Wall Street Journal 5/12/25
A near-term cut to benchmark interest rates looks less likely after a thawing in trade relations between the U.S. and China.
-- There is now a 57% chance the Federal Reserve holds rates steady through its next two meetings, CME FedWatch data shows.
-- That's up from 40% as of Friday, according to the data, which is based on futures tied to the fed-funds rate.

Bloomberg 5/7/25
Federal Reserve officials held interest rates steady for a third-straight meeting and emphasized they see a growing risk of both higher inflation and rising unemployment.
“Uncertainty about the economic outlook has increased further,” the Federal Open Market Committee said in a statement Wednesday at the conclusion of a two-day meeting in Washington. “The committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”

Bloomberg 5/7/25
The US dollar rose more than 0.4% to a session high and the Japanese yen fell close to 1% after Federal Reserve Chair Jerome Powell downplayed prospects of monetary easing.
BBDXY advanced as much as 0.43% and USD/JPY rose as much as 0.93% to a high of 143.78; both have since trimmed gains
Powell said in Q&A session that there’s no need to adjust rates “in a hurry” and the central bank doesn’t see progress on its price goals this year “if tariffs stay”

Bloomberg 5/2/25
Treasuries fell after stronger-than-expected US employment data that showed tariff uncertainty has yet to materially hit the nation’s jobs market, prompting traders to trim bets on imminent interest-rate cuts.
The yield on two-year notes rose as much as seven basis points to 3.77% after non-farm payrolls rose 177,000, above all estimates compiled by Bloomberg. Traders cut bets on the Federal Reserve’s rate reductions, pricing in around 85 basis points of total easing this year, compared to around 90 basis points before the report.

Bloomberg 5/1/25
The Bank of Japan left its benchmark rate
unchanged while pushing back the timing for when it expects to
reach its inflation target amid intensified uncertainties due to
US tariff measures.
Governor Kazuo Ueda’s board maintained the central bank’s
policy rate at 0.5% at the end of the two-day gathering,
according to a statement, as expected by all 54 economists
surveyed by Bloomberg.
The BOJ said it expects inflation to be consistent with its
2% goal around the second half of its outlook period, which was
extended by a year to include fiscal 2027. The bank halved its
economic growth projection to 0.5% for this fiscal year in a
sign of heightened caution following the US levies.

Bloomberg News 5/12/25

The US and China will temporarily lower tariffs on each other’s products, according to a joint statement released in Geneva, in a move to cool trade tensions and give the world’s two largest economies three more months to resolve their differences.

The combined 145% US levies on most Chinese imports will be reduced to 30% including the rate tied to fentanyl by May 14, while the 125% Chinese duties on US goods will drop to 10%, according to the statement and officials in a briefing Monday.

“We had a very robust and productive discussion on steps forward on fentanyl,” Treasury Secretary Scott Bessent said. “We are in agreement that neither side wants to decouple.”

The statement also said “the parties will establish a mechanism to continue discussions about economic and trade relations.”

The announcement represents a step toward de-escalating a tariff war that has led to an immediate slump in trade across the Pacific Ocean. The two countries had earlier reported “substantial progress” in their talks, which buoyed markets and helped Chinese stocks recoup their losses since President Donald Trump’s “Liberation Day” announcement of tariffs on April 2.

Bloomberg 4/23/25
President Donald Trump said he plans to be “very nice” to China in any trade talks and that tariffs will drop if the two countries can reach a deal, a sign he may be backing down from his tough stance on Beijing amid market volatility.
“It will come down substantially but it won’t be zero,” Trump said Tuesday in Washington, following earlier comments from Treasury Secretary Scott Bessent that the standoff was unsustainable.
Foreign Ministry spokesman Guo Jiakun said “the door for talks is wide open,” at a regular press briefing in Beijing on Wednesday, reiterating that trade wars don’t have any winners. While Trump has repeatedly sought to get Xi on the phone, China wants the two sides to work out the contours of an agreement before the leaders speak.

