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Fed cuts interest rates again, but Trump's victory makes future path much murkier

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Fed cuts interest rates again, but Trump's victory makes future path much murkier

The Federal Reserve cut interest rates for a second straight time Thursday in an effort to keep the economy sailing along by easing the high borrowing costs it engineered to fight inflation. But going forward the Fed’s rate path looks very uncertain as policymakers must contend with a big new unknown: the policies and politics of a second Trump presidential term.

Thursday’s quarter-percentage-point reduction in the Fed’s benchmark rate was expected. It comes on the heels of a half-point cut in September, when the central bank pivoted to loosen monetary policy after having held its key rate at a two-decade high of 5.33% for months to throttle back inflation.

“The economy is strong overall,” said Jerome H. Powell, the Fed’s chair, at a news conference after a two-day meeting. “The labor market has cooled from its formerly overheated state and remains solid. Inflation has eased substantially.”

Although inflation remains a bit higher than the Fed’s 2% target, prices have come down sharply from their highs in 2022. Fed officials had previously signaled Thursday’s rate cut and another one in December, followed by several more next year.

The Fed eventually wants to get to a point where interest rates are neither stimulating nor restricting the economy, as they are now. That’s seen as happening with a rate of about 3%.

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“We’re trying to steer between the risk of moving too quickly and perhaps undermining our progress on inflation or moving too slowly and allowing the labor market to weaken too much,” Powell said. “We’re trying to be on a middle path where we can maintain the strength in the labor market while also enabling further progress on inflation.”

But with Trump’s victory, the Fed’s balancing act may get a lot harder.

Economists see risks on two fronts: If Trump follows through on his campaign promises to lower taxes, levy across-the-board tariffs on foreign goods and undertake mass deportations, thereby shrinking the labor supply, he could spur economic growth but also reignite inflation in the process, forcing the Fed to pull back on its rate-cutting plans.

The prospect of stronger growth, especially for corporations, was largely behind the huge rally on Wall Street after Trump’s sweeping win. The Dow, which surged more than 1,500 points Wednesday, or up 3.6%, closed unchanged. The broader Standard & Poor’s 500 index extended its gains, rising 0.74%; and the Nasdaq climbed 1.5%.

But even as the Fed has lowered rates, mortgage rates have edged a bit higher recently, along with long-term bond yields, reflecting what some see as expectations for higher inflation and interest rates down the road. If that trend continues, it could further complicate Fed decisions, especially because housing costs seem to be a top concern for people.

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“The rise in long-term rates and mortgages is kind of offsetting some of the oomph of the Fed’s rate cuts,” said Ryan Sweet, chief U.S. economist at Oxford Economics.

“We’re watching that,” Powell said when asked about higher long-term bond yields, which move in tandem with mortgage rates. But, he added, “it’s too early to say where they settle. If they’re persistent and they’re material, we’ll certainly take them into account.”

The second risk is the politics of a reelected president who has often challenged the traditional independence of the central bank and the mainstream economics of Powell.

In Trump’s first term, he at times publicly hectored Powell and his advisors pushed him to resign, though it was Trump who appointed him. The Fed and financial markets consider the central bank’s independence sacrosanct for sound economic policymaking.

Without commenting on Trump, Rodney Ramcharan, a former Fed economist who is now professor of finance and business economics at USC’s Marshall School of Business, said that “a feature of authoritarian governments is an erosion of norms and institutions.” And he noted that political pressure could be applied in public or privately.

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“He likes low interest rates,” Christopher Rupkey, chief economist at Fwdbonds, an economic and market research firm in New York, said of Trump. “There could be more jawboning to get rates lower and to get stronger growth.”

And if he doesn’t get what he wants, Rupkey said, Trump could replace Powell when his term expires in May 2026. “One of the wild card factors is, he gets someone in there that would be amenable to pushing rates even lower.”

Powell has long insisted that the Fed makes its decision without consideration of politics. Asked on Thursday whether he would resign if president-elect Trump asked him to, Powell replied, “No.”

For now, analysts expect the Fed to stay on its rate-cutting course, shaving another quarter of a percentage point from its main interest rate at its December meeting.

But since Trump’s sweeping victory, odds have increased that Fed officials will pause next month or early next year as they wait to see what a second Trump administration might mean for fiscal policies and the economy.

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Powell said that the Fed’s decisions will continue to be data driven and that it’s too early to say how the economy might evolve.

