CNBC Daily Open: Washington family divided over interest rates

Hello, my name is Hui Jie from Singapore. Welcome to another edition of CNBC’s Daily Open.

Abraham Lincoln warned that “houses at odds cannot be divided.” When it comes to interest rates, opinions are certainly divided in Washington.

Federal Reserve Chairman Kevin Warsh has indicated that raising interest rates could be on the table. Governor Christopher Waller said interest rates could remain unchanged if inflation continues to slow. Vice President J.D. Vance wants to lower it.

Given this situation, the market is in speculation mode as to which option the Fed will select later this month.

U.S. markets rallied on Thursday after Waller signaled he would support keeping interest rates on hold if inflation data came out as expected.

Although the S&P 500 Index posted a streak of gains, the benchmark 10-year Treasury yield fell to 4.77%. On Wednesday, yields hit their highest level since November 2023.

The probability that the Fed will raise interest rates at its September meeting fell to 50.2% from 63.2% on Wednesday, according to the CME FedWatch tool.

In an interview with Reuters, Waller expressed confidence in current inflation trends, saying the impact of tariffs and rising energy prices have not really affected the economy.

He said that while inflation is “well above” the Fed’s 2% target, recent trends “suggest that we are finally starting to see signs of disinflation.”

Vice President J.D. Vance went further, urging the Fed to lower interest rates to make housing more affordable.

“We believe the Fed should lower interest rates,” he said, calling it an “appropriate and responsible” response to recent U.S. inflation data and reinforcing President Donald Trump’s calls.

All of this is in stark contrast to Fed Chairman Kevin Warsh, who last week at a Jackson Hole symposium suggested raising interest rates to combat persistently high inflation.

Carney fights back

Away from the market, the U.S.-Canada trade dispute has restarted, with Canadian Prime Minister Mark Carney responding to U.S. Commerce Secretary Howard Lutnick’s claims that Ottawa halted trade talks with the U.S. for political purposes.

“With all due respect, I do not believe that an appointed, non-elected minister in the United States is an expert on Canadian politics,” Carney said, adding that the administration will always advocate for Canada’s best interests.

But the prime minister insisted a deal that benefits both Canada and the United States is possible. “When the U.S. side is ready, we are ready to sit down and conclude a deal,” he said.

lululemon stock tank

Influencers on social media may be promoting Lululemon’s products, but it appears it wasn’t enough to save the company from disappointing quarter results. The company’s stock price fell 15% after the company lowered its outlook for this year.

Interim CEO Megan Frank said on a conference call with analysts that the company experienced “negative comments” on social media that impacted its second-quarter results.

Lululemon also experienced a “bigger than expected” slowdown in some of its core categories, such as leggings.

And finally…

Microsoft imposes time limits on Xbox cloud gaming subscribers as costs continue to rise

Microsoft’s Xbox division announced Thursday that the company will impose monthly cloud gaming time limits on Game Pass subscribers, who have had unlimited access for years, as the company aims to find a better balance between usage and cost.

Players will be able to pay for additional time above the cap that takes effect in November.

Users with the high-end Game Pass Ultimate subscription, which costs $22.99 per month, will have access to 15 hours of cloud gaming.

According to the blog post, Game Pass Premium account holders who pay $14.99 per month get 10 hours of cloud-based playtime, while Game Pass Essential, which costs $9.99 per month, includes five hours.

— Jordan Novett