The news at a glance
Economy: The Fed finally hikes interest rates
For only the second time in 10 years, the Federal Reserve bumped up its benchmark interest rate this week, said Harriet Torry in The Wall Street Journal. The modest increase raised the Fed’s key federal-funds rate by a quarter point, from a range of 0.25 to 0.5 percent to a range of 0.5 to 0.75 percent. The central bank’s move comes against a political and market backdrop “drastically different” from when it last issued projections in September, with many analysts anticipating morerapid growth and inflation under President-elect Donald Trump, warranting a faster pace of rate hikes. Even so, the Fed signaled that it still plans to “proceed cautiously.”
Nearly all market watchers believe that still higher interest rates “are on the way” in 2017, said Neil Irwin in The New York Times. But don’t be so sure. There’s no guarantee that Trump’s promises on tax cuts and stimulus spending will match their economic hype, especially after Congress has its say. Then there’s the influence of new Trump nominees to the Fed’s seven-member board of governors, where there are two vacancies. The president-elect railed against the Fed’s easy-money policies during the campaign, but “politicians, once in office, tend to learn that they like low interest rates.”
Tech: Trump and Silicon Valley execs make nice
Silicon Valley luminaries met with Donald Trump this week to offer an “olive branch” to the president-elect, said Elizabeth Dwoskin in The Washington Post. Unlike President Obama, Trump has had a “bitter relationship” with the tech industry, lambasting Apple for manufacturing iPhones in China and feuding with Amazon CEO Jeff Bezos over taxes. Bezos was in attendance for the closed-door meeting, along with Apple CEO Tim Cook, Tesla chief Elon Musk, Facebook COO Sheryl Sandberg, and Microsoft CEO Satya Nadella. Boosting U.S. jobs was reportedly at the top of the agenda.
Banks: Wells Fargo fails ‘living will’ test again
Wells Fargo crowned a “dismal year” this week by failing a key regulatory test, said Dan Freed and Patrick Rucker in Reuters.com. Federal regulators ruled that the bank’s contingency plans to protect markets in the event of a bankruptcy are insufficient. Wells now has until March 31 to submit an amended living will. Until then, “the bank may not establish international bank entities or acquire non-bank subsidiaries.” Five banks failed an initial assessment in April, including Bank of America and JPMorgan Chase. Only Wells failed the follow-up test.
Aerospace: Boeing inks historic deal in Iran
Boeing has agreed to sell 80 aircraft to Iran’s national carrier, “the first deal of its kind since 1979,” said Golnar Motevalli and Spencer Soper in Bloomberg.com. The $16.6 billion deal, announced this week, was made possible by last year’s nuclear accord, which lifted most major international sanctions against Iran. The sale “will force Congress and President-elect Trump to balance their diplomatic priorities with U.S. job growth.” Boeing says the deal will support 100,000 aerospace jobs in the U.S. Republicans, however, have threatened to scuttle the nuclear deal and reimpose sanctions.
Energy: Oil prices increase after global supply pact
Oil prices surged this week after OPEC “clinched a long-sought pact” with Russia and other non-OPEC nations to cut production, said David Sheppard in the Financial Times. The price of Brent crude oil, the international oil benchmark, jumped above $57 a barrel after the deal, which was made to prop up falling oil prices. Russia spearheaded a “loose coalition” of oil producers, including Oman, Mexico, and Kazakhstan, that agreed to reduce supply by 558,000 barrels a day, on the heels of OPEC’s agreement last month to cut production. Together, “the deals amount to the first global supply pact since 2001.”