Federal Reserve set to make interest rate decision days after election of Trump
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(WASHINGTON) — The Federal Reserve on Thursday will announce its latest decision on the direction of interest rates, setting the path for borrowing costs just two days after the victory of President-Elect Donald Trump.
The Fed cut its benchmark interest rate a half of a percentage point in September, dialing back its yearslong fight against inflation and delivering relief for borrowers saddled with high costs.
The Federal Open Market Committee (FOMC), a policymaking body at the Fed, has forecast further interest rate cuts.
By the end of 2024, interest rates will fall another half of a percentage point from their current level of between 4.75% and 5%, according to FOMC projections. Interest rates will drop another percentage point over the course of 2025, the projections further indicated.
The central bank is widely expected to cut interest rates by another quarter of a percentage point when it meets on Thursday, according to the CME FedWatch Tool, a measure of market sentiment.
In recent months, the U.S. has inched closer to a “soft landing,” in which inflation returns to normal and the economy averts a recession.
Government data released last week showed robust economic growth over a recent three-month period, alongside a continued cooldown of inflation.
U.S. hiring slowed in October, but fallout from hurricanes and labor strikes likely caused an undercount of the nation’s workers, U.S. Bureau of Labor Statistics data on Friday showed.
Since 2021, the Fed has sought to rein in inflation with elevated interest rates. Even after the Federal Reserve cut its benchmark interest in September, it still stands at a historically high level.
Inflation has cooled dramatically from a peak of about 9% in 2022, hovering right near the Federal Reserve’s target rate of 2%.
The trajectory of inflation could shift in the coming months. Trump’s proposals of heightened tariffs and the mass deportation of undocumented immigrants are widely expected to raise consumer prices, experts previously told ABC News.
To be sure, the Fed says it bases its decisions on economic conditions and operates as an independent government body.
When asked previously about the 2024 election at a press conference in Washington, D.C., in December, Powell said, “We don’t think about politics.”
The election of Trump appears to have delivered a boost for the stock market. The U.S. stock market soared at the open of trading on Wednesday, just hours after Trump declared victory.
The Dow Jones Industrial Average climbed more than 1,300 points, amounting to a nearly 3% rise in the index. The S&P 500 and the tech-heavy Nasdaq each jumped more than 2%.
Shares of Tesla, the electric vehicle company headed by Trump ally Elon Musk, spiked about 14.5% in early trading on Wednesday.
(NEW YORK) — President-elect Donald Trump sharply criticized the rising price of groceries throughout his campaign, even delivering an address outside his New Jersey home in August alongside a table covered with cereal boxes, coffee grounds and ketchup.
A wave of consumer discontent appears to have helped lift him back into the Oval Office, but Trump now faces the task of how to ease voters’ frustration.
Food inflation soared to a peak of more than 10% in 2022, but price increases have slowed to about 2%, U.S. Bureau of Labor Statistics data shows.
Still, the yearslong bout of rapid inflation has sent food prices soaring more than 25% since President Joe Biden took office.
Typically, prices do not fall across the board unless the economy slows or even tips into recession, which would reduce consumer demand but also impose economic hardship, some economists told ABC News.
Still, Trump could enact policies that may slow the rise of grocery prices, or even lower the cost of some household staples, economists added.
“Prices on different items absolutely could come down,” Michael Faulkender, a professor of finance at the University of Maryland’s Robert H. Smith School of Business, told ABC News.
In response to ABC News’ request for comment, the Trump transition team said in a statement that Trump intends to fulfill the commitments he made during the campaign. But the transition team did not specifically address the issue of grocery prices.
“The American people re-elected President Trump by a resounding margin giving him a mandate to implement the promises he made on the campaign trail. He will deliver.” Karoline Leavitt, a spokesperson for the transition team, told ABC News.
Increase oil production
On the campaign trail, Trump often responded to concern about prices with a three-word mantra: “Drill, baby, drill.”
Trump, who has downplayed human-caused climate change, vowed to bolster the oil and gas industry by easing regulation and expanding output.
