Hassett Says Room Now For Fed To Cut More Than 25 Basis Points

Central Bank

Economic

Summary:

White House National Economic Council Director Kevin Hassett said he sees plenty of room to substantially lower the Federal Reserve's benchmark interest rate.

Hassett, the frontrunner in Donald Trump's search for the next Fed chair according to a Bloomberg report, was asked at the Wall Street Journal CEO Council Summit Tuesday if he would push for the substantially lower rates the president wants if he gets the job.

"If the data suggests that we could do it, then — like right now — I think there's plenty of room to do it," he said. Asked whether that meant more than 25 basis points, he said, "correct."

Hassett's close alignment with Trump has stirred debate over whether he would maintain the Fed's decades-long tradition of political independence on interest-rate decisions should he be selected as chair.

Trump himself said in an interview with Politico published Tuesday that a quick reduction of borrowing costs would be a litmus test for his choice to head the Fed.

Asked whether his loyalty, if he takes the Fed's helm, would be to Trump or to his independent economic judgment, Hassett said he would adhere "to my judgment, which I think the president trusts."

Hassett again directed criticism at the Fed for some of its policy choices in recent years, accusing the central bank of acting politically.

"I think the most important job that the Fed chair has is to be looking at the economic data and to avoid being part of politics," he said.

Source: Bloomberg

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Adam

Cryptocurrency

With a series of record highs and crushing sell-offs, 2025 has been a rollercoaster ride for bitcoin, the world's largest cryptocurrency, which is at risk of ending the year with its first annual decline since 2022.

The world's main stock benchmarks have also had a turbulent year, repeatedly hitting record peaks and then pulling back as worries over tariffs, interest rates and a possible AI bubble whipsawed markets. While equities are mostly up year-to-date, bitcoin's overall correlation with share prices has strengthened markedly this year.

Analysts say bitcoin's gyrations increasingly tracked stock market sentiment as traditional retail and institutional investors jumped into cryptocurrencies, which next year may be even more closely tethered to factors driving stocks and other risk assets, such as monetary policy shifts and nervousness over the lofty valuations of AI-related stocks.

"Crypto reacting to broader equities has been a consistent theme in 2025," said Jasper De Maere, desk strategist at crypto algorithmic trading firm Wintermute.

Bitcoin was hovering around $89,000 on Monday.

Bitcoin's 2025 rollercoaster may end on a low_1

Most popular cryptocurrency tumbles after hitting all-time highs earlier this year

After soaring earlier this year with the election of crypto-friendly U.S. President Donald Trump, cryptocurrencies - along with stocks - plummeted in April on his tariff announcements, but quickly rebounded. Bitcoin went on to hit an all-time peak above $126,000 in early October.

But just days later, on October 10, the market plunged again when Trump announced a new tariff on Chinese imports and threatened export controls on critical software. That sparked more than $19 billion worth of liquidations across leveraged crypto market positions, the largest liquidation in crypto history.

Bitcoin has struggled to regain its footing ever since and in November experienced its biggest monthly drop since mid-2021, although options market bearishness has ebbed a little in recent weeks, according to options platform Derive.xyz.

Traders as of late last week had assigned a 15% probability that bitcoin will finish the year below $80,000, compared with the 20% probability they had assigned just a few weeks ago.

That's still a blow for crypto bulls, including Michael Saylor's Strategy, the world's biggest bitcoin hoarding company, which had projected as recently as October 30 that the token would hit $150,000 this year. Analysts at Standard Chartered last year forecast bitcoin would hit $200,000 by the end of 2025, due in part to flows into bitcoin exchange-traded funds.

In a change of tune, Strategy CEO Phong Le warned on a podcast last month of a possible "bitcoin winter." In October, Standard Chartered forecast bitcoin would fall below $100,000 but said that may be the last time it will hit that low, according to media reports.

Saylor, speaking to Reuters last week, said his company could survive a 95% fall in the price of bitcoin.

EQUITIES CORRELATION

Those April and October plunges highlighted the growing correlation between bitcoin and equities, and in particular, artificial intelligence stocks, which share similar attributes and have been hit by worries that valuations are in bubble territory.

Historically, bitcoin and stocks did not move in tandem because crypto was seen as an alternative investment. But with broader crypto adoption by traditional retail investors and some institutions, the correlation looks to be strengthening, analysts said.

