Summers Says Fed Policy ‘on The Loose Side,’ Inflation Top Issue

The UAE Central Bank on Wednesday lowered its benchmark interest rate, mimicking the US Federal Reserve’s move to cut its policy rate, the first since President Donald Trump resumed office in January.After hitting the pause button for several quarters, the rate cut comes amid mounting pressure from the White House and open criticism of the Fed from Mr Trump amid weakening US economy.The Fed lowered its benchmark rate a quarter of a percentage point, from 4 per cent to 4.25 per cent, at the end of the two-day meeting of the rate setting Federal Open Market Committee.

With the much anticipated cut in the benchmark interest rates, the US has entered the latest monetary policy easing cycle as the Fed tries to stave off a recession, quell divisions within the bank and fend off pressure from Mr Trump, who has been demanding a major rate cut to reboot growth in the world’s biggest economy.Most central banks in the six-member economic bloc of GCC move in lock-step with the Fed's policy rate moves because their currencies are pegged to the US dollar, with Kuwait the only exception in the Gulf region as the dinar is tied to a basket of currencies.The UAE Central Bank said it would cut the base rate applied to its overnight deposit facility by 25 basis points to 4.15 per cent, from 4.40, effective Thursday.

The base rate, which is anchored to the Fed's interest on reserve balances (IORB), signals the general stance of the Central Bank's monetary policy and provides an effective interest rate floor for overnight money market rates.

Strong economic fundamentals

The UAE economy, which has maintained a robust growth momentum since the coronavirus pandemic driven slowdown, grew by 3.9 per cent on an annual basis in the first quarter of 2025,Gross domestic product at the end of the three-month period rose to Dh455 billion, according to preliminary estimates released by the Federal Competitiveness and Statistics Centre earlier this month.Non-oil GDP posted 5.3 per cent rise on yearly basis, rising to Dh352 billion, contributing more than 77 per cent of total real GDP as the country continues to diversify its economy away from oil.

Non-oil contributions to GDP have risen consistently in the past five years, from 71.3 per cent level in 2020. Oil-related activities accounted for 22.7 per cent of GDP in the first three months of 2025.Non-oil private sector activity in the UAE also rose in August, with output growth and business confidence increasing in the Arab world's second-largest economy, driven by the fastest pace of activity in six months.The seasonally adjusted S&P Global UAE Purchasing Managers' Index climbed to 53.3, from 52.9 in July, partly boosted by an expansion in output levels in the third quarter.

The CBUAE expects the UAE’s GDP to expand at 4.7 per cent in 2025 and by 5.7 per cent in 2026. The country’s non-oil economy is set to grow by 5.1 per cent this year.The banking regulator estimates the country’s hydrocarbons economy to jump by 3.6 per cent in 2025 and by 8.5 per cent the following year.Inflation in the UAE stood at 1.4 per cent in the first quarter of 2025 and the central bank has slightly revised down its inflation forecast for 2025 to 1.9 per cent from 2 per cent.The UAE Central Bank has also lowered its inflation estimate for 2026 to 1.9 per cent from 2.1 per cent.

Source: THENATIONALNEWS

The number of Americans filing new applications for unemployment benefits fell last week, but the labor market has softened as both demand for and supply of workers have diminished.

Initial claims for state unemployment benefits decreased 33,000 to a seasonally adjusted 231,000 for the week ended September 13, the Labor Department said on Thursday. The decline partially reversed a surge in the prior week, which had pushed claims to levels last seen in October 2021.

That increase in applications was concentrated in Texas, with the state's Workforce Commission later saying it had since the September 1 Labor Day holiday "observed an uptick in identity fraud claim attempts aimed at exploiting the unemployment insurance system."

Economists polled by Reuters had forecast 240,000 claims for the latest week. Layoffs remain relatively low, but the hiring side of the labor market has almost stalled. Demand for workers has slowed, with economists blaming uncertainty stemming fromtariffson imports. At the same time, an immigration crackdown has reduced labor supply, creating what Federal Reserve Chair Jerome Powell on Wednesday described as a "curious balance."

