Tag Archives: Economy

With U.S.-China tensions running high, hopes dim for end to trade war

By Andrea Shalal and Cate Cadell

WASHINGTON/BEIJING (Reuters) – Beijing sharply rebuked Washington on Tuesday for adding some top Chinese artificial intelligence startups to its trade blacklist, dimming hopes for progress in high-level talks aimed at ending a 15-month trade war between the two economic giants.

U.S. and Chinese deputy trade negotiators were due to meet in Washington for a second day of talks on Tuesday, laying the groundwork for the first minister-level meetings in over two months later this week.

A report from the South China Morning Post said China had tamped down expectations ahead of the talks scheduled for Thursday with Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, saying the Chinese delegation could leave earlier than planned because “there’s not too much optimism.”

The mood soured this week after the U.S. Commerce Department widened its trade blacklist to include 20 Chinese public security bureaus and eight companies including video surveillance firm Hikvision <002415.SZ>, as well as leaders in facial recognition technology SenseTime Group Ltd and Megvii Technology Ltd.

The action bars the firms from buying components from American companies without U.S. government approval, a potentially crippling move. It follows the same blueprint used by Washington in its attempt to limit the influence of Huawei Technologies Co Ltd [HWT.UL] for what it says are national security reasons.

Hikvision, with a market value of about $42 billion, calls itself the world’s largest maker of video surveillance gear.

U.S. officials said the action was tied to China’s treatment of Muslim minorities and human rights violations, provoking a sharp reaction from Beijing.

China said the United States should stop interfering in its affairs. It will continue to take firm and resolute measures to protect its sovereign security, foreign ministry spokesman Geng Shuang told a regular media briefing without elaborating.

Major U.S. stock indexes fell on Tuesday, amid the continued tensions between the United States and China, whose tit-for-tat tariffs have roiled financial markets, slowed capital investment, and triggered a slowdown in trade flows.

New International Monetary Fund Managing Director Kristalina Georgieva issued a stark warning about the state of global growth on Tuesday, saying trade conflicts had thrown it into a “synchronized slowdown” and must be resolved.

In her inaugural speech after taking over the global crisis lender on Oct. 1, Georgieva unveiled new IMF research showing that the cumulative effect of trade conflicts could mean a $700 billion reduction in global GDP output by 2020, or around 0.8%.

LOOMING TARIFF HIKES

The trade talks are taking place days before U.S. tariffs on $250 billion worth of Chinese goods are slated to rise to 30% from 25%. Trump has said the tariff increase will take effect on Oct. 15 if no progress is made in the negotiations.

President Donald Trump on Monday said a quick trade deal was unlikely, and that he would not be satisfied with a partial deal.

The two sides have been at loggerheads over U.S. demands that China improve protections of American intellectual property, end cyber theft and the forced transfer of technology to Chinese firms, curb industrial subsidies and increase U.S. companies’ access to largely closed Chinese markets.

Trump launched a new round of tariffs after the last high-level talks in late July failed to result in agricultural purchases or yield progress on substantive issues. China quickly responded with tariff increases of its own.

Washington is also moving ahead with discussions around possible restrictions on capital flows into China, with a focus on investments made by U.S. government pension funds, Bloomberg reported. The news sent shares of chipmakers sharply lower.

Another flashpoint has been a widening controversy over a tweet from an official with the NBA’s Houston Rockets. His backing of Hong Kong democracy protests was rebuked by the National Basketball Association, sparking a backlash.

Trump also called for a peaceful resolution to the protests in Hong Kong, and warned the situation had the potential to hurt trade talks.

Police in Hong Kong have used rubber bullets, tear gas and water cannons against pro-democracy demonstrators in the former British colony, which has been plunged into its worst political crisis in decades.

Beijing views U.S. support for pro-democracy protests in Hong Kong as interfering with its sovereignty.

(Reporting by Andrea Shalal and David Lawder in Washington and Cate Cadell in Beijing; Writing by Andrea Shalal; Editing by Paul Simao)

U.S. unemployment rate falls to 3.5%; job growth steady

By Lucia Mutikani

WASHINGTON, (Reuters) – U.S. job growth increased moderately in September, with the unemployment rate dropping to near a 50-year low of 3.5%, assuaging financial market concerns that the slowing economy was on the brink of a recession amid lingering trade tensions.

