Fed's Bowman: Weak Job Market Keeps Rate Cuts on the Table

Michelle

Remarks of Officials

Economic

Central Bank

Political

Summary:

A Fed Vice Chair urges readiness for more rate cuts due to a fragile job market, contrasting the central bank's caution.

Federal Reserve Vice Chair for Supervision Michelle Bowman stated on Friday that a fragile U.S. job market, which could weaken quickly, means the central bank must be prepared to cut interest rates again if necessary.

Federal Reserve Vice Chair for Supervision Michelle Bowman stated the central bank should remain open to further interest rate cuts.

A Call for Policy Flexibility

In a speech for the New England Economic Forum, Bowman argued that without a "clear and sustained improvement in labor market conditions, we should remain ready to adjust policy to bring it closer to neutral." She emphasized that while monetary policy is not on a predetermined path, the Fed "should also avoid signaling that we will pause" on more rate cuts unless economic conditions change.

Bowman described the current monetary policy stance as "moderately restrictive" and stressed that officials should be forward-looking when setting rates. She advocated for using forecasts informed by a wide range of indicators and direct engagement with businesses and communities.

Balancing Inflation and Employment Risks

Bowman’s baseline forecast is for continued solid economic expansion and a labor market stabilizing near full employment as policy becomes less restrictive. However, she noted that the risks to the Fed's dual mandate are uneven.

She believes price pressures are likely to ease as the effects of trade tariffs diminish, bringing underlying inflation closer to the Fed's 2% target. In contrast, she sees the job market as "increasingly more fragile" and warned it "could continue to deteriorate in the coming months." Given that conditions can shift rapidly, Bowman argued for the Fed to remain nimble on policy decisions.

The Fed's Current Cautious Approach

The Federal Reserve enters 2026 with policymakers generally expecting inflation to moderate, the job market to stabilize, and economic growth to remain decent as uncertainty from President Donald Trump's policies subsides.

In the last months of 2025, the Fed cut its benchmark interest rate by three-quarters of a percentage point, bringing it to a range of 3.50%-3.75%. These cuts were intended to support a weakening job market while keeping enough restraint to lower high inflation.

At their December 9-10 meeting, Fed officials projected a single quarter-percentage-point rate cut for 2026. Since the start of the year, they have signaled no immediate urgency to act, preferring to wait for more evidence that inflation, still well above the 2% target, is on a downward path.

This cautious stance comes amid considerable pressure from President Trump to lower rates further. The president is expected to soon announce his choice to succeed Fed Chair Jerome Powell, whose term ends in May. Tensions recently escalated after it was revealed the administration is criminally targeting the Fed over costs related to its headquarters renovation, an action Powell described as a response to the central bank exercising independent judgment on rate policy.

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Adam

Stocks

Economic

The first two weeks of 2026 have seen U.S. President Donald Trump’s administration capture Venezuela’s president, threaten to respond to Iran’s violent crackdown on protests, and talk up the possibility of using force to seize Greenland. So why are stocks rising?

The headlines have caused price swings in asset classes like gold, silver and oil as traders sought safe havens and weighed the impact a U.S. intervention in the Middle East could have on oil supply.

Equity markets, however, appear to be shrugging off the news. The S&P 500 has had just three losing sessions since markets began the new trading year, and was up around 1.5% year-to-date at Thursday’s close. Europe, Latin America and the Middle East, where the tensions hit much closer to home, have also risen, as have Asia-Pacific stocks.

The U.S. view

Wall Street’s three major averages have made gains despite the news, appearing to shrug off U.S. President Donald Trump’s apparent willingness to order military operations overseas and threats to take territory from a close ally by force.

Alongside the S&P 500′s gain, Wall Street’s two other major averages are up this year: the Dow Jones Industrial Average has added close to 3%, while tech-heavy Nasdaq Composite is up 1.2%.

Eric Freedman, chief investment officer for Chicago-based Northern Trust Wealth Management, which manages assets worth $492.6 billion, said markets hadn’t been moved by Trump’s actions and rhetoric on Iran, Venezuela, and Greenland partly because no other large economic or military powers had responded.

