Trump Urges Rate Cuts Amidst Shrinking US Economy; Jobless Claims Rise
Key Takeaways
- Trump urged Powell to cut rates in their first meeting since 2019; Powell demurred.
- US economy shrank 0.2% in Q1; jobless claims rose to 240,000.
- Chinese banks face a $583B liquidity test in June due to maturing debt.
- Spanish inflation eases below 2%, supporting the case for ECB rate cuts.
- Gap announces Trump's tariffs could cost the company $100-$150 million.
Top Stories
Trump urged Powell to cut rates; Powell demurred.
On May 29, 2025, President Trump urged Fed Chair Powell to lower interest rates during their first in-person meeting since 2019. Powell responded that Fed decisions would be based on objective analysis, while the Fed confirmed the discussion included economic growth, employment, and inflation.
US economy shrank 0.2%; jobless claims rose.
On May 29, 2025, reports indicated the US economy shrank by 0.2% in the first quarter, with weaker consumer spending and trade impacting growth. Initial jobless claims rose to 240,000, up from 227,000 the previous week, signaling higher unemployment.
Chinese banks face $583B liquidity test in June.
On May 29, 2025, it was reported that Chinese banks are facing a liquidity test in June 2025 due to a record 4.2 trillion yuan ($583 billion) in negotiable certificates of deposit maturities and a potential deposit exodus.
Spanish inflation eases, supporting rate cut case.
Spanish inflation eased to just below the European Central Bank’s 2% target in May 2025, supporting the case for interest rate cuts, according to a report published on May 30, 2025.
Gap: Trump's tariffs could cost $100-$150 million.
On May 29, 2025, Gap announced that tariffs imposed by President Donald Trump could cost the company between $100 million and $150 million, even with mitigation efforts. Gap CEO Richard Dickson stated that Gap plans to buy more cotton from the U.S. to mitigate the tariff impact and does not expect "meaningful" price increases for consumers.
Economic Trends
U.S. Trade Court ruled Trump Administration's tariffs illegal.
On May 29, 2025, the U.S. Trade Court ruled the Trump Administration's tariffs illegal. The Trump Department has filed a notice of appeal.
Citigroup CEO: US outlook stronger from Europe.
On May 29, 2025, Citigroup Inc. CEO Jane Fraser stated that the US economic outlook appears stronger when viewed from Europe, despite policy uncertainty.
Fed’s Kugler: Examine safe haven role changes.
Published on May 29, 2025, Fed’s Kugler stated that it is crucial to examine how possible changes in the role of the U.S. financial assets as a safe haven might affect financial stability, both domestically and abroad.
Goolsbee: US moving in 'stagflationary direction'.
On May 29, 2025, Federal Reserve Bank of Chicago President Austan Goolsbee stated that the US is moving in a "stagflationary direction" but not like the 1970s, during a discussion in Mackinac Island, Michigan.
ECB's Panetta signals inflation tamed, rate cuts considered.
On May 30, 2025, European Central Bank Governing Council member Fabio Panetta signaled that inflation is nearly fully tamed but cautioned that further interest-rate cuts require finely balanced judgments.
Investors await US inflation data amid trade war.
On May 30, 2025, investors were awaiting the US personal consumption expenditures price index, the Federal Reserve’s preferred inflation metric, for insights into consumer spending and wage growth in April and the impact of President Trump’s global trade war on the economy.
Bailey discusses world trade in Dublin.
On May 29, 2025, Bank of England Governor Andrew Bailey spoke at the Irish Association of Investment Managers Event in Dublin, discussing the state of world trade and the need to rebuild the multilateral system.
FHFA’s Pulte argues for Fed rate cuts.
On May 29, 2025, FHFA’s Pulte discussed the argument for the Fed to cut rates, noting that inflation is lower than the last time rates were cut and that President Trump has been successful in reducing inflation. He also mentioned that people are trapped in their homes with low interest rates and that lower rates are needed to unlock the existing home market.
Japan city reduces school rice servings to cut costs.
Published on May 30, 2025, the city of Katano, in Osaka, Japan, reduced rice servings in school restaurants to twice a week, from the usual three times, to avoid increasing canteen fees, according to the mayor, Kei Yamamoto.