“In the near term, the election will have no effects on our policy decisions,” he said. “Here, we don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy will be, specifically whether and to what extent those policies would matter in the achievement for our goal variables, maximum employment and price stability.

“We don’t guess, we don’t speculate and we don’t assume,” he said.

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‘Stranger Things’ finale turns box office downside up pulling in an estimated $25 million

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‘Stranger Things’ finale turns box office downside up pulling in an estimated  million

The finale of Netflix’s blockbuster series “Stranger Things” gave movie theaters a much needed jolt, generating an estimated $20 to $25 million at the box office, according to multiple reports.

Matt and Ross Duffer’s supernatural thriller debuted simultaneously on the streaming platform and some 600 cinemas on New Year’s Eve and held encore showings all through New Year’s Day.

Owing to the cast’s contractual terms for residuals, theaters could not charge for tickets. Instead, fans reserved seats for performances directly from theaters, paying for mandatory food and beverage vouchers. AMC and Cinemark Theatres charged $20 for the concession vouchers while Regal Cinemas charged $11 — in homage to the show’s lead character, Eleven, played by Millie Bobby Brown.

AMC Theatres, the world’s largest theater chain, played the finale at 231 of its theaters across the U.S. — which accounted for one-third of all theaters that held screenings over the holiday.

The chain said that more than 753,000 viewers attended a performance at one of its cinemas over two days, bringing in more than $15 million.

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Expectations for the theater showing was high.

“Our year ends on a high: Netflix’s Strangers Things series finale to show in many AMC theatres this week. Two days only New Year’s Eve and Jan 1.,” tweeted AMC’s CEO Adam Aron on Dec. 30. “Theatres are packed. Many sellouts but seats still available. How many Stranger Things tickets do you think AMC will sell?”

It was a rare win for the lagging domestic box office.

In 2025, revenue in the U.S. and Canada was expected to reach $8.87 billion, which was marginally better than 2024 and only 20% more than pre-pandemic levels, according to movie data firm Comscore.

With few exceptions, moviegoers have stayed home. As of Dec. 25., only an estimated 760 million tickets were sold, according to media and entertainment data firm EntTelligence, compared with 2024, during which total ticket sales exceeded 800 million.

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Tesla dethroned as the world’s top EV maker

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Tesla dethroned as the world’s top EV maker

Elon Musk’s Tesla is no longer the top electric vehicle seller in the world as demand at home has cooled while competition heated up abroad.

Tesla lost its pole position after reporting 1.64 million deliveries in 2025, roughly 620,000 fewer than Chinese competitor BYD.

Tesla struggled last year amid increasing competition, waning federal support for electric vehicle adoption and brand damage triggered by Musk’s stint in the White House.

Musk is turning his focus toward robotics and autonomous driving technology in an effort to keep Tesla relevant as its EVs lose popularity.

On Friday, the company reported lower than expected delivery numbers for the fourth quarter of 2025, a decline from the previous quarter and a year-over-year decrease of 16%. Tesla delivered 418,227 vehicles in the fourth quarter and produced 434,358.

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According to a company-compiled consensus from analysts posted on Tesla’s website in December, the company was projected to deliver nearly 423,000 vehicles in the fourth quarter.

Tesla’s annual deliveries fell roughly 8% last year from 1.79 million in 2024. Its third-quarter deliveries saw a boost as consumers rushed to buy electric vehicles before a $7,500 tax credit expired at the end of September.

“There are so many contributing factors ranging from the lack of evolution and true innovation of Musk’s product to the loss of the EV credits,” said Karl Brauer, an analyst at iSeeCars.com. “Teslas are just starting to look old. You have a bunch of other options, and they all look newer and fresher.”

BYD is making premium electric vehicles at an affordable price point, Brauer said, but steep tariffs on Chinese EVs have effectively prevented the cars from gaining popularity in the U.S.

Other international automakers like South Korea’s Hyundai and Germany’s Volkswagen have been expanding their EV offerings.

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In the third quarter last year, the American automaker Ford sold a record number of electric vehicles, bolstered by its popular Mustang Mach-E SUV and F-150 Lightning pickup truck.

In October, Tesla released long-anticipated lower-cost versions of its Model 3 and Model Y in an attempt to attract new customers.

However, analysts and investors were disappointed by the launch, saying the models, which start at $36,990, aren’t affordable enough to entice a new group of consumers to consider going green.

