highly-watched FedWatch tool showed a decline in odds of an interest rate cut this summer.

Thus, the odds of the Fed cutting interest rates in the second half of 2025 will increase if next week’s May CPI and PPI data support the “May inflation data we’ve seen thus far, and there is no meaningful progress on trade deals,’ according to TheStreet’s Chris Versace.

May Labor Department figures on jobs were slightly higher than expected but down from April.

This soft jobs report led Fed watchers to turn to the CPI as a harbinger of potential Fed action, including a possible quarter-point cut this summer that would serve as the only rate deduction for the year.

The May CPI numbers will be released at 8:30 a.m. June 11. If that figure is lower or higher than expected, it will likely reset interest rate predictions again.

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