"Typically when we say things are in balance, that sounds good," Powell told reporters. "But in this case, the balance is because both supply and demand have come down quite sharply. We now see the unemployment rate edging up."

FED CUTS INTEREST RATES

The U.S. central bank on Wednesday cut its benchmark overnight interest rate by a quarter-percentage-point to a 4.00%-4.25% range and projected a steady pace of reductions for the rest of 2025 to help the labor market. The Fed paused its policy easing cycle in January because of uncertainty over the inflationary impact of President DonaldTrump'simport tariffs.

The claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of September's employment report. Payrolls increased by only 22,000 jobs in August, with employment gains averaging 29,000 positions per month over the last three months.

The unemployment rate is near a four-year high of 4.3%. The government said last week payrolls could have been overstated by 911,000 jobs in the 12 months through March.

Though layoffs remain low, those who lose their jobs are experiencing long bouts of unemployment because of the stall-speed pace of hiring. The number of people receiving benefits after an initial week of aid fell 7,000 to 1.920 million during the week ending September 6, the claims report showed.

The average duration of joblessness jumped to 24.5 weeks in August, the longest since April 2022, from 24.1 in July.

Source: Reuters

After months of pressure from President Donald Trump, Federal Reserve Chair Jerome Powell made clear Wednesday he and most of his colleagues aren’t about to buy the administration’s argument on inflation or the case for slashing rates.

While policymakers did trim their benchmark rate by 25 basis points, it was really just a “risk-management cut,” Powell said in his press conference after the decision to bring the target to a 4% to 4.25% range. He said the move reflected “the much lower level of job creation and other evidence of softening in the labor market apparent in data in recent weeks.

As for where the economy is headed from here, however, he flagged risks to both of the Fed’s main mandates – price stability and full employment. But “our tools can’t do two things at once,” so policy isn’t on any pre-set path.

The Fed’s new board member, Stephen Miran, who was Trump’s White House chief economist until shifting roles Tuesday, dissented for a 50 basis-point cut. But the other two Trump appointees on the board, Christopher Waller and Michelle Bowman, failed to join him, even after having dissented themselves in July in favor of a quarter-point cut.

“Really the only way for any voter to really move things around is to be incredibly persuasive,” Powell said. And, apparently, Miran wasn’t. “There wasn’t widespread support at all for for a 50 basis point cut today,” Powell said.

Peppered with questions about Fed independence and political pressure, he dismissed the idea of the US central bank becoming a politicized cabal. “Really strong arguments based on the data and one’s understanding of the economy” is all that matters, he said. “And that’s how it’s going to work,” said Powell, who’s been on the board since 2012.

“That’s in the DNA of the institution, that’s not going to change,” he emphasized. For good measure, he also declined specific comment on Treasury Secretary Scott Bessent’s call for an independent review of the Fed, saying he wouldn’t reply to anything an “officer” says.

Perhaps most provocative to Trump and his team, Powell continued to hold out the possibility that he stays on the Fed board even after his term as chair ends in May. (His governorship runs to January 2028.) That would limit Trump’s ability to revamp its leadership.

Waller and Bowman might have taken themselves out of the running to succeed Powell as the next Fed chair, but “it does signal that the independence of the institution may be more durable than some have feared,” Michael Feroli, chief US economist at JPMorgan Chase, wrote in a note.

Is Trump bringing an end to US free market capitalism? On this week’s Trumponomics podcast, host Stephanie Flanders is joined by Bloomberg managing editor Shelly Banjo and senior reporter Ian King to discuss how the US president’s dealmaking is reshaping corporate America and whether it will outlast his presidency. Listen on Apple, Spotify or wherever you get your podcasts.

Before the latest economic projections from Fed policymakers, a group of former central bankers trimmed their own forecasts for rate cuts, taking the benchmark rate down to 3.5% by the end of 2026. The survey, conducted by ex-reporter Jon Hilsenrath, now a visiting scholar at Duke University, also warned about the consequences of political pressure.

