Chapter 1: What does a strengthening euro mean for the European economy?
What if Jay Powell's press conference today wasn't really about the economy? I have nothing for you on that today. I can't comment on that. I'm not going to be getting into that. I have nothing for you. Sorry. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizdahl. It is Wednesday today, the 28th of January. Good as it always is, everybody, to have you along.
Okay, look, to be clear, Chair Powell's press conference today was really about the economy. But given the Department of Justice subpoena from a couple of weeks ago, the possibility of a criminal investigation, his video in response, who the next person in the hot seat might be, and...
Whether Powell is going to stay on the Board of Governors post-chairmanship, as is his right, there was, shall we say, a subtext to the proceedings. All of them met firmly by various thesaurus alternatives to no comment. Anyway, the economy. The economy has once again surprised us with its strength. Hence, no cut in interest rates. Growth is on a solid footing, it looks like.
And it's not just those things. It's just the consumers. The consumer is filling out, you know, surveys that sound really negative and then spending. Thank you, consumers of America, about whom more in a minute from Kristen Schwab. But what, I hear you asking, about inflation, Kai? Most of the overrun in goods prices is from tariffs.
And that's actually good news because if it weren't from tariffs, it might mean it's from demand. And, you know, that's a harder problem to solve. We do think tariffs are likely to move through and be a one-time price increase. Definitely good news if it turns out to be true. And then finally, Chair Powell, sir, where oh where might the central bank be taking this economy? Inflation?
The labor market? What are you looking at? So we'll always be looking at both things. And so there could be combinations, infinite numbers of combinations that would cause us to want to move. Didn't want to pick a side? Certainly, a weakening labor market would be an argument for loosening. But what's happening with inflation?
If inflation were at the same time getting worse, you know, you just have a very difficult situation there. So we'll be looking at both. Okay, fine. Wall Street today, traders did what they do on a Fed day when what the central bank is going to do is already priced in. That is, we all knew what was going to happen. We will have the details. Yeah, when we do the numbers.
There is apparently some economic confusion at the highest levels of the Trump administration. To be specific, in case you were confused, the foreign exchange markets are the topic at hand. Asked yesterday about the slide in the value of the dollar over the past eight or ten months, the president said, and this is a quote, I could have it go up or down like a yo-yo.
This morning, Treasury Secretary Scott Besson tried to do a little cleanup, saying the United States has always had a strong dollar policy. Setting aside for just a second here the irony that it is the administration's own policies that have been sending the dollar lower, a falling dollar is a sign that Greenback might be losing its safe haven luster.
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Chapter 2: How do currency fluctuations affect trade balance?
Kenneth Kim is senior economist with KPMG. He says that's because weak demand for European exports could result in inflation that's too low.
That might put the ECB in a spot where with inflation falling, perhaps the ECB might have to lower rates if inflation does continue to go down.
Last year, an ECB official told Bloomberg News that the euro at $1.20, which it recently hit, could complicate things for policymakers. Ricardo Amaro with Oxford Economics says while the euro's value isn't currently raising any red flags.
I think it's more where things go from here. Like, do we get some stabilization or does the dollar weaken further?
The ECB will make its next decision on interest rates a week from tomorrow. I'm Justin Ho for Marketplace.
Tariffs were, as you heard earlier, a topic of interest at Chair Powell's press conference today. So we thought we would reach out to some small businesses feeling the weight of said tariffs. Ellie Trella-Jones is the owner of Bruised Boutique Skate Shop in Nashua, New Hampshire.
I never thought when I started a small business selling roller skates that I would be looking into, you know, what's happening in the government so closely.
The constant changing of tariffs and the constant changing of prices has not only made it an unusual environment for us to try to figure out what the year is going to be like, but it also poses a little bit of a challenge because our employees then have to go through and change the prices of each vendor. Like all skateboards are made out of Canadian maple, for example.
So we can't get Canadian maple here. We have to import it. And so, you know, the price of skateboards is constantly changing as well, too. So we took out a $100,000 loan in order to keep our business afloat. We have been paying it back slowly. So it's good that it's like a low-interest loan through the Small Business Association.
