Masterful inactivity

Daily update

The Federal Reserve meeting minutes were a masterclass in the art of sitting on a fence. US President Trump’s trade tax inflation might be a one-off, or it might persist. The labor market may be weak enough to justify rate cuts, or not. Uncertainty over trade tax levels is a problem, but the real issue is the lack of clarity about the severity of second-round effects (e.g. profit-led inflation). Masterful inactivity seems the default policy option.
Most of Trump’s tax announcements yesterday were political theater—impressive sounding tariff rates on countries that are not major trading partners. The threat of a 50% tax on US consumers of Brazilian products is possibly more serious—Brazil does export food to the US, so a 1 August tax hike would raise these prices relatively quickly (given limited inventory). As a high frequency purchase, tariff-induced food inflation would be more visible to US consumers.
Germany offers final June consumer price inflation data, and some smaller European economies also produce their numbers. This is not likely to excite market attention as investors seem comfortable with disinflationary tendencies.
US initial and continuing jobless claims data are due. The continuing claims numbers have been consistent with firms being increasingly reluctant to hire workers.