The Fed had cut its main interest rate sharply from September through the end of last year, intending to make borrowing cheaper, help the economy and boost prices for stocks, bonds and other investments. But the Fed warned at the end of 2024 it may not cut rates by as much in 2025 because of worries about inflation staying stubbornly high. Its goal is to keep inflation at 2 per cent, and lower rates can give inflation more fuel.
Tariffs could push up on inflation further by raising the cost of imports. A news conference is scheduled for Thursday afternoon where Trump said he’ll discuss increases to US tariffs to match the tax rates that other countries charge on imports.
While economists warn about the pain such tariffs can create, financial markets have increasingly been taking threats about them in stride. Belief is growing that Trump is using tough talk to drive negotiations, but he may not fully go through with it in order to avoid damaging the US stock market and economy.
Trump has already shown he can quickly pull back on such threats, like when he put a 30-day pause on 25 per cent tariffs he had announced for all imports from Canada and Mexico.
Still, Trump followed through on his threat of a 10 per cent tariff on Chinese products. GE HealthCare said it took those tariffs into account when it drew up its forecasts for profit and other financial measures in 2025, though it didn’t give the exact dollar amount of the impact.
On Wall Street, Deere & Co. fell 1.5 per cent after the farm equipment manufacturer reported a 30 per cent decline in fourth-quarter sales and a 50 per cent drop in profit. The company said it was focused on reducing inventory amidst the “uncertain market conditions” its customers were facing.
Reddit, the online message board, dropped 7.2 per cent even as it handily outdistanced Wall Street’s fourth quarter sales and profit targets.
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After jumping to a big early gain, Cisco Systems later pared its rise to 1.6 per cent after the tech giant reported stronger profit for the latest quarter than analysts expected. It cited strength for a wide range of its products, including for artificial-intelligence infrastructure.
In the bond market, Treasury yields eased. While hotter-than-expected data on wholesale inflation typically sends yields higher, economists saw some encouraging nuggets underneath the surface in Thursday’s report. Easier health care services costs, for example, could end up helping to pull a different measure of inflation lower, one that the Federal Reserve gives more attention to than the consumer price or producer price indexes.
The yield on the 10-year Treasury fell to 4.54 per cent from 4.63 per cent.
In stock markets abroad, indexes were mixed across Europe and Asia. Japan’s Nikkei 225 rose 1.3 per cent after automakers Honda, Nissan and Mitsubishi said they’re ending talks on integrating their businesses.
AP
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