Credit Card Rate Cap Sparks Fierce Backlash From Banks

JPMorgan is challenging market expectations for interest rate relief, forecasting that the U.S. Federal Reserve will hold rates steady throughout 2026. The bank’s analysis suggests the Fed's next move could be a rate hike in 2027, a stark contrast to investor bets on multiple cuts.

In a client note from January 9, JPMorgan outlined a macroeconomic environment that it believes will prevent the Fed from easing its policy.

Strong Economy Undermines Case for Cuts

JPMorgan projects that the U.S. economy is set for accelerated employment and growth in 2026. At the same time, the bank expects core inflation to remain stubbornly above 3 percent. This combination, according to the note, removes the justification for the central bank to lower borrowing costs.

"Given this macroeconomic background, we don't think even a new and relatively dovish Fed chairman could convince the FOMC to cut interest rates," stated JPMorgan Chief Economist Michael Feroli.

Feroli’s forecast indicates stable rates for all of 2026, with the first potential rate hike of 25 basis points arriving in the third quarter of 2027.

Market Pricing Tells a Different Story

Investors are positioned for a much more dovish outcome than JPMorgan anticipates. Data from the CME FedWatch Tool reveals that markets see a high probability of rate reductions in 2026:

• Two Rate Cuts: 32% probability

• One Rate Cut: 25% probability

• Three Rate Cuts: 22% probability

In sharp contrast, the market is pricing in only an 8% chance that the Fed will keep interest rates unchanged through the end of the year, which is JPMorgan's base case.

Political Pressure Mounts on the Fed

The economic debate is unfolding against a tense political backdrop. President Donald Trump is expected to appoint a new Federal Reserve Chairman in the coming months, with the new four-year term starting in May.

Trump has a history of pressuring the central bank to lower interest rates more aggressively, having previously argued that the policy rate should be around 1 percent. Currently, the Fed's benchmark interest rate sits in the 3.5–3.75 percent range.

Tensions between the White House and the Fed escalated over the weekend. In a video, Fed Chairman Jerome Powell announced he had been summoned by the U.S. Department of Justice to testify before Congress. The testimony concerns statements he made last year about the renovation costs of the Fed building. It is known that President Trump has previously explored using these same renovation costs as a reason to remove Powell from his position.

Oil prices climbed to a seven-week high on Monday, driven by growing concerns that political turmoil in Iran could disrupt the country's crude exports. However, expectations of new supply from Venezuela kept the rally in check, creating a tense balance in global energy markets.

Brent futures rose by 53 cents, or 0.8%, to settle at $63.87 a barrel, its highest closing price since November 18. U.S. West Texas Intermediate (WTI) crude increased by 38 cents, or 0.6%, settling at $59.50, a peak not seen since December 5.

Iran Tensions Fuel Supply Concerns

The primary driver for the price increase is the uncertain situation in Iran. The OPEC member is cracking down on widespread anti-government protests, which represent one of the most significant challenges to its leadership since the 1979 Islamic Revolution.

The U.S. is closely monitoring the events. President Donald Trump has weighed potential responses to the lethal violence against demonstrators and threatened possible military action. While Iran stated it is keeping communication channels with Washington open, the market remains on edge.

Data from Kpler and Vortexa reveals that Iran currently has a record volume of oil stored on tankers at sea, equivalent to about 50 days of its output. This strategy is partly due to reduced purchases from China amid sanctions and an effort by Tehran to safeguard its supply from potential U.S. military strikes.

Venezuela's Potential Return Caps Gains

Counterbalancing the fears over Iranian supply is the prospect of Venezuela resuming oil exports following the ouster of President Nicolas Maduro. President Trump announced last week that the new government in Caracas is preparing to hand over as much as 50 million barrels of sanctioned oil to the United States.

According to four sources familiar with the logistics, oil companies are actively seeking tankers and preparing for operations to ship the crude safely. At a White House meeting on Friday, multinational commodities firm Trafigura stated its first vessel is expected to begin loading within the next week.

In a related development, LSEG shipping data on Monday showed that two China-flagged supertankers, originally sailing to Venezuela to collect crude for debt repayment, have reversed course and are now heading back to Asia.

Broader Geopolitical Risks on the Radar

Investors are also monitoring other global hotspots for potential supply disruptions.

Russia-Ukraine Conflict

Ukraine's ongoing attacks targeting Russian energy infrastructure continue to pose a risk to supply. The possibility of tougher U.S. sanctions on Moscow's energy sector adds another layer of uncertainty for the market.

OPEC+ Production Landscape

Elsewhere in the OPEC+ alliance, which includes OPEC and its allies, production figures are mixed.

• Azerbaijan: The country's energy ministry reported on Monday that oil exports fell to 23.1 million tonnes in 2025, down from 24.4 million tonnes in 2024.

• Norway: The Norwegian government plans to present a policy document on the future of its oil and gas industry next year. However, Prime Minister Jonas Gahr Stoere affirmed the sector's importance, stating it "should be developed, not phased out."

