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Ongoing tariff threats from Washington and potentially sweeping government job cuts have darkened consumers’ mood and may be weighing on an otherwise mostly healthy economy. Data released Wednesday showed that consumers slashed their spending by the most since February 2021, even as their incomes rose. On a positive note, inflation cooled, but President Donald Trump’s threats to impose large import taxes on Canada, Mexico, and China -- the United States’ top trading partners -- will likely push prices higher, economists say.

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Interest rates have fallen to their lowest level of the year as more investors believe Trump's tariff plans will hurt the US economy.

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(Bloomberg) -- The world’s oil traders descended on London this week, and in the bars and hotels of the city’s Mayfair district they were getting re-accustomed to checking their phones for what Donald Trump might say next. Most Read from BloombergCuts to Section 8 Housing Assistance Loom Amid HUD UncertaintyThe Trump Administration Takes Aim at Transportation ResearchShelters Await Billions in Federal Money for Homelessness ProvidersNYC Office Buildings See Resurgence as Investors Pile Into Bond

NEW YORK (Reuters) -Federal Reserve Bank of Cleveland President Beth Hammack reckons the U.S. central bank can keep steadily shrinking its balance sheet through a period of uncertain government finances, while noting she is disinclined to support an interest rate hike even if inflation pressures do not retreat quickly enough. Hammack said her "baseline preference" is that the Fed presses forward with the balance sheet drawdown commonly referred to as quantitative tightening, or QT, while the government sorts out its spending plans and adjusts the debt ceiling to facilitate its borrowing needs. Once that is resolved, the Fed can use temporary bond repurchases, or repos, if needed, "to put more (liquidity) back in the system until you figure out" the market's needs, Hammack said in an interview with Reuters on Thursday.

The stakes are high for the monthly U.S. jobs report in the coming week, as investors gauge whether a string of worrisome data is signaling significant concern about the economy. The benchmark S&P 500 stock index has pulled back 4% from its all-time high reached earlier this month, while falling Treasury yields and a slide in bitcoin are also indicating increasing investor wariness. The Trump administration's dramatic moves on trade and other policies have injected uncertainty for consumers and businesses.