Finance

The many challenges facing Jay Powell as he tries to pull off a soft landing

Published

4 months ago

September 20, 2024

The many challenges facing Jay Powell as he tries to pull off a soft landing

Jay Powell argued this week that the Fed is not “behind” as it starts a cycle of interest rate cuts.

His main challenge in the coming months is to keep that narrative intact if the job market keeps cooling and the economy deteriorates.

“We don’t think we’re behind,” the Federal Reserve chairman said during a Wednesday press conference following a decision to cut rates for the first time since 2020. “We think this is timely, but I think you can take this as a sign of our commitment not to get behind.”

Some on Wall Street still have their doubts, arguing the jumbo 50 basis point move announced this week is an attempt to play catch up and that the path ahead for rate cuts may be too shallow.

Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve in Washington, Wednesday, Sept. 18, 2024. (AP Photo/Ben Curtis) — Federal Reserve Board Chairman Jerome Powell speaks during a news conference at the Federal Reserve in Washington on Wednesday. (AP Photo/Ben Curtis) (ASSOCIATED PRESS)

The central bank is being “reactionary” instead of proactive, said EY Chief Economist Gregory Daco, who pointed to the fact that Powell acknowledged the Fed might have cut rates in July if its policymakers had seen July’s employment figures first.

Those figures, released just two days after the Fed’s July 31 meeting, showed that the unemployment rate had risen to 4.3%, stoking concerns the Fed had waited too long.

The rate dropped to 4.2% in August, but another rise in the coming months could bring those same fears back.

“It’s essential for Fed policymakers to adopt a robust forward-looking framework and abandon data dependency,” Daco said. “Unfortunately, that’s not the case so far.”

There remain “real risks” that a soft landing for the US economy may not be achieved especially if the labor market deteriorates, Nationwide chief economist Kathy Bostjancic told Yahoo Finance Thursday.

“Chair Powell is trying to get ahead of that…but there is always the risk they have been a little too slow in doing this.”

Fed officials this week predicted the unemployment rate would tick up to 4.4% this year and hold at that level through next year.

Another hurdle for Powell is that Wall Street expects more future cuts than predicted by central bank policymakers, who this week estimated two more smaller cuts of 25 basis points through the rest of 2024 followed by four smaller cuts in 2025.

One Wall Street firm that came out with a more aggressive forecast was BofA Global Research, which raised its call for rate cuts during the remainder of this year to 75 basis points.

JPMorgan Chase chief economist Michael Feroli also said he is still expecting a faster pace of rate cuts than the Fed consensus.

Feroli expects a 50 basis point cut at the next meeting in early November contingent on further softening in the two jobs reports between now and then.

Luke Tilley, chief economist for Wilmington Trust, said the Fed’s predicted path is too slow for an economy where the job market has normalized and inflation is likely to reach the Fed’s 2% target in the first quarter of 2025.

Tilley thus expects 200 basis points of cuts next year — double the Fed’s projection — and for rates to come down to neutral – the level that neither boosts nor slows growth — by next fall.

“It’s the longer-term path that matters more, and here the Fed is still a bit behind in that the median expectation is for just 100 bps of cuts next year,” he said.

Signs of division

But the Fed expects the economy to continue to show strength, aligning with their shallower rate cut predictions. Officials see the economy expanding at 2% this year, roughly inline with the 2.1% previously forecast, and coasting at that level the next few years.

And the goal is to preserve that economic growth without re-stoking inflation. Officials predict inflation will end the year at 2.6%, down from 2.8% previously, before falling to 2.2% next year.

No matter what happens, Powell will also have to manage signs of internal division over the path ahead.

The Fed’s rate-setting committee is almost evenly split on the number of additional rate cuts expected this year, with seven policymakers favoring one additional 25 basis point rate cut before year end and nine members favoring 50 basis points of additional easing.

Two policymakers expect no more rate cuts.

That path implies several officials could have supported a 25 basis point cut this week but decided to err on the side of caution and not regret further deterioration in the job market.

Fed governor Michelle Bowman even voted against the 50 basis point cut, arguing instead for a smaller quarter point cut. Her dissent was the first for the Fed since 2005.

“The Fed chair is now seen to have significant influence over the FOMC as he managed to convince most officials that front-loading cuts was optimal,” said EY’s economist Daco.

