Fed's Daly: Further Rate Cuts Will Likely Be Needed

Summary:

San Francisco Federal Reserve Bank President Mary Daly said on Wednesday she "fully supported" the decision by the Fed to cut its policy rate last week and expects further reductions ahead.

"Will they come right now, this year or going forward?" Daly said at the University of Utah’s David Eccles School of Business. "It's hard to say, but what's really important is that making those policy adjustments will likely be required to balance both of our goals -- keep pressure on inflation to bring it to price stability and offer support to the labor market to ensure that it stays near full employment."

Daly said she does not expect a recession and rejected the idea that the economy is heading toward the high-inflation, high-unemployment environment known as "stagflation."

Inflation excluding tariff-driven goods inflation, she said, is probably around 2.4% or 2.5% -- still too high compared to the Fed's 2% goal, but approaching it. And though the labor market has cooled and can no longer be called solid, she said, she wouldn't call it weak either.

"I'd say it's sustainable, but ... I do not want to see further softening," she said. "That's part of why the interest rate decision was very straightforward: You're taking out some insurance" to support the labor market, even as borrowing costs remain high enough to keep continued downward pressure on inflation.

"It's an economy that still needs monetary policy bridling, but not as much as we had," she said.

Fed policymaker projections released at the end of the September 16-17 meeting showed most U.S. central bankers expect at least one more quarter-point cut this year, and the largest number expect two more.

Echoing Fed Chair Jerome Powell, Daly said those projections are not promises and noted that the Fed's actual rate-setting decisions may require assessing tradeoffs between the Fed's two goals.

Daly had previously said she felt two quarter-point rate cuts this year was a reasonable forecast. On Wednesday she did not provide an update to that view.

Source: Kitco

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Fiona Harper

The Bank of Japan may raise its benchmark interest rate as soon as next month, according to a former BOJ board member, backing intensifying market speculation over an impending move.

“The BOJ may act in October,” Makoto Sakurai, a former member of the nine-person board, said in an interview Wednesday. The decision will depend heavily on the degree of certainty authorities are seeking, “but economic data by then could be robust because of a delay in the appearance of the tariff impact.”

Market expectations for a rate hike when the bank next sets policy on Oct. 30 have been gaining momentum as inflation held steady and the economy showed resilience even as US trade policies jolted global commerce. With uncertainties remaining high, he also said he wouldn’t rule out the chance of officials waiting until December to be more confident about the tariff impact.

Money markets increased their bets on a hike by year-end after people familiar said earlier this month that BOJ officials were of the view that another rate hike in 2025 was possible. Those bets got a further boost after the BOJ’s hawkish policy hold last week.

The BOJ’s board surprised analysts with its Sept. 19 policy vote. For the first time in Governor Kazuo Ueda’s tenure, two members dissented in opposition to a rate hold. Sakurai said it’s possible the votes were meant to flag a looming shift.

The two dissenters Naoki Tamura and Hajime Takata essentially cited the strength of inflation for their votes. Sakurai said he was a little puzzled by that rationale, considering inflation has stayed at or above the BOJ’s target for more than three years.

The dissenters could have taken the same action with the same explanation back in June. That raises the possibility the vote was part of a coordinated message from the board, said Sakurai, who left the bank in 2021. “The BOJ can raise rates anytime it wants if they only look at inflation.”

A wildcard factor for the BOJ’s policy path could be the result of the ruling Liberal Democratic Party’s leadership election on Oct. 4, Sakurai said. Authorities might have to delay a hike if Sanae Takaichi, a top contender, prevails. She’s considered a monetary easing advocate, although she’s toned down her dovish rhetoric this year compared with remarks she made during last year’s leadership contest, he said.

At a debate with other four contenders Wednesday, Takaichi signaled a softening of her stance on policy by saying the means of monetary policy should be left to the BOJ while the government decides the direction of fiscal and monetary policy. A year ago she said a rate hike would be absurd.

Ultimately Sakurai sees the potential for the bank’s policy rate to rise by as much as 100 basis points from the current 0.5% over the next two and a half years before Ueda’s term ends in April 2028. That’s a little higher than the median market consensus of a 1.25% peak for the current cycle, according to a Bloomberg survey.

“The BOJ probably wants to surely bring it to around 1.5%,” Sakurai said. “It looks certain to hit 1.25%.”