“Markets are looking at these events in isolation, and it would likely take a unique response to each flare-up to drive more market agita,” he told CNBC in an email. “We don’t want to speculate what subsequent actions may follow, but what we would be concerned with beyond the human conditions in a given region would be if lines are drawn that impact trade in an increasingly sequestered world.”

A U.S. Supreme Court ruling is due soon on the legality of Trump’s tariffs, but, in the meantime, global investors appear to have adapted to the White House’s 2025 pivots, Freedman said.

“Increased flare ups beyond what has occurred already could push countries to revisit trade ties or threaten sanctions, but until they arrive, markets will remain in more reactive mode if an event happens and not necessarily adjust portfolio positioning now in anticipation of an event,” he added. “If markets were leaning into prescriptive positioning or the thought that taking defensive measures was appropriate because flare-up probabilities were increasing, we would likely see a weaker U.S. dollar.”

The U.S. dollar index, which measures the greenback against a basket of major rivals, has risen by around 1% since the beginning of the year.

Equity market ‘meh’

Alex Morris, CEO of Washington, D.C.-headquartered F/m Investments, called stock market investors’ reactions “equity market ‘meh’.”

“Geopolitics are simmering, but not boiling over,” he said. “The president’s use of highly targeted shows of force but low-time and personnel in-theater operations leaves markets little to react to.

“Short-lived and final events (no ongoing commitment) give little for markets to react to. News happens and that’s it. It also helps there has been no meaningful response from Iran or Venezuela.”

Morris argued that the market’s muted reaction was underpinned by a “growing inurement” to what the Trump says, and increasingly, to what he does.

“Despite substantial action, there is little the president is unwilling to immediately backtrack on and much of the flood the zone action has been undone or overturned,” he added. “The market has learned to temper enthusiasm and wait for receipts.”

Anthony Esposito, founder and CEO of AscalonVI Capital, said markets have not cared to discount geopolitical risk for some time now.

“Israel bombs Iran – the S&P 500 was down 1% overnight and closed down just 50bps. U.S. bombs Iran – almost no reaction,” he told CNBC.

“Venezuela, Greenland could be seen as positives for the markets and even GDP in the U.S., [but] with no regard for the what ifs,” he said, noting that energy production, rare earth procurement, national security and infrastructure expansion were all at play.

“Iran is the wild card,” he added, saying the market slid earlier this week “until Trump settled fears,” by seeming to back away from military action. “If there was an event in Iran the market would react (oil up, stocks down, gold up) but aside from that the markets are focused on rates, growth, earnings and the Trump agenda.”

European rally

Stocks in Europe have also strengthened even amid questions about the future of Greenland, a self-governing Danish territory in the Arctic, and what Trump’s determination to take the island could mean for NATO and continental defense. The pan-European Stoxx 600 has added almost 4%.

“Bottom line, there is a lot of issues but as yet, they haven’t created an impact via investor sentiment or activity,” said Toni Meadows, head of investment at U.K.-based BRI Wealth Management.

“This might not always be the case,” he added. “Greenland is [the] bigger deal in terms of impact as this is an argument within NATO, so if at some point the market believes Trump’s threat to make it a military conflict then markets will react,” he said. “But for now, it is a case of stay close to the news flow.”

Benjamin Jones, global head of research at Invesco, told CNBC in an email that historically, geopolitics, military conflicts, and unconventional policy haven’t weighed on portfolios as much as investors fear.

“Many geopolitical events are troubling, but markets are callous and only react meaningfully and sustainably when these events impact economic fundamentals or lead to a change in policy,” he said.

“History is clear, equity markets have historically performed well in the 12 months following a spike in geopolitical risk.”

Asian stocks on the rise

In fact, the MSCI AC Asia Pacific Index, which tracks large and mid-cap stocks across 15 Asia-Pacific countries, has risen over 5% this year to a record high. Japan’s benchmark Nikkei 225 and South Korea’s Kospi similarly reached all-time highs in recent days.

