DealBook Briefing: The Fed Gave Trump What He Wants, Carefully


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The Federal Reserve painted a far less rosy economic picture than the White House as it left interest rates unchanged yesterday, and signaled little appetite for any raises in the near future, Jim Tankersley of the NYT writes.

Growth appears to be slowing from last year, Jay Powell, the Fed chairman, said. That’s a result of the trade war, economic slowdowns in Europe and China and fading stimulus from the 2017 tax cuts. The central bank now expects 2.1 percent growth this year, down from its 2.3 percent forecast in December — and more than a percentage point less than the 3.2 percent the White House predicts.

Rate hikes seem to be off the table. Forecasts show that Fed officials broadly expect not to raise rates at all this year, with a single rate increase in 2020 and none in 2021. In December, they expected two rate increases this year and another in 2020.

“The Fed is effectively giving Mr. Trump what he wants from monetary policy, but with a twist,” Mr. Tankersley writes. “The president has publicly pushed Mr. Powell to stop raising rates. But if the Fed is correct and growth falls well below 3 percent this year, without a single rate increase, it will be difficult for Mr. Trump to pin the blame on Mr. Powell.”

• U.S. negotiators “are more willing to roll back at least some of the 10 percent tariffs on $200 billion of Chinese goods, which took effect in September as the U.S. tried to put more pressure on China.”

• But they’re more resistant to removing 25 percent levies on $50 billion of Chinese goods, imposed in response to “harm to U.S. companies caused by China’s forced technology transfers.”

• “As part of any enforcement plan, the U.S. is also asking China for another important concession — that it agree not to retaliate against U.S. tariffs reimposed for at least some violations of a trade pact.”

With just eight days to go until Britain is scheduled to withdraw from the E.U., a standoff appears to have put the possibility of a chaotic no-deal Brexit back on the table.

• Ms. May requested from the E.U. a short delay to Britain’s exit, until June 30.

• But the E.U. said it would only allow that if lawmakers endorsed her Brexit plan.

• That seems unlikely, given that lawmakers have twice rejected it already.

“European Union officials appeared to be trying to strengthen Mrs. May’s position and pressure British lawmakers to fall into line behind her plan, which would allow Britain to exit the bloc but maintain its trade ties until at least the end of 2020,” Stephen Castle of the NYT writes.

“If they don’t, the alternative may be an outcome many of the lawmakers like even less than the prime minister’s plan: a break from the bloc with no provisions for cushioning its economic impact — a so-called no-deal Brexit — or an even lengthier delay. And that could potentially mean no withdrawal from the bloc at all.”

• “The delays from the Oracle lawsuit could help Microsoft. In the months since the request for proposals went out, the company, which has supplied the Pentagon for decades, has improved its capabilities to the point that some experts believe it is an increasingly credible competitor to Amazon.”



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