Source: Bloomberg Europe

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Samantha Luan

Economic

Political

Forex

Denmark's Aalborg airport, used for commercial and military flights, was closed due to drones in its airspace, police said early on Thursday, two days after Copenhagen airport was shut over drone sightings that raised European security concerns.A string of drone sightings and digital outages has repeatedly disrupted airports since 2017. These episodes bypass core flight‑safety systems and instead hit choke points such as check‑in and boarding systems, power infrastructure and airfield perimeters, causing ripple effects across networks.

May 27, 2017: IT FAILURE AT BRITISH AIRWAYS' LONDON HUBS

British Airways cancelled all flights from Heathrow, Europe's busiest airport, and Gatwick on the first day of a holiday weekend after a data-centre power issue, affecting 75,000 passengers.A power surge on the morning of Saturday, May 27 hit BA's flight, baggage and communication systems. It was so strong it also rendered the back-up systems ineffective, with knock-on delays lasting into the following Monday as systems were restored.

December 19, 2018: REPEATED DRONE SIGHTINGS AT LONDON GATWICK

Persistent drone reports crippled London's Gatwick Airport for three days during peak travel in the run up to Christmas. Roughly 140,000 passengers and about 1,000 flights were affected in the biggest disruption since an Icelandic volcanic ash cloud in 2010.The British army was drafted in to Gatwick to deploy "specialist equipment" as the anti-drone capability needed was not yet commercially available.The length of disruption at an airport the size of Gatwick was unprecedented. Dubai airport was shut a number of times in 2016 due to unauthorised drone activity, but the longest period was for under two hours.

January 11, 2023: SAFETY SYSTEM FAILURE CAUSES NATIONWIDE HALT IN U.S.

The Federal Aviation Administration (FAA) ordered a nationwide ground stop lasting about 90 minutes that disrupted more than 11,000 U.S. flights, following a "Notice to Air Mission" (NOTAM) system failure.This FAA system is meant to alert pilots to a range of hazards, including snow, volcanic ash or birds near an airport. It also provides information on closed runways and temporary air restrictions.

August 28, 2023: NATS FLIGHT DATA GLITCH IN UK

UK air traffic control limited flows after a flight‑plan processing fault, forcing manual input. Around 1,500 flights were cancelled and disruptions spilled into the following day.

July 19, 2024: FAULTY CROWDSTRIKE UPDATE CAUSES GLOBAL WINDOWS OUTAGE

A faulty security software update by global cybersecurity firm CrowdStriketriggered widespread Windows crashes, which affected numerous industries and grounded more than 5,000 flights worldwide.Across the United States, Asia and Europe, carriers such as Delta Air Lines, Ryanair, United Airlinesand Air India said they had faced delays or disruptionU.S. cancellations topped 2,200 on day one, with nearly 7,000 delayed, and some airlines took days to fully recover operations.

March 21, 2025: SUBSTATION FIRE SHUTS LONDON HEATHROW

Britain's Heathrow Airport, the world's fifth-busiest, was shut for 18 hours after a huge fire at a nearby electrical substation knocked out its power, stranding over 200,000 people and costing airlines millions of poundsThe airport had been due to handle 1,351 flights on the Friday, flying up to 291,000 passengers, but planes were diverted to other airports in Britain and across Europe.

September 10, 2025: DRONE INCURSION INTO POLAND SHUTS SEVERAL AIRPORTS

Several Polish airports were temporarily closed when around 21 suspected Russian drones entered Polish airspace.Warsaw Chopin and Modlin airports, as well as Rzeszow and Lublin airports in the country's east, temporarily closed before resuming operations.

September 20, 2025: CYBER ATTACK AFFECTS MULTIPLE EUROPEAN HUBS

A cyberattack targeting check-in and boarding systems provider Collins Aerospace, owned by RTX, disrupted operations at several major European airports including London's Heathrow, Berlin Airport and in Brussels.Brussels Airport canceled 25 flights on Saturday, 50 on Sunday and half of Monday's flight departures due to persistent problems.

September 22, 2025: DRONE INCURSIONS IN DENMARK AND NORWAY

Two to three large drones repeatedly flew over Copenhagen's airspace, prompting a nearly four‑hour airport shutdown, diversions and delays, leaving tens of thousands of passengers stranded.Authorities in Norway also shut the airspace at Oslo airport for three hours after a drone was seen.Denmark said the incident at Copenhagen airport was the most serious attack yet on its critical infrastructure and linked it to a series of suspected Russian drone incursions and other disruptions across Europe.