As evidenced by Tesla’s continuing sales decline, the new Model 3 and Model Y have not been huge wins for the company, Brauer said.

“There’s a core Tesla following who will never choose anything else, but that’s not how you grow,” Brauer said.

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Tesla lost a swath of customers last year when Musk joined the Trump administration as the head of the so-called Department of Government Efficiency.

Left-leaning Tesla owners, who were originally attracted to the brand for its environmental benefits, became alienated by Musk’s political activity.

Consumers held protests against the brand and some celebrities made a point of selling their Teslas.

Although Musk left the White House, the company sustained significant and lasting reputation damage, experts said.

Investors, however, remain largely optimistic about Tesla’s future.

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Shares are up nearly 40% over the last six months and have risen 16% over the past year.

Brauer said investors are clinging to the hope that Musk’s robotaxi business will take off and the ambitious chief executive will succeed in developing humanoid robots and self-driving cars.

The roll-out of Tesla robotaxis in Austin, Texas, last summer was full of glitches, and experts say Tesla has a long way to go to catch up with the autonomous ride-hailing company Waymo.

Still, the burgeoning robotaxi industry could be extremely lucrative for Tesla if Musk can deliver on his promises.

“Musk has done a good job, increasingly in the past year, of switching the conversation from Tesla sales to AI and robotics,” Brauer said. “I think current stock price largely reflects that.”

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Shares were down about 2% on Friday after the company reported earnings.

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Elon Musk company bot apologizes for sharing sexualized images of children

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Elon Musk company bot apologizes for sharing sexualized images of children

Grok, the chatbot of Elon Musk’s artificial intelligence company xAI, published sexualized images of children as its guardrails seem to have failed when it was prompted with vile user requests.

Users used prompts such as “put her in a bikini” under pictures of real people on X to get Grok to generate nonconsensual images of them in inappropriate attire. The morphed images created on Grok’s account are posted publicly on X, Musk’s social media platform.

The AI complied with requests to morph images of minors even though that is a violation of its own acceptable use policy.

“There are isolated cases where users prompted for and received AI images depicting minors in minimal clothing, like the example you referenced,” Grok responded to a user on X. “xAI has safeguards, but improvements are ongoing to block such requests entirely.”

xAI did not immediately respond to a request for comment.

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Its chatbot posted an apology.

“I deeply regret an incident on Dec 28, 2025, where I generated and shared an AI image of two young girls (estimated ages 12-16) in sexualized attire based on a user’s prompt,” said a post on Grok’s profile. “This violated ethical standards and potentially US laws on CSAM. It was a failure in safeguards, and I’m sorry for any harm caused. xAI is reviewing to prevent future issues.”

The government of India notified X that it risked losing legal immunity if the company did not submit a report within 72 hours on the actions taken to stop the generation and distribution of obscene, nonconsensual images targeting women.

Critics have accused xAI of allowing AI-enabled harassment, and were shocked and angered by the existence of a feature for seamless AI manipulation and undressing requests.

“How is this not illegal?” journalist Samantha Smith posted on X, decrying the creation of her own nonconsensual sexualized photo.

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Musk’s xAI has positioned Grok as an “anti-woke” chatbot that is programmed to be more open and edgy than competing chatbots such as ChatGPT.

In May, Grok posted about “white genocide,” repeating conspiracy theories of Black South Africans persecuting the white minority, in response to an unrelated question.

In June, the company apologized when Grok posted a series of antisemitic remarks praising Adolf Hitler.

Companies such as Google and OpenAI, which also operate AI image generators, have much more restrictive guidelines around content.

The proliferation of nonconsensual deepfake imagery has coincided with broad AI adoption, with a 400% increase in AI child sexual abuse imagery in the first half of 2025, according to Internet Watch Foundation.

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xAI introduced “Spicy Mode” in its image and video generation tool in August for verified adult subscribers to create sensual content.

Some adult-content creators on X prompted Grok to generate sexualized images to market themselves, kickstarting an internet trend a few days ago, according to Copyleaks, an AI text and image detection company.

The testing of the limits of Grok devolved into a free-for-all as users asked it to create sexualized images of celebrities and others.

xAI is reportedly valued at more than $200 billion, and has been investing billions of dollars to build the largest data center in the world to power its AI applications.

However, Grok’s capabilities still lag competing AI models such as ChatGPT, Claude and Gemini, that have amassed more users, while Grok has turned to sexual AI companions and risque chats to boost growth.

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