Market speculators held their breath for the latest inflation data, betting on a “soft” reading that would pave the way for a long-awaited rate cut. With stocks at record highs, their hopes were clearly pinned on a favorable outcome. While the headline CPI number was lower than expected, the Fed’s preferred measure of core inflation, which excludes food and energy, continues to creep higher. This suggests that prices for most goods and services are still on the rise. Meanwhile, a chorus of voices, including political appointees, are urging the Fed to cut rates.
Tariffs
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Powell in No Hurry to Cut Rates
You have to feel for Jay Powell. He’s in a tough spot – facing pressure from the market and the President to cut rates. However, to his credit – he can separate the noise from the signal. The Fed Chairman reiterated his narrative – signaling the need for a more cautious stance amid ongoing economic uncertainty. In addition, he emphasized the Fed needs to maintain credibility and independence. However, there was some dissent within the ranks…
15%+ Tariffs Are Not Reason to Cheer
The market is cheering the “better than feared” trade deals with the likes of Europe and Japan. Yes, 15% is better than 30%. But 30% would be an embargo – not a tariff. 15% will not be good for global trade. Growth will slow; consumption will fall; resulting in fewer jobs. Trump’s terrible tariffs will be at least ~12% more than what we had at the beginning of the year. This consumption tax will need to be paid by someone… just a question of who. The market is not pricing this in….