I mean, nobody knows what I’m going to do

Daily update

The US Federal Reserve did as expected yesterday—nothing. The Fed’s dilemma can be summed up by a comment from US President Trump (in a different context) “I mean, nobody knows what I’m going to do”. The uncertainty about trade taxes, fiscal policy, and the reactions of US companies and consumers means (as Fed Chair Powell noted) there can be very little certainty about the future path of interest rates.
The Bank of England meets today, and again economic forecasters are unanimous in their expectations of unchanged rates. The Bank does at least offer the entertainment of divergent opinions, as disagreement is embedded into the culture of UK rate setting. Underlying disinflation forces support the idea of a steady but moderately slow series of interest rate cuts in the future.
Assorted ECB speakers crowd the agenda, but there is likely to be little to animate economists. Comments on reactions to the modestly higher oil price may be of some interest.
The Middle East situation is likely to add to market uncertainty, with signs that the US may be preparing to strike against Iran. While there are clear humanitarian consequences from escalating military action, in the absence of meaningful disruption to oil supplies (or perhaps shipping), the economic consequences are limited.