Trump Again Attacks Fed Chair, Says Powell 'hurting' The Housing Industry

Summary:

President Donald Trump said on Tuesday that Federal Reserve Chair Jerome Powell is "hurting" the housing industry "very badly" and repeated his call for a big cut to U.S. interest rates.

"Could somebody please inform Jerome "Too Late" Powell that he is hurting the Housing Industry, very badly? People can't get a Mortgage because of him. There is no Inflation, and every sign is pointing to a major Rate Cut," Trump wrote on Truth Social.

Inflation is well off the highs seen during the pandemic, but some recent data has given a mixed picture and inflation continues to track above the Fed's 2% target range.

Trump's latest salvo against Powell comes ahead of the Fed chair's Friday speech at the annual Jackson Hole central banking symposium, where investors will cleave to his every word for hints on his economic outlook and the likelihood of a coming reduction to short-term borrowing costs.

The Fed's next policy meeting will be held on September 16-17.

Investors and economists are betting the Fed will cut rates by a quarter of a percentage point next month with perhaps another reduction of similar size to come later in the year, far less than the several percentage points that Trump has called for.

Trump's Treasury secretary, Scott Bessent, has promoted the idea of a half-point rate cut in September.

The U.S. central bank cut its policy rate half a percentage point last September, just before the presidential election, and trimmed it another half of a percentage point in the two months immediately following Trump's electoral victory, but has held it steady in the 4.25%-4.50% range for all of this year. Fed policymakers have worried that Trump's tariffs could reignite inflation and also felt the labor market was strong enough not to require a boost from lower borrowing costs.

MIXED INFLATION PICTURE

The Consumer Price Index rose 0.2% in July, with the 12-month rate through July at 2.7%, unchanged from June. Core CPI, which strips out the volatile food and energy components, increased 3.1% year-over-year in July. Based in part on that data, economists estimated the core Personal Consumption Expenditures Price Index rose 0.3% in July. That would raise the year-on-year increase to 3% in July. The PCE is a key measure tracked by the Fed against its own 2% inflation target.

And despite a moderate rise in overall consumer prices in July, producer and import prices jumped, a suggestion that higher consumer prices could be coming as sellers pass higher costs onto households. The inflation picture comes amid a picture of a possible cooling in the labor market, with declines in monthly job gains, although the unemployment rate, at 4.2%, remains low by historical standards.

Trump's online attacks on the Fed and Powell more typically focus on the cost that higher interest rates mean for U.S. government borrowing. High mortgage rates are a key pain point for potential homebuyers who are also facing high and rising home prices due to a dearth of housing supply.

Mortgage rates can be loosely tied to the Fed's overnight benchmark rate but more closely track the yield on the 10-year Treasury note, which typically rises and falls based on investors' expectations for economic growth and inflation. A Fed rate cut does not always mean lower long-term rates -- indeed after the Fed cut rates last September, mortgage rates -- which had been on the decline -- rose sharply.

In recent weeks the most popular rate - the 30-year fixed mortgage rate -- has drifted downward but -- at around 6.7% most recently -- is still much higher than it had been before inflation took off after the pandemic shock and the Fed began its rate-hike campaign in 2022.

Source: Reuters

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Winkelmann

Economic

Political

Forex

Japan’s exports sustained their steepest drop in more than four years as US tariffs continued to weigh on global commerce, clouding the outlook for economic growth at a time when personal spending remains unsteady.Exports fell 2.6% in value in July from a year earlier, sliding more than the median forecast of a 2.1% decline, the Ministry of Finance reported Wednesday. The downturn, led by cars, auto parts and steel, was the biggest since February 2021. Export volumes rose by 1.2%, suggesting exporters are continuing to absorb US tariff costs by cutting selling prices to preserve market share.

Imports decreased 7.5% and the trade balance flipped to a deficit of ¥117.5 billion.The latest slide in exports may strengthen concerns over whether Japan’s economy can continue to expand as US President Donald Trump’s tariffs weigh on global trade. While the economy has so far managed to eke out growth in the last five quarters despite weakness in domestic consumption, further drops in exports could drag the economy into reverse.

Continued falls in exports may also encourage the Bank of Japan to adopt a cautious stance. The ability of the economy to show resilience in the face of the US duties is a factor in the calculus for the BOJ as it considers the best timing for its next interest rate hike. The BOJ is widely expected to stand pat when it next sets policy on Sept. 19.The report showed that exports to the US dropped by 10.1% last month from a year earlier, with shipments of vehicles and auto parts plunging 28.4% and 17.4%, respectively. Shipments to the US of semiconductor manufacturing equipment fell 31.3%.

