President-elect Donald Trump announced Monday that SoftBank will make a $100 billion investment in the U.S. that will create 100,000 jobs focused on artificial intelligence and emerging technologies. SoftBank plans to complete the work before Trump leaves office in 2029, according to a person familiar with the matter.
The problem is that while inflation has dropped far below its peak of 9.1% in mid-2022, it remains stubbornly above the Fed's 2% target. As a result, the Fed, led by Chair Jerome Powell, is expected Wednesday to signal a shift to a more gradual approach to rate cuts in 2025. Economists say that after cutting rates for three straight meetings, the central bank will likely do so at every other gathering, or possibly even less often than that.
"Growth is definitely stronger than we thought, and inflation is coming in a little higher," Powell said recently. "So the good news is, we can afford to be a little more cautious" as the Fed's officials seek to lower rates to what they consider a "neutral" level - one that neither spurs nor restricts growth.
Some economists question whether the Fed even needs to cut this week. Inflation, excluding volatile food and energy costs, has been stuck at an annual rate of about 2.8% since March. A year ago, the policymakers had forecast that that figure would have fallen to 2.4% by now and that they'd have cut their key rate by three-quarters of a point. Instead, inflation has become stuck at a higher level, yet the Fed has lowered its benchmark rate by a full point.
Tara Sinclair, an economist at George Washington University who is a former Treasury Department official, suggested that the uncertainty surrounding whether Trump's policy changes will keep inflation elevated - and necessitating higher rates - could also lead the Fed to cut rates more gradually, if at all.
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