Correlation is measured from -1 to 1, with figures above zero indicating a positive correlation. In 2025, the average correlation between bitcoin and the S&P 500 (.SPX) - which tracks a broad basket of companies - was 0.5, compared with an average correlation in 2024 of 0.29, LSEG data shows.

Bitcoin's 2025 rollercoaster may end on a low_2

Bitcoin's correlation with the S&P 500 on a one-month rolling basis has hovered above zero for most of 2025. Correlation is measured from -1 to 1, with anything above zero being positive.

For the tech-heavy NASDAQ 100 index (.NDX), the average correlation this year was 0.52, compared with 0.23 in 2024, according to LSEG data.

Crypto has grown especially sensitive to AI stock moves partly because they have been drivers of broader equity markets, and partly because, like crypto, they are currently seen as somewhat speculative investments, largely dependent on investor sentiment and risk appetite, analysts said.

"Crypto (was) already a little weak after October 10," said Cosmo Jiang, a general partner at Pantera Capital, a crypto investor. "Things really started to break in risk markets in the recent weeks, because of the AI bull case coming under question."

RATE CUT QUESTIONS

Like stocks, cryptocurrencies also appear increasingly sensitive to the path of interest rates. Fidelity research from last year found that, while there is little historical data to indicate that the price of bitcoin increases when the Federal Reserve cuts rates, some analysts have observed that crypto tends to rally in line with dovish signals from the central bank.

Analysts also point out that hawkish Fed signals from October onwards weighed on bitcoin. Since then, the release of fresh economic data has the market pricing an 86% chance of a 25-basis-point cut this week.

That rate decision, along with the outlook for AI stocks, will likely be a key driver for crypto prices in the near term, analysts said.

"The Fed's support of monetary supply in this particular scenario is going to be an indicator that crypto is all looking at," said Mo Shaikh, co-founder and general partner at Maximum Frequency Ventures.

Source: reuters

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Warren Takunda

Economic

A boom in exports that has pushed China’s trade surplus past $1tn for the first time reveals the extent to which its economy is still overwhelmingly reliant on foreign markets – and the difficulty figures like Donald Trump will have in trying to rebalance global trade.

Data released on Monday shows that in the first 11 months of this year, China’s trade surplus in goods was $1.076tn. The record trade surplus comes even as exports to the US have plummeted, a reflection of the bruising US-China trade war that, despite a recent cooling, has dampened the flow of goods between the world’s two largest economies.

Exports to the US plummeted by nearly a third in November. Speaking on Tuesday, Chinese premier Li Qiang said the “mutually destructive consequences of tariffs have become increasingly evident”.

The fall in exports to the US has led to concerns that China is flooding other parts of the world – especially south-east Asia and Europe – with cheap goods that threaten local industry.

But experts believe that many of the goods bound for south-east Asia ultimately end up in the US, via a practice known as trans-shipment where products are sent via a third country to avoid tariffs. That is because the demand in the US for cheap products has not gone away, and few countries can replicate China’s mammoth ability to produce consumer goods at scale at low prices.

In the first eight months of this year, the US imported $23.1bn in goods from Indonesia, an increase of nearly a third on the same period in 2024. Experts believe this rise is largely down to Chinese goods being redirected via Indonesia.

There have also been increases in imports from Malaysia and the Philippines.

The statistics suggest that the huge tariffs placed by the US and China on each other’s goods has dented bilateral trade but done little to change the overall flow of goods in the global economy.

And as China becomes dominant in the production of hi-tech goods such as electric vehicles and batteries, it is unlikely to lose its place as the world’s factory for the products that are vital to global development. While overall Chinese exports grew by 5.4% this year, certain products – such as semiconductors – saw even larger increases, with a 24.7% jump in exports, according to Chatham House.

Exports to the EU rose sharply in November, by 14.8%, compared with 0.9% in October.

French president Emmanuel Macron said in an interview published over the weekend that on a recent trip to China he had threatened China’s leader, Xi Jinping, with tariffs if there was no action taken to reduce the trade deficit with the EU.

Economists at Morgan Stanley expect China to increase its share of global exports from 15% to 16.5% by 2030.

Zichun Huang, China economist at Capital Economics, agreed, telling Reuters: “We expect China’s exports will remain resilient, with the country continuing to gain global market share next year.”

The data also reveal the extent to which China’s economy is still dependent on exports, despite efforts in Beijing to rebalance the economy at home and boost domestic demand.

Xi chaired a meeting of the Chinese Communist party’s ruling politburo on Monday. According to a readout in state media, the cadres discussed the need to “continuously expand domestic demand” and to make consumption the “main driver” of the economy.