Pending home sales fell most since September 2022.
Hassett confident tariff rulings will be overturned.
On May 29, 2025, Kevin Hassett, director of the National Economic Council, voiced his confidence that court rulings against tariffs would be overturned on appeal. He believes the administration's use of tariffs to ensure fair trade is legal and will resume soon.
Pulte discusses Fannie, Freddie, mortgage market stability.
On May 29, 2025, Bill Pulte mentioned that he, along with Secretary Best and Secretary Lot, will be meeting to come up with ideas regarding Fannie Mae and Freddie Mac, but ultimately, it will be the president's decision. He conveyed that maintaining stability in the mortgage market is crucial, with no disruption or upward pressure on mortgage rates, and hopes to get mortgage rates lower than the current 7%.
Market Insights
US stock futures fall amid tariff uncertainty.
On May 29, 2025, it was reported and updated on May 30, 2025, that US stock futures fell amid uncertainty about US tariffs. Asian stocks dropped 0.7%, while European stocks were little changed. The dollar and US Treasuries posted small gains.
Wall Street faces economic data, tariff legal issues.
On May 29, 2025, Wall Street traders faced slowing economic data and legal uncertainties around Donald Trump’s trade war, despite solid results from Nvidia Corp. The S&P 500 pared most of an advance. A federal appeals court offered Trump a temporary reprieve regarding his tariff agenda. Treasuries rose, and the dollar fell.
Hong Kong Chinese stocks decline on US-China trade.
On May 30, 2025, Chinese stocks in Hong Kong experienced a decline following US Treasury Secretary Scott Bessent's statement indicating that trade talks between the US and China were "a bit stalled." The Hang Seng China Enterprises Index saw a drop of up to 2.1%, primarily affecting technology and electric-vehicle companies.
Shapoorji Pallonji completes $3.4B financing deal.
On May 29, 2025, it was reported that Indian real estate and construction conglomerate Shapoorji Pallonji Group has completed a $3.4 billion financing in the country’s biggest ever private credit deal.
Riskier US stocks gain pace since November.
On May 29, 2025, it was reported that riskier US stocks, including AMC Entertainment Holdings Inc. and GameStop Corp., are on pace for their biggest gain since November. A UBS Group AG basket of low-scoring stocks is up 11%, outpacing the Dow Jones Industrial Average and S&P 500 Index in May 2025.
US investment-grade bond market busiest since 2020.
On May 29, 2025, reports indicated that the US investment-grade primary bond market is experiencing its busiest May since 2020, with firms raising approximately $153 billion this month. In May 2020, the Federal Reserve cut interest rates and high-grade firms issued a record $243 billion.
Ghana's bonds lead emerging markets in returns.
On May 29, 2025, it was reported that Ghana's dollar-denominated bonds are on track to deliver the best returns in emerging markets for May 2025, with a total return of 8.7%, significantly higher than the emerging markets average of 0.4%.
Gold prices fall, heading for weekly loss.
On May 30, 2025, gold prices fell, heading towards a weekly loss of almost 2%, due to a technical pullback ahead of key US economic data.
Apollo, JPMorgan, Goldman trade private credit.
On May 29, 2025, Apollo Global Management Inc. partnered with JPMorgan Chase & Co., Goldman Sachs Group Inc., and three other banks to trade private credit and syndicate investment-grade debt. Wall Street banks have become major financial supporters of the $1.7 trillion private credit industry, with loans to private debt funds increasing by 145% over the past five years.
Credit Agricole prices ¥85B Samurai bond deal.
On May 30, 2025, Credit Agricole SA priced a seven-tranche Samurai bond deal totaling ¥85 billion ($591 million), including a five-year floating-rate tranche that raised ¥26.9 billion. This is the first time in about a decade that Credit Agricole SA is issuing floating-rate Samurai bonds.
Nippon Steel invests $6B in cleaner furnaces.
Nippon Steel Corp. plans to invest 869 billion yen ($6 billion) to expand output from cleaner furnaces at home. The investments in electric arc furnaces will be spread across three of the steelmakers’ mills, with up to 29% of the funding from the Japanese government. This was reported on May 30, 2025.