Market watchers said the increases are not investors being complacent, but fundamentals like the absence of major oil shocks and the expectation that easier monetary policy and AI spending will continue to underpin earnings growth.

“The impact of geopolitical events would usually transmit to global markets via the oil price but the oil market is not seeing significant shocks so far,” said Yap Fook Hien, senior investment strategist at Standard Chartered.

Yap added that Asian investors and global equity markets are driven more by policy stimulus, including U.S. rate cuts and AI investments, all of which support a strong outlook for earnings growth this year.

“Geopolitics remain a key risk but the shock since Liberation Day in April 2025 has conditioned markets to respond more calmly to Trump’s actions,” he said.

Morningstar’s Southeast Asia managing director, Shihan Abeyguna, told CNBC that markets may now view geopolitics as “a chronic risk rather than an acute shock.”

He added that Asia valuations are not stretched enough to make markets vulnerable to prolonged drawdowns without a genuine shock.

Geopolitical concerns in the region “tend to be more calibrated, so it would need to be a true unexpected shock that would alter earnings expectations,” said Abeyguna.

Source: cnbc

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Devin

Central Bank

WASHINGTON, Jan 16 (Reuters) - White House adviser Kevin Hassett played down the federal criminal investigation into Federal Reserve Chair Jerome Powell on Friday, saying he expected there would be "nothing to see here".

The Trump administration has opened a criminal investigation into Powell over cost overruns for a $2.5 billion project to renovate two historical buildings at the Fed's headquarters complex. Powell, who disclosed the probe on Sunday, denies wrongdoing, and said the unprecedented actions were a pretext to put pressure on him for not satisfying U.S. President Donald Trump's long-running demands for sharply lower interest rates.

Hassett, the director of the National Economic Council who is a candidate to replace Powell, said in an interview with Fox Business Network that he wished there had been more transparency from the Fed about cost overruns of building renovations.

"The bottom line is, I expect, you know, Jay is a good man - I expect that there's nothing to see here, that the cost overruns are related to things like asbestos, as he says. But I sure wish they had been more transparent," Hassett said.

The probe drew criticism from foreign economic officials, investors and former U.S. government officials from both political parties - as well as lawmakers in Trump's own Republican Party, as politicizing sensitive policymaking.

Powell's term as Fed chair ends in May. Trump has yet to announce a replacement.

Hassett tried to minimize the federal criminal probe as a "simple request for information".

"I'm sure the information will be forthcoming shortly, and then things will move forward," he told "Mornings with Maria."

Source: Investing

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Isaac Bennett

Remarks of Officials

Political

The Trump administration is pursuing a dual-track strategy in its relationship with Venezuela, marked by high-level diplomatic meetings in both Caracas and Washington following the capture of President Nicolas Maduro earlier this year.

In a significant move, CIA Director John Ratcliffe met with Venezuela's acting president, Delcy Rodriguez, in Caracas. Simultaneously, Venezuelan opposition leader Maria Corina Machado held a meeting with President Donald Trump at the White House.

The Washington Channel: Trump Hosts the Opposition

Maria Corina Machado, a prominent liberal opposition figure, met with President Trump on Thursday. The meeting was highlighted by a significant gesture: Machado presented Trump with the Nobel Peace Prize medal she had received the previous year.

Venezuelan opposition leader Maria Corina Machado in Washington D.C. ahead of a high-profile meeting with President Donald Trump.

After what she described as an "excellent" meeting, Trump publicly thanked Machado for the medal on social media, calling it "a wonderful gesture of mutual respect." Machado is scheduled to speak with reporters on Friday at the Heritage Foundation, a conservative think tank with strong connections to the Trump administration.

The Caracas Channel: CIA Director Meets Interim Government

John Ratcliffe’s visit to Caracas makes him the most senior U.S. official known to have met with acting President Delcy Rodriguez since the U.S. attack on January 3 that resulted in the capture of Nicolas Maduro and his wife.

According to a U.S. official, the CIA chief met with Rodriguez at Trump's direction. The key objectives of the meeting were:

• To signal that the United States is seeking an improved working relationship.