Beijing has sent People’s Bank of China Governor Pan Gongsheng, his deputy, Xuan Changneng, and Finance Minister Lan Fo’an to Washington, which this week will host meetings of the World Bank Group and International Monetary Fund. That could create an opening for top Chinese and American officials to exchange views and open the door to trade talks.

Bloomberg 4/16/25
China’s economy showed surprising strength in early 2025 thanks to consumer subsidies and a rush of export shipments to beat tariffs, although an impasse with Donald Trump over the trade war is darkening its outlook and fueling calls for stimulus.

China’s gross domestic product grew 5.4% in the first quarter from a year ago, the government said Wednesday, more than a forecast of 5.2%. Both production and consumption indicated unexpected momentum in March, before massive US levies on Chinese goods kicked in this month.

New York Times 4/14/25
In a speech on Monday, Christopher J. Waller laid out two scenarios that may play out for Mr. Trump’s tariffs, which the Fed governor described as “one of the biggest shocks to affect the U.S. economy in many decades.” How these levies impact both inflation and growth will impact how soon the Fed can again lower interest rates.
If a recession appears to be taking shape, Mr. Waller said he would support the Fed cutting interest rates “sooner and to a greater extent” than initially expected.
The first scenario Mr. Waller laid out assumes that the average tariff imposed on U.S. imports remains around its current level of 25 percent for an extended period. The second assumes a more modest 10 percent universal tariff, as other levies are removed over time.
In both cases, Mr. Waller argued, the effects on inflation would not persist so long as expectations about future price pressures remained under control.

Bloomberg 4/16/25
Federal Reserve Chair Jerome Powell again stressed the central bank's focus on preventing potential tariff-driven price hikes from triggering a more persistent rise in inflation.
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said Wednesday in the text of a speech prepared for the Economic Club of Chicago.
Powell said policymakers would balance their dual responsibilities of fostering maximum employment and stable prices, “keeping in mind that, without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans.”
The remarks reinforce a message Powell has repeatedly emphasized, including most recently on April 4: Fed officials are in no hurry to change the central bank’s benchmark policy rate.
As they seek greater certainty about how President Donald Trump’s economic policies, especially on trade, will affect the US economy, Powell and other Fed policymakers have expressed support for holding rates steady.
“For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance,” Powell said.

Bloomberg 6/18/25
Japan, the biggest foreign holder of Treasuries, saw its holdings tick up by $3.7 billion in April, to $1.13 trillion. China, which in March slipped to become the No. 3 foreign holder, behind the UK, had $757 billion of Treasuries in April, down $8.2 billion from the previous month. Belgium, whose holdings include Chinese custodial accounts according to market analysts, went up by $8.9 billion, to $411 billion.

CNN 4/11/25

As the rest of the world received a 90-day respite, Trump escalated tariffs on China, saying the US will now charge an extra 145% on all Chinese goods that arrive in the US. In response, Beijing ratcheted up its own tariffs on American goods Friday to 125%, and the country’s leader — who Trump is urgently working to engage — warned China was “not afraid” of a prolonged trade conflict.
In private discussions hours before China announced new retaliatory tariffs, the Trump administration warned Chinese officials against such a move, according to a source familiar with the discussions.
The Chinese were also told – once again – that Chinese President Xi Jinping should request a call with US President Donald Trump.

BEIJING - Reuters 4/11/25
Chinese President Xi Jinping begins a three-nation tour of Southeast Asia next week, his first overseas trip this year, aiming to consolidate ties with some of China's closest neighbours as trade tension escalates with the United States.

Xi will visit Vietnam from April 14 to 15, and Malaysia and Cambodia from April 15 to 18, state-run Xinhua news agency said on Friday, after the Chinese president pledged this week to deepen "all-round cooperation" with China's neighbours.