“The bargain is probably that policymakers may be more resistant to rapid easing at the next two policy meetings.”

Bostjancic, the chief economist at Nationwide, said she believes the Fed should cut another 50 basis points at its next meeting in November, even though that is not her firm’s forecast.

But to cut by another 50 “you would really have to have consensus” among Fed officials. “It’s a hurdle and you would have to have broad agreement.”

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Finance

Financial empowerment trainings and workshops

Published

4 hours ago

January 6, 2025

Press Room

Financial empowerment trainings and workshops

BANGOR, Maine (PENQUIS) – As the new year begins many people have dreams of starting their own business or are thinking about turning a passion or hobby into a way to make money, but they are not sure how to start the process. Thankfully, there is a local resource available to help provide guidance right here in Penobscot, Piscataquis and Knox counties.

MaineStream Finance, a subsidiary of Penquis, is a nonprofit community development financial institution (CDFI) certified by the US Treasury, helping ALL Maine home-buyers, business owners, and consumers secure advice and financing to grow and thrive. MaineStream Finance offers a wide variety of workshops and classes on business, home buying, and financial empowerment for you and your co-workers. They deliver these services throughlending, savings products, classes, and one on one advisory support. MaineStream works closely with federal and state agencies, foundations, and local financial institutions, including banks, to help them meet Community Reinvestment Act (CRA) goals through financial education programs, loan capital, and volunteering opportunities for homeowners and small businesses.

Thinking of starting a business? Check out the Business 101 classes. These free workshops will provide an overview of the pros and cons of operating a microenterprise or small business. What a business plan is and why it is needed, plus resources for your business development. Topics include being an Entrepreneur, Business Success; Professionalism; Business Plans, Networking; Business Loans; Resources; Budgets; Credit; and Review of Upcoming Classes and Workshops. These workshops are FREE and offered via Zoom. The dates of the classes are: Monday, 1/27/25 & 2/3/25 @ 6 pm via Zoom; Tuesday, 2/18/25 & 2/25/25 @ 6 pm via Zoom, and Monday, 3/17/25 & 3/24/25 @ 6 pm via Zoom.

Are you interested in turning your passion or hobby into a business? Do you have a passion for creating or is your hobby sellable? Be sure to check out their free two-night Hobby workshop, where you will discuss what to think about before creating a new business. Areas that will be discussed: Questions to ask myself; Is there a market for my products and/or services; Business Plan; Recordkeeping; Regulations; Taxes; Marketing; Funding sources and more. The two-night workshop is FREE! The first two classes are on Monday, 1/27/25 & 2/3/25 @ 6 pm via Zoom, the next two nights run on Tuesday, 2/18/25 & 2/25/25 @ 6 pm via Zoom, and the final two classes run Monday, 3/17/25 & 3/24/25 @ 6 pm via Zoom.

To register for any of these classes or for more information to sign up visit: www.mainestreamfinance.org

MaineStream Finance can also help turn childcare into a business and they provide business lending too. Does children’s laughter sound like music to your ears? The number of working parents–including single-parent families and families with both parents employed–is climbing, creating an ever-growing need for quality childcare. That need creates a tremendous entrepreneurial opportunity for people who love children and want to build a business caring for them. Child-care services range from small home-based operations to large commercial centers and can be started with an investment of as little as a few hundred dollars. You can stay very small, essentially just creating a job for yourself, and possibly others. Our team of business advisors can help you create a business plan, design, develop, provide assistance with the Child Care Provider Licensing process and more. Our business advising services are free.

Are you aware that Mainstream Finance does business loans? MaineStream Finance offers a variety of loan products throughout Maine to small businesses that may have trouble finding credit.

Amount: Minimum $500 – Up to $200,000 / Term: Up to 20 years.

Whether you are a startup or an existing business we can do financing to help you move your project forward. MaineStream Finance does what is called “Gap financing” so the difference between the amount of your down payment you have and what another lender has and can lend. This Gap amount could stop your project, we may be able to help finance that Gap to complete the project. We are also looking at startup businesses in need of financing to purchase equipment, inventory, training, a building, or an existing business. The team at Mainstream Finance will help a business develop a business plan and business financials as well as help you prepare the loan documents that you will need to apply for a loan and all of this is at no charge. The MaineStream Finance mission is to help small businesses grow in Maine.