In April the US imposed a 25% tariff on imports of Japanese cars and auto parts and a 10% duty on most other goods. A levy on imports of steel was doubled to 50% in early June.The levies on cars and broad-based goods will be assessed at 15% under a trade deal reached in late July, although it may take some time for that deal to be implemented. Written documentation on the trade deals agreed to with Japan and South Korea are “weeks away,” US Commerce Secretary Howard Lutnick said Tuesday in an interview with CNBC.

Beyond the US, exports to China fell 3.5%, while shipments to Europe declined by 3.4%. The yen averaged 145.56 per the dollar in July, 8.9% stronger than a year earlier, according to the Finance Ministry.

Source: Bloomberg Europe

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Kevin Morgan

The dollar got off on the front foot on Wednesday following two days of gains as traders awaited the Federal Reserve's Jackson Hole annual symposium later this week for clues on the path for monetary policy.

A speech on Friday by Fed Chair Jerome Powell is the main focus, with the market watching for any push back against market pricing of a rate reduction next month.

Traders currently place 84% odds on a cut next month, and expect around 54 basis points of reductions by year-end.

The dollar index , which measures the currency against six major counterparts, edged up to 98.393 early on Wednesday, the highest since August 12. It had gained about 0.4% in the first two days of this week.

"Given the relatively high bar for Powell to meet, there's a bit of risk being baked into the markets that he leans to the hawkish side and the proverbial rug gets pulled from beneath investors," said Kyle Rodda, an analyst at Capital.com.

In Asian hours, the Reserve Bank of New Zealand sets policy later in the day, with a large majority of economists predicting a quarter-point cut to the cash rate.

The New Zealand dollar drooped close to Tuesday's nearly two-week low, last changing hands at $0.5895.

"There's little reason for RBNZ to keep rates on hold," said Rodda.

"Inflation is within its target band, and although it is no longer mandated to target the labour market, the unemployment rate is at a post-COVID high."

For the Fed, traders ramped up bets for a cut on September 17 after a surprisingly weak payrolls report at the start of this month, and were further encouraged after consumer price data showed limited upward pressure from tariffs.

However, a hotter-than-expected producer price reading last week complicated the policy picture.

Powell has said he is reluctant to cut rates due to expected tariff-driven price pressures this summer.

The Fed will release minutes from its July 29-30 meeting later on Wednesday, when the central bank held rates steady, although they may offer limited insight as the meeting came before the weak jobs numbers.

Source: Reuters

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James Whitman

Economic

Japan's exports dropped 2.6% year over year in July, their steepest drop since February 2021.

The fall was sharper than the 2.1% contraction expected by economists polled by Reuters and compared to the 0.5% drop seen in June.

Imports to the world's fourth-largest economy sank 7.5%, compared to the 10.4% fall expected by the Reuters poll.

Exports to the U.S. also continued to fall, dropping 10.1% in July and slightly softer than June's decline of 11.4%.

Japan reached a deal with Washington on July 22 that saw its so-called "reciprocal tariff" lowered to 15% from the 25% threatened by U.S. President Donald Trump earlier that month.

The trade readings come after Japan reported its second-quarter GDP figures, which saw the country beat expectations as net exports drove growth.

Japan's economy grew by 0.3% quarter over quarter and 1.2% on a yearly basis in the second quarter as exports remained resilient, even as imports fell.

Hirofumi Suzuki, Chief FX Strategist at Sumitomo Mitsui Banking Corporation, told CNBC after the GDP release that while exports have been volatile, there was a higher level of automobile shipments in April to June.

This may be due to an increase in catch-up shipments after production recovered from an accident at an automobile parts manufacturer in March, Suzuki said.

Tariffs on automobiles were cut from 25% to 15% as part of Japan's trade deal. Autos are one of Japan's largest exports, and make up its largest export to the U.S. in 2024.

The value of auto exports — which includes cars, buses and trucks — to the U.S. plunged 28.4% year over year in July, a steeper fall compared to the 26.7% decline in June.

While the effects of the 15% tariffs will not show up until the August data, analysts have warned about their impact on the Japanese economy.

Senior economist Masato Koike at Sompo Institute Plus said in an Aug 14 note that there was a possibility that Japan could enter a recession, depending on the magnitude of the impact of tariffs.

Source: CNBC

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James Whitman

Economic

Key points:

● Analysts predict Nikkei will slip to 42,000 by December

● Recent Nikkei gains linked to corporate governance push

● Outlook hinges on Japan's fragile trade deal with US

Japan's Nikkei share averagewill likely ease off recent record highs toward year-end, according to strategists in a Reuters poll, though much depends on a fragile trade agreement with the United States.

