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The U.S. economy is mostly in good shape but that isn’t saving Federal Reserve chair Jerome Powell from a spell of angst.As the Fed considers its next moves during a two-day meeting this week, most economic data looks solid: Inflation has been steadily fading, while the unemployment rate is still a historically low 4.2%. Yet President Donald Trump’s widespread tariffs may push inflation higher in the coming months, while also possibly slowing growth.With the outlook uncertain, Fed policymakers are expected to keep their key interest rate unchanged on Wednesday at about 4.4%. Officials will also release a set of quarterly economic projections that are expected to show inflation will accelerate later this year, while unemployment my also tick up a bit.The projections may also signal that the Fed will cut its key rate twice later this year, economists say.The prospect of higher inflation would typically lead the Fed to keep rates unchanged or even raise them, while rising unemployment would usually lead the Fed to cut its key rate. With the economy potentially pulling in both directions, Powell and other Fed officials have underscored in recent remarks that they are prepared to wait for clearer signals on which way to move.The Fed is in “an uncomfortable purgatory,” said Diane Swonk, chief economist at accounting giant KPMG. “Without the threat of tariffs, we would be seeing the Fed cut. That’s not where we’re at because of the uncertainty and the threat and the effects (of tariffs) that we don’t know yet.”The Trump White House has sharply ramped up the pressure on Powell to reduce borrowing costs, with Trump himself calling the Fed chair a “numbskull” for not cutting and other officials, including Vice President JD Vance and Commerce Secretary Howard Lutnick, also calling for a rate reduction.When the Fed reduces its key short-term rate, it oftenthough not alwaysleads to lower costs for consumer and business borrowing, including for mortgages, auto loans, and credit cards. Yet financial markets also influence the level of longer-term rates and can keep them elevated even if the Fed reduces the shorter-term rate it controls.For example, if investors worry that inflation will remain elevated, they can demand higher interest rates on longer-term Treasury securities, which influence other borrowing costs.Even though Trump has said the economy is doing well, he has also argued that a rate cut would cause the economy to take off “like a rocket.”But Trump has also highlighted another concern: If the Fed doesn’t cut rates, the federal government will have to pay more interest on its huge budget deficits, which are projected to grow even larger under the White House’s proposed tax and budget legislation currently being considered by the Senate.“We’re going to spend $600 billion a year, $600 billion because of one numbskull that sits here (and says), ‘I don’t see enough reason to cut the rates now,'” Trump said last week.Pushing the Fed to cut rates simply to save the government on its interest payments typically raises alarms among economists, because it would threaten the Fed’s congressional mandate to focus on stable prices and maximum employment.Yet the markets haven’t reacted much to Trump’s recent attacks on the Fed, now that the Supreme Court, in a ruling last month, suggested that a president doesn’t have the legal power to fire the Fed chair.Still, with inflation remaining low, so far, despite the imposition of tariffs, the Fed may come under greater pressure in the coming months from economists and investors to cut rates. Policymakers estimate that the interest rate that would neither stimulate the economy nor slow it downknown as the “neutral rate”is about 3%.Meanwhile, inflationaccording to the Fed’s preferred measureis just 2.1%, almost back to the central bank’s 2% target. Such a low reading suggests the Fed’s rate should be closer to neutral, below its current level of 4.4%, because it doesn’t need a high rate to slow inflation.“It’s a reasonable case for the Fed to grapple with,” said Jon Hilsenrath, a visiting scholar at Duke University.Yet according to a survey Hilsenrath conducted for Duke of former Fed officials and staff, they expect the Fed to cut interest rates just once this year. “There’s a risk that inflation moves up and they don’t want to get ahead of themselves,” he said.It’s possible that tariffs may not push up inflation as much as economists have feared. But one reason for that could be that the economy may slow, lifting unemployment and making consumers unwilling to pay higher prices, which would reduce inflation.Economists at Goldman Sachs said in a recent research note that they expect inflation will rise to 3.6% by December, but that the increase will only be temporary.“The main reason we are less worried is that we expect the economy to be weak this year, with . . . a modest rise in the unemployment rate,” Jan Hatzius, chief economist at Goldman, and his colleagues wrote.A noticeable weakening of the economy that slows consumer spending and holds down inflation would likely lead the Fed to quickly cut rates. But they will be more comfortable doing so once they have a better sense of the full impact of tariffs.Michael Gapen, chief U.S. economist at Morgan Stanley, said in a note Monday that the Fed “will need several months to assess the effects of policy changes, believing that ‘later and correct is better than sooner and wrong.'” Christopher Rugaber, AP Economics Writer
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E-Commerce
The chase is on among premium credit card issuers. JPMorgan Chase has announced some big changes to its high-end Chase Sapphire Reserve credit card, which include a hefty new annual fee of $795, up from $550. The Sapphire Reserve card, which is known for its slate of perks and benefits including travel credits and access to airport lounges, is also getting a counterpart in the Chase Sapphire Reserve for Business card. When the card was first introduced in 2016, the annual fee was $450, so it has increased by more than 75% since then. Interestingly, customers dont seem to mind: The amount paid in annual fees totaled $6.4 billion in 2022, more than double the $3 billion paid in 2015, according to a 2023 report from the Consumer Financial Protection Bureau (CFPB). When will the fee increase take effect? According to Chase, customers still have a few days to sign up for the card at the old rate. If you’re already a Sapphire Preferred member, or if you sign up before Monday, June 23, you can expect the same benefits and fee through October 25 of this year. Though the fee is increasing significantly, there will be new card designs, and new credits and benefits that arrive along with the revamp. Specifically, for cardholders who spend at least $75,000 per year on their cards, there will be new perks, such as exclusive online shopping experiences, and status rewards at IHG Hotels, and Southwest Airlines. Points earnings rates and multipliers are also changing through a new Points Boost program. The new Business card will also have credits for services from ZipRecruiter, Google Workspace, and more. Its the culmination of five years of investment that weve made across Chase in completely uplifting and repositioning what we mean for premium travelers in the premium-card space, Allison Beer, JPMorgans head of card and connected commerce, told Bloomberg. This is about having the best-in-class travel assets and an end-to-end travel experience. Premium card issuers up the stakes Chase’s announcement comes shortly after American Express, one of its chief rivals in the credit card space, teased a forthcoming overhaul to its premium Platinum Card. Details are scarce, but those changes are expected by the end of the year. The Platinum Card currently has a $695 annual fee. In all, the board is set for Chase and Amex to duke it out with their premium offerings, which might provide some serious perks to customers who can afford them. Were going to take these cards to a new level,” Amex’s said Howard Grosfield in a statement, “not only in what they offer in travel, dining and lifestyle benefits, but also in how they look and feel, to meet the evolving needs of our customers.
