Uncertainty

Daily update

The key message from yesterday’s pontification of Federal Reserve speakers was “uncertainty”. Uncertainty about policy, uncertainty about how companies and consumers would react to that uncertainty, uncertainty about second-round effects from tariffs, and so on. The result is a wait-and-see approach from the Fed. The risk is that a reactive policy may come too late to correct any economic damage from all the uncertainty.
There are more Fed speakers today, but no reason to suppose the focus will shift. There is little economic data of note, with the Philly Fed non-manufacturing sentiment poll likely to be as subject to partisan bias, as all the other sentiment indicators.
The UK and the EU seem to be playing nicely for a change, with a “reset” agreement yesterday. This included defence cooperation and chipping away at some of the unnecessary barriers to trade. The result is likely to be a modest positive for growth in both economies.
US President Trump appeared to retreat from a position as mediator in the war in Ukraine, but suggested the two sides would start talking at once. Russian President Putin seemed less enthusiastic to talk. While a comprehensive peace would have economic consequences (via reconstruction), the global economic implications of moving towards a ceasefire are likely to be very limited.