Market Outlook and US Economic Factors

Looking ahead, U.S. bank Goldman Sachs noted that it expects oil prices to likely drift lower this year. The bank anticipates that new supply will create a market surplus, although it acknowledged that geopolitical risks tied to Russia, Venezuela, and Iran will continue to drive volatility.

Meanwhile, in the United States, the Trump administration's decision to open a criminal investigation into Federal Reserve Chair Jerome Powell has intensified pressure on the central bank. Powell described the move as a "pretext" to influence interest rate decisions. The investigation has drawn criticism from former Fed chiefs and senior Republicans.

Any move toward lower interest rates could potentially stimulate economic growth and boost oil demand by reducing borrowing costs. However, such a policy could also complicate the Federal Reserve's efforts to manage inflation.

Economists forecast that U.S. consumer prices likely rose 2.7% year-over-year in December, matching the annual inflation rate seen in November. Core inflation, which excludes food and energy, is expected to have climbed to a 2.7% annual rate, up from 2.6% the previous month.

This expected uptick follows an unusual slowdown in November, which some analysts believe was skewed by data collection issues. Looking ahead, most forecasts suggest inflation will moderate over the year as slowing rent growth begins to offset price pressures from tariffs.

Unpacking the December Inflation Figures

The upcoming Consumer Price Index (CPI) report from the Bureau of Labor Statistics is projected to show inflation holding firm. According to a survey of economists by Dow Jones Newswires and The Wall Street Journal, the headline CPI is expected to register a 2.7% annual increase for December.

Meanwhile, core prices, which provide a clearer view of underlying inflation trends by stripping out volatile food and energy costs, are anticipated to have risen 2.7% over the last 12 months. This marks an acceleration from the 2.6% pace recorded in November.

If these forecasts prove accurate, it would signal that inflationary pressures are edging higher again. Inflation has consistently run above the Federal Reserve's 2% target since 2021, driven in part by tariffs implemented by the Trump administration.

The Impact of the Government Shutdown

Some economists suggest that November's surprisingly soft CPI report may have understated the true level of inflation. Data collection was delayed by a government shutdown that ended on November 13, pushing the bureau's price surveys much later into the month than usual and coinciding with Black Friday sales.

Analysts believe December's report will reflect a reversal of these potential distortions.

"Data collection issues stemming from the longest-ever government shutdown led to a surprisingly soft November CPI report," wrote economists at Wells Fargo Securities, led by Sarah House. "Most, although not all, of these distortions should be unwound in the December report."

Implications for Federal Reserve Policy

Federal Reserve officials will be scrutinizing the report for any signs that tariffs are fueling inflation more than anticipated. While the Fed has cut its benchmark interest rate three times in recent months amid a weakening labor market, persistent inflation could prevent further cuts in the near term.

The central bank's decisions hinge on balancing efforts to support the economy without letting inflation accelerate unchecked.

The Broader Outlook for Inflation

Despite the current pressures, many forecasters expect inflation to cool over the course of the year. Two key factors are driving this outlook:

• Slowing Housing Costs: Rent increases have moderated after spiking during the pandemic era.

• Weaker Labor Market: A faltering job market means that rising wages are not a significant source of inflation.

These dynamics are widely expected to outweigh the ongoing price pressures from tariffs.

"The two most valuable indicators for forecasting inflation further ahead—the state of the labor market and leading indicators of rent inflation—now point to lower inflation than they did late last cycle," noted researchers at Goldman Sachs, led by chief U.S. economist David Mericle.

Senator Elizabeth Warren is directly challenging the Securities and Exchange Commission over a plan to introduce cryptocurrency into American retirement accounts. In a letter to SEC Chair Paul Atkins, Warren questioned how the agency will protect investors following President Trump's executive order greenlighting crypto for 401(k) plans.

The executive order, signed in August, opened the door for alternative assets like bitcoin and private equity funds to be included in traditional retirement plans. Warren argues this move introduces unacceptable risks to the financial security of millions.

A "Playground for Financial Risk"

In her letter, the Massachusetts Democrat framed 401(k) plans as a "lifeline to retirement security rather than a playground for financial risk." She expressed deep concern that the Trump administration's decision could lead to significant losses for workers and families.

Warren detailed several core threats posed by crypto assets:

• High Volatility: She cited a 2024 Government Accountability Office study that found crypto assets have "uniquely high volatility" and no standard method for projecting future returns.

• Lack of Transparency: The market's opacity makes it difficult for average investors to assess true value and risk.

• Conflicts of Interest: Warren pointed to President Trump's own history, noting he once called bitcoin a "scam" in 2021. Yet, a report from the Center for American Progress estimated that Trump and his family gained over $1.2 billion from crypto in the year after his 2024 reelection.

"There is no reason to expect that inviting plans to offer these alternative investments will lead to better outcomes overall for participants," Warren wrote, adding that the higher fees common with such assets could make things worse.

Legislative Loopholes and Union Concerns

Warren's letter arrives as two Senate committees are set to hold hearings on a major crypto market structure bill. She warned that this legislation could create a "tokenization loophole," allowing financial products on the blockchain to sidestep the SEC's regulatory authority. This, she argued, would further endanger Americans' retirement savings.

