In an interesting alignment of timing, we had Central Bankers at the Fed, the bank of Canada and also the ECB who will turn up today talk about their latest monetary decisions. And whilst it is expected the ECB will cut again, and in Canada they cut rates and announced the end of QT, the FED is firmly on pause for maybe an extended period.
But certainly, the implication how President Donald Trump’s policies — in areas such as immigration, tariffs, fiscal policy and regulation — was the spectre at the feast.
As RBC Economists wrote “The U.S. Federal Reserve says “thank you for calling, please hold” as it keeps policy rates unchanged and makes almost no adjustments to its recent narrative that inflation and the labour market are back to appropriate levels. Unlike the Bank of Canada’s rate cut just mere hours earlier, which was almost uniquely focused on trade conflicts, the U.S. central bank seemed to almost go out of its way to avoid mentioning any potential (however probable) policy changes from Washington D.C.
The Fed’s emphasis is instead that starting places matter and the U.S. economy is in “a really good place”. Federal Reserve Chair Jerome Powell made clear on Wednesday the US central bank intends to hold interest rates in a range of 4.25%-4.5% for the foreseeable future.
Over in Europe. The ECB will announce its decision at 2:15 p.m. in Frankfurt. ECB policymakers are balancing warnings that greater global trade stress could damp exports against lingering fears over services prices still rising at twice the 2% goal.
All up, the zone of uncertainty has expanded, making it more likely Central Bankers will make policy missteps. And whilst the US economy still seems in fine fettle, despite sticky inflation, other countries including Canada, the UK, the Eurozone, China and even Australia are facing into the teeth of a gale. Things could get very interesting….
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