Daily update
Daily update
- US President Trump is proposing new tariffs—an additional 10% for US consumers of goods from most major economies. Someone in the administration seems to be aware that tariffing high frequency purchases aggravates inflation perceptions and the affordability crisis, and some key food items are exempted.
- The now-unlawful tariffs were passed to consumers, but (generally speaking) their reversal did not reverse the earlier consumer price increases. This resulted in profit margin expansion. Those profits could be used to absorb any new tariffs if the new tariffs are applied to the same products as the unlawful tariffs. However, consumers may still blame tariffs for any price increase, whatever the cause.
- The ECB reports gold holdings now exceed US dollar holdings in official reserves. It is mainly due to the soaring price of gold last year, and gold is a dollar asset. The dollar’s market share in reserves has been slowly eroded, and the use of Gulf economies’ reserves to rearm and rebuild may reduce its role in the future.
- Federal Reserve Chair Warsh is signaling a desire to reduce or end forward guidance. Ending the fabled dot plots would be welcome (they create a fantasy of precision and absolute certainty). Abandoning more carefully nuanced forward guidance risks increasing market volatility.