• To discuss intelligence cooperation and economic stability.

• To demand assurances that Venezuela will not serve as a "safe haven for America's adversaries, especially narco-traffickers."

Political Tensions Remain High

The diplomatic overtures are set against a backdrop of deep political friction. During her first State of the Union address on Thursday, acting President Rodriguez appeared to take a swipe at Machado's visit to Washington.

"If I should visit Washington," Rodriguez told the Venezuelan people, "I will do so with my head held high, walking, not on my knees."

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King Ten

Political

Forex

Remarks of Officials

Economic

Central Bank

President Donald Trump's recent comments on potential candidates for the Federal Reserve chairmanship have sent immediate shockwaves through financial markets, reshaping the race to lead the central bank.

In a move that caught traders by surprise, Trump appeared to rule out Kevin Hassett, a top contender, for the position. The statement triggered a sharp rally in the U.S. dollar while sending gold and silver prices tumbling.

Trump Publicly Sidelines Hassett for Fed Chair

Speaking to reporters, President Trump indicated he prefers Hassett to remain in his current post at the White House National Economic Council (NEC).

"Hassett performs very well on television, and I want him to stay in his current position. We'll see," Trump said. He added a revealing justification: "Fed officials don't talk much, Hassett talks a lot."

This public dismissal of Hassett's candidacy for the Fed's top job had an instant impact on market sentiment and leadership odds.

Markets React: Dollar Soars, Gold Tumbles

The financial market response was swift and decisive. Following the president's remarks, the U.S. Dollar Index (DXY) surged by over 20 points.

Simultaneously, prices for precious metals dropped. Both spot gold and silver experienced sharp short-term declines as investors recalibrated their expectations for the future of U.S. monetary policy and leadership at the Federal Reserve.

On forecasting platforms, the probabilities for the next Fed chair shifted dramatically. Kevin Warsh saw his chances increase, while Hassett's plummeted. Other potential candidates, including Christopher Waller, Rick Rieder, and Michelle Bowman, continue to be listed with lower probabilities.

The Powell Factor: A Lingering Presence?

The shakeup has also intensified uncertainty around the future of the current Fed Chair, Jerome Powell. While his term as chairman ends in May, his term as a member of the Fed's Board of Governors runs until January 2028.

Recent events have fueled speculation that Powell may choose to remain on the board after stepping down as chair. A grand jury subpoena from the Justice Department, which Powell linked to his congressional testimony on renovations at the Fed building, has been interpreted by some as a political move.

In a statement on January 11, Powell characterized the subpoena within a wider context of "government pressure and threats," leading many to believe he might stay on to safeguard the central bank's institutional integrity.

Analysts Warn of a "Shadow Chairman"

If Powell remains on the board, it could significantly complicate Trump's efforts to install a Fed leadership more inclined to support interest rate cuts.

Former Cleveland Fed President Loretta Mester warned this scenario could create the perception of a "dual authority" within the Fed, potentially confusing markets.

Antulio Bomfim, Global Macro Director at Northern Trust Asset Management, noted that while Powell likely does not want a "shadow chairman" role, his continued presence on the board would inevitably serve as a strong balancing force.

Near-Term Monetary Policy Remains Steady, For Now

Despite the leadership drama, no radical shifts in monetary policy are expected in the immediate future. The Fed recently cut its policy rate by 25 basis points—its third consecutive reduction—and has signaled a wait-and-see approach pending clearer inflation and employment data.

However, the ongoing uncertainty over the Fed's next leader and the potential for Powell to remain on the board could delay President Trump's plans to appoint new members and secure a majority more aligned with his economic agenda.

To stay updated on all economic events of today, please check out our Economic calendar

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Justin

Political

Economic

A view shows the U.S. Capitol dome from the Cannon House Office Building on Capitol Hill in Washington, U.S., July 14, 2022. REUTERS/Elizabeth Frantz

· Senate approves significant funding for NASA, NSF, NOAA

· NSF funding to support 10,000 awards, 250,000 scientists

· Critics argue NSF funding lacks oversight, clear public return

The U.S. Senate voted on Thursday to approve billions of dollars in funding for federal science agencies, rejecting deep cuts proposed by President Donald Trump in space and other areas.