This sentiment is shared by major labor organizations. The American Federation of Teachers and the AFL-CIO have also voiced public concern over the Trump administration's approach. The unions worry that allowing widespread tokenization could weaken the SEC's ability to regulate securities, creating new systemic risks.

Warren's Key Questions for the SEC

To understand the SEC's strategy for mitigating these risks, Warren demanded answers to several key questions:

1. Fair Value Disclosures: Has the SEC ensured that public companies holding crypto assets are providing disclosures that reflect fair market value, given the extreme price volatility?

2. Market Manipulation: Has the SEC's Division of Risk and Analysis assessed the use of deceptive or manipulative practices in crypto markets? If not, does it plan to publish research to educate retail investors?

3. Investor Education: What specific guidance is the SEC's Office of Investor Education and Assistance providing to retail investors who may soon be able to purchase crypto assets through their retirement plans?

The SEC declined to comment on the letter.

The SEC's Pro-Innovation Agenda

Despite Warren's pressure, the SEC under Chair Paul Atkins appears poised to continue the administration's pro-crypto policy. Atkins has publicly stated that the goal is to make "America the crypto capital of the world" by creating "good rules fit for the purposes of the crypto industry."

He has emphasized that his approach will differ significantly from that of his predecessor, Gary Gensler, who pursued aggressive regulation. Atkins has said the SEC will "forge forward" and "embrace this new area of innovation."

However, Atkins has also stressed that innovation must be balanced with investor protection. In a November speech, he outlined his vision for regulation while making it clear that his agency will not tolerate misconduct.

"Fraud is fraud," Atkins stated. "If you raise money by promising to build a network, and then take the proceeds and disappear, you will be hearing from us, and we will pursue you to the full extent of the law."

API SAYS FINANCIAL INCENTIVES UNNECESSARY FOR VENEZUELA

Source: Reuters

China and the European Union have signaled a breakthrough in their trade dispute over electric vehicles, agreeing to a framework that could help Chinese manufacturers avoid steep import duties.

The EU on Monday released a guidance document outlining a process for Chinese EV companies to propose price undertakings. This allows them to offer a minimum import price for their vehicles, a key step toward resolving the conflict that began with an EU anti-subsidy investigation.

How the New Price Guidelines Work

The new instructions provide a path for Chinese automakers to negotiate pricing directly with the EU. The goal is to set minimum import prices high enough "to remove the injurious effects of the subsidization," according to the European Commission.

Brussels also confirmed that any plans by Chinese EV manufacturers to invest within the EU would be taken into consideration during negotiations.

"The European market is open to electric vehicles from all around the world, provided that they have come here according to that level playing field," said European Commission spokesperson Olof Gill. "If those conditions are met, then we can look at price undertakings in a serious way."

The EU has pledged to assess each offer objectively and fairly, adhering to non-discrimination principles and World Trade Organization rules.

China Welcomes a "Soft Landing"

The move was met with positive responses from Beijing. A statement from China's Commerce Ministry noted the development was "conducive not only to ensuring the healthy development of China-EU economic and trade relations, but also to safeguarding the rules-based international trade order."

The China Chamber of Commerce to the EU also welcomed the agreement, stating it could bring about a "soft landing" in the ongoing standoff.

The dispute escalated in late 2024 when the EU imposed countervailing tariffs ranging from 7.8% to 35.3% on Chinese battery EV imports for a five-year period. EU officials argued that massive support from the Chinese government created an "unfair" subsidy advantage, threatening European auto manufacturers as low-priced Chinese EVs entered the market.

Market Impact and Future Outlook

Analysts believe this new framework offers a pragmatic solution that could reshape the competitive landscape.

"The minimum prices offer Chinese brands probably some comfort to continue their exports long term... while avoiding higher import tariffs," said Rico Luman, a senior economist at ING who covers the automotive industry. "I'm convinced the inroads of Chinese brands will continue."

Luman also pointed out the EU's strategic dependency on China for batteries, rare-earth materials, and computer chips, which necessitates "a balancing act to avoid frustrating the trade relationship."

However, the final impact hinges on the agreed-upon price floors. Stephen Chan, an associate director at S&P Global Ratings, warned that European demand for Chinese vehicles could be constrained if the approved minimum price "significantly narrows the gap between Chinese BEVs and European rivals."

The development follows the EU's announcement last month that it was reviewing a price undertaking offer from a Chinese joint venture of the Germany-based Volkswagen Group as a potential alternative to tariffs on its China-built EVs.

The Rise of Chinese EVs in Europe

Despite the trade friction, Chinese automakers are steadily expanding their presence.

• Market Share Growth: Cars manufactured in China accounted for 6% of EU sales in the first half of 2025, up from 5% during the same period in 2024, according to the European Automobile Manufacturers’ Association (ACEA) and S&P Global Mobility.

• Dominant Local Players: EU-based manufacturers still represented 74% of total EU car sales in the first half of 2025. Germany remains the largest producer, accounting for about 20% of cars sold in the bloc.

• Future Projections: Consultancy AlixPartners forecasts that Chinese automakers are on track to double their European market share to approximately 10% by 2030.