Boosting consumer spending is expected to be a top economic priority in 2026. But policymakers have a big hill to climb. Chinese households are keen on saving money, a trend exacerbated by the pandemic and real estate crash in China that wiped out many people’s savings. Chinese consumption as a share of GDP is about 50%, compared to about 80% in the US.

Source: Theguardian

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Adam

Economic

The Federal Reserve may have to turn to quantitative easing to lower long-term borrowing costs if bond markets start to question the independence of the next chairman, according to Man Group.

Investors only have to look at what happened in the UK when traders sold off gilts in 2022 due to a lack of confidence in the economic policies of then-Prime Minister Liz Truss, said Kristina Hooper, chief market strategist at the world’s largest publicly traded hedge fund group.

UK borrowing costs have been higher than many other Group-of-Seven economies since then, which is a reminder that “credibility of public officials matters,” Hooper wrote in a LinkedIn post.

“If anyone perceived to be less than independent is chosen as Fed chair and is focused on lowering rates at the long end, I suspect that person will have to resort to quantitative easing to offer the best chance to achieve that objective,” she said.

Treasury 10-year yields have already climbed more than 20 basis points from their October lows, an unusual phenomenon given the Fed is likely to make another quarter-point interest-rate cut this week.

President Donald Trump has said he’s close to naming his choice to replace Chair Jerome Powell, whose term ends in May. White House National Economic Council Director Kevin Hassett has emerged as the front-runner.

Hassett is widely considered a supporter of Trump’s preference for lower rates. Trump said earlier this month that the race for the central bank chief job is “down to one” while referring to Hassett as a “potential Fed chair.”

Hassett said on Monday it would be irresponsible for the Fed to lay out a plan for where it aims to take interest rates over the next six months.

While equity investors typically have “simple motivations” such as loose monetary policy, bond investors are more focused on fiscal sustainability and Fed independence, according to Man Group’s Hooper.

“Cutting the fed funds rate does not ensure that rates on the long end move lower; in fact, it could have the opposite effect,” she said.

Fed May Need QE If Market Questions New Chair, Man Group Says_1

PGIM Fixed Income’s co-chief investment officer Gregory Peters last week pointed to the rise in Treasury yields since it was first reported that Hassett had emerged as the leading contender to take over from Powell.

The increasing chance of Hassett getting the job has fueled questions about the independence of the Fed, which remains a major concern for investors, said Peters, who is also a member of the Treasury Borrowing Advisory Committee.

Source: Bloomberg

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Samantha Luan

Political

Economic

· India grants IndiGo exemption from pilot night-duty rules

· IFALPA president warns exemption not based on scientific evidence

· Pilots push for global common standard to combat fatigue

· Canadian pilots say regulator has proposed exemptions to duty rules

India's decision to ease stricter rules on pilot rest following a wave of flight cancellations by the country's largest carrier should be reversed due to the adverse effect of fatigue on safety, the head of global pilot union group IFALPA said.

IndiGo (INGL.NS), which controls about 65% of India's domestic aviation market, has said it failed to plan adequately for a November 1 deadline to implement stricter rules on night flying and weekly rest for pilots.

The poor planning resulted in at least 2,000 flight cancellations this month, leaving tens of thousands of passengers stranded, upending vacation plans and weddings, and sparking growing fury about lost luggage.

India's aviation regulator on Friday granted IndiGo a one-time exemption from new pilot night-duty rules and withdrew a rule that stopped airlines from counting pilot leave as weekly rest.

Captain Ron Hay, president of the Montreal-based International Federation of Air Line Pilots' Associations (IFALPA), said India's decision to grant the exemption to the rest rules was concerning because it was not based on scientific evidence.

"We are informed that the change is due to staffing issues," he told Reuters on Monday. "This is troubling as fatigue clearly affects safety."

Hay warned the government's decision could also exacerbate staffing issues given that working conditions account for one of the reasons pilots depart airlines based in the country.

India's civil aviation ministry did not immediately respond to a request for comment outside regular business hours.

MORE SPECIFIC GLOBAL PILOT FATIGUE STANDARD SOUGHT

Hay's comments come as IFALPA is pushing for a more specific global standard that would combat pilot fatigue evenly across regions, as aviators in other countries also press back against exemptions.

Under the U.N. aviation agency's global standard, each country can set its own duty-time limits using scientific knowledge and operational experience.