In theory, increased oil production could lower food prices since gas makes up a key source of costs throughout the supply chain, whether a firm is growing crops or transporting them to a seller, economists said.
“Energy is a big input cost for food,” David Andolfatto, an economist at the University of Miami, told ABC News. “That should put downward pressure on food prices.”
While such a move could prove beneficial, increased oil output under President Joe Biden coincided with the surge of inflation in recent years. Since oil is sold on a global market, a surge in domestic production may not lower prices for U.S. consumers as much as some may expect.
The U.S. set a record for crude oil production in 2023, averaging 12.9 million barrels per day, according to the U.S. Energy Information Administration, a federal agency.
A further uptick in oil production risks accelerating the nation’s carbon emissions and worsening the impact of climate change, which would carry costs down the road, Luis Cabral, a professor of economics at New York University, told ABC News.
“We can’t simply look at the benefits,” Cabral said, acknowledging the potential for lower food prices. “There are also important costs in terms of emissions and climate change.”
Bolster antitrust enforcement
To address high food prices, the Trump administration could crack down on market concentration, a term economists use to describe the dominance of a given industry by a handful of firms, some experts said.
They pointed to the market power of large corporations as a cause of rapid price increases, saying companies use their outsized role in the market to raise prices without fear of a competitor offering a comparable product at a more affordable price.
“Whenever there are fewer players in an industry, prices tend to be higher,” Cabral said. “Supermarkets aren’t an exception.”
Grocery store profit margins surged in 2021 and rose even higher two years later, even after price increases had begun to cool, a Federal Trade Commission study in March showed.
In February, the Federal Trade Commission sued to block the merger of supermarket chains Kroger and Albertsons, which would amount to the largest supermarket merger in U.S. history. The proceedings are ongoing, and will likely stretch into the Trump administration.
Some economists cast doubt over the potential benefits of antitrust, saying the recent bout of inflation coincided with an uptick in production costs during the pandemic. “It’s hard to argue that it’s therefore some kind of profiteering,” Faulkender said.
Price-gouging ban
During the campaign, Vice President Kamala Harris proposed a federal ban on price gouging for food and groceries.
The plan could resemble price-gouging bans in place in 37 states, which prohibit a sudden spike in prices for scarce goods, the Harris campaign said. Those bans prohibit companies from exploiting a sudden imbalance between supply and demand by significantly hiking prices.
While Trump may be reluctant to adopt a policy put forward by his proponent, he could advance a price-gouging ban as a means of preventing acute price increases for specific goods.
For instance, egg prices have skyrocketed 30% over the year ending in October, U.S. Bureau of Statistics data on Wednesday showed. The spike owed primarily to an avian flu outbreak that has decimated supply. Last year, egg prices climbed more than 60% in response to a similar avian flu outbreak.
Economists who spoke to ABC News differed on the effectiveness of a potential price-gouging ban.
Some economists dismissed the policy as a flawed solution, since state-level bans usually get triggered only in the case of emergencies and, even then, often lack clarity about the type of company behavior that constitutes price-gouging.
“I don’t think a federal price-gouging ban would help at all,” Cabral said.
Andolfatto, of the University of Miami, said a price-gouging ban could lower food prices if it barred rapid price increases under some circumstances. However, those benefits may be outweighed by the downside, since such a ban could override the market signal delivered by prices, which help direct the distribution of goods to places where they are in short supply.
“These types of interventions have unintended consequences,” Andolfatto said.
(NEW YORK) — Much like its fellow fast food competitors slashing prices and offering special discounts to lure in customers, Arby’s is adding a new deal to its menu with its Double the Meats Meal.
For just $7, the new Double the Meats Meal includes a Double Roast Beef or Double Beef ‘N Cheddar sandwich, along with a medium fry and medium drink.
The Double Roast Beef sandwich boasts two times the amount of slowly roasted, thinly sliced-to-order, signature roast beef piled high on a toasted sesame seed bun.
The Double Beef ‘N Cheddar also piles on a double portion of roast beef, topped with cheddar sauce and zesty Red Ranch, served on a toasted onion roll.
