The Fed is not ready to cut interest rates

Federal Reserve Chairman Jerome Powell reiterated that he expects interest rates to start falling this year but did not provide a specific timeline. In prepared remarks to Congress on March 6 and 7, Powell said policymakers are still considering the risks posed by inflation and do not want to cut rates too quickly. Overall, the speech did not provide any new insights into the Fed’s monetary policy or economic outlook.

US Federal Reserve Chairman Jerome Powell reiterated that he expects interest rates to start falling this year but did not give a specific date.

However, comments indicated that officials remain concerned about undoing progress in fighting inflation and will base decisions on aggregate data rather than a predetermined path. Mr. Powell again noted that cutting rates too quickly risks undoing gains in fighting inflation and may require further rate hikes, but waiting too long could also jeopardize economic growth.

Investors are now betting on the first rate cut in June, with three to four cuts expected this year. Policymakers will release updated rate projections at the Fed’s meeting this month. Powell is likely to face a variety of questions at congressional committee hearings, mostly focused on inflation and interest rates. While the Fed tries to stay out of politics, an election year presents special challenges. Former President Donald Trump was a fierce critic of Powell and his colleagues while in office. Some Democrats in Congress have called on the Fed to cut rates as pressure mounts on low-income families to make ends meet.

US economic activity increases slightly

The U.S. economy has grown modestly since the start of the year, while consumers have shown more sensitivity to rising prices, the Federal Reserve said in its Beige Book survey of regional business contacts. The report released Wednesday showed economic activity has increased slightly, but balanced, since the start of January 2024, with eight regions reporting slight to moderate growth, three reporting no change and one reporting a slight decline.

The report also showed that consumer spending, especially retail spending, has slowed slightly in recent weeks; businesses are finding it harder to pass on higher costs to customers. Moreover, raw material costs for many manufacturers and construction companies have fallen in recent weeks.

On the labor market front, employment continued to increase in most regions, but at a modest pace. Overall, labor market tightness eased, with nearly all regions reporting some improvement in labor availability and retention, according to the Beige Book. Many economists expect the labor market to cool this year, as evidenced by the growing list of high-profile companies that have announced layoffs in recent weeks.

However, the Labor Department's January jobs report showed employers raised wages by the most in a year. The Beige Book pointed to some reports of slower wage growth. More restrained labor costs could further dampen inflationary pressures that unexpectedly spiked earlier this year.

US calls on allies to tighten China's grip on chip technology

The U.S. government is pressing allies including the Netherlands, Germany, South Korea and Japan to further tighten restrictions on China’s access to semiconductor technology, Bloomberg reported. The Biden administration’s latest efforts are aimed at plugging loopholes in export controls and limiting China’s progress in developing its own chipmaking capabilities. The U.S. is pushing the Netherlands to prevent ASML Holding NV from servicing and repairing sensitive chipmaking equipment that Chinese customers bought before restrictions on such equipment were imposed this year. The U.S. also wants Japanese companies to limit exports to China of specialized chemicals critical to chipmaking, including photoresists.

Japan and the Netherlands have responded coolly to Washington's latest effort, arguing that they want to assess the impact of existing restrictions before considering tougher measures, the sources said. The Biden administration is trying to include Germany and South Korea in a deal that also includes Japan and the Netherlands, as all four countries are home to key companies in the semiconductor supply chain. The Netherlands hopes Germany will join the export control group, and the Biden administration is pushing for a deal before the G7 summit in June. The US has also been in talks with South Korea on chip export controls, given the country's leading role in chip production and supply of components for chipmaking equipment.

Former President Trump leads incumbent President Biden in 7 battleground states

The latest poll conducted by Bloomberg News/Morning Consult shows that former President Donald Trump is leading current President Biden in seven "battleground" states including Arizona, Georgia, Pennsylvania, Michigan, North Carolina, Nevada and Wisconsin.

Across the seven states, 48% of voters said they would vote for Trump, while 43% said they would vote for Biden. North Carolina is the state where former President Trump leads his successor Biden by the most (9 points), with 50% and 41% respectively.

In addition, Mr. Trump also leads Mr. Biden by 6 points in Arizona, Nevada, Georgia and Pennsylvania - 4 states that the Democratic candidate won in the 2020 presidential election. The gap is narrower in Wisconsin and Michigan - 2 states that brought victory to Mr. Biden in 2020, with the lead for Mr. Trump being 4 points and 2 points, respectively.

According to the poll, 80% of respondents said that Mr. Biden is “too old” and unfit to be President of the United States, while 60% of voters considered Mr. Trump “dangerous”. However, the percentage of American voters who rated Mr. Trump as “mentally fit” to be President of the United States was also higher than Mr. Biden.

The poll was conducted by Bloomberg/Morning Consult from February 12 to 20, attracting 4,955 respondents in seven battleground states, with a margin of error of about 1%.

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