Fed: Cautious Policy Due To Uncertainty

March 19, 2025 7:26 PM UTC

The Fed do not appear to be in a hurry to cut interest rates, both as economic momentum remains reasonable and as the Fed waits to see how Trump administration policy feedthrough – especially tariffs to inflation. This suggests that the Fed will need to see a weaker economy and we pencil in one 25

U.S. Fed's Powell - Waiting for greater clarity

March 19, 2025 6:48 PM UTC

Fed's Powell is in no rush to change policy, and downplayed a technical reduction in QT.

FOMC leaves rates unchanged, dots unchanged but skew more hawkish

March 19, 2025 6:24 PM UTC

The FOMC has left rates unchanged at 4.25-4.5% as expected.  The median dots are unchanged but economic activity forecasts are weaker and the inflation forecast for 2025 is significantly stronger showing concern over the impact of tariffs. The statement notes increased uncertainty and announced a s

Uncertainty Over Pace and Scale of Extra European Defense Spending

March 18, 2025 9:05 AM UTC

·       The crucial date for more clarity is the June 24-26 NATO summit.  Donald Trump might attend but will ask for more spending.  NATO head Rutte’s desire is for above 3% of GDP for NATO countries, but the politics and budget suggest that a 2.5% minimum may only be agreed with Germany

Preview: Due March 28 - U.S. February Personal Income and Spending - Core PCE Prices to outperform Core CPI

March 17, 2025 4:15 PM UTC

We expect a 0.3% rise in February’s core PCE price index, ahead of a 0.2% core CPI to partially offset a January underperformance when core PCE prices rose by 0.3% while core CPI surged by 0.5%. We also expect a subdued 0.1% rise in personal income to follow a strong 0.9% increase in January but p

U.S. February Retail Sales - Q1 looking subdued, but reasons unclear

March 17, 2025 12:58 PM UTC

February retail sales with a gain of 0.2% overall is unimpressive, particularly with January revised down to -1.2% from -0.9% while gains of 0.3% ex auto and 0.5% ex auto and gas fail to reverse respective January decline of 0.6% and 0.8%. However the control group, which contributes to GDP, with a

Preview: Due March 17 - U.S. February Retail Sales - Only a partial reversal of January's drop

March 14, 2025 12:58 PM UTC

We expect US retail sales to rise by 0.5% in February in what would be only a partial reversal of a 0.9% decline in January. Ex autos we expect a 0.3% increase after a 0.4% January decline while ex autos and gasoline we expect a 0.4% increase after a 0.5% January decline.

Trump’s Policies and U.S. Equities

March 13, 2025 8:35 AM UTC

Models would suggest that the current and prospective direct tariff impact should slow GDP growth to a 1.5% pace, which should see slow Fed easing in 2025 given the boost to inflation. However, the policy uncertainty means that business and consumer behaviour could see a large adverse hit that keeps

FOMC Preview for March 19: No change and few clear signals given exceptional uncertainty

March 12, 2025 6:46 PM UTC

In the current exceptionally uncertain environment, the FOMC looks set to keep rates unchanged at 4.25-4.5% at its March 19 meeting, and give little away on future policy. The dots will be closely watched but we expect they will change little from January 29. Powell is likely to stress at the press

U.S. February CPI - Renewed progress, but threatened by tariffs

March 12, 2025 12:58 PM UTC

February CPI is softer than expected with gains of 0.2% both overall and ex food and energy, with the ex food and energy rate up by 0.227% before rounding. Coming after a strong January conclusions should be cautious, while upcoming months may be lifted by tariffs. However, the data will come as a r

Preview: Due March 12 - U.S. February CPI - Not as firm as January, but upside risks persist

March 11, 2025 12:10 PM UTC

We expect February’s CPI to increase by 0.3% both overall and ex food and energy, with the gains before rounding being 0.29% overall and 0.32% ex food and energy. The gains will be less strong than in January but a tendency for early year data to be strong is likely to persist. Tariffs on China wi

China: PBOC Slow Cuts with 5% Nominal GDP

March 11, 2025 8:45 AM UTC

•    The PBOC will likely cut slowly and gradually, as China seeks to avoid Yuan depreciation that could worsen the trade war with the U.S.  Additionally, MOF last week forecast nominal GDP of 5%, which with a real GDP target of 5% means that MOF is also forecasting zero inflation.  Close to

Trump and Dollar Policies

March 10, 2025 6:04 AM UTC

   The Trump administration could decide to more broadly talk the USD down or less likely try to reach a cooperative Mar A Lago accord with big DM and EM countries. A more cohesive alternative is a forced currency deal for countries to appreciate their currencies to avoid more tariffs and withdraw

U.S. Fed's Powell - Well positioned to wait for greater clarity

March 7, 2025 6:10 PM UTC

Currently the tone of data and policy uncertainty justifies steady Fed policy.

