WSJ What’s News - Fed Warns of Increased Uncertainty, Holds Rates

Episode Date: May 7, 2025

P.M. Edition for May 7. Despite political pressure from President Trump, the Federal Reserve kept interest rates steady today. WSJ chief economics commentator Greg Ip explains how tariff uncertainty factored into their decision. And Disney seeks a foothold in the Middle East with an upcoming theme park in Abu Dhabi. WSJ entertainment reporter Ben Fritz has details on the company’s ambitions. Plus, investigations reporter Katherine Long tells us what U.S. spy agencies are after in Greenland. Victoria Craig hosts. Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

We hope you're enjoying your Air Canada flight. Rockies, vacation here we come. Whoa, is this economy? Free beer, wine, and snacks. Sweet! Fast free Wi-Fi means I can make dinner reservations before we land. And with live TV, I'm not missing the game. It's kind of like I'm already on vacation.

Nice. On behalf of Air Canada, nice travels. Wi-Fi available to Air Plan members on Equip Flight, sponsored by Bell Conditions Supply, seercanada.com. Despite President Trump's demands, the Fed keeps rates steady and warns of increased economic uncertainty. Plus, Mickey Mouse heads to the Middle East as Disney plans a new theme park in the capital of the United Arab Emirates. Abu Dhabi is in the heart of the Middle East, which is a region where Disney doesn't have nearly as much of a presence as it does in the rest of the world. It's a region where there's a growing number of middle class people and it's a huge tourist

destination. And what U.S. spy agencies are up to in Greenland. It's Wednesday, May 7th. I'm Victoria Craig for The Wall Street Journal, filling in for Alex Osala. And what U.S. spy agencies are up to in Greenland. It's Wednesday, May 7th. I'm Victoria Craig for the Wall Street Journal, filling in for Alex Osala. This is the PM edition of What's News, the top headlines and business stories that move the world today. The Federal Reserve has voted unanimously to keep its benchmark interest rate in the

4.25% to 4.5 percent range for the third straight month. It's the Fed's first rate decision since President Trump imposed a sweeping tariff package in April, much of which was later reversed. At a press conference following today's decision, Fed Chair Jerome Powell responded to a question from The Wall Street Journal saying tariffs presented continuing uncertainty. The administration is entering into negotiations with many countries over tariffs. We'll know more with each week and month that goes by about where tariffs are going to land, and we'll know what the effects will be when we start to see those things.

So we think we'll be learning. I can't tell you how long it will take, but for now it does seem like it's a fairly clear decision for us to wait and see and watch. For more, I'm joined by The Wall Street Journal's chief economics commentator, Greg Ipp. Greg, we talk a lot about the impact of President Trump's tariff policy. How are these new levies affecting the economy and the Fed's reaction to it? Well, it's not a very satisfying answer, but the main impact is just raising a lot of uncertainty. I mean, we've said it before on this show and other places, is that we have a lot of anxiety out there.

We know that from confidence surveys. We can see it in the volatility of the stock market, all the so-called soft indicators. But when we look at the hard indicators, like employment and spending and production, they're not yet showing up much impact of the tariffs. But there's just so much they don't know about what the impact of tariffs will be. And the Fed has been extremely cautious with its language about tariffs. But what information does it need for the next interest rate decisions over the next couple of months? And when might we see rates move?

Well, they, like the rest of us, are waiting effectively to see the extent to which the tariffs show up in prices or the result in cutback in deliveries or production, you know, whether there are actually empty shelves from certain products don't show up. And that could happen in as little as several weeks or it could take longer. But this is kind of a moving target because as you know, the president and his advisors are right now entering into negotiations with a lot of countries. The tariffs on China could end up being lower than we currently expect. That adds further uncertainty because it means that in addition to the lags from the tariffs that are already in place, the tariffs in place may not

stay at that level. The feds basically say why rush a decision that they don't have to make now. Wall Street Journal Chief Economics commentator Greg Ip, thank you so much. Thanks a lot. The feds basically say why rush a decision that they don't have to make now. Wall Street Journal chief economics commentator Greg Ip, thank you so much. Thanks a lot. Tariffs aren't just making the feds job more complicated. According to new modeling from the Consumer Technology Association, they could also push prices for video game consoles up nearly 70%. That's if they aren't covered by an exemption to the tariffs.

The industry group sees prices for smartphones, laptops, and other widely used devices rising 30 percent, with the assumption that the administration lands on a 25 percent tariff for those products. U.S. stocks closed higher today after the Fed's decision to hold steady. The Dow ended the session up 0.7 percent, boosted by Disney, the index's best performer. Shares soared nearly 11 percent on its earnings results. More on that later. The S&P 500 rose four tenths of a percent,

while the Nasdaq gained a quarter of a percent. We exclusively report that U.S. intelligence agencies are stepping up their activity in Greenland. That's according to people familiar with the effort. The directive is one of the first concrete steps the Trump administration has taken toward fulfilling the president's often-stated desire to acquire Greenland. Catherine Long is a reporter on the Journal's investigations team and she joins me now. Catherine, what kind of information are these agencies looking together? What we know is that several high-ranking officials

in the office of the Director of National Intelligence asked intelligence agency heads to collect information relating to Greenland's independence movement, attitudes on American resource extraction in the island, and also to identify people in Greenland and Denmark who support U.S. objectives for the island. Greenlanders overwhelmingly reject the idea that the island should become part of the U.S. That being said, there is a small, but vocal independence movement on the island

that has expressed some interest in the idea. And the White House has framed this around security concerns in Greenland and in the Arctic. Tulsi Gabbard, who heads up the National Intelligence Agency, she had some choice words for the Journal about this story. Tell us about that. Yes. D&I Gabbard recommended that we should be ashamed of aiding deep state actors who seek to undermine the president. That's a direct quote. Catherine Long, a reporter on the Journal's investigations team, thanks so much.

