Powell says tariff-driven inflation a big question for Fed
Federal Reserve Chair Jerome Powell said the US central bank is still struggling to determine the impact of tariffs on consumer prices.
Bloomberg – Politics
U.S. stocks closed higher on Aug. 12, with the broad S&P 500 and tech-laden Nasdaq notching record highs after a tame inflation report fueled rate cut bets.
Annual July inflation rose 2.7%, compared with forecasts for an uptick to 2.8% and even from June’s 2.7%. However, the so-called core, excluding the volatile food and energy sectors, rose 3.1%, compared with expectations for 3%.
Economists said they’ve seen some signs of tariff costs passing through to consumers, though not yet in significant ways.
“There is some sign of tariff pass through to consumer prices but, at this stage, it is not significant enough to ring alarm bells,” said Seema Shah, chief global strategist at Principal Asset Management.
The inflation report stoked speculation the Federal Reserve will lower interest rates at its next policy meeting in September. The CME FedWatch tool that tracks the odds the markets put on a rate move at each Fed policy meeting shows a more than 94% chance of a rate cut, up from about 85% before the inflation report was released.
“Although core annual inflation is back to its highest level since February, today’s (inflation) print is not hot enough to derail the Fed from cutting rates in September,” Shah said.
After the July employment report released on Aug. 1 showed weaker-than-expected jobs growth, markets aggressively began to price in rate cuts. Lower interest rates make borrowing less expensive, which fuels business investments and consumer spending needed to boost the economy.
However, some economists say a September rate cut still isn’t a sure bet.
The Fed’s “likely to remain on hold until it’s clear the (tariff) pricing pass-through is a one-time effect before cutting rates,” said Joe Brusuelas, chief economist at consulting firm RSM. He forecasts one rate cut this year, but not until December when the inflation picture may be clearer.
The blue-chip Dow rose 1.1%, or 483.52 points to 44,458.61; the S&P 500 added 1.13%, or 72.31 points, to 6,445.76 and the Nasdaq gained 1.39%, or 296.50 points, to 21,681.90. The benchmark 10-year yield rose to 4.289%.
Before the open on Aug. 13, investors will get another glimpse of inflation effects but through the eyes of businesses instead of consumers. July’s producer price index reflects increases in prices business pay for their goods and services.
Fed watch
President Donald Trump on Aug. 12 again demanded on his Truth Social platofmr that Fed Chair Jerome Powell lower rates.
In the same social media post, he also said he was considering allowing “a major lawsuit against Powell to proceed because of the horrible, and grossly incompetent, job he has done in managing the construction of the Fed Buildings.”
Corporate news
- U.S. planemaker Boeing said it delivered 48 airplanes in July, down from 60 in June but five more than a year earlier. It was the most deliveries by the company in July since 2017, when it delivered 58 aircraft. Its stock rose 2.92%.
- Opendoor shares jumped 6.93% after Anthony Pompliano, chief executive of ProCap Acquisition Corp., said in a social media post he’s invested in the company.
- Cardinal Health said it will buy healthcare management firm Solaris for $1.9 billion. Cardinal shares tumbled 7.34%.
- AST SpaceMobile plans 45 to 60 satellite launches by 2026, with at least five orbital launches anticipated by the end of the first three months of 2026. The company missed second-quarter expectations. Shares of the satellite company added 8.36%.
- Mercury Systems topped estimates in the last three months of its fiscal year. Its stock surged 26.95%.
- E-commerce company Sea reported better-than-expected quarterly results. Shares advanced 19.01%.
- Hillenbrand beat third-quarter forecasts and lifted the low end of its annual sales guidance. Shares soared 18.45%.
- Eastman Kodak swung to a quarterly loss and warned about its ability to pay off debt. Shares tumbled 20.09%.
- Celanese topped second-quarter estimates but warned of a slowdown in the second half of the year. It issued third-quarter earnings per share sharply below Wall Street forecasts. Shares plunged 13.07%.
- Alphabet received a $34.5 billion offer from artificial intelligence startup Perplexity for its Google Chrome Browser. Alphabet stock gained 1.16%.
- Circle, the issuer of the world’s second-largest stablecoin, reported a wider-than-expected second-quarter loss, but sales topped forecasts. Shares rose 1.27%.
- Sinclair said it’s reviewing its options, which could result in a merger or a possible spinoff of its ventures business. Shares jumped 19.19%.
- Hanesbrand reportedly is on the verge of agreeing to be bought by Canada’s Gildan Activewear for about $5 billion, including debt. Hanesbrand stock surged 27.95%.
- Sneaker maker On Holding raised its annual sales forecast. The stock rallied 8.87%.
- Intel’s chief executive Lip-Bu Tan met with Trump at the White House. Just days after calling Tan to resign, Trump’s calling him a success. Shares added 5.46%.
- Apple is under fire by Tesla chief executive Elon Musk who accuses the company of violating antitrust law by favoring OpenAI in its App Store. Musk said his xAI company would “take immediate legal action.” Apple shares rose 1.09%.
- Smithfield Foods raised its full-year profit expectations. Shares of the meat company shed 2.58%.
- Nvidia stock edged up after Trump said he would be open to Nvidia’s selling a downgraded chip to China. Meanwhile, China reportedly has been warning companies there to steer away from using Nvidia and AMD chips.
Cryptocurrency
Companies continue to add Bitcoin to their corporate coffers. Japan’s Metaplanet and the United Kingdom’s The Smarter Web Company, added almost $100 million worth of Bitcoin to their corporate treasuries.
Metaplanet said it had purchased 518 Bitcoin for about $61.4 million at an average price of $118,519 per coin. It brings its total holdings to 18,113 Bitcoin, worth about $2.15 billion at current prices, and acquired at an average of $101,911 per Bitcoin.
Smarter Web bought 295 Bitcoin for 26.3 million pounds ($35.2 million) at an average of $119,412 each to bring its total holdings to 2,395 Bitcoin valued at about $284.8 million at current prices.
Bitcoin was last up 0.78% at $119,649.70.
(This story was updated with new information.)
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.