Preview: Due March 17 - U.S. February Retail Sales - Only a partial reversal of January's drop

March 7, 2025 2:53 PM UTC

We expect US retail sales to rise by 0.5% in February in what would be only a partial reversal of a 0.9% decline in January. Ex autos we expect a 0.3% increase after a 0.4% January decline while ex autos and gasoline we expect a 0.4% increase after a 0.5% January decline.

U.S. February Employment - Detail mostly on weak side of trend

March 7, 2025 1:54 PM UTC

February’s non-farm payroll with a 131k increase in not far from consensus with near neutral back revisions, but does suggest momentum is slowing in Q1, though probably in part on weather. Other detail is on the soft side, with average hourly earnings up 0.3% with net negative revisions, and the w

Preview: Due March 7 - U.S. February Employment (Non-Farm Payrolls) - Stronger than January, but slower than November and December

March 6, 2025 3:00 PM UTC

We expect a 210k increase in February’s non-farm payroll, with 190k in the private sector, slightly stronger than in January but slower than in November and December. We expect unemployment to remain at 4.0% and a 0.3% rise in average hourly earnings, following an above trend 0.5% in January.

U.S. Fed Beige Book Summary - Slowing growth, some uptick in prices

March 5, 2025 7:16 PM UTC

The latest Fed Beige Book looks a little slower on activity but slightly stronger on prices, though wage pressures slowed. 

Trump Latest Thinking

March 5, 2025 11:07 AM UTC

Bottom line: President Donald Trump signaled that he is committed to tariffs to raise revenue; bring production back to the U.S. and get fairer trade relations.  This three part approach will likely shape implementation of further product and reciprocal tariffs from April.  However, reports sugges

U.S. Fed's Williams - Beginning to factor in tariff impact on prices

March 4, 2025 7:45 PM UTC

Fed's Williams' tone is cautious but he expect tariffs to have a high pass-through to consumers.

Preview: Due March 12 - U.S. February CPI - Not as firm as January, but upside risks persist

March 4, 2025 5:38 PM UTC

We expect February’s CPI to increase by 0.3% both overall and ex food and energy, with the gains before rounding being 0.29% overall and 0.32% ex food and energy. The gains will be less strong than in January but a tendency for early year data to be strong is likely to persist. Tariffs on China wi

Trump Tariffs: Bad for The U.S. Worse For Canada

March 4, 2025 3:48 PM UTC

When Trump announced 25% tariffs on Canada and Mexico in February, we put up a piece outlining the likely economic consequences, which became dated by the end of the day as Mexico and Canada won a one month delay in return for some concessions at the border. We are now recycling that story, with som

Trump Tariffs and U.S. Business and Consumer Sentiment

March 3, 2025 9:02 AM UTC

 •    Mexico and Canada are trying to frantically find solutions to delay across the board tariffs again, though the U.S. is hinting that the rate could be less than 25%.  China extra 10% tariff remains likely, as the U.S. increases trade pressure on China.  More tariffs also remain highly

U.S. January Core PCE Prices as expected, special factors bring some surprises elsewhere

February 28, 2025 2:07 PM UTC

January’s PCE price data, up 0.3% both overall and core (0.325% and 0.285% respectively before rounding) is in line with expectations, but significantly less alarming than the respective CPI gains of 0.5% and 0.4%. There were some surprises elsewhere, with income sharply ahead of spending and a ma

China: How Much U.S. Trade and Taiwan Pressure?

February 28, 2025 9:05 AM UTC

·       Trump eventually wants a trade deal with China and this could occur by the end of 2025, but the U.S. will ask for penalties if targets for U.S. imports to China are not met and this will lead to difficult negotiations. Reciprocal and product specific tariffs on China are also likely i

Continuum Economics Calendar March 2025

February 27, 2025 9:52 AM UTC

Data and Events Calendar March 2025.

U.S. Budget Proposal Shows Fiscal Policy Scope is Limited

February 26, 2025 6:55 PM UTC

While there is still a long way to go before legislation is passed, passage of a budget proposal in the House makes the fiscal policy outlook look clearer, and reduces negative risks such as a government shutdown or a debt default. The package is will probably be a mild negative for economic growth,

Equities: Growth, Rates and Tariffs

February 26, 2025 8:30 AM UTC

·        EZ equities still have further scope to outperform U.S. equities in the remainder of 2025 helped by further ECB easing/hopes of a Ukraine peace deal and U.S. equity market overvaluation restraining the U.S.  However, this can be volatile with uncertainty over the scale of U.S. tari

China: More U.S. Tariffs, No Yuan Depreciation?

