Reuters World News - The Fed cuts rates - and signals a pause

Starting point is 00:00:00 Hi, I'm Sharon Reisch Garson in New Jersey. It's Wednesday, December 10th. Today, the Fed has lowered interest rates a quarter percentage point. Trump gets on message about affordability at a campaign-style rally, the Supreme Court grapples with campaign spending limits, and balloons carrying cigarettes from Belarus land in Lithuania. This is Reuters World News, bringing you everything you need. need to know from the front lines in 10 minutes, seven days a week. We start with Chris Wall

Starting point is 00:00:43 Jasper in Chicago for the latest on the Federal Reserve's decision. Thanks, Sharon. As expected, the Fed has cut interest rates by a quarter of a percentage point. In a highly unusual meeting, the policymakers showed their divisions over the future of the U.S. economy, and the central bank is now signaling it could halt further interest rate cuts. New projections could have have the Fed delivering just a single quarter point cut next year and only one again in 2027. Much has been said in the lead up to today's meeting about divisions inside the central bank.

Starting point is 00:01:20 Three members cast dissenting votes today, one saying it should have been a half-point cut, with the other two arguing against a cut. Today's decision comes as the Fed deals with an uncertain future over its makeup and where the U.S. economy goes from here. You can follow live coverage of the market reaction and the latest analysis all on Reuters.com. Our Fed reporter, Howard Schneider, who was in the room for the decision, spoke to us earlier about what comes next. So this is a potentially volatile period for the central bank because the leadership's going to be turning over Fed Chair Powell's term as chair ends in May. You've got a Supreme Court decision at some point on Lisa Cook.

Starting point is 00:02:05 The thinking is she's probably going to get to stay in her job, despite the efforts to fire her by the administration. But that remains to be seen. You're going to see Stephen Myron, who's been the champion of steep rate cuts that Trump wants, probably go back to his job at the Council of Economic Advisors, because otherwise there's not an open seat to appoint the chair. The projections themselves are coming out of a data gap. They still have not caught up the reporting from the government shutdown. So the last real official touch point on inflation and jobs that policymakers have to study is way back in September, which is ages ago now.

Starting point is 00:02:42 So they're going to take their best guess on where all that's heading next year and the policy to go alongside it. You've got a whole bunch of Reserve Bank presidents who think, well, inflation's too high for me to cut anymore. You've got some governors sitting in Washington saying, well, the job market's weakening. We need to cut some more. So I would say something's going to have to break one way or the other, either higher unemployment or lower inflation to do anything else. Howard says 2026 could also bring a rush of new stimulus that may impact Fed decision making. You've already got a tremendous amount of AI investment going on and that could be labor displacing perhaps. But to some extent, it is adding to construction jobs, engineering jobs and things like that.

Starting point is 00:03:29 So what's the net, net, short, medium to long term TBD? This is what they're wrestling over right now, and it's why there is a divide in opinion among people who feel you want to get ahead of this and not let the labor market weaken any further versus people who think, you know what, inflation's sticky. It's still 2.8%. And you've got to guard against that moving any higher. And I have no higher priority than making America affordable again. That's what we're going to do.

Starting point is 00:03:58 And again, they cause. the high prices and we're bringing them down. It's a simple message. Trump has ramped up his focus on affordability after scaling back some tariff increases and pledging to combat high food prices. That's after the wake-up call from GOP losses in November state elections, where Democrats hammered the administration over inflation. And this recent pivot is seeing some positive results. According to the latest Reuters Ipsis poll, his approval rating is ticked up to 41 percent, rebounding from a low point last month. Thank you, Pennsylvania.

Starting point is 00:04:34 Japan has scrambled jets to monitor Russian and Chinese air forces conducting joint patrols around the country. The Japanese defense ministry calling it a show of force against our nation in a post on X. It adds to rising tensions between Tokyo and Beijing after Japan said Chinese fighter jets aimed radar at Japanese military aircraft over the weekend. It's an accusation Beijing disputed. The Supreme Court has heard arguments in a case that could wipe out federal limits on how much political parties can spend on candidates. The case was brought by Republican groups and Vice President J.D. Vance.

Starting point is 00:05:17 At least four of the six conservative justices appeared sympathetic to striking down the restrictions on free speech grounds. But there was some indication that conservative justices like Justice Brett Kemp, Kavanaugh were conflicted. I am concerned, as you said, that the combination of campaign finance laws and this court's decisions over the years have together reduced the power of political parties as compared to outside groups with negative effects on our constitutional democracy. The three liberal justices warned that siding with Vance could eliminate what's left of campaign finance controls.

Starting point is 00:06:01 The court is expected to rule on the case by June 2026, just months before the U.S. midterm elections. Lithuania has declared a state of emergency after a wave of smuggler balloons carrying cigarettes from Belarus. These large weather balloons have repeatedly shut down Vilnius Airport in recent months. Lithuania calls it a hybrid attack by its neighbor, which is a close ally of Russia. It's an accusation Belarus denies. Lithuania is now asking Parliament to authorize military support for police and border guards to deal with the problem. Reporter Andreas Situs is in Vilnius. These are meteorological balloons.

Starting point is 00:06:46 These balloons don't have any propellant, so they fly wherever the wind takes them, but they can adjust their height. So if you know where a wind blows at which heights, you can control. where roughly they fly. Then the balloon flies almost undetected into Lithuania, and once it's there, they switch on the GPS equipment. They tell the balloon to land, so they pick up the goods and sell it on the black market in Lithuania or elsewhere. The smuggling from Belarus into Lithuania has been going on since the break of Soviet Union, because prices in Lithuania are significantly higher than in Belarus. But smugglers faced Issues after illegal migrants appeared on the border between Lithuania and Belarus.

Starting point is 00:07:33 This resulted in Lithuania fencing off all of its border with Belarus. So they were looking for other ways. And they tend to using these balloons. But because of how disruptive the balloons have been to air travel, Lithuania claims the balloons have a more sinister intent. Lithuanian government has been saying that smuggling must be directed by KGB. within Belarus, and since this is hurting Lithuania, they say, and KGB is allowing this to happen, this probably is part of a hybrid attack. Belarus is denying it and saying that, look,

Starting point is 00:08:10 now these balloons are not flying into nowhere. Someone is picking up with them on Lithuanian side. So it's up to Lithuania to clean up its acts and make sure that the smuggling would not be a profitable thing, which is currently. And for today's recommended read, we head to Honduras, where the president is denouncing what she calls an electoral coup after a chaotic presidential election now more than a week ago. There's a link to that story in the pod description. For more on any of the stories from today, check out reuters.com or the Reuters app.

Starting point is 00:08:51 Don't forget to follow us on your favorite podcast player. And if you're listening on a smart speaker, just ask for the latest news for Reuters seven days a week. We'll be back tomorrow with our daily. Headline Show.

Reuters World News - The Fed cuts rates - and signals a pause

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