Japan's benchmark stocks index last week surpassed its previous intraday record, and traded as high as 43,876.42 this week.

The index is up more than 9% so far this year, but is forecast to slip back to 42,000 at the end of December, according to the median estimate of 18 analysts polled August 8-18.

The Nikkei joined global equity bourses in a steep dive in April after U.S. President Donald Trump announced sweeping tariffs on imports. As Trump backed down on deadlines and his administration worked out bilateral trade deals, many benchmarks recovered.

Japanese equities jumped around 11% after the U.S. agreed last month to reduce tariffs on Japanese auto imports to 15% from 27.5%, though a timeframe for the change and other details remain nebulous.

"The 15% tariff is relatively low compared to the one on China, so Japanese companies may be able to gain a competitive advantage," said Masayuki Kubota, chief strategist at Rakuten Securities. "However, there is growing uncertainty about whether President Trump will actually uphold this agreement."

Japan's economy remains largely reliant on exports. Data last week showed that the country's gross domestic product, the fourth biggest globally, grew much faster than expected in the second quarter.

GOVERNANCE PUSH

A major theme behind the Nikkei's gains in recent years has been the Tokyo Stock Exchange's push to boost corporate governance. Under pressure to improve returns and corporate value, companies have bought back shares in droves, and go-private deals have proliferated.

The Nikkei early last year finally broke through the key high of 38,957.44 that had stood since 1989 during Japan's heady bubble economy. The gauge of blue-chip shares went on to set an intraday high of 42,426.77 on July 11, 2024, before the momentum petered out.

Japan's long road back

With the tariff turmoil diminishing and the domestic economy resilient, nine of 12 analysts in the Reuters poll expect Japanese corporate earnings to be higher in the second half of 2025 than the first.

"If the U.S. economy is solid, it becomes easier for Japanese firms to raise prices for their exported goods to cover the cost of the tariffs," said Yugo Tsuboi, chief strategist at Daiwa Securities. "That will underpin corporate earnings."

Median forecasts predict the Nikkei will trade at 43,000 by mid-2026 and 45,500 by end 2026.

Improving domestic wages, along with looser monetary policy by the U.S. Federal Reserve, will continue to make Japan a destination for foreign investors, said Oanda senior market analyst Kelvin Wong.

"An increase in global liquidity due to a weaker U.S. dollar and an impending dovish Fed pivot is likely to trigger a positive feedback loop back into the Japanese stock market," said Wong.

BOJ AND POLITICS

Within the country, the major events investors are looking out for are a long-delayed rate hike by the Bank of Japan and the potential for political upheaval.

Prime Minister Shigeru Ishiba is under pressure to step aside after an electoral drubbing last month. Expectations that his replacement will be more fiscally expansive have added to tailwinds for stocks, said IG analyst Tony Sycamore.

"We do see the market continue to run higher into year-end, and then after that I'd expect to see a pullback as we get close to the BOJ rate-hiking cycle taking effect," he added.

Source: Reuters

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Manuel

Cryptocurrency

Central Bank

Federal Reserve Vice Chair for Supervision Michelle Bowman acknowledged that crypto firms experienced debanking due to regulatory uncertainty.

During the Wyoming Blockchain Symposium on Aug. 19, Bowman also announced a fundamental shift in the Fed’s approach to blockchain innovation.

She revealed the central bank eliminated reputational risk considerations from bank supervision in late June to address barriers preventing financial institutions from serving digital asset companies engaged in legal activities.

The Fed official stated: “Your industry [crypto] has already experienced significant frictions with bank regulators applying unclear standards, conflicting guidance, and inconsistent regulatory interpretations.”

Bowman emphasized that banks should not face penalties for serving customers conducting lawful business operations, stating that customer selection decisions “lie solely within the purview of bank management” rather than regulatory interference.

Furthermore, she noted the Fed’s transition from an “overly cautious mindset” toward embracing blockchain technology within the traditional banking system.

She warned that regulators must choose between shaping technological frameworks or allowing innovations to bypass banks entirely, potentially diminishing the banking sector’s economic relevance.

The Fed is updating examination manuals and supervisory materials to ensure lasting implementation of the reputational risk removal policy.

Four-principle regulatory framework

The Fed Vice Chair established four core principles guiding the central bank’s new approach to digital asset regulation.

Regulatory certainty tops the list, addressing industry concerns about investing in blockchain development without clear supervisory standards.

Bowman questioned whether companies would partner with banks, knowing that regulatory scrutiny brings uncertainty, rather than pursuing alternatives outside the banking system.

