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In today’s big story, the Fed cutting interest rates yesterday was never in doubt. What comes next is not so clear.
What’s on deck:
But first, more relief … for now.
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The big story
The Fed’s new conundrum
MANDEL NGAN/AFP via Getty Images; Chelsea Jia Feng/BI
Americans got a little more relief from the Fed, but questions are swirling about what the president-elect will say about future plans.
Federal Reserve cut interest rates by 25 basis points on Thursdayits second straight reduction since September in a move that was largely expected. However, additional rate cuts are not as clear cut as the sweeping tariffs proposed by Donald Trump could slow the Fed’s plans.
Economists have said Trump’s 10-20% total tariff on most imported goods will spark inflation as manufacturers and importers pass the cost of the tax on to consumers. Before the election, Nobel economist Paul Krugman said Trump’s tariff plans would result in an “inflationary hit that is bigger than almost anything else you can do through federal policy.”
It’s not just speculation from economists. The market is indicating that inflation may cause the Fed to keep borrowing rates high. Treasury yields rose a day after the election, a sign Wall Street sees interest rates remaining high.
Interest rate traders have also recalibrated their expectations. According to the CME FedWatch tool, the odds of a 25 basis point rate cut in December fell from 83% at the start of the month to 63% yesterday after the Fed’s announcement. (It currently stands at around 75%).
Chip Somodevilla/Getty Images
However, speculating on what can come from a president-elect is a complicated game.
Greg McBride, chief financial analyst at Bankrate.com, told Insider Today that Fed Chairman Jerome Powell did not indicate a pause in cuts was coming in December during Thursday’s news conference. Powell also stressed that the election will not affect the central bank’s short-term actions, McBride added.
“Until policy specifics are signed into law, there is nothing for the Fed to put into their economic models and they will not speculate or assume anything in the interim,” McBride wrote via email.
There is also the question of whether Trump’s tariff would be as inflationary as some fear. During his first term, the former president issued tariffs against China that did not raise prices.
Trump’s proposals this time are much more aggressive, but it is not clear what will actually be implemented.
“No one knows what is going to be implemented and what is just a negotiating position,” McBride added.
Dominique Lapointe, director of macro strategy for Manulife Investment Management, told Insider Today via email that the firm’s base case is still a 25 basis point drawdown in December. The Fed will only change course in response to rates if they are official and have an impact, meaning the central bank’s policy likely won’t change until mid-2025, Lapointe added.
One thing is clear: Powell doesn’t go away.
When a reporter asked the Fed chief if he would resign if Trump, who has been critical of him, asked him to leave, his answer was simple: “No.”
News summary
Main headlines
3 things in the market
ANGELA WEISS/AFP
- Morningstar thinks you should stay on course with your investment plan. Trump’s victory boosted the stock market, but this it doesn’t mean you have to rethink your investment strategysaid Dave Sekera, Morningstar’s senior US market strategist. His call for restraint is partly due to the stock’s current high value, although he sees opportunity among small caps.
- Young Goldman executives who just got the call of a lifetime. Goldman Sachs was tapped 95 people will join its exclusive partnership on Thursday, a record high under CEO David Solomon. Twenty-six of the new partners are women, a closely watched group following a series of departures of high-profile female partners.
- Trump’s election may be Citi’s saving grace. The bank has spent more than $7.4 billion to address regulators’ concerns, particularly about its data and risk problems. Donald Trump can ease that pain. The president-elect has signaled he would reduce oversight of Wall Street, having previously pledged to eliminate 10 regulations for every new one.
3 things in technology
Getty Images; Jenny Chang-Rodriguez/BI
- How Elon Musk Swinged Pennsylvania for Trump The tech mogul spent millions in the Keystone State to deliver to Trump, launching a last-minute search effort and unproven ground game techniques. Musk’s strategy could usher in a “new era” in campaign spending, one political scientist told BI.
- Big Tech’s biggest winners and losers after Trump’s victory. Which companies will gain more under a new Trump presidency? BI looked at the two-day performance of the shares of many of the largest technology companies to discover.
- Trump’s plan to “never ban” TikTok will be difficult to achieve, legal experts say. The former president campaigned on the promise that TikTok would be here to stay. But legal experts told BI that he has only two options to try to save it – and none of them are straightforward.
3 things in business
NurPhoto/Getty Images
- Retail giants prepare for Trump 2.0. Fees are the biggest concern for superstores like Walmart, Target and Costco. If the president-elect follows through on his campaign promises, consumers could foot the high toll bill through higher prices. On the other hand, tax cuts can boost spending— but it took them many months to see results.
- The job market under Trump. Employment experts expect a “Trump bump” as employers feel comfortable posting openings now that the election result is clear. They predict a post-election hiring rush and increased demand in some sectorsespecially technical.
- David Zaslav is optimistic about Trump’s effect on Big Media. The CEO of Warner Bros. Discovery wanted a president who was more open to M&A, as his company has seen consolidation for a while. One second The Trump administration could provide that opportunityZaslav said on WBD’s earnings call, but it’s too early to be sure.
In other news
what is happening today
- Paramount, Sony and other companies report earnings.
- The nominations for the Grammy Awards have been announced.
The Insider Today team: Dan DeFrancesco, deputy editor and anchor, in New York. Jordan Parker Erb, editor, in New York. Hallam Bullock, senior editor, London. Ella Hopkins, Associate Editor, London. Amanda Yen, friend, in New York. Milan Sehmbi, colleague, in London.