The Labor Department’s closely watched monthly employment report on Friday, however, showed wage growth stagnating and manufacturing payrolls declining for the first time in six months. The retail sector also continued to shed jobs.

The report came on the heels of a string of weak economic reports, including a plunge in manufacturing activity to more than a 10-year low in September and a sharp slowdown in services industry growth to levels last seen in 2016, that heightened fears the economy was flirting with a recession.

With signs that the Trump administration’s 15-month trade war with China is spilling over to the broader economy, continued labor market strength is a critical buffer against an economic downturn. The trade war has eroded business confidence, sinking investment and manufacturing.

Nonfarm payrolls increased by 136,000 jobs last month, the government said. August data was revised to show 168,000 jobs created instead of the previously reported 130,000 positions.

The initial August job count was probably held back by a seasonal quirk related to students leaving their summer jobs and returning to school. Economists polled by Reuters had forecast payrolls would increase by 145,000 jobs in September.

U.S. stock index futures pared losses after the release of the data and later moved into positive territory. U.S. Treasury yields jumped and the dollar trimmed losses against the yen and euro. (Full Story)

Regardless of the continued moderate employment growth and sharp drop in the jobless rate, economists expect the Federal Reserve to cut interest rates at least one more time this year, given the trade policy uncertainty.

Washington announced this week tariffs on aircraft, other industrial products and agricultural products from the European Union as part of a World Trade Organization penalty award in a long-running aircraft subsidy case. Trade experts expect the EU will impose tariffs on U.S. goods next year over state subsidies for Boeing BA.N.

The U.S. central bank cut rates last month after reducing borrowing costs in July for the first time since 2008, to keep the longest economic expansion in history, now in its 11th year, on track. Growth estimates for the third quarter range from as low as a 1.3% annualized rate to as high as a 1.9% pace. The economy grew at a 2.0% pace in the second quarter, slowing from a 3.1% rate in the January-March period.

STRONG GOVERNMENT HIRING

Steady job growth last month came despite the Institute for Supply Management’s (ISM) measure of manufacturing employment tumbling to more than a 3-1/2-year low. In September, the ISM’s gauge of services industry employment fell to its lowest reading since February 2014.

While September’s job gains were below the monthly average of 161,000 this year, they were still above the roughly 100,000 needed each month to keep up with growth in the working-age population. The two-tenths of a percentage point drop in the unemployment rate from 3.7% in August pushed it to its lowest level since December 1969.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, declined to 6.9%, the lowest level since December 2000, from 7.2% in August.

Despite the tight labor market, average hourly earnings were unchanged last month after advancing 0.4% in August. That lowered the annual increase in wages to 2.9% from 3.2% in August. The average workweek was unchanged at 34.4 hours.

Hiring is slowing across all sectors, with the exception of government, which is being boosted by state and local government recruitment.

Private payrolls increased by 114,000 jobs in September after rising by 122,000 in August. Manufacturing shed 2,000 jobs last month, the first decline in factory payrolls since March, after hiring 2,000 workers in August.

Factory employment growth has slowed from last year’s brisk pace. Manufacturing has ironically borne the brunt of the Trump administration’s trade war, which the White House has argued is intended to boost the sector.

Last month’s decline in manufacturing payrolls was led by the automotive sector, which lost 4,100 jobs. There were also job losses in machinery, fabricated metals products and primary metal industries.

Construction employment increased by 7,000 jobs last month after rising by 4,000 in August. Retail payrolls dropped by 11,400 jobs, shedding employment for an eight straight month.

Government employment increased by 22,000 jobs in September after surging by 46,000 in August. Hiring was boosted by state and local governments. Only 1,000 workers were hired last month for the 2020 Census. Government payrolls have increased by 147,000 over the year, driven by local governments.

((Reporting by Lucia Mutikani; Editing by Sandra Maler and Paul Simao))

UK PM Johnson makes final Brexit offer to cool EU reception

By Elizabeth Piper, William James and Kylie MacLellan

MANCHESTER, England (Reuters) – Prime Minister Boris Johnson made a final Brexit offer to the European Union on Wednesday and said that unless the bloc compromised, Britain would leave without a deal at the end of this month.

In what supporters cast as a moment of truth after more than three years of crisis, Johnson stuck to his hard line on Brexit, giving some of the first, albeit vague, details of what he described as “constructive and reasonable proposals”.

