Daily update
Daily update
- A unanimous 92 out of 92 surveyed economists expect no change in US interest rates today. That many economists could never be wrong. An insurance rate cut may be necessary, to keep fear of unemployment low and allow US consumers to continue cutting savings rates to pay for tariffs. An insurance cut is not urgent, however.
- The press conference is likely to focus on independence. Will Powell stay on as governor after May? What happens if US President Trump’s court case against the Fed continues (senators indicated that Trump’s nominee for Fed chair would not advance)? The FOMC chair is decided by the FOMC. Powell might conceivably chair the FOMC beyond May.
- If the Fed took Trump’s social media posts seriously, there would be some uncertainty about inflation from future potential tariffs. It seems unlikely the Fed will focus on this, however.
- Trump’s comments suggesting support for the US dollar’s slide have limited inflation implications. Companies price to market—few chief executives change pricing strategy just because a foreign exchange dealer presses a button. Nearly all US imports are contracted in dollars. The risk of the weaker dollar is the narrative of relative US decline, with implications for capital flows. Bonds, not inflation, are most vulnerable to dollar weakness.