The result is there are still regional differences, with some of the most robust systems to promote pilot rest found in Europe and the United States, Hay said.

In Canada, the Air Line Pilots Association said the country's regulator has proposed exemptions to science-based duty-time regulations.

For example, one proposed exemption from Transport Canada would allow pilots to work up to 23 days in a row rather than having a day off per week, ALPA Canada President Captain Tim Perry said in an interview.

"If adopted we would have more pilots fatigued, more often, and with worse fatigue symptoms, all to the detriment of air safety," he said.

Transport Canada did not respond immediately to a request for comment.

Source: Reuters

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Adam

Economic

A day doesn’t seem to go by without a market pundit asserting that Japan is in a monetary and fiscal death spiral. It’s easy to come to such a conclusion given:

Debt to GDP: 230%.

Bank of Japan (BOJ): Holds over 50% Japanese Treasury debt.

Population: Shrinking by 0.5% a year.

GDP Stagnation: Real GDP has grown by less than 0.5% annualized since 2008.

Debt Servicing: Nearly 25% of Japan’s fiscal budget is spent on servicing its debt.

Yen: Its currency has fallen by over 50% against the US dollar since 2012, as shown below.

Based on those stats and others, it’s easy to see why many think it’s only a matter of time before Japan’s economic system collapses. Michael Nicoletos, in Japan Isn’t Losing Control, argues otherwise.

In fact, he thinks everything is going according to plan. To wit, he deems the BOJ as “the most experienced unconventional monetary operator on the planet.” With the Bank of Japan owning about half of all Japanese government bonds and domestic holders a large majority of the remaining debt, Japan effectively is its own bond market. This allows the BOJ to let long‑term yields rise and engineer a weaker yen, which boosts exporters’ profits. To wit:

When Toyota’s finance team crunches the numbers, they estimate they gain about $300 million in profit for every single yen the currency weakens against the dollar.

Michael believes Japan and China are in a “diplomatic crisis.” Given that their second-largest trade customer is China, Japan needs to diversify. A weaker yen allows such to occur. He states:

Japanese goods are becoming cheaper relative to Chinese alternatives, not just for American buyers, but also for customers throughout Southeast Asia, Europe, and Latin America. Just as political tensions make relying on China riskier, Japan becomes a more attractive alternative supplier.

Overall, Michael claims that “the yen is not crashing because Japan lost control” but because “Japan wants it to.” Furthermore, this is a major but “underappreciated” story in global finance.

Is Japan in a Death Spiral? A Contrarian Take_1

Breadth Is Good, But Confusing

As we share below, all but one of the stock factors is overbought on an absolute basis. The one oversold factor is low-beta stocks. Interestingly, the high dividend yield factor is among the most overbought sectors. Generally, over the last six months, low-beta, high-dividend, small-cap, and value-oriented sectors have had similar scores and, for the most part, been among the worst performers.

The current divergence is unique for this cycle. Similarly, note the divergence between emerging and developed markets. And for that matter, the separation between small-cap value and small caps.

Sector analysis shows that interest rate-sensitive sectors, especially utilities, are oversold relative to the market. It’s worth noting that natural gas prices are up by more than 50% since mid-October. Given that many utilities’ customer pricing is regulated, the higher prices of its primary input are weighing on margins.

Is Japan in a Death Spiral? A Contrarian Take_2

Source: investing

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Justin

Economic

U.S. private payrolls increased by 4,750 on average per week in the four weeks ending on November 22, according to a weekly update of the monthly ADP National Employment Report.

The data comes after hiring in the American private sector notched its biggest drop in more than two and a half years in November.

However, analysts cautioned against reading too much into the figures, arguing that the monthly estimate has recently diverged from a separate gauge of the U.S. employment market from the Labor Department's Bureau of Labor Statistics.

The BLS is due to release its closely-monitored nonfarm payrolls report for November on December 16, after it was delayed by a record-long U.S. government shutdown. The October unemployment rate will also never be known, after having hovered around a four-year high of 4.4% in September.

But the economy is still tipped to have shed jobs in October, as thousands of federal workers accepted buyout packages which would take them off government payrolls.

Federal Reserve policymakers and investors alike have been forced to rely on alternative data sources because of the blackout of official data, intensifying the spotlight recently on some of these numbers.

On Tuesday, the Fed is due to begin its latest two-day policy gathering. Markets are widely betting that the central bank, assessing a slowing labor market, resilient consumer spending and sticky inflation, will slash interest rates by 25 basis points at the end of the meeting.