With the Oct. 31 Brexit deadline moving closer, Johnson’s aides cast the proposals to be delivered to Brussels as London’s final gambit to try to break the deadlock – principally over arrangements for the Irish border – and find a path to a smooth departure from the EU.

“We are coming out of the EU on October 31, come what may,” Johnson told party members, after expressing “love” for Europe in a speech that focused mostly on domestic issues such as health, the economy and crime.

“We are tabling what I believe are constructive and reasonable proposals which provide a compromise for both sides,” Johnson said. “Let us be in no doubt that the alternative is no deal.”

Many diplomats fear the United Kingdom is heading towards a no-deal or another delay as they say the British proposals are not enough to get an agreement by Oct. 31. Johnson said further delay was “pointless and expensive”.

The initial reaction from other European capitals was cool. Berlin and Paris said they were awaiting details.

EU diplomats and officials in Brussels were less polite with one calling the reported proposals “fundamentally flawed”.

“If it’s take it or leave it, we better close the book and start talking about the modalities of an extension,” a senior EU official told Reuters.

“Essentially it is a non-runner,” said another EU diplomat.

NO DEAL?

Quitting the EU is Britain’s most significant geopolitical move since World War Two. It is, though, still uncertain if it will leave with a deal or without one – or even not leave at all.

Deutsche Bank said it saw a 50 percent chance of a no-deal Brexit by the end of the year. This would spook financial markets, send shockwaves through the global economy and divide the West. It could also bring chaos to British ports and disrupt supply lines in goods from food products to car parts.

Despite Johnson’s repeated promises to deliver Brexit on Oct. 31, parliament has passed a law stating that Britain must request a delay if it does not have a deal by Oct. 19. Johnson has repeatedly refused to say how he will get around the law.

A senior British official said: “The government is either going to be negotiating a new deal or working on no deal – nobody will work on delay.”

Ireland, whose 500 km (300 mile) land border with the United Kingdom, will become the frontier of the EU’s single market and customs union, is crucial to any Brexit solution.

The problem is how to prevent Northern Ireland becoming a back door into the EU market without erecting border controls that could undermine the 1998 Good Friday Agreement that ended decades of sectarian violence in Northern Ireland in which more than 3,600 people were killed.

The Withdrawal Agreement that former Prime Minister Theresa May struck last November with the EU says the United Kingdom will remain in a customs union “unless and until” alternative arrangements are found to avoid a hard border.

Johnson said Britain had compromised in putting forward a proposal to try to change that so-called backstop, an insurance policy to ensure there is no return to a hard border.

Giving little detail on his proposals, Johnson said there would be no checks at or near the Irish border. He said London would respect the 1998 peace agreement. He did not explain how.

IRELAND

Britain would “protect the existing regulatory arrangements for farmers and other businesses on both sides of the border” while Northern Ireland would leave the bloc alongside the rest of the United Kingdom, he said.

“By a process of renewable democratic consent by the executive and assembly of Northern Ireland,” Johnson said. “We will go further and protect the existing regulatory arrangements for farmers and other businesses on both sides of the border.”

He said the United Kingdom “whole and entire” would withdraw from the EU, with London keeping control of its own trade policy from the start. Technology could offer a solution, he said, without giving details.

“I hope very much that our friends understand that and compromise in their turn,” said Johnson, who took office in July after May stood down.

With the EU already pouring cold water on some of the reports of his proposal, the likelihood of a no deal appears to be rising – something Johnson’s opponents say they believe is the prime minister’s overriding goal.

John McDonnell, finance policy chief for the opposition Labour Party, described Johnson’s proposals as “a cynical attempt to force through a no-deal Brexit”.

Johnson has repeatedly said he wants a deal.

(Additional reporting by John Chalmers and Gabriela Baczynska in Brussels; Writing by Elizabeth Piper and Guy Faulconbridge; editing by Angus MacSwan)

China’s top diplomat says Beijing willing to buy more U.S. products

By Michelle Nichols

NEW YORK (Reuters) – China’s top diplomat said on Thursday that China was willing to buy more U.S. products and said trade talks would yield results if both sides “take more enthusiastic measures” to show goodwill and reduce “pessimistic language” in the trade dispute.

Wang Yi, China’s state councilor and foreign minister, said in response to questions from Reuters that the Trump administration had shown goodwill by waiving tariffs on many Chinese products.