The new deal comes on the heels of similar promotions and discounts from Arby’s competitors. In June, McDonald’s launched a $5 Meal Deal that includes a McDouble or McChicken sandwich, small french fries, a four-piece Chicken McNuggets and a small soft drink. Earlier this month, the fast food giant extended the popular deal through December.
Several other fast food chains including Burger King, Wendy’s, Starbucks and Taco Bell have rolled out comparable discounts, hoping to entice customers looking to stretch their dollars as much as possible.
(NEW YORK) — General Motors is “very serious about making Cadillac a premium brand again,” Michael Simcoe — the company’s senior vice president of global design — told ABC News in an interview about the “engineering and design tour de force” that is the new Celestiq.
The interview below has been edited for clarity.
Q: A huge trend in the industry now is customization, coachbuilding, bespoke vehicles. Why is Cadillac going in that direction and what has the response been like? And are you trying to appeal to customers who have Bentleys and Rolls-Royces?
A: With the Celestiq, we’re offering customers the ability to truly customize everything. The tyranny of choices is there and we try to help them. Customers have the ability to touch every color and finish on the exterior and interior of the car to give it their own personality. Yes, there are a few competitors, but people at this level are looking for something very unique and very specific to them.
Q: How long does it take to build a Celestiq?
A: We can build two a day. We are building cars right now and a number of people have gone through the design process and selected their interior, their exterior with our designers. So their cars are now in line to be built.
Q: How many orders have you received?
A: I can’t tell you that.
Q: Are customers coming to the Cadillac House in Michigan or are your designers flying all over the world to meet with clients?
A: They have a choice. We can do it online with them, they can come to Cadillac House and go through the samples with us. Or we’ll send designers to customers if we need to.
Q: When did Cadillac make the decision to go ultra luxe and offer a product that starts at $350,000?
A: Cadillac has tried a number of times to reestablish its position. It was and is becoming again the standard of the world. That’s the way we have always thought about it. Certainly for our customers we haven’t delivered that, at least delivered what they expected. We have tried a number of times to through vision products and concept flagships to spark a rebirth of Cadillac.
The only way to prove internally and externally that we were very serious about making Cadillac a premium brand again was to do a vehicle like the Celestiq. It’s an engineering and design tour de force and it’s hand built. It’s proof we can actually can take Cadillac back to the position it had in the past.
The Celestiq is new and represents the current generation. We really are predicting and showing people where we are going and I think that’s very important. Cadillac will no longer be something static that people get a chance to ignore and forget. We will be out there with beautiful designs and vehicles that people fall in love with.
Q: Celestiq, Lyriq, Optiq, Escalade IQ — why do all Cadillac EVs end in IQ?
A: We could have gone with our venerable names from the past, but that didn’t seem right when we were moving the brand to an all EV-based architecture. It was a signal that these vehicles were our new generation of Cadillacs.
Q: When you were overseeing the design of these new EVs, particularly the Celestiq, what was important to include?
A: We wanted a vehicle that was different to some of the high-end competition. We feel like we did our own thing in proportion to the vehicle. It still has a long hood. It has a hint of Cadillac heritage in the way the interior was designed. These long, horizontal architecture lines with metallic finishes and detail inside the car — that hints back to Cadillacs in the early 60s and 70s.
Q: Are customers actually going to drive the Celestiq or is it a vehicle to be chauffeured in?
A: This won’t be their daily driver but it could be. It has 300-ish miles of range, lots of power, lots of performance. It’s a very easy car to drive and control. It has four-wheel steering, so it drives like a small car. It has ride control and air suspension and all of the technical marvels like a large screen.
It is a spirited drive and it feels good. Jay Leno drove it and I think he enjoyed himself. But you can sit back here, in the second row, and it’s a premium experience as well. We’re not dictating where you should be.
Q: I want to ask about the CT5-V Blackwing and CT4-V Blackwing, two high-performance sedans that have received top praise from the enthusiast community. Are they going away now that the brand’s direction is electric? What’s the future for them?
A: I can’t tell you in detail but they’ll be around. We recognize the value of the cars so they”ll be around.