Category:
E-Commerce
The Senate is expected to approve legislation Tuesday that would regulate a form of cryptocurrency known as stablecoins, the first of what is expected to be a wave of crypto legislation from Congress that the industry hopes will bolster its legitimacy and reassure consumers.The fast-moving legislation, which will be sent to the House for potential revisions, comes on the heels of a 2024 campaign cycle where the crypto industry ranked among the top political spenders in the country, underscoring its growing influence in Washington and beyond.Eighteen Democratic senators have shown support for the legislation as it has advanced, siding with the Republican majority in the 5347 Senate. If passed, it would become the second major bipartisan bill to advance through the Senate this year, following the Laken Riley Act on immigration enforcement in January.Still, most Democrats oppose the bill. They have raised concerns that the measure does little to address President Donald Trump’s personal financial interests in the crypto space.“We weren’t able to include certainly everything we would have wanted, but it was a good bipartisan effort,” said Sen. Angela Alsobrooks, D-Md., on Monday. She added, “This is an unregulated area that will now be regulated.”Known as the GENIUS Act, the bill would establish guardrails and consumer protections for stablecoins, a type of cryptocurrency typically pegged to the U.S. dollar. The acronym stands for “Guiding and Establishing National Innovation for U.S. Stablecoins.”It’s expected to pass Tuesday, since it only requires a simple majority voteand it already cleared its biggest procedural hurdle last week in a 6830 vote. But the bill has faced more resistance than initially expected.There is a provision in the bill that bans members of Congress and their families from profiting off stablecoins. But that prohibition does not extend to the president and his family, even as Trump builds a crypto empire from the White House.Trump hosted a private dinner last month at his golf club with top investors in a Trump-branded meme coin. His family holds a large stake in World Liberty Financial, a crypto project that provides yet another avenue where investors are buying in and enriching the president’s relatives. World Liberty has launched its own stablecoin, USD1.The administration is broadly supportive of crypto’s growth and its integration into the economy. Treasury Secretary Scott Bessent last week said the legislation could help push the U.S. stablecoin market beyond $2 trillion by the end of 2028.Brian Armstrong, CEO of Coinbasethe nation’s largest crypto exchange and a major advocate for the billhas met with Trump and praised his early moves on crypto. This past weekend, Coinbase was among the more prominent brands that sponsored a parade in Washington commemorating the Army’s 250th anniversaryan event that coincided with Trump’s 79th birthday.But the crypto industry emphasizes that they view the legislative effort as bipartisan, pointing to champions on each side of the aisle.“The GENIUS Act will be the most significant digital assets legislation ever to pass the U.S. Senate,” Senate Banking Committee Chair Tim Scott, R-S.C., said ahead of a key vote last week. “It’s the product of months of bipartisan work.”The bill did hit one rough patch in early May, when a bloc of Senate Democrats who had previously supported the bill reversed course and voted to block it from advancing. That prompted new negotiations involving Senate Republicans, Democrats and the White House, which ultimately produced the compromise version expected to win passage Tuesday.“There were many, many changes that were made. And ultimately, it’s a much better deal because we were all at the table,” Alsobrooks said.Still, the bill leaves unresolved concerns over presidential conflicts of interestan issue that remains a source of tension within the Democratic caucus.Sen. Elizabeth Warren, D-Mass., has been among the most outspoken as the ranking member on the Senate Banking Committee, warning that the bill creates a “super highway” for Trump corruption. She has also warned that the bill would allow major technology companies, such as Amazon and Meta, to launch their own stablecoins.If the stablecoin legislation passes the Senate on Tuesday, it still faces several hurdles before reaching the president’s desk. It must clear the narrowly held Republican majority in the House, where lawmakers may try to attach a broader market structure billsweeping legislation that could make passage through the Senate more difficult.Trump has said he wants stablecoin legislation on his desk before Congress breaks for its August recess, now just under 50 days away. Joey Cappelletti, Mary Clare Jalonick and Alan Suderman, Associated Press
Category:
E-Commerce
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