House Republicans Say They Expect To Vote On Wednesday Night On Trump's Tax-cut Bill

European Central Bank Governing Council member Olli Rehn is worried that inflation staying below 2% for a lengthy period could shift the price outlook of euro-zone consumers.

The ECB is projecting 18 months of inflation below its goal as US tariffs dent confidence and the 20-nation economy struggles to expand. Rehn, who heads Finland’s central bank, said risks are currently two-sided, but is more uneasy about the knock-on effects of the undershoot.

“I’m quite concerned about inflation being below target for an extended period of time,” he told Blomberg TV on Wednesday in Sintra, Portugal, where he’s attending the ECB’s annual retreat. “We have to make sure that will not become persistent and become embedded in inflation expectations.”

With price growth at the ECB’s 2% goal and the economy battling headwinds ranging from trade to wars, officials are pondering whether to lower borrowing costs further. While investors expect the deposit rate to remain at 2% this month, they see one more cut by year-end.

“We are in a good place but there is no reason for complacency,” Rehn said.

Some officials are wondering whether a rapid strengthening of the euro could derail efforts to anchor inflation at target. Vice President Luis de Guindos told Bloomberg TV on Tuesday that any rise above $1.20 could make things “much more complicated.”

Rehn repeated standard ECB language on how he and his colleagues don’t aim for a specific level for the common currency, but acknowledged the assistance they’ve had from its rally against the dollar this year.

“The appreciation of the euro has indeed helped us reaching the 2% target for now,” he said. “We are following closely the developments in the exchange rate.”

Source: Bloomberg Europe

Employment at US companies fell in June for the first time in more than two years, reflecting a drop in services payrolls that may raise concerns about a more pronounced labor market slowdown.

Private-sector payrolls decreased 33,000 last month after a downwardly revised 29,000 gain in May, according to ADP Research data released Wednesday. None of the economists in a Bloomberg survey of economists expected a decline.

“Though layoffs continue to be rare, a hesitancy to hire and a reluctance to replace departing workers led to job losses last month,” Nela Richardson, chief economist at ADP, said in a statement.

Treasury yields slumped after the figures, while stock-index futures fell and the dollar trimmed gains.

Employers have grown increasingly cautious about the impact from the Trump administration’s trade policy, and are doubling up efforts to reduce costs. Companies are focused on bringing headcounts more in line with economic activity that has slowed this year.

Service providers reduced payrolls by 66,000 in June, largely due to declines in professional and business services as well as health care and education. Payrolls climbed in manufacturing, construction and mining. Employment fell among small- and medium-size businesses.

Based on the ADP report, average payrolls growth over the past three months slowed to 18,700 in May, the weakest since early in the pandemic. Other data indicate it is taking longer for unemployed people to find a new job, while figures from placement firm Challenger, Gray & Christmas show hiring plans in June were the second-weakest in data back to 2004.

Data from The Conference Board show the share of consumers who said jobs were plentiful in June declined to a more than four-year low.

Despite signs of a downshift, Federal Reserve Chair Jerome Powell has repeated that the labor market remains solid. Fed officials have refrained from lowering interest rates this year as they wait to see the impact of tariffs on inflation.

The ADP report, published in collaboration with the Stanford Digital Economy Lab, showed wage growth cooled. Workers who changed jobs saw a 6.8% increase in pay, while those who stayed put saw a 4.4% gain. ADP bases its findings on payrolls covering more than 25 million US private-sector employees.

The government’s June employment report due Thursday is expected to show the slowest payrolls growth in four months and a slight increase in the unemployment rate to 4.3%.

Source: Bloomberg Europe

Japan's service sector activity expanded at a slightly faster pace in June, with business confidence improving to a four-month high, a private sector survey showed on Thursday.

The final au Jibun Bank Japan Services purchasing managers' index (PMI) rose to 51.7 in June from 51.0 in May, topping the flash figure of 51.5 and marking a third consecutive month of growth.

