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The More Trump Pressures the Fed, the Less Likely He Gets Lower Rates
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The Trump administration has ramped up its attacks on Fed Chairman Jerome Powell in the past few weeks as the president pushes for lower interest rates. The louder he shouts, the less likely he is to get what he really wants: lower government borrowing costs and cheaper mortgages, writes James Mackintosh for The Wall Street Journal. Trump toured the Fed’s construction site Thursday afternoon with White House advisers—including Powell’s most vocal critics—ramping up the pressure campaign on the Fed chair. The president indicated he wasn’t likely to follow the advice of advisers who have encouraged him to force out Powell, which would almost certainly trigger a court challenge by the Fed leader.
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The More Trump Pressures the Fed, the Less Likely He Gets Rate Cuts
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Photo: Chip Somodevilla/Getty Images
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At the highest level the dispute between the White House and the Federal Reserve is a battle about institutions versus populism, the question of whether experts operating at arms length from the government will do a better job than the elected politician of the day.
President Trump’s views are captured by the Latin phrase vox populi, vox dei: The voice of the people is the voice of God. The Fed is exactly the opposite, deliberately set up not to be beholden to day-to-day politics.
The two sides disagree about the economics of tariffs, which the administration expects to have little effect on prices. The Fed—burned by its mistake in missing the inflationary boom under former President Joe Biden—is waiting to see if tariffs feed through into higher prices before restarting rate cuts.
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Trump’s Tariffs Are Being Picked Up by Corporate America
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The U.S. has collected an additional $55 billion in tariffs this year. Corporate America has largely shouldered the bill. President Trump’s new levies, which have pushed the country’s tariffs to their highest levels in decades, are typically paid by importers when goods reach U.S. ports.
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Fewer U.S. Jobless Claims Were Filed Last Week
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U.S. initial jobless claims declined last week, according to the Department of Labor, extending a stretch of evidence that layoffs have remained constrained. In the week through July 19, 217,000 people newly filed for unemployment benefits, compared with 221,000 the week before.
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Key Developments Around the World
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ECB Holds Rates Steady as U.S. Tariff Negotiations Cloud Outlook
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Russia’s Central Bank Cuts Key Rate Again as Economy Slows
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Russia’s central bank lowered its key interest rate to 18% from 20% for a second straight meeting amid mounting signs of a sharp slowdown in economic activity. That was a larger cut than investors had expected.
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Turkey Central Bank Returns to Rate Cuts After Unrest Forced Hike
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Goldman and BNY Team Up to Tokenize Money-Market Funds
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Goldman Sachs and Bank of New York Mellon are bringing the technology that underpins crypto to an investing stalwart: the humble money-market fund.
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Lawmakers Subpoena JPM, BofA Over IPO of Chinese Battery Giant
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U.S. lawmakers are demanding JPMorgan Chase and Bank of America produce documents related to their roles in a Chinese battery giant’s initial public offering.
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Banks Get Pickier About Whom They Want as Credit-Card Customers
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Banks are making credit cards harder to get—for some customers. Lenders opened fewer cards in the second quarter, according to earnings reports from major issuers. They raised qualification requirements for lower-end customers that tend to be at greater risk of missing payments. It was a different story for higher-end customers, which are increasingly propelling the U.S. economy.
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8:30 a.m.: Advance Report on Durable Goods
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10 a.m.: U.S. Housing Vacancies
10:30 a.m.: Texas Manufacturing Outlook Survey
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ECB’s Largarde Says Stronger Euro Could Drag Down Inflation
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A stronger euro could bring inflation down more than expected, European Central Bank President Christine Lagarde said Thursday. Speaking at a press conference after the ECB left interest rates unchanged, Lagarde said the ECB doesn’t target a specific exchange rate but it monitors currency movements “because it matters for inflation forecasts.” She also said trade tensions could weigh on domestic demand and lower inflation. Moreover, a stronger euro and potentially higher U.S. tariffs would make firms more hesitant to invest, she said. — Renae Dyer
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Money Markets Are Less Confident ECB Will Cut Rates in 2025
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Money markets no longer fully price in a 25-basis-point interest-rate cut by the European Central Bank in 2025 after the ECB's decision to leave interest rates on hold and after President Christine Lagarde's press conference. Prior to the ECB meeting, markets had priced in a nearly 90% chance of a rate cut in December, according to LSEG data. They now price in only a 68% chance of this scenario happening. Markets nevertheless see a high probability of a rate cut in March or April next year, LSEG data show. — Emese Bartha
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There are early signs Canada’s economy firmed coming into the summer, with advance tallies pointing to the strongest retail sales growth since the end of last year and the first rise in manufacturing sales in five months.
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German business confidence inched up this month, a signal of resilience against U.S. tariffs, although with high uncertainty keeping any upswing in check.
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U.K. consumer sentiment worsened this month as the country faces an unhappy combination of weak growth and still-high inflation, a survey showed Friday.
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As the U.S. heads toward fresh trade talks with China next week, President Trump is increasingly focused on trying to strike an economic bargain with Beijing, one that aims to open the Asian giant to more American business and technology.
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Consumer inflation in Tokyo eased slightly in July, suggesting that the Bank of Japan can take more time to gauge the economic impact of U.S. tariffs before raising interest rates.
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WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by news associate Roshan Fernandez in New York. Send your tips, suggestions and feedback to roshan.fernandez@wsj.com.
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