“And so, (on) the Chinese side, we are willing to buy more products that are needed by the Chinese market,” Wang said on the sidelines of the United Nations General Assembly. “We hope both sides can take more enthusiastic measures, reduce pessimistic language and actions. If everyone does this, talks will not only resume, but will proceed and yield results.”

(Reporting by David Lawder, Koh Gui Qing and Michelle Nichols; editing by Grant McCool)

Upbeat data suggest U.S. economy still on moderate growth path

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits increased less than expected last week, pointing to strong labor market conditions that should continue to support an economy growing at a moderate pace.

The steady economic growth pace was also underscored by other data on Thursday showing home resales rising in August to a 17-month high. While factory activity in the mid-Atlantic region slowed in September, orders remained solid, leading manufacturers in the region to increase employment and boost hours for workers.

The reports suggested that housing and manufacturing, the two weak spots in the economy, were stabilizing. The Federal Reserve cut interest rates by another 25 basis points on Wednesday, citing risks to the longest economic expansion in history from a year-long U.S.-China trade war and slowing economic growth overseas.

Fed Chair Jerome Powell said he expected the economy, now in its 11th year of expansion, to continue to “expand at a moderate rate,” but noted trade tensions were “weighing on U.S. investment and exports.”

The U.S. central bank cut rates in July for the first time since 2008. The Fed offered mixed signals on further monetary policy easing. Data, including retail sales, so far in the third quarter suggest the economy is growing close to the April-June quarter’s 2.0% annualized rate.

Financial markets have been flagging a recession. The Atlanta Fed is estimating gross domestic product rising at a 1.9% pace this quarter.

“Fed officials are done cutting interest rates for the rest of this year and one of the reasons for this is that the economic data continue to surprise us on the upside,” said Chris Rupkey, chief economist at MUFG in New York.

Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 208,000 for the week ended Sept. 14, the government said. Economists polled by Reuters had forecast claims increasing to 213,000 in the latest week.

Layoffs remain low despite the trade tensions, which have weighed on business investment and manufacturing. But there are concerns that slowing job growth could take some shine off robust consumer spending, which is largely driving the economy.

Last week’s claims data covered the survey period for the nonfarm payrolls component of September’s employment report. Claims were little changed between the August and September survey periods suggesting a steady pace of job growth this month.

The economy created 130,000 jobs in August. Economists say it is unclear whether the loss of momentum in hiring is due to ebbing demand for labor or a shortage of qualified workers.

Job gains have averaged 158,000 per month this year, still above the roughly 100,000 per month needed to keep up with growth in the working-age population and sustain a healthy pace of consumer spending.

“If there was a problem in the labor market it would be visible in initial claims and they are not raising any red flags,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Though business confidence has dropped noticeably this year, it hasn’t led businesses to lay off workers yet.”

The dollar fell against a basket of currencies, while prices for U.S. Treasuries rose. Stocks on Wall Street were trading higher, with Microsoft’s planned share buy-back helping to push the benchmark S&P 500 within striking distance of its record high.

SOLID HOME SALES

In a second report on Thursday, the National Association of Realtors said existing-home sales increased 1.3% to a seasonally adjusted annual rate of 5.49 million units last month.

That was the second straight monthly gain in sales and confounded economists expectations for a 0.4% drop to 5.37 million units.

The increase in home resales, which make up about 90 percent of U.S. home sales, came on the heels of data on Wednesday showing housing starts and building permits surged to a more than 12-year high in August. The housing market, which hit a soft patch last year, is being lifted by lower mortgage rates.

But the sector is not yet out of the woods as builders continue to grapple with land and labor shortages, which have constrained their ability to construct more of the sought-after lower-priced homes.

“It appears that the housing market is gaining some momentum as autumn approaches,” said Matthew Speakman, an economist at online real estate database company Zillow. “Even stronger sales volumes may be around the corner given that mortgage rates plummeted in August.”

In a third report, the Philadelphia Fed said it’s business conditions index fell to a reading of 12.0 in September from 16.8 in August. The survey’s measure of new orders dipped to 24.8 this month from 25.8.

Its measure of factory employment in the region that covers eastern Pennsylvania, southern New Jersey and Delaware jumped to a reading of 15.8 in September from 3.6 in the prior month. A gauge of the factory workweek increased to a reading of 13.0 from 6.8 in August.

Manufacturing, which makes up about 11% of the economy, has shouldered the brunt of the U.S.-China trade war. A measure of national manufacturing activity contracted in August for the first time in three years.