“Twenty-four of 25 people described the risk of a policy error due to political interference as ‘extreme,’ ‘serious,’ or ‘elevated,’” the survey, which included nine former policymakers and 16 staff members, showed. “More specifically, people said the Fed risked cutting interest rates too much and spurring more inflation than is already projected.”

The former officials “strongly support” Waller, who served as research director at the St. Louis Fed before joining the Fed board in 2020, to succeed Powell as chair next year, “in part because he was deemed most independent among leading contenders for the job.” However, “several people expressed skepticism that Waller will get the job,” because of that same perception of independence.

Source: Bloomberg Europe

Last week’s unprecedented NATO downing of Russian drones over Poland, which this analysis here argues was due to jamming causing them to radically veer off course, drew wider attention to the dueling military drills in Central & Eastern Europe (CEE).

The day before the incident, RT informed their audience that Poland, Lithuania, and eight other NATO allies in Latvia were carrying out three separate drills timed to coincide with Russia and Belarus’ then-upcoming Zapad 2025 ones in that latter state.To illustrate the mismatch between each side, Poland’s, Lithuania’s, and Latvia’s drills respectively involve 30,000, 17,000, and 12,000 for a little less than 60,000 total troops compared to Zapad 2025 only involving 13,000 troops from Russia and Belarus. Observers should also know that Belarus only has around 60,000 servicemen (48,000) and border guards (12,000) in total so these NATO drills on its western and northern borders comprise the same number of troops as its armed forces.

It's little wonder then that Russia earlier transferred tactical nukes to Belarus with the right to use them in self-defense and is planning to deploy hypersonic Oreshnik missiles there too for deterrence purposes. NATO as a whole and in particular its three aforesaid members who hosted the latest drills believe that Belarus is the “weak link” in Russia’s regional security matrix and thus think they can intimidate it via large-scale drills into “defecting” to the West after summer 2020’s attempted Color Revolution failed.

This plot won’t succeed due to Russia’s Article 5-like mutual security guarantees for Belarus, its abovementioned tactical nuke and Oreshnik deployments there, and President Alexander Lukashenko striking up a surprising friendship with Trump via his role in trying to facilitate a grand deal with Putin. Nevertheless, none of this means that NATO will abandon its intimidation campaign against Belarus, ergo the importance of regular joint Russian-Belarusian drills in order to visibly demonstrate deterrence.

These same drills are then deliberately misportrayed by the West as aggressively intentioned and consequently exploited as the pretext for staging their own much larger ones at the same time for faux deterrence purposes that thinly veil their aggressive motives against Belarus and Russia by extension. This dynamic isn’t new but has been dishonestly dramatized by the West since the start of the special operation for maximum domestic fearmongering purposes that advance the elite’s geopolitical agenda.

Given these stakes, it’s expected that they’ll maintain this dynamic even after the Ukrainian Conflict ends, which’ll keep NATO-Russian tensions high for the indefinite future. The Western elites might also have economic interests in doing so since this’ll serve as the impetus for accelerating construction of the “EU Defense Line” along NATO’s borders with Russia and Belarus. Knowing how corrupt the West is, it should be assumed that some officials have invested in companies involved in this megaproject.

The new normal of dueling military drills in CEE is therefore driven by the Western elite’s geopolitical interests in fearmongering about Russia and their economic ones in enriching themselves from this. Russia won’t unilaterally suspend these drills since doing so could further embolden Western warmongers and inadvertently prompt Belarus into panicking that it might soon be “sold out”. The ball is thus in NATO’s court whether or not to maintain this dynamic, but all indications suggest that it will.

Source: Zero Hedge

The United Arab Emirates could downgrade diplomatic ties with Israel if Prime Minister Benjamin Netanyahu's government annexes part or all of the Israeli-occupied West Bank, according to three sources briefed on the Gulf Arab state's deliberations.

UAE is one of just a few Arab states with diplomatic relations with Israel and downgrading ties would be a major setback for the Abraham Accords - a signature foreign policy achievement of U.S. PresidentDonald Trumpand Netanyahu.