September 24, 2025: DENMARK CLOSES ANOTHER AIRPORT DUE TO DRONES

Drones were first sighted near Denmark's Aalborg airport at about 9:44 p.m. (1944 GMT) on Wednesday, police said.The drones followed a similar pattern to the ones that had halted flights at Copenhagen airport two days earlier, police said.The closure of Aalborg airport also affected Denmark's armed forces because it is used as a military base, police added.

Source: TradingView

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Olivia Brooks

Economic

Political

South Korean President Lee Jae Myung told U.S. Treasury Secretary Scott Bessent that trade talks with the United States should be "commercially rational" and meet the interests of both countries, the president's office said on Thursday.

Lee spoke to Bessent at the United Nations on the sidelines of the General Assembly on Wednesday, his chief secretary for policy, Kim Yong-beom, told a briefing in New York.

The meeting focused on the $350 billion package of investment from South Korea agreed in principle between Lee and U.S. President Donald Trump at a summit in July as part of a deal to lower tariffs against South Korean goods, Kim said.

"With regard to the investment package with the U.S., (Lee) expressed hope that the discussions would progress based on commercial rationality and in a direction that serves the interests of both countries," Kim said.

He said South Korea’s economy and its foreign exchange market — which differ significantly from Japan’s — should be key factors in the ongoing talks on a final agreement.

Japan formalized a trade deal with the U.S. earlier in September to lower tariffs on its exports. The agreement includes Japan investing $550 billion in U.S. projects.

South Korea's Lee has said that a similar arrangement involving large capital outflow to the United States could destabilize the currency market and drain South Korea's foreign reserves.

South Korea is seeking a foreign exchange swap with an unlimited credit line from the U.S. to support any final trade agreement, Kim said. South Korean officials have said Washington is reviewing the FX swap proposal.

Source: Yahoo Finance

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Olivia Brooks

Economic

Central Bank

Federal Reserve Bank of San Francisco President Mary Daly said further interest-rate cuts are likely needed, but the US central bank should approach those with caution.

“Moving forward, it is likely that further policy adjustments will be needed as we work to restore price stability while providing needed support to the labor market,” Daly said Wednesday in prepared remarks for an event at the University of Utah.

“But these are projections, not promises, and making good decisions will require us to anchor on our objectives, assess the tradeoffs and decide, again and again,” Daly said in speech focused on the need to be steady and careful in making decisions in uncertain times.

Policymakers last week lowered interest rates for the first time since December, cutting their benchmark by a quarter percentage point. Daly said she “fully supported” the decision as growth, consumer spending and the labor market have slowed.

She added that inflation has accelerated less than she and her colleagues expected, and that price pressures have mainly been confined to parts of the economy directly impacted by tariffs. Before this month’s rate reduction, Fed officials had left rates on hold this year to assess how new policies, including those on trade, would affect the economy.

Source: Bloomberg Europe

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Manuel

Political

Economic

Canada aims to establish duty-free access for up to 95% of its exports to Indonesia over the next eight to 12 months, International Trade Minister Maninder Sidhu said, after signing a trade agreement with one of Southeast Asia's biggest markets.

The Comprehensive Economic Partnership Agreement is Canada's first in the economically crucial Indo-Pacific region since Prime Minister Mark Carney took charge earlier this year with a promise to diversify Canada's exports away from the U.S.

"I see a lot of opportunities in agriculture, in energy and telecom, in defense and aerospace," Sidhu said in an interview.

Indonesia was "seriously looking" at Canadian small modular reactors, a new class of relatively compact nuclear reactors, he added.

The bilateral agreement is likely to be ratified by the respective governments within a year or earlier, Sidhu said, adding that Canadian bilateral trade with Indonesia could double within six years.

Indonesia is a small market for Canadian goods and does not feature among its top 10 trading partners. Total bilateral trade between the two countries was just over C$5 billion ($3.60 billion) last year in sharp contrast to the U.S., Canada's biggest trading partner, where bilateral trade was above C$1 trillion.

Indonesia is Canada's biggest export market in Southeast Asia, giving Canada a gateway to the fast-growing region, Sidhu said.