While factory surveys have remained weak, so-called hard data have suggested the manufacturing downturn could soon run its course. Manufacturing production rebounded 0.5% in August after falling 0.4% in July, the Fed reported on Tuesday.

“It is hard to explain the month-to-month changes in the different business surveys and the differences across the various measures, but with manufacturing output rising in recent months, some of the other surveys that have been weak may start to firm up and look more like the Philadelphia Fed survey,” said Daniel Silver, an economist at JPMorgan in New York.

(Reporting by Lucia Mutikan, Additional reporting by Lindsay Dunsmuir; Editing by Chris Reese and Andrea Ricci)

House readies vote on stopgap funding bill to avoid government shutdown

WASHINGTON (Reuters) – The U.S. House of Representatives prepared to vote on Thursday on a stopgap government funding bill that would avoid a government shutdown on Oct. 1 by maintaining current spending levels until Nov. 21.

The measure, known as a continuing resolution or CR, is intended to give lawmakers additional time to agree on more comprehensive funding legislation after overcoming differences on funding priorities, including President Donald Trump’s proposed border wall with Mexico and immigration policies that Democrats oppose.

“Our hope is that we will take the few weeks we have, now that we have a continuing resolution, and actually get a spending bill that will get bipartisan support,” said Representative Jim McGovern, a Democrat.

The vote was expected to occur after an hour-long debate due to begin in mid-afternoon. If approved as expected, the measure would move to the Senate. Final passage would require approval from both houses of Congress and the signature of Trump.

The new measure was hammered out during negotiations involving members of both parties and lawmakers from both chambers of Congress.

Lawmakers adopted a two-year budget and debt deal in July that authorized discretionary defense and non-defense programs. But Congress still needs to pass annual legislation to fund agencies. Without approval of the new measure, funding would expire after midnight on Sept. 30, when the current federal fiscal year ends.

The government shut down for more than a month in December and January, after Trump initially refused to sign a spending bill without funding for the U.S.-Mexico border wall.

The new funding measure requires the Department of Agriculture to report to Congress by the end of October on payments made to U.S. farmers under the Trump administration’s trade war mitigation program, according to an aide who said payments to foreign-owned companies would have to be listed.

In composing the measure, lawmakers avoided border policy proposals from liberal Democrats to better ensure passage by both the Democratic-controlled House and Republican-led Senate.

The measure does include funding that Democrats sought for public-health centers and for the Medicaid healthcare program in the U.S. territory of Puerto Rico.

(Reporting by David Morgan and Susan Cornwell; Editing by Tom Brown)

As Amazon burns, 230 big investors call on firms to protect world’s rainforests

By Gram Slattery

RIO DE JANEIRO (Reuters) – With widespread fires wreaking havoc on the Amazon, over 200 investors representing some $16.2 trillion under management on Wednesday called on companies to do their part in halting the destruction of the world’s largest tropical rainforest.

Nongovernment organization Ceres said in a statement that 230 funds have signed a declaration calling on firms to keep a close tab on supply chains, among other measures to curtail forest destruction.

Signatories range from major private managers like HSBC Global Asset Management and BNP Paribas Asset Management to public pension funds like California’s CalPERS, according to a list provided by Ceres, a Boston-based NGO encouraging sustainability among investors.

“Deforestation and loss of biodiversity are not only environmental problems. There are significant negative economic effects associated with these issues and they represent a risk that we as investors cannot ignore,” said Jan Erik Saugestad, CEO of Storebrand Asset Management, Norway’s largest private asset management firm and one of the signatories.

The resolution did not explicitly say signatories were threatening to withdraw investments from any companies. Still, it added to the pressure that international corporations and investors have put on partners operating in the Amazon, the world’s largest tropical rainforest that lies in Brazil, Bolivia and seven other countries.

In Brazil alone, more 2,400 square miles of the Amazon have been deforested this year, an area larger than the U.S. state of Delaware.

Meanwhile, 60,472 fires have been recorded year-to-date in the Amazon, up 47% from last year, according to government data. Many fires have been set intentionally by farmers and ranchers, and the response of the government of Brazil’s right-wing president, Jair Bolsonaro, has been criticized as indifferent.

In neighboring Bolivia, President Evo Morales has come under scrutiny for his ambitions to make the country a global food supplier, calling agricultural commodities the “new gold” that will help diversify the economy.