The Senate bill approved significant science funding for NASA, the National Science Foundation and the National Oceanic and Atmospheric Administration above what the White House had sought. NSF will receive $8.75 billion for research efforts including in quantum information science, artificial intelligence and other areas.

The White House had sought to cut the budget by 57%.

The NSF funding is expected to support nearly 10,000 new competitive awards and more than 250,000 scientists, technicians, teachers, and students, Democratic Senator Chris Van Hollen said.

The Senate rejected nearly all of Trump's cuts to NASA. The president had sought a $6 billion cut from the $24.9 billion budget, but the Senate voted for a much smaller cut, appropriating $24.44 billion.

The bill rejected a proposal to cut NASA Science by 47% and terminate 55 operating and planned missions. The legislation also provides $1.6 billion for Astrophysics, including $300 million to complete a telescope to investigate dark energy and $500 million for the Dragonfly mission to explore the largest moon of Saturn.

This week, White House science adviser Michael Kratsios addressed criticism of proposed science budget cuts. "Even in our attempt to try to rightsize the budget, the one area where we have kept a consistent amount of proposed budget funding has been in AI," he said.

Senator Maria Cantwell, the top Democrat on the Commerce Committee that oversees many science-related agencies, said in a Reuters interview the bipartisan vote was a vote for science. "Congress won by saying, 'No, science does matter, and we're going to invest in it.'"

The bill supports big projects like creating a "permanent outpost on the Moon, developing space technology that monitors extreme weather and protects our citizens from natural disasters, and inventing the microelectronics of the future," Cantwell said.Senator Rand Paul, a Republican, said the legislation "wastes $8.75 billion on the National Science Foundation—a massive taxpayer-funded expansion with weak oversight, vague priorities, and no clear return for the public."

Source: Reuters

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Henry Thompson

Political

Remarks of Officials

Economic

Central Bank

Daily News

The Trump administration is developing a plan that would allow investors to use their 401(k) retirement funds to make a down payment on a house. White House economic adviser Kevin Hassett confirmed the proposal on Friday, stating that more details would be released next week.

In an interview with Fox Business Network, Hassett said the administration will "allow people to take money out of their 401ks and use that for down payment." He added that President Donald Trump is expected to present the final plan during the economic conference in Davos, Switzerland.

Hassett, who will be traveling with the president, noted that officials are still determining the "mechanics of it" to ensure the policy doesn't negatively impact individuals' retirement savings. The goal is to find a "simple" way to facilitate the transfer of funds.

Addressing the Housing Affordability Crisis

This new initiative comes as the administration confronts economic pressures ahead of the November midterm elections. A central campaign promise was to find solutions for the high prices facing American consumers.

Housing affordability has become a major challenge across the United States. A combination of high mortgage rates and elevated home prices has pushed many potential buyers out of the market, leading to a slowdown in housing activity. Investors and would-be homeowners have been watching for policy changes or market shifts that could revive mortgage applications.

Recent consumer inflation data from the Bureau of Labor Statistics confirmed that housing inflation remains strong, underscoring the persistence of the problem.

A Broader Push to Lower Housing Costs

The 401(k) proposal is the latest in a series of ideas from the Trump administration aimed at tackling the housing market. Other recent proposals include:

• Banning institutional investors from purchasing single-family homes.

• Instructing the Federal Housing Finance Agency to buy $200 billion in bonds from mortgage giants Fannie Mae and Freddie Mac to help lower mortgage rates.

• Repeatedly calling on the U.S. Federal Reserve to lower its benchmark interest rates.

Will It Work? Analysts Question the Approach

While these measures are designed to stimulate demand, some economists and market analysts argue they miss the core issue: a critical lack of housing supply.

According to this view, local zoning laws and regulations are the primary constraints on building new homes. They caution that policies designed to lower rates or ease down payments could increase demand for a limited number of houses, which would likely just push prices even higher without a corresponding increase in supply.

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