Alex Osolov (2:39)

Back in September, there was a narrow majority of officials who said that they did expect several more rate cuts through the year, including in December. But does that seem like that picture has changed?

Greg Ip (2:49)

The following things have changed. There was support for that rate cut in September on the view that you had seen weaker labor market data and that the actual level of rates was still rather high. So today what has changed? Even though there's a blackout on official data, the unofficial data tell them that the labor market has not deteriorated further. There seems to be a lot of buoyancy out there around spending, around AI, around the stock market, and rates are another quarter point lower as of today. And so given the absence of urgency to ease further to help the economy and the fact that they're getting closer to the sweet spot for where rates should be, it's just a lot less of a compelling case to cut further to a lot of folks at the.

Alex Osolov (3:31)

Fed as they're looking ahead for this next meeting. Hopefully there will be some government data by then. What are the kinds of things that they're going to be looking at to determine whether there is a need to cut rates further?

Greg Ip (3:43)

As you said, the absence of the data makes life really hard. And I think everybody's hoping that the government shutdown will be over and we can start to fill in some of those blank spots. But in the meantime, we'll be getting a variety of non official data. You will still get some information on number of people claiming unemployment insurance from state offices. There will be a stream of announcements from corporations. One of the things on people's minds is that there seems to have been an uptick in layoff announcements. On the other side, there is price data, right? So we had a consumer price index reading for September. It seems less likely we'll get one for October. But we will continue to get anecdotal data about price increases. Just based on what Fed chairman said today and where things are likely to go, it seems unlikely you'll get a cut in December.

Alex Osolov (4:23)

That was WSJ chief economics commentator Greg Imp. Thank you, Greg.

Greg Ip (4:27)

Thanks for having me.

Alex Osolov (4:34)

Major US Indexes were mixed today. The Dow turned lower, closing down about 0.2% after Powell sowed doubt about a further rate cut in December. But the Nasdaq hung onto its gains, adding over half a percent and notching its fourth straight record. The S&P 500 was flat. Meanwhile, Nvidia has become the first company to hit $5 trillion in market value, according to FactSet. The chip maker stock closed at $207.16, or a market cap of roughly $5.03 trillion. Shares have been boosted by exuberance for AI's potential and a recent flurry of deals and partnerships with some of the biggest companies in AI and corporate America. It's been a difficult week for some American workers, with a number of companies announcing thousands of job cuts. Today, two more companies join them. Paramount said it will lay off roughly 2,000 workers across the company. In a memo to employees, CEO David Ellison said that the layoffs were focused on addressing redundancies and to accommodate its shifting priorities. And General Motors said it was laying off more than 3,300 hourly workers at factories that make electric vehicles and EV batteries. Of Those, more than 1700 are being laid off indefinitely, with more than 1500 expected to be called back in mid-2026. President Trump is now in South Korea on the next leg of his Asia tour. Today he met with the country's president, Lee Jae Myung, and said that the two countries are close to completing a trade pact. It's a surprise breakthrough following months of contentious talks over $350 billion in investments surrounding Seoul has pledged to America. The two leaders didn't sign a formal agreement, but a trade pact, as agreed by both sides, could be released in the next two to three days. One of the things that's come up in discussions with South Korea as well as with other countries on Trump's Asia trip is the US Demand that nations spend more on defense. For more, I'm joined now by WSJ national security reporter Alex Ward, talking to us from South Korea. Alex, why is Trump asking Asian countries to increase their defense spending now?

Alex Ward (6:46)

Because he was pretty successful with Europe getting NATO countries to do that. And now Trump is turning his attention to Asia. And there's a very clear reason. One is the China of it all. He would love for Japan and South Korea above all, but there are other countries here that he would love to see spend more on their defense so they could counter China. And then there's the issue that the Japanese and the South Koreans fear, which is, hey, if we spend more on our defense, does that mean the US Wants out of this region or at least a lesser role in this region? So it's a weird situation here where it's kind of like a damn if they do, damn if they don't.

Alex Osolov (7:19)

What kinds of threats is Washington seeing emerge in Asia?