The resolution called on companies to implement a “no deforestation policy” with “quantifiable, time-bound commitments,” assess and disclose the risks their supply chains pose to forests, establish a monitoring system for supply chain partners and report annually on “deforestation risk exposure and management.”

“There is an urgent need to focus more on effective management of agricultural supply chains,” Jan Erik Saugestad, CEO of Storebrand Asset Management, was quoted as saying in a statement released by Ceres.

In August, VF Corp – owner of apparel brands such as The North Face and Vans – said it would stop purchasing leather from the Amazon in response to the fires.

Norway, home to the world’s largest sovereign wealth fund, has urged several of its companies to ensure they do not contribute to Amazon deforestation, including oil firm Equinor ASA, fertilizer-maker Yara International ASA and aluminum producer Norsk Hydro ASA.

Separately, investors managing $15 trillion in assets turned up the heat on oil and gas sector ahead of a United Nations summit in New York aimed at accelerating efforts to fight climate change.

(Reporting by Gram Slattery; Additional reporting by Tatiana Bautzer in Sao Paulo; Editing by David Gregorio)

Fed cuts rates on 7-3 vote, gives mixed signals on next move

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – The U.S. Federal Reserve cut interest rates by a quarter of a percentage point for the second time this year on Wednesday in a widely expected move meant to sustain a decade-long economic expansion, but gave mixed signals about what may happen next.

The central bank also widened the gap between the interest it pays banks on excess reserves and the top of its policy rate range, a step taken to smooth out problems in money markets that prompted a market intervention by the New York Fed this week.

In lowering the benchmark overnight lending rate to a range of 1.75% to 2.00% on a 7-3 vote, the Fed’s policy-setting committee nodded to ongoing global risks and “weakened” business investment and exports.

Though the U.S. economy continues growing at a “moderate” rate and the labor market “remains strong,” the Fed said in its policy statement that it was cutting rates “in light of the implications of global developments for the economic outlook as well as muted inflation pressures.”

With continued growth and strong hiring “the most likely outcomes,” the Fed nevertheless cited “uncertainties” about the outlook and pledged to “act as appropriate” to sustain the expansion.

U.S. stocks, lower ahead of the statement, dropped further, and Treasury yields ticked up from their lows of the day. The S&P 500 was last down 0.64% and the 10-year Treasury note yield inched up to 1.77%.

The dollar gained ground against the euro and yen.

“Another rate cut from the Fed to try to shield the U.S. economy from global headwinds,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. “Today’s move was more of a hawkish easing in that the Fed’s median forecasts for rates suggested no more cuts this year, while some officials dissented.”

New projections showed policymakers at the median expected rates to stay within the new range through 2020. However, in a sign of ongoing divisions within the Fed, seven of 17 policymakers projected one more quarter-point rate cut in 2019.

Five others, in contrast, see rates as needing to rise by the end of the year.

The divisions were reflected in dissents that came from both hawks and doves.

St. Louis President James Bullard wanted a half-point cut while Boston Fed President Eric Rosengren and Kansas City Fed President Esther George did not want a rate cut at all.

There was little change in policymakers’ projections for the economy, with growth seen at a slightly higher 2.2% this year and the unemployment rate to be 3.7% through 2020. Inflation is projected to be 1.5% for the year, below the Fed’s 2% target, before rising to 1.9% next year.

Fed Chair Jerome Powell is scheduled to hold a press conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the policy decision.

The rate cut fell short of the more aggressive reduction in borrowing costs that President Donald Trump had demanded from Fed officials, whom he has insulted as “boneheads” who have put the economic recovery in jeopardy.

The Fed also cut rates in July, the first such move since 2008.

Fed officials have said the rate cuts are justified largely because of risks raised by Trump’s trade war with China, a global economic slowdown and other overseas developments.

Their aim, they say, is to balance the potential need for lower rates against the risk that cheaper money may cause households and businesses to borrow too much, as happened in the run-up to the financial crisis more than a decade ago.

(Reporting by Howard Schneider and Ann Saphir; Additional reporting by Richard Leong in New York; Editing by Paul Simao and Dan Burns)

Fed’s Bullard says a ‘robust debate’ is coming over steep interest rate cut

FILE PHOTO: St. Louis Federal Reserve Bank President James Bullard speaks at a public lecture in Singapore October 8, 2018. REUTERS/Edgar Su

(Reuters) – Federal Reserve policymakers will have a “robust debate” about cutting U.S. interest rates by a half percentage point at their next policy meeting in September, St. Louis Federal Reserve Bank President James Bullard said on Friday.