Bloomberg 4/10//25
President Donald Trump’s drive to enact trillions of dollars in tax cuts and raise the federal debt is on track after he and congressional leaders successfully corralled House Republican lawmakers to approve a Senate-passed budget outline.
The 216-214 vote on the budget — which outlines the parameters for the tax cut and debt ceiling increase — was delayed a day so Trump and Republican congressional leaders could assuage a dissident group of conservative spending hawks pressing for deeper cuts in safety-net programs.
The president worked the holdouts by phone and in a White House meeting. House Speaker Mike Johnson held a press conference to declare himself “committed” to coming up with at least $1.5 trillion in spending cuts. And Senate Republican leader John Thune joined the speaker to announce “a lot of” Republican senators shared the goal, though he stopped short of a commitment.
It was enough.
With the budget approved, the way is open for a follow-on package to cut taxes by up to $5.3 trillion over a decade and raise the debt ceiling by $5 trillion, in exchange for $4 billion in spending cuts. Republicans can now pass Trump’s tax-cut agenda solely on GOP votes, bypassing the need for negotiations with Democrats.

Traders Trim Bets for Fed Rate Cuts to Three by 2026
By Kristine Aquino
Bloomberg 4/9/25
Traders have promptly scaled back their expectations for Fed rate cuts by early 2026, and now see three quarter-point reductions by then. Prior to Trump’s announcement of a tariff reprieve, there were at least four such moves fully priced in, so the market is clearly taking the news as a reason to believe there’s less urgency for policymakers to act to support growth for now.

Bloomberg 4/9/25
President Donald Trump announced a 90-day pause on higher reciprocal tariffs that hit dozens of trade partners after midnight, while raising duties on China to 125%.
The president’s about-face comes roughly 13 hours after higher reciprocal duties on 56 nations and the European Union took effect, fueling market turmoil and stoking recession fears. Trump came under massive pressure from business leaders and investors to reverse course.
“I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately,” Trump posted Wednesday on social media.
Stocks surged the most since 2020 on Trump’s abrupt announcement, with the S&P 500 Index rising over 8%, with almost every company gaining, and the tech-heavy Nasdaq 100 jumping the most since 2008. Goldman Sachs Group Inc. economists rescinded their forecast for a US recession.
Countries that were hit with the higher, reciprocal duties that went into effect Wednesday will now be taxed at the earlier 10% baseline rate applied to other nations, with the exception of China, according to a White House official. Trump said that more than 75 countries had contacted his administration to negotiate on trade barriers and “have not, at my strong suggestion, retaliated in any way, shape, or form.”

Bloomberg 4/4/25
Federal Reserve Chair Jerome Powell said the economic impact of new tariffs is likely to be significantly larger than expected, and the central bank must make sure that doesn’t lead to a growing inflation problem.
“While uncertainty remains elevated, it is now becoming clear that the tariff increases will be significantly larger than expected,” Powell said Friday at the Society for Advancing Business Editing and Writing annual conference. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
Despite that view, in a question-and-answer session following his speech, Powell emphasized the central bank doesn’t need to hurry to adjust interest rates as policymakers wait for more clarity on the administration’s policies and their impact.

Bloomberg 4/4/25
Yields largely failed to react to Fed Chair Jerome Powell and stocks saw little relief from his speech. The initial read is that Powell has failed to support the market narrative of much easier monetary policy in the wake of tariffs. If anything, he seems to be trying to suggest a more hawkish reaction function.

Powell said the Trump tariff increases were larger than expected and that the same is likely to be true of the economic effects, which will include higher inflation and slower growth. If there are any equity traders who are hoping for a Fed put, they’re going to have to keep hoping.

Faster inflation with slower growth is any central banker’s least favorite cocktail, and faced with that combination, the Fed seems likely to be cautious. Powell said it was well-positioned to wait. However, the Fed would respond to a persistent inflation problem.

Bloomberg 4/15/25
The RBA flagged that a move may come as soon as next month. By the May 19-20 meeting, the board will have
additional data on the labor market, inflation, household spending, a fresh set of staff forecasts as well as “further
information about the likely evolution of global trade policies,” the minutes showed. “Collectively, this information
would have a considerable bearing” on the decision, it said.