Israel's government has recently taken steps that could presage annexation of the West Bank, which was captured along with East Jerusalem in a war in 1967. The United Nations and most countries oppose such a move.

For Netanyahu, whose coalition relies on right-wing nationalist parties, annexation could be seen as a valuable vote winner before an election expected next year.

NOT ALL TIES LIKELY TO BE CUT, SOURCE SAYS

Abu Dhabi warned Netanyahu's right-wing coalition this month that any annexation of the West Bank would be a "red line" for the Gulf state but did not say what measures could follow.

The UAE, which established ties with Israel in 2020 under the Abraham Accords, was considering withdrawing its ambassador in any response, the sources told Reuters.

The sources, who all spoke on condition of anonymity, said Abu Dhabi was not considering completely severing ties, although tensions have mounted during the almost two-year-oldGaza War.

A source in Israel said the government believed it could repair its strained ties with the UAE, a major commercial centre seen as the most significant of the Arab states to establish ties with Israel in 2020. The others were Bahrain and Morocco.

No other Arab state has since established formal ties with Israel, which also has diplomatic relations with Egypt and Jordan, and direct contacts with Qatar, though without full diplomatic recognition. Once-thriving business ties between the UAE and Israel have cooled due to the Gaza war and Netanyahu has yet to visit the Gulf state five years after establishing ties.

ISRAELI COMPANIES BARRED FROM UAE AIRSHOW

In a sign of growing tension with Israel, the Gulf state last week decided to bar Israeli defense companies from exhibiting at the Dubai Airshow in November, three of the sources said. Two other sources, an Israeli official and an Israeli defence industry executive, confirmed the decision.

Israel's defence ministry said it had been made aware of the decision but did not elaborate. A spokesperson for the Israeli embassy in Abu Dhabi said discussions over Israel's participation in the week-long trade show were continuing.

Israel's media were the first to report the move to block the firms from the UAE's flagship aerospace and defence event.

The UAE foreign ministry did not respond to questions on whether it was weighing downgrading diplomatic ties with Israel.

The spokesperson at the Israeli embassy in Abu Dhabi said that Israel was committed to the Abraham Accords and that it would continue to work towards strengthening ties with the UAE.

Emirati foreign ministry official Lana Nusseibeh had told Reuters and Israeli media on September 3 that any annexation of the West Bank would jeopardise the Abraham Accords and end the pursuit of regional integration.

That warning preceded Israel's air strike on Qatar last week, which targeted Hamas leaders, an attack that Anwar Gargash, diplomatic adviser to UAE President Sheikh Mohamed bin Zayed Al Nahyan, condemned as treacherous.

At an emergency meeting of Muslim nations in Qatar, convened in response to the strike, a communique was issued urging countries to review diplomatic and economic ties with Israel.

As part of the Abraham Accords, Netanyahu promised to hold off annexing the West Bank for four years. But that deadline has passed and some Israeli ministers are now pressing for action.

Finance Minister Bezalel Smotrich this month said that maps were being drawn up to annex most of the West Bank, urging Netanyahu to accept the plan. Itamar Ben-Gvir, the national security minister, also backs annexing the territory.

TIES WITH ISRAEL DETERIORATED AFTER 2023

After establishing ties, the UAE and Israel built a close relationship, focusing on economic, security and intelligence cooperation. This followed years of discreet contacts.

But differences began emerging after Netanyahu returned to power in 2023, leading the most right-wing government in Israel's history. Abu Dhabi has condemned repeated efforts by Ben-Gvir to alter the status quo of Jerusalem's Al Aqsa compound to allow Jews to be able to pray there. The site is sacred to Muslims and Jews and at present non-Muslims can visit but cannot pray.

The UAE has also criticised Israel's policies in the West Bank, including the expansion of settlements, and its military siege of Gaza, and said an independent Palestinian state alongside Israel was necessary for regional stability. Netanyahu this month declared there would never be a Palestinian state.

Source: Reuters