The Fed cut rates by a quarter point at its July policy review although the minutes of that meeting showed a couple OF policymakers favored a 50 basis point reduction.

Bullard said there would be a hardy discussion about a steep cut next month.

“I think there will be a robust debate about 50,” he said in an interview with Bloomberg TV. “I think it’s creeping onto the table.”

Bullard said a key reason for further rate cuts is the Treasury yield curve, which recently inverted again.

“The yield curve is inverted here. We’ve got one of the higher rates on the yield curve here. That’s not a good place to be,” Bullard told CNBC in a separate interview.

Bullard had said last week that he was not ready to commit to reducing rates at the Fed’s upcoming Sept. 17-18 meeting.

(Reporting by Jason Lange in Washington and Kanishka Singh in Bengaluru; Editing by Chizu Nomiyama)

China strikes back at U.S. with new tariffs on $75 billion in goods

FILE PHOTO: A U.S. flag on an embassy car is seen outside a hotel near a construction site in Shanghai, China, July 31, 2019. REUTERS/Aly Song

By Se Young Lee and Judy Hua

BEIJING (Reuters) – China said on Friday it will impose retaliatory tariffs against about $75 billion worth of U.S. goods, putting as much as an extra 10% on top of existing rates in the dispute between the world’s top two economies.

The latest salvo from China comes after the United States unveiled tariffs on an additional $300 billion worth of Chinese goods, including consumer electronics, scheduled to go into effect in two stages on Sept. 1 and Dec. 15.

China will impose additional tariffs of 5% or 10% on a total of 5,078 products originating from the United States including agricultural products such as soybeans, crude oil and small aircraft. China is also reinstituting tariffs on cars and auto parts originating from the United States.

“China’s decision to implement additional tariffs was forced by the U.S.’s unilateralism and protectionism,” China’s Commerce Ministry said in a statement, adding that its retaliatory tariffs would also take effect in two stages on Sept. 1 and Dec. 15.

The White House and U.S. Trade Representative’s office did not immediately respond to Reuters’ request for comment on China’s latest tariffs.

Though Chinese and U.S. trade negotiators held another discussion earlier in August, neither side appears ready to make a significant compromise and there have been no sign of a near-term truce.

The protracted dispute has stoked fears about a global recession, shaking investor confidence and prompting central banks around the world to ease policy in recent months. U.S. stocks fell on Friday on the news of China’s tariffs, underscoring growth concerns.

In an interview on CNBC, Federal Reserve Bank of Cleveland President Loretta Mester said she viewed the Chinese retaliatory tariffs as “just a continuation” of the aggravated trade policy uncertainty that has begun weighing on American business investment and sentiment.

AGRICULTURE, AUTO SECTORS HIT

The knock-on effects of the U.S.-China trade dispute was a key reason behind the Fed’s move to cut interest rates last month for the first time in more than a decade.

“It is unclear as things stand whether the U.S.-China trade negotiations will continue as planned in early September,” said Agathe Demarais, global forecasting director at The Economist Intelligence Unit, in an e-mail statement.

“All eyes will now turn to the U.S. Fed to see whether Jerome Powell, the Fed Chairman, will react to these developments by accelerating rate cuts.”

Among U.S. goods targeted by Beijing’s latest tariffs were as soybeans, which will be hit with an extra 5% tariff starting Sept. 1. China will also tag beef and pork from the United States with an extra 10% tariff.

China is also reinstituting an additional 25% tariff on U.S.-made vehicles and 5% tariffs on auto parts that had been suspended at the beginning of the year. Carmakers such as Daimler <DAIGn.DE> and Tesla <TSLA.O> had adjusted their prices in China when the auto and auto parts tariffs had been suspended.

Ford <F.N>, a net exporter to China, said in a statement it encouraged the United States and China to find a near term solution.

“It is essential for these two important economies to work together to advance balanced and fair trade,” the company said.

White House trade adviser Peter Navarro told Fox Business News that trade negotiations with China would still go on behind closed doors.

(Reporting by Judy Hua, Min Zhang, Se Young Lee, Stella Qiu, Hallie Gu and Dominique Patton in BEIJING, Yilei Sun in SHANGHAI, Doina Chiacu and David Shepardson in WASHINGTON; Editing by Alison Williams)