Bloomberg 4/3/25
Stocks were pummeled on Thursday, with the S&P 500 losing over 4.5% as the White House made clear that tariffs are here to stay. Meanwhile, volatility-targeting portfolios have another $15 billion to $20 billion of equity exposure to sell over the next few days, according to JPMorgan. The dollar fell along with precious metals. Crude futures tanked. OPEC+ unexpectedly increased oil supply by three times the planned amount in May to punish members who have been producing excess oil, particularly Kazakhstan and Iraq. The surprise move is seen as a deliberate effort to drive down prices. Treasuries rose, with the two-year yield dropping 15 bps as traders sought haven trades to escape the tariff aftermath. Elsewhere, Bitcoin fell over 4%. The next focus point will be Friday’s jobs report.

Wall Street Journal 4/17/25
The European Central Bank cut interest rates to offset the economic blow of tariffs, drawing the attention of President Trump, who urged the Federal Reserve to follow suit.
The ECB on Thursday lowered its key interest rate to 2.25% from 2.5%, its seventh cut in eight meetings, taking borrowing costs to their lowest level since early 2023. U.S. tariffs are expected to erode already-weak economic growth in the bloc, where struggling auto, luxury goods and high-end food and beverage companies are reliant on exports to America.

BBG 3/19/25
Ueda suggested the BOJ won’t necessarily wait much longer to
determine the impact from US trade policies before proceeding
with its next rate hike. He said the BOJ may be able to discern
how uncertainties on trade policies could affect its outlook in
early April by watching data such as sentiment gauges.
* This implies the BOJ could be in a position to build a case
that it’s safe to lift rates again as soon as its April 30-May 1
meeting.
* All in all, Ueda appeared to less worried about US factors
than he was in September, when the BOJ paused rate hikes due to
downside risks it saw in the US economy.

Bloomberg 3/19/25
Federal Reserve officials held their benchmark interest rate steady for a second straight meeting, though they telegraphed expectations for slower economic growth and higher inflation.
The Federal Open Market Committee voted on Wednesday to keep the benchmark federal funds rate in a range of 4.25%-4.5%, and said it would further slow the pace at which it is reducing its balance sheet. Governor Christopher Waller, who supported holding rates steady, dissented from the decision over the balance sheet move.
In their fresh economic forecasts, officials raised the median estimate for so-called core inflation, which strips out volatile food and energy prices, at the end of this year to 2.8% from 2.5%. Their outlook for 2025 economic growth cooled to 1.7% from 2.1%.
They raised their estimate for unemployment to 4.4% by the end of this year, from the 4.3% they saw in December.

FOMC Press conference 3/19/25

Powell
Inflation is running around 2.5% for some time I do think with the arrival of the tariff inflation, further progress may be delayed. The SEP doesn't really show further downward progress of inflation and that's due to the tariffs coming in. So delayed but if you look at the forecast we do see ourselves getting back into the low 2s in 26 and down to 2 by '27. Of course highly uncertain. So I see progress having been made toward that and progress in the future. I think that progress is probably delayed for the time being.


>> QUESTION: If that's the case why are there cuts in the SEP for 2025? >> Again, people wrote down two cuts last time. And they look -- they wrote down -- you know meaningful decline in growth from 2.1 to 1.7 in 2025. A particular up in the unemployment rate so not much there. And so those two balance each other out. So people -- not everybody but on balance people wrote down similar numbers. The changes E aren't that big. Other factor as I mentioned is really high uncertainty. What would you write down? It's really hard to know how this is going to work out. And again, we think our poll is in a good place. We think it's a good place where we can move in the direction where we need to. But in the meantime it's really appropriate to wait for further clarity. And of course you know the cost of doing that given that the economy is still solid, are very low.

QUESTION: Ask standing here today would you surprised to pivot back toward rate cuts in May?
I think we are not going to be in any hurry to move. As I mentioned I think we are well positioned to wait for further clarity. Not in any hurry

AFP 4/17/25
The European Central Bank cut interest rates again Thursday amid fears that US President Donald Trump's stop-start tariff announcements could threaten growth across the eurozone.
ECB policymakers decided to lower the benchmark deposit rate by a quarter point for the sixth time in a row, leaving it at 2.25 percent.