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Most will probably agree that US President Donald Trump\u2019s back-and-forth on tariffs is challenging to keep track of, and the uncertainty is impacting risk assets. Last Tuesday, the US administration imposed levies on three of America\u2019s largest trading partners: Canada, Mexico, and China, only to see some goods exempted the following day (for one month), with additional items added to the exempted list on Thursday of the same week. During an interview with Fox News on Sunday, uncertainty mounted when Trump sidestepped whether he was expecting a recession this year, stating \u2018he hates to predict things like that\u2019 and adding that there would be a \u2018period of transition\u2019.<\/p>\n
As a result of tariffs enforced in February, this week\u2019s CPI inflation release could be a turning point. Although tariffs did not take effect in February (except for China), given the 30-day reprieve, businesses have been preparing to bear tariffs by raising prices. Both the ISM (Institute for Supply Management) manufacturing and services PMIs (Purchasing Managers\u2019 Indexes) showed that the prices paid sub-indexes pushed higher. While the ISM manufacturing index dropped to 50.3 from January\u2019s reading of 50.9 \u2013 along with the employment and new orders indexes dipping into contractionary territory to 47.6 and 48.6, respectively \u2013 the prices paid index surged to the upside, coming in at 62.4 from 54.9 in January.<\/p>\n
If this week\u2019s report indicates rising price pressures, I believe this presents a noteworthy upside risk to inflation, potentially influencing rate pricing, which may result in a bid in US Treasury yields and the US dollar (USD).<\/p>\n
Should data report as expected, although this would mark signs of cooling inflation, it provides the US Federal Reserve (Fed) with little incentive to begin easing policy at this juncture given the current uncertainty ahead.<\/p>\n
According to market pricing, this month\u2019s meeting (19 March) will unlikely see any rate adjustment; investors currently have their eye on June\u2019s meeting for the next 25 basis point (bp) cut (-34 bps). As a note, Fed speak will be limited until the next meeting as the central bank limits the extent to which Fed officials speak publicly \u2013 known as the \u2018blackout period\u2019.<\/p>\n
Nevertheless, Fed Chairman Jerome Powell made the headlines on Friday. Speaking at the University of Chicago Booth School of Business Monetary Policy Forum in New York, Powell reiterated that the Fed is not in a rush to cut rates, commenting: \u2018Our current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate\u2019.<\/p>\n<\/div>\n
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[ad_1] Most will probably agree that US President Donald Trump\u2019s back-and-forth on tariffs is challenging to keep track of, and the uncertainty is impacting risk assets. Last Tuesday, the US administration imposed levies on three of America\u2019s largest trading partners: Canada, Mexico, and China, only to see some goods exempted the following day (for one month), with additional items added to the exempted list on Thursday of the same week. During an interview with Fox News on Sunday, uncertainty mounted when Trump sidestepped whether he was expecting a recession this year, stating \u2018he hates to predict things like that\u2019 and adding that there would be a \u2018period of transition\u2019. As a result of tariffs enforced in February, this week\u2019s CPI inflation release could be a turning point. Although tariffs did not take effect in February (except for China), given the 30-day reprieve, businesses have been preparing to bear tariffs by raising prices. Both the ISM (Institute for Supply Management) manufacturing and services PMIs (Purchasing Managers\u2019 Indexes) showed that the prices paid sub-indexes pushed higher. While the ISM manufacturing index dropped to 50.3 from January\u2019s reading of 50.9 \u2013 along with the employment and new orders indexes dipping into contractionary territory to 47.6 and 48.6, respectively \u2013 the prices paid index surged to the upside, coming in at 62.4 from 54.9 in January. If this week\u2019s report indicates rising price pressures, I believe this presents a noteworthy upside risk to inflation, potentially influencing rate pricing, which may result in a bid in US Treasury yields and the US dollar (USD). Fed Unlikely to Move Based on February\u2019s CPI Print Should data report as expected, although this would mark signs of cooling inflation, it provides the US Federal Reserve (Fed) with little incentive to begin easing policy at this juncture given the current uncertainty ahead. According to market pricing, this month\u2019s meeting (19 March) will unlikely see any rate adjustment; investors currently have their eye on June\u2019s meeting for the next 25 basis point (bp) cut (-34 bps). As a note, Fed speak will be limited until the next meeting as the central bank limits the extent to which Fed officials speak publicly \u2013 known as the \u2018blackout period\u2019. Nevertheless, Fed Chairman Jerome Powell made the headlines on Friday. Speaking at the University of Chicago Booth School of Business Monetary Policy Forum in New York, Powell reiterated that the Fed is not in a rush to cut rates, commenting: \u2018Our current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate\u2019. [ad_2]<\/p>\n","protected":false},"author":1,"featured_media":38305,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[45],"tags":[],"class_list":["post-38304","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financas"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t