Alex Ward (7:24)

There's kind of two main ones. There are thousands of American troops in this region, roughly 30,000 in South Korea. There's many more thousand in Japan. Say China really wanted to come after the United States. They know where these American troops are and they could target them easily. And then there's Taiwan. Today the Chinese government said that they would absolutely not rule out a military or at least a forceful takeover of Taiwan. And that is something that the United States has worried about long before Trump was president. If you are the US Government, you're thinking it would be better for us to have, let's say, force multipliers in the Japanese or the South Koreans to make Beijing think twice at least about moving on American troops to Taiwan.

Alex Osolov (8:08)

And how's this message from President Trump.

Alex Ward (8:11)

Going over relatively well. The Japanese, the South Koreans, the Filipinos, et cetera, are all for spending more on defense because the China of it all is threatening them. Why not spend more, especially if the United States is willing to sell its higher end weapons. And so it's all heading in the direction that Trump wants. One quick caveat. This is basically the Biden policy. Biden's argument was the United States should cooperate with China where we can and bolster up defenses and allies where else? So they're coming at it at different ways for sure. But there's remarkable continuity in the Biden to Trump policies.

Alex Osolov (8:51)

That was WSJ national security reporter Alex Ward. Thanks, Alex.

Alex Ward (8:55)

Yeah, thanks for having me.

Alex Osolov (8:57)

Coming up, why a Senate proposal that would raise the limit for deposit insurance is a nightmare for big bangs. That's after the break.

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Alex Osolov (9:44)

We're in the thick of earnings season with a number of companies reporting today. Here's a rundown of the latest results from some of the biggest names. Meta platforms reported record revenue in the third quarter. It brought in 50%, $51.2 billion in sales for the quarter. For a year over year growth rate of 26% ahead of analyst expectations. But its $2.7 billion in net income fell far short of analysts expectations. Google's parent company reported a 16% surge in third quarter revenue, with growth in its digital advertising and cloud computing units helping to finance robust artificial intelligence spending. And Microsoft reported revenue of $77.7 billion for its first fiscal quarter, exceeding Wall street expectations. The company's closely watched Azure cloud business grew by about 40%, topping expectations. There's a debate going on over deposit insurance, the federal backstop intended to protect bank customers deposits up to a certain amount. Right now that limit is $250,000. But a group of senators has proposed a bill that would raise it to as much as $10 million for certain accounts. An idea that has gotten support from an unlikely coalition of leaders. But for the nation's biggest banks, it's a nightmare scenario. Dylan Tokar covers regulatory policy for the Journal and is here to tell us more. Dylan, why do mid sized banks want to increase the limit?

Dylan Tokar (11:19)

This whole conversation stretches back to the regional banking crisis in 2023. Several mid sized banks had a lot of businesses that had these very large non interest bearing transaction accounts to cover payroll and operating expenses. And many of those accounts are over 250,000. When questions arose about Silicon Valley banks stability, the businesses rush to withdraw the money from those accounts before a potential collapse. And so arose this debate around coverage limit we are seeing resurface now.

Alex Osolov (12:02)

So two of the people who are engaged in this debate and pushing for raising this limit are Treasury Secretary Scott Besant and Democratic Senator Elizabeth Warren. Pretty surprising combination of people there. Why are they each pushing for this?

Dylan Tokar (12:17)

Treasury Secretary Besant is perhaps one of the more interesting unexpected supporters of this. He has been on the record saying that he is very interested in community banks and the diverse slate of banks in this country and making sure that there's a level playing field for them here vis a vis the very big mega banks. On the other hand, Elizabeth Warren, who I think views this proposal as a way to make the largest banks pay for some of the implicit too big to fail backstop they already potentially have.

Alex Osolov (12:58)

Why don't these big banks want this?

Dylan Tokar (13:00)

The cost? The big banks pay a lot more into the fund. The second reason right now, at least with the proposal, they are actually carved out from receiving this new benefit. They will still have the $250,000 deposit insurance limit on all accounts, but they won't have the $10 million on business transaction accounts. So they're going to be paying for something that doesn't potentially benefit them.

Alex Osolov (13:28)

That was WSJ reporter Dylan Tokar. Thank you Dylan.

Dylan Tokar (13:31)

Thank you.

Alex Osolov (13:32)

And that's what's news for this Wednesday afternoon. Today's show is produced by Pierre Bienname and Zoe Culkin. We're with supervising producer Jana Herron. I'm Alex Osolov for the Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

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Greg Ip (14:20)

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