To learn more about what MaineStream Finance has to offer go to their webpage at mainestreamfinance.org, or call 207-973-3500 or email the team at MSFInfo@penquis.org for more information.

Finance

Security Bank, JuanHand tie up for financial inclusion in Philippines

Published

11 hours ago

January 6, 2025

Press Room

Security Bank, JuanHand tie up for financial inclusion in Philippines

JuanHand app users can now apply for loans by providing basic personal information and one valid ID. Credit: JuanHand/ Security Bank.

Filipino lender Security Bank has signed a credit facility agreement with WeFund Lending, the operator of fintech cash lending app JuanHand in Philippines.

This partnership aims to bolster financial inclusion by providing Filipinos with accessible financial solutions.

JuanHand app users can now apply for loans by providing basic personal information and one valid ID.

Utilising Finvolution group’s proprietary AI technology, borrowers are said to get loan approvals in under five minutes, without collateral or the need to upload proof of income or a billing address.

The signing event was attended by Security Bank executive vice president John Cary L. Ong and assistant vice president and relationship manager Earvin Lucido.

Finvolution and WeFund Lending were represented by chief financial officer Alexis Xu and CEO Francisco “Coco” Mauricio.

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Cary L. Ong said: “We are grateful for the opportunity to be part of the JuanHand family. We resonate with JuanHand’s vision of one family with one heart that gives Filipinos a helping hand with their financial needs.”

JuanHand, operated by WeFund Lending, has disbursed over PHP 40bn in loans and boasts over 12 million registered users.

“Coco” Mauricio stated: “We are thrilled that Security Bank chose JuanHand as their first fintech lending company partner. By giving us their trust and confidence, this truly exemplifies Security Bank’s commitment to rapidly expand financial inclusion for all underserved Pinoys. Security Bank’s support helps fulfil our mission of being a helping hand for every Juan.”

In November 2024, Security Bank signed an agreement to acquire a 25% stake in HC Consumer Finance Philippines, also known as Home Credit Philippines.

Finance

Where to put your money in 2025

Published

19 hours ago

January 6, 2025

Press Room

The most frustrating answer in financial services is ‘it depends’, so if you’re keen to find out where to put your money in 2025, you’re not going to like the answer – because it really does depend.

Fortunately, that’s not the start and end of the answer, because once you know what it depends on, it’s actually much more useful advice than someone simply giving you the name of a fund or telling you to keep your cash in a shoebox under the bed.

Read more: 7 post-budget steps to protect your finances

When people ask about the best home for their money, they’re usually thinking about external factors, but the key is to start with your own needs. Think about your finances in the round. Are your short-term debts under control? Do you have protection in place for your family?

Do you have enough saved for emergencies? Are you on track with your pension? And are you investing to make the most of your money? There’s a decent chance that you’re falling short in one or more areas, so these are your key priorities for the year.

It’s important to think about your finances in the round. Are things like credit card debts under control? · boonchai wedmakawand via Getty Images

If short-term debt, like credit cards and loans, are an issue, it makes sense to set up a direct debit to pay down the most expensive of them first. Over time, you’ll spend less on interest, so you can free up more money for your other financial goals. If protection is a priority, you need to consider how to free up cash for insurance premiums to cover those who rely on you.

For emergency savings, the first step is working out how much you ought to have. This is another frustrating ‘it depends’ answer. While you’re working age, you should have enough cash to cover 3-6 months’ worth of essential spending – and in retirement that grows to 1-3 years. It means considering the cost of your essentials, and then looking at your circumstances to figure out where on the saving spectrum you need to be. The answers will be radically different for every household, but as a very rough starting point, the Hl Savings & Resilience Barometer shows that the median spent on essentials is £1,842 a month.

Read more: 6 red flags that will help you spot a scam

For any other cash you’ll need over the next five years, savings is still the most sensible home for it, but you can consider tying it up for periods in a fixed rate account, in order to lock in a decent rate. You need to decide what the money is for, when you’ll need it, and how long you can fix it for.

British pound notes in savings jar — For emergency savings, you should have enough cash to cover 3-6 months’ worth of essential spending – and in retirement that grows to 1-3 years · Peter Dazeley via Getty Images

You also need to look ahead, and consider your pension. The best approach is to start with a pension calculator, where you put in details of what you’ve saved so far, what you’re putting aside each month, and when you want to retire. It will show you what you’re on track for, and whether you need to do more.