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Chapter 3: What challenges does a strong euro pose for Germany's economy?
I'm Kristen Schwab, a millennial, and according to Consumer Confidence Data, a slightly less grumpy-than-average American for Marketplace.
Sometimes it's not the tariffs you have in the moment, but the ones that you had in the past that are shaping your right now. Here's Kristen Tolleheimer-Bingham. She's the co-owner of Dean Sweets in Portland, Maine.
Tariffs for cocoa ended in mid-November of last year, so not that long ago. And even though the tariffs aren't in place right now, the chocolate we're using now to make our products was purchased when the tariffs were active. So we really haven't escaped the tariffs, not yet anyway. We had to raise our prices last fall because of the tariffs and the increase in the cost of chocolate.
And so we are living now with the effects of both of those things. We are starting to see price resistance with some customers. So that means even more than in the past, we think about every penny and every dime. Future tariffs, if they came back at a higher rate, could be the one cost that could be too much for us.
Right now, the concern we're hearing from our suppliers is more about the availability of chocolate. it's been and still is quite touch and go. Our suppliers can't always get what they order or even predict what will be available a month from now. Dean and I are generally optimistic people. We don't see a day when tariffs will be the thing that hurts our business most.
That may not be true for our neighbors or for other businesses we know and work with. So we might worry more about that. And at the same time, We're also witnessing how consumers respond to higher and higher prices. We may be on the edge now, and if we get hit with tariffs again, something would have to give.
Chris in Tallahassee, Bingham, making chocolate in Portland, Maine.
Coming up. Everyone's heard that an awful lot. It's like the boy that cried wolf.
Maybe this time, though, it's not a false alarm. First, though, let's do the numbers. Dow Industrials up 12 points. We'll call that flat, 49,015. The Nasdaq found 40 points in the couch cushions, about two-tenths percent, 23,857. The S&P 500 briefly crossed 7,000 before going back to where it started, ending things at 69,78, as I said, priced in. Bank stocks after the Fed's rate decision?
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Chapter 4: How are small businesses coping with tariffs?
There were wires everywhere and workers in jeans and T-shirts hovering over screens filled with code. In one room on a wall of computer servers, Satish pulled out a rack of little yellow plugs. Kind of like the Ethernet cables you might stick into your home computer.
These are typically what you would see in a data center.
Yep, I've seen a lot of them recently as I've been reporting on data centers. AWS has built about 9 million kilometers of fiber cable to link computers around the world. It's enough to stretch to the moon and back 11 times. And it's all connected with fiddly little plugs like these.
Plugging in these many connections, like these are 60, 32 ports, it's slowing us down.
So the ergonomics of actually plugging those individually.
Individually, it takes a lot of time, and doing it reliably is also a challenge. So what we have done here is that we kind of looked into this problem and how we could actually miniaturize it so that we can actually reduce it. So these are 64 fibers that we connected, and here we got... a single connector that actually can do exactly the same thing that we are doing in a smaller form factor here.
So that enables us to reduce our deployment time by more than 54 percent.
The whole point of this is to build data centers. Satish also showed me these devices, they're called transponders, that convert electric signals, aka data, into light waves.
And then the light gets sent over a fiber optic cable to any distance you want. And that's the information highway that connects across.
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Chapter 5: What impact do tariffs have on consumer prices?
I will tell you why I attended. I would say that that case is perhaps the most important legal case in the Fed's 113-year history. And as I thought about it, I thought it might be hard to explain why I didn't attend. In addition, Paul Volcker went to a Supreme Court case famously in, I guess, 1985 or so. So it's precedented, and I thought it was an appropriate thing, and I did it.
Pal, by the way, I've said this before. He was a lawyer back in the day. Our media production team includes Brian Allison, John Fochie, Montana Johnson, Drew Johnstead, Gary O'Keefe, and Charlton Thorpe. I'm Kyle Rizdal. We will see you tomorrow, everybody. This is APM.