Tailored regulation forms the second principle, requiring supervisors to evaluate use cases based on specific circumstances rather than applying worst-case scenario expectations.

The Fed must recognize unique features distinguishing digital assets from traditional financial instruments while avoiding one-size-fits-all approaches that fail to address actual risk profiles.

Consumer protection represents the third principle, ensuring customer-facing products comply with existing consumer protection laws, including prohibitions against unfair, deceptive, or abusive practices.

Digital asset frameworks must incorporate Bank Secrecy Act and anti-money laundering requirements while maintaining bank safety and soundness standards.

American competitiveness completes the framework, positioning the US as the premier global innovation destination. Bowman warned that failing to establish appropriate regulatory structures could jeopardize long-term American leadership in financial technology development.

Technology integration and supervision changes

Bowman announced the Fed’s “novel supervision” activities will be reintegrated into Reserve Bank examination staff, reestablishing normal supervisory processes for monitoring banks’ innovative activities.

She proposed allowing Federal Reserve staff to hold minimal digital assets to develop a working understanding of blockchain functionality, comparing the necessity to hands-on learning rather than theoretical knowledge.

[Editor’s Note: This is an abrupt U-turn from previous government approaches, notably those of former SEC Chair Gary Gensler. Gensler taught college-level blockchain courses at MIT yet never actually touched a blockchain with his own funds, having admitted to never holding any digital assets and, therefore, never executing his own transactions.]

The Fed recognizes tokenization potential for facilitating faster asset ownership transfers while reducing transaction costs and settlement risks. Bowman noted that banks of all sizes, including community institutions, can benefit from efficiency gains flowing from asset tokenization technology.

Furthermore, she highlighted that the GENIUS Act passage and presidential signature position stablecoins as integral components of the financial system, with implications for traditional payment rails.

Bowman called for industry engagement to help regulators understand blockchain’s capacity for solving additional problems beyond current use cases.

She specifically requested input on leveraging new technologies to combat fraud, identifying this as an exciting collaboration opportunity between the Fed and the digital asset sector.

The Fed Vice Chair concluded that innovation and regulation complement rather than oppose each other in creating more modern, efficient financial systems.

Source: Cryptoslate

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Manuel

Stocks

Economic

Major U.S. equities indexes were mixed Tuesday as tech sector losses weighed on their performance. The S&P 500 ended the session 0.6% lower, while the tech-heavy Nasdaq dropped 1.5%. The Dow held onto a fractional gain.

Shares of analytics software provider Palantir Technologies (PLTR) tumbled over 9%, falling the most of any S&P 500 stock. The slide marked the fifth consecutive day of losses for the stock, which was sitting at record-high levels just a week ago after a strong earnings report. The latest move lower came after short seller Andrew Left of Citron Research expressed concerns about the stock's valuation, suggesting its price has become disconnected from the company's fundamentals.

The price of Bitcoin (BTCUSD) and other major cryptocurrencies moved lower, extending declines posted over the past week. Shares of Coinbase Global (COIN), operator of the largest U.S. cryptocurrency exchange, sank 5.8%.

Shares of enterprise software provider Oracle (ORCL) also lost 5.8% Tuesday. The company is in the midst of a reorganization and has been cutting jobs, particularly in its cloud infrastructure division as it aims to focus more resources on AI, according to reports last week. Yesterday, Bloomberg reported Mary Ann Davidson, the company's long-serving chief security officer, would be stepping down from her role.

Intel (INTC) shares soared nearly 7%, logging the top performance in the S&P 500 Tuesday. The latest push higher for the struggling chipmaker's stock followed the announcement of a $2 billion investment by Japan's SoftBank Group (SFTBY). Masayoshi Son, CEO of SoftBank, said the move reflects the firm's anticipation of an expansion in U.S. semiconductor manufacturing, and comes amid speculation the Trump administration is evaluating taking a stake in the struggling chipmaker.

Shares of Prologis (PLD), a real estate investment trust focused on warehouses, data centers, and other industrial properties, jumped 5%. Analysts at Mizuho upgraded Prologis to "outperform" from "neutral" and raised their price target, citing a more favorable view on the industrial REIT subsector. Mizuho suggested Prologis could be positioned to benefit from potential interest-rate cuts, as well as growth following the recently passed tax and spending bill.

Palo Alto Networks (PANW) shares added just over 3% after the cybersecurity firm reported quarterly earnings that topped analysts' forecasts. The company's outlook for fiscal 2026 also exceeded consensus estimates. Analysts said the strong quarter demonstrated Palo Alto's success in the implementation of its platformization strategy, positioning itself as a one-stop shop for clients by offering multiple cybersecurity products on a single platform.