Canada would look to strike a deal with the Philippines as part of his Southeast Asian outreach soon, he added.

"I will be going to the region quite frequently in the next few months to get that visibility, (and) to have conversations with my counterparts," he said, noting that other countries on his radar in Asia are Malaysia, South Korea and Japan.

CANADA-CHINA TIES

Sidhu said he was likely to travel to China in November as part of an increasing dialogue between the two countries to deescalate a trade war that has hurt some critical sectors in both countries.

Carney has been trying to improve Canada's relationship with China, its second-biggest trading partner, after U.S. President Donald Trump buffeted Canada with a barrage of tariffs.

Carney said on Tuesday he had "constructive" trade talks with Chinese Premier Li Qiang and expected the dialogue to deepen over time.

"We are having this dialogue, this conversation (and) in the past there hasn't been that kind of engagement. And we want to make sure we are engaged at all levels," Sidhu said.

He said Canada was also keen to engage with India on broader economic ties, but discussions were at an early stage.

Source: Reuters

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Manuel

Stocks

Intel Corp. has approached Apple Inc. about securing an investment in the ailing chipmaker, according to people familiar with the matter, part of efforts to bolster a business that’s now partially owned by the US government.

Apple and Intel also have discussed how to work more closely together, said the people, who asked to not be identified because the deliberations are private. The talks have been early-stage and may not lead to an agreement, the people said.

Shares of Intel rose 6.4% to $31.22 on Wednesday in New York after Bloomberg News reported on the discussions. Apple closed down less than 1% at $252.31.

Such a deal would follow a $5 billion investment last week by Nvidia Corp., which plans to work with Intel on chips for personal computers and data centers. SoftBank Group Corp., the Japanese tech giant seeking to expand further in the US, announced a $2 billion investment in Intel last month.

Intel also has reached out to other companies about possible investments and partnerships, the people said.

A deal with Apple, a longtime Intel customer that switched to in-house processors in the past five years, would represent further validation of the chipmaker’s turnaround bid. Still, it’s unlikely that Apple would switch back to Intel processors in its devices. The iPhone maker’s most sophisticated chips are now produced by partner Taiwan Semiconductor Manufacturing Co.

A representative for Intel declined to comment. An Apple spokesperson didn’t respond to a request for comment.

Intel Chief Executive Officer Lip-Bu Tan is attempting a comeback with the backing of the federal government. In an unconventional deal brokered by the Trump administration in August, the US acquired a roughly 10% stake in the chipmaker. Intel is seen as a critical piece of efforts to reinvigorate domestic production — a priority for the White House.

Even with financial support, Intel’s challenges remain daunting. The Santa Clara, California-based company has lost its long-held technological edge and ceded market share to rivals such as Advanced Micro Devices Inc. Moreover, Intel has struggled to capitalize on booming sales of artificial intelligence gear — a specialty of Nvidia.

Once the dominant chipmaker, Intel now has a fraction of Nvidia’s sales and market capitalization. It also has laid off workers and delayed factory expansion plans to cope with its deteriorating finances.

Still, investors have grown more optimistic about its prospects since the government infusion. The stock is up more than 60% since the beginning of August.

Under former CEO Pat Gelsinger, Intel set out to become a chip foundry — a business that makes semiconductors for outside clients. But the company has struggled to secure enough customers to support its factory expansion plans.

Intel has continued to pursue the foundry strategy under Tan, though more cautiously. He said in July that Intel would only roll out a new cutting-edge production technique — called 14A — if customers committed to it.

Apple and Intel have a long, sometimes strained history together. Apple used Intel chips in its Macs for years but began shifting away from the supplier in 2020 — part of a broader effort to use more in-house components. Apple also acquired most of Intel’s modem chip business in 2019.

These days, Apple has sought to show that it’s investing heavily in the US — even as much of its production remains overseas. At a White House event in August, the company announced plans to spend $600 billion on domestic initiatives over a four-year period, up from a previous pledge of $500 billion. The centerpiece of the expansion was a $2.5 billion investment in Corning Inc., Apple’s longtime glass supplier.

Apple CEO Tim Cook told CNBC’s Jim Cramer that the investments would encourage other companies to add US production, creating a “domino effect.”

When asked about Intel, he said that competition would be good for the chip foundry industry. “We’d love to see Intel come back,” Cook said.