Thanks for having me. A federal appeals court has ruled that Tufts University graduate student Ramesa Ozturk must be moved from a Louisiana detention center to a Vermont one where her case is unfolding. Ozturk's lawyers say her arrest in March was in retaliation for co-writing a pro-Palestinian opinion piece for a student newspaper. She has not been charged with any crimes. The Trump administration has detained multiple foreign-born students in Louisiana, where experts say courts have precedent that is less friendly to immigrants. The appeals court's decision today could set a precedent for other detained students

to be moved out of Louisiana. Coming up, why Disney chose Abu Dhabi as the home of its next theme park. That's after the break. Oh! Excuse me, why are you walking so close behind me? Well, you're a tall guy. You throw a decent shadow when I'm walking in it

to keep out of this bright sun. It hurts my eyes. Okay, well you know what, Specsavers, you can get two pairs of glasses from $149 and, oh you'll like this, one can be a pair of prescription sunglasses. Sounds great! Where's the nearest store? Mmm, not far. Come on. Let's hurry then! To my count. One, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, two, one, one, two, one, two, one, one, two, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, two, one, one, one, two, one, one, one, two, one, one, one, one, one, one, one, one, one, one, one, one, one, one, Visit Specsavers.ca for details. Disney is setting up shop in Abu Dhabi. The House of Mouse announced plans today for its seventh global theme park, which will

give it an anchor in the Middle East. The Disneyland project will be designed by the company's Imagineers, but built and financed by a local company, Miral, which has constructed other theme parks on the same island Disney has set its sights on. Ben Fritz covers the entertainment industry for the Wall Street Journal. Ben, why Abu Dhabi and why now for Disney? Abu Dhabi was in the heart of the Middle East, which is a region where Disney doesn't have nearly as much of a presence as it does in the rest of the world.

It's a region where there's a growing number of middle-class people and it is a huge tourist destination. There's already a bunch of other museums, parks, etc. there that draw a lot of tourists and Disney both thinks there's a good theme park business and also is hoping that by establishing a theme park there it will make people more interested in Disney's brands which will get them more likely to use Disney+, watch Disney movies, buy Disney consumer products and toys, etc. What does the partnership between these two companies, Disney and Miral, look like? Sure, so it's unusual.

So usually Disney partially or entirely builds the theme parks itself and then owns them, which cost many billions of dollars, but obviously has a huge upside eventually from the ownership. In this case, Disney is partnering with Miral, and Miral is going to entirely pay for the theme park. Disney is licensing its IP to them, and then Disney is going to do the actual design of the rides and attractions, and it's going to consult on how to operate the park. Working with a local company in a foreign country where Disney has done very little business kind of helps it to navigate things there.

And then also, Disney has a big but limited amount of capital and they're making a lot of other investments. Now Disney CEO Bob Iger says we could be as many as seven years away from the opening of this new Abu Dhabi theme park, but we did learn today through the company's earnings that the experience part of its business, which include theme parks and cruises, is a big part of the company's revenue stream. Walk us through how those did last quarter given all of the global uncertainty for consumers. So the experiences division of Disney, which is primarily parks as well as consumer products,

is a growing share of its operating income, especially. And Disney said that last quarter, despite some economic uncertainty that we're all familiar with, the domestic parks attracted more guests and higher spending from the visitors who came. So the operating income for the experiences business rose 9% to two and a half billion dollars. It was some of the best growth for any business within the company. At the entertainment streaming business,

outside of sports, reported a profit. It was $336 million last quarter, compared to 47 million a year ago. But the big streaming question for Disney this year is gonna be what happens to ESPN. Disney is planning to launch a standalone ESPN streaming service that has everything you can get from ESPN on TV. Currently, ESPN Plus service that has everything you can get from ESPN on TV.

Currently ESPN Plus basically just has the sports that don't make the cut for ESPN cable, you know. Bob Iger said on the earnings call today that Disney is going to announce the official name for it and announce the price for it next week. Entertainment industry reporter Ben Fritz, thanks so much, Ben. Sure, my pleasure. Thanks so much, Ben. Sure, my pleasure. Some other corporate news to tell you about. Cybersecurity firm CrowdStrike says it's slashing about 500 jobs or 5% of its global

workforce. That's as the company tries to make its business more efficient. CrowdStrike said it expects as much as a $56 million charge from the decision, which comes after it swung to a loss last quarter and shared full-year earnings guidance that fell short of expectations. The Federal Aviation Administration is scrambling to update and improve its air traffic operations after technology breakdowns disrupted operations at Newark Liberty International Airport in recent days.

The FAA said it's working to increase staffing of controllers who oversee Newark traffic and adding new high-bandwidth connections between the Philadelphia facility and New York to improve reliability and redundancy. Finally, it's black smoke at the Sistine Chapel. The papal conclave began in the Vatican today, but Cardinals did not elect a new pope in their first vote. Beginning tomorrow, there will be four votes a day until the 133 cardinals select a new leader for the Catholic Church. Before we go, heads up, we ran a bonus episode of the podcast earlier today. You can listen

to what's news in earnings for the latest quarterly reports from the automotive sector, including how car companies are reacting to President Trump's tariff plans and whether and when consumers might see higher prices passed along to them. And that's what's news for this Wednesday afternoon. Today's show was produced by Anthony Bansi. Our supervising producer was Pierre Bienamé. I'm Victoria Craig for The Wall Street Journal. We'll be back with a new show tomorrow morning.

Thanks for listening.