Readings above 50.0 indicate expansion in activity, while those below that level point to a contraction on a monthly basis.

Overall new order growth accelerated slightly from May. But the increase in new export business, generally attributed to tourist activities, decelerated to the slowest since December.

Service firms' business confidence on a 12-month outlook improved to a four-month high in June, with companies citing expansion plans, staff hiring and new product rollouts, according to the survey. As a result, employment in the sector grew at the fastest pace since January.

Input price inflation eased to a six-month low, but output inflation rose to the fastest rate in 14 months, as service firms continued to pass higher labour, fuel and other costs onto their customers.

The upturn in services, coupled with factory activities' return to growth for the first time in about a year, helped lift the composite PMI to 51.5 in June from 50.2 in May, marking the strongest overall business activity growth since February.

"However, market confidence and trading conditions remain subdued, in part due to lingering uncertainty over U.S. tariffs," said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, which compiled the survey.

"The PMI data signalled that overall growth momentum slowed in the second quarter compared to the first quarter of 2025, to suggest an easing of GDP growth," Fiddes added.

Japan's GDP shrank by an annualised 0.2% in the January-March quarter due to falling exports and lacklustre domestic consumption even before the full blow of U.S. President Donald Trump's tariffs hit the economy.

Source: Reuters

UK Prime Minister Keir Starmer said Rachel Reeves will stay on as Chancellor of the Exchequer, as he sought to draw a line under speculation about her future that sparked a bond selloff.

Reeves would stay as chancellor “for many years to come,” Starmer told the BBC on Wednesday evening, hours after failing to guarantee her position when asked in parliament. “She and I work together, we think together,” he said, adding, “We’re in lockstep.”

The prime minister’s words appeared to be an attempt to calm markets that tumbled earlier Wednesday after a tearful appearance by Reeves in the House of Commons fueled rumors that she was about to leave her position.

The premier, who guided the Labour Party to a resounding electoral win a year ago, said he saw his project to “change the country” as something he would be working on with Reeves “together” for “a very long time to come.” He added, “That’s the strong relationship we have between each other.”

The yield on 30-year gilts earlier rose more than 20 basis points past 5.4% on the uncertainty, while the pound was the worst-performing major currency in the world, slumping more than 1% to below $1.36. Stocks also fell.

The market slide came after Starmer performed an embarrassing U-turn on his flagship welfare reforms which were supposed to save £5 billion but were effectively canceled on Tuesday after a rebellion by Labour lawmakers.

Despite Reeves’ failure to get her spending plans past her own party, many bond traders see her as their preferred chancellor because of her commitment to the so-called fiscal rules restricting UK government borrowing. They see a downside risk that a replacement could adopt a looser approach to the public finances.

Starmer said of Reeves crying in the House of Commons chamber earlier, “It was a personal matter for the chancellor, and I’ve been absolutely clear with you, nothing to do with politics, nothing to do with any discussion between me and Rachel. Nothing to do with matters of this week.”

Source: Bloomberg Europe

As President Donald Trump and his advisers begin weighing replacements for Federal Reserve Chair Jerome Powell, they’re running into one significant complication: It’s not clear that Powell will leave the US central bank next year.

The Fed chief has repeatedly declined to say whether he will step down when his four-year term as chair expires in May, or remain on the Fed board — something he could technically do until his tenure as a governor expires in January 2028. The prospect of Powell remaining at the central bank has prompted administration officials to begin planning for multiple scenarios for his replacement, as Trump seeks a chair who will support his economic agenda.

The president said Tuesday he has “two or three top choices” to potentially succeed Powell, but declined to name them. In recent weeks, Trump’s advisers have even discussed with him the possibility that Scott Bessent could simultaneously serve as Treasury secretary and Fed chair, according to people familiar with the matter. Such a move would be unprecedented since the two roles were separated in 1935, in legislation aimed at giving the Fed a measure of independence.

