Lisa Cook so she can further her impactful tenure on the Federal Reserve’s Board of Governors. A recent court ruling rejected former President Donald Trump’s effort to remove her. The ruling comes at a time of extraordinary uncertainty for the U.S. economy. Labor market indicators have surprised to the downside, most recently with a larger-than-expected jump in weekly jobless claims.
The legal ruling further boosts Cook’s chances of holding her position as an upstart at the Fed. She was nominated by President Biden and previous administration’s efforts to oust her failed. This development underscores the ongoing tensions between the Trump administration and the current Fed leadership, particularly regarding monetary policy and interest rates.
During that same first week of September, the U.S. Labor Department announced that initial jobless claims had increased to 263,000. This unprecedented, massive increase has economists nearly aghast and up in arms. That spike, albeit extreme in nature, is the exception in what has overall been a very strong labor market. Analysts say that the increase was largely driven by dramatic developments in the state of Texas. One state-specific issue there had an outsized effect on the national figures.
Just when it seems everything is in place for a booming labor market, the bottom drops out and leaves everyone surprised. The Fed is preparing for its next meeting. Market participants are 100% convinced that the Fed will cut rates next week. Some economists believe this is only the beginning of a new wave of monetary loosening expected. They’re betting on two more rate cuts before the year is out.
At the same time, Japan’s inflation data will be coming out soon, with possible ramifications for global economic conditions. The CPI release for August showed a month-over-month inflation rate of 0.4%, above economists’ expectations. Though prices have increased in the last couple months, CPI remains well shy of the Federal Reserve’s goal inflation rate. That’s a sign that price pressures are not, at this point, a cause for concern to policymakers.
Yet, the Trump administration has been pushing even harder for ever-lower interest rates to magically stimulate economic growth. This combination of pressure makes it particularly difficult for the Fed. They need to thread the needle between moderating inflation and the most recent signals coming from the labor market.
In France, political changes have been almost as dramatic, with President Emmanuel Macron naming Sébastien Lecornu as the new État-major des armées/government. This change in leadership may influence France’s economic strategies and its relationship with international markets, particularly in light of ongoing discussions about monetary policy.