February 25, 2025 9:30 AM UTC

•    China is currently reluctant to see Yuan depreciation as it wants to get the U.S. to the negotiating table for a revised phase 1 trade deal and also over concerns about domestic capital outflows.  Cuts to the 7-day reverse repo rate are now likely to be in 10bps steps and we look for the

Ukraine Peace, U.S. Troop Withdrawals and Trump NATO Threats

February 24, 2025 8:27 AM UTC

·       Our baseline remains of a Russia-friendly peace deal in Ukraine, but this need not lead to a weaker European security situation.  This is our baseline (Figure 1), but does require Europe to make concessions to the Trump administration on defence spending increases and trade. However,

Preview: Due March 7 - U.S. February Employment (Non-Farm Payrolls) - Stronger than January, but slower than November and December

February 20, 2025 7:02 PM UTC

We expect a 210k increase in February’s non-farm payroll, with 190k in the private sector, slightly stronger than in January but slower than in November and December. We expect unemployment to remain at 4.0% and a 0.3% rise in average hourly earnings, following an above trend 0.5% in January.

Bunds and ECB Easing/Trump Tariffs

February 20, 2025 8:03 AM UTC

          It is highly likely in April that the U.S. will announce a 25% tariff on EU cars and pharmaceuticals (here) and also reciprocal tariffs against the EU. The majority could be implemented given Trump’s desire to raise revenue/dislike of the EU as well as negotiate trade deals. This

U.S. Fed's Bostic - Doesn't expect inflation progress to be a straight line

February 19, 2025 8:36 PM UTC

Fed's Bostic's moderate tone is consistent with that of the recent minutes.

FOMC Minutes from January 29 - No rush to ease, but not hawkish

February 19, 2025 7:59 PM UTC

FOMC minutes from January 29 showed agreement to hold policy steady, and that further progress was needed before additional policy adjustments were made. High uncertainty was seen as making a careful approach appropriate, but the minutes contained few shocks, in a market that appeared to be braced f

U.S. 25% Tariff for Cars, Pharma and Semiconductors?

February 19, 2025 1:40 PM UTC

·        Tariff reality in the spring and summer will likely be both tariff threats to negotiate trade deals and permanently higher tariffs in certain products and reciprocally to raise revenue for the U.S. government – along Peter Navarro guidance to Trump.  The macro effects of this cou

U.S. Fed's Daly - Stay restrictive until inflation declines

February 18, 2025 4:08 PM UTC

Fed's Daly's tone is consistent with most recent Fed speakers, but perhaps too optimistic.

U.S. Treasuries and the Trump Effect

February 18, 2025 1:20 PM UTC

If the Fed convince the market that it is leaving the door open to easing and sees Fed Funds reduction multi-year, then 2yr could hold onto a small discount in the next two quarters and then swing to a small premium of 2yr to Fed Funds (Figure 1).  10yr yields will likely maintain a small to modest

Reciprocal Tariffs and Reducing Bilateral Trade Imbalances

February 17, 2025 10:28 AM UTC

·       President Trump’s executive order on reciprocal tariffs has not produced much market reaction, both as the proposals will not be delivered to the president until April 1 and the process of Commerce/U.S. Treasury and Homeland Security input is seen reducing the odds of penal tariffs.

U.S. Fed's Logan - Wants caution on rates

February 14, 2025 8:06 PM UTC

Fed's Logan continues to sound quite hawkish, particularly after the strong CPI.

Preview: Due February 28 - U.S. January Personal Income and Spending - Core PCE Prices to underperform Core CPI

February 14, 2025 4:33 PM UTC

We expect a 0.3% rise in January’s core PCE price index, slower than the 0.4% seen from core CPI, while we expect a modest 0.3% rise in personal income to outpace an unusual 0.1% decline in personal spending.

U.S. January Retail Sales - Slippage likely to be weather-induced

February 14, 2025 1:57 PM UTC

January retail sales at -0.9% saw a significant downside surprise, though we believe the main reason for weakness was bad weather, with a correction from strength in Q4 also likely to be a factor. The core rates were also weak, ex auto at -0.4%, ex auto and gas at -0.5%, and the control group that c

Preview: Due February 14 - U.S. January Retail Sales - Weather to bring correction from Q4 strength

February 13, 2025 2:33 PM UTC

We expect US retail sales to fall by 1.0% in January with declines of 0.2% both ex autos and ex autos and gasoline. The monthly weakness is likely to be largely due to bad weather with potential for a correction from Q4 strength adding to downside risk.

Revised FOMC view: One 25 bps easing in late 2025, two 25bps easings in 2026

February 13, 2025 12:46 PM UTC

Strength in January CPI does in part reflect residual seasonality, but continued stalling of progress in yr/yr growth is of concern. This revives concerns that the economy may need to slow to return inflation to the 2.0% target, something tariffs are likely to make more difficult. Uncertainty is exc