“Any reporting suggesting that the President is considering having Secretary Bessent serve as both Treasury Secretary and Federal Reserve Chairman concurrently is absolutely fake news,” a White House official said.

A Treasury spokesperson pointed to Bessent’s comments earlier this week on his potential candidacy. “I will do with the president wants, but I think I have the best job in DC,” he said on Bloomberg TV.

As the selection for a new Fed leader unfolds, the president has made clear the next chair must be “somebody that wants to cut rates.” Powell has led his colleagues in standing pat this year, saying they need more certainty that Trump’s tariffs won’t trigger a persistent rise in inflation.

When asked about his tenure Tuesday in a panel discussion with fellow central bankers from around the world, Powell said, “I have nothing for you on that.”

Powell’s circumspection has frustrated some of Trump’s advisers, who are taking the silence as an attempt to push back against the president’s desire for more influence on monetary policy, according to people familiar with the matter.

If he did stay on as a Fed governor, Powell would leave Trump with just one scheduled opportunity to fill a board slot — Governor Adriana Kugler’s, whose term ends in January — until the president’s final year in office.

Bessent, publicly acknowledging Powell could stay, said in a Bloomberg TV interview Monday one idea would be to fill Kugler’s slot with the person who would later be elevated to chair. Choosing an existing governor is another option, he said.

Powell’s coyness has raised speculation that he could stay on the board if Trump picks a nominee who is overly deferential to the president’s demands, said Neil Dutta, head of economic research at Renaissance Macro. “That’s the leverage Powell has right now by not declaring his intentions.”

While Trump has sometimes speculated about firing Powell, a May Supreme Court ruling raised the hurdle for that, without having legal “cause.”

Pressure on Powell heated up further on Wednesday, with Trump’s housing-finance chief, Bill Pulte, accusing Powell of misleading lawmakers about Fed building renovations. Pulte claimed the issue was sufficient to remove him “for cause,” and the president later posted on social media that Powell “should resign immediately.”

The supercharged political environment surrounding the US central bank makes the upcoming chairmanship decision all the more sensitive than it usually is. Typically, Fed chairs retire from the central bank when their terms at the helm end, but the political backdrop has rarely been as tense as today’s.

Governor Michael Barr took the step in February of resigning as vice chair for supervision, while remaining on the board — constraining Trump’s options for reshaping the board. “The independence of the Federal Reserve is critical to our ability to meet our statutory mandates,” Barr emphasized that month.

Christopher Waller, a current governor who was nominated for the Fed board by Trump in his first term, is one option for the chair job. Kevin Hassett, the White House’s National Economic Council director and ex-Fed official Kevin Warsh are also top contenders from outside the Fed, people familiar with the matter said. Former World Bank President David Malpass has also been floated.

Trump’s nominee would need to be confirmed by the Senate, and Republicans’ narrow majority means they couldn’t lose more than three votes for the pick.

Powell has often declined to answer politically tinged questions related to Trump amid the president’s steady stream of criticism.

“I’m very focused on just doing my job,” Powell said this week when asked about Trump’s attacks. “The things that matter are using our tools to achieve the goals that Congress has given us.”

Sarah Binder, a professor of political science at George Washington University, said “it’s a sort of a defensive mechanism” to forgo specific comment on when he’ll leave. “My guess is Powell doesn’t see it in his interest, but really in the Fed’s interest, to engage with the president at all.”

If Powell did remain on the board, he could continue to influence policy decisions made by the 19-person interest-rate setting Federal Open Market Committee, having worked with most members for years. Rate moves are made by majority vote, and it’s unclear what sway the new chief might have, especially if the candidate came from outside the current board.

“He’s developed a lot of loyalty among the governors and Fed staff who I expect would remain loyal to him” if Trump picked a “toady,” Dutta said. “The problem Trump has created for the next chairman is making his desire for rate cuts so obvious that it becomes very challenging for that person. You look like a political stooge.”

Source: Bloomberg Europe

Source: Yahoo Finance