Fed’s Barkin: Tariffs create dual risks for inflation and jobs

    Richmond Fed President Thomas Barkin highlighted growing concerns over the economic impact of the Trump administration’s upcoming tariffs. He told CNBC that the tariffs could both stoke inflation and weigh on the labor market.

    “Call me nervous on both,” Barkin said, signaling that the path forward for monetary policy remains highly data-dependent.

    Barkin emphasized “there’s a lot of uncertainty right now, and I think that makes the case for wait and see how this plays out.”

    Fed’s Williams: Tariff impacts on inflation could linger for years

      New York Fed President John Williams cautioned that the inflationary effects of new US tariffs could be “more prolonged” than initially anticipated.

      In an interview with Yahoo Finance, Williams emphasized that while the immediate price increases are expected, the true impact of tariffs “might not be fully felt for a couple of years.”

      He stressed the importance of monitoring not just the direct price changes, but also the “indirect effects” that ripple through the broader economy over time.

      “It is still early days to be able to come to a concrete conclusion around this,” Williams said, noting that Fed will need to remain open-minded about “how long these last in terms of their effects on inflation and the economy.”

      ECB’s Panetta: Uncertainty demands caution on rate cuts

        Italian ECB Governing Council member Fabio Panetta warned that the battle against inflation “cannot yet be said to be over.” and urged caution in the timing of interest rate cuts.

        In a speech today, Panetta pointed to the heightened uncertainty stemming from “contradictory” announcements on US trade policy, suggesting that such unpredictability complicates the ECB’s path forward. As a result, the central bank must continue to monitor “all the factors that could hinder the return to the 2% target”

        Panetta emphasized the balancing act the ECB now faces. On one hand, subdued consumption and investment, driven by geopolitical tensions and weak Eurozone growth, are helping to ease inflationary pressures.

        But on the other hand, the resurgence of uncertainty—particularly around US tariffs—means the ECB must remain vigilant and not rush into policy loosening.

        ECB Lagarde: Europe must march toward economic independence amid tariff threats

          ECB President Christine Lagarde emphasized the need for Europe to assert more control over its economic future in light of looming US tariffs, set to begin on April 2.

          In a France Inter radio interview, Lagarde reframed the narrative around “Liberation Day,” saying that while the US sees it as a move toward sovereignty, Europe must seize it as an inflection point—“a march toward independence.”

          Lagarde reiterated her previous estimates that tariffs from the US could shave around 0.3% off Eurozone growth in the first year. Should Europe retaliate with reciprocal measures, the negative impact could deepen to as much as 0.5%.

          On inflation, Lagarde noted that keeping it in check remains a “constant battle.” She stressed that while some progress has been made, inflation needs to fall in a sustainable way. That, she said, requires a carefully calibrated interest rate policy.

          China’s official PMI manufacturing rises to 50.5, but labor market lags

            China’s official PMI data for March offered modest optimism, with the manufacturing index rising from 50.2 to 50.5, matching expectations and marking its highest level in a year.

            Sub-indices for production and new orders both improved to 52.6 and 51.8, respectively. However, employment index slipped to 48.2, highlighting persistent weakness in labor market conditions within the manufacturing sector.

            Non-manufacturing activity also improved slightly, with the PMI climbing from 50.4 to 50.8, beating expectations of 50.5.

            Still, employment in the non-manufacturing sector deteriorated, with the index falling to 45.8, as both the services and construction sectors shed workers.

            NZ ANZ business confidence dips to 57.5, rising inflation expectations stir doubts over RBNZ cuts

              New Zealand’s ANZ Business Confidence dipped slightly from 58.4 to 57.5 in March. Own Activity Outlook improved from 45.1 to 48.6.

              However, the data also brought a clear warning on inflationary pressures. Cost expectations surged from 71.3 to 74.1, the highest level in a year. Pricing intentions climbed from 46.2 to 51.3, marking the strongest since May 2023.

              Perhaps more importantly, one-year inflation expectations also ticked up from 2.53% to 2.63%, inching further above the RBNZ’s 2% midpoint target.

              ANZ flagged the rising inflation signals as “a little disconcerting,” cautioning that these developments could influence how enthusiastic RBNZ will be about delivering further rate cuts.

              A rate cut at the April meeting appears locked in, and a second in May is viewed as likely. However, ANZ noted that the odds of a third cut in July are now “more of a coin toss.”

              Full NZ ANZ business confidence release here.

              Japan’s industrial production beats with 2.5% mom growth in Feb

                Japan’s industrial production rose 2.5% mom in February, beating market expectations of 1.9% mom gain. The strong growth was driven by key tech-related sectors, with chipmaking machinery output jumping 8.2% and electronic parts and devices surging 10.1%.

                A survey by Ministry of Economy, Trade and Industry projects continued, albeit modest, gains in output of 0.6% mom in March and 0.1% mom in April.

                While the headline data is encouraging, the METI acknowledged that the outlook could quickly shift. Though no direct production impact from the proposed US tariffs has been reported yet, METI emphasized the need to monitor the situation more closely going forward.

                On the consumer side, retail sales grew just 1.4% yoy, missing expectations of a 2.4% rise.

                US core PCE accelerates to 2.8% in Feb, above expectations

                  US PCE inflation data for February came in largely in with notable surprises. Headline PCE rose 0.3% mom and held steady at 2.5% yoy, both matched expectations. However, core PCE, excluding food and energy, rose by 0.4% mom, slightly hotter than expected 0.3% mom. That pushed , pushing the annual core PCE rate up to 2.8% from 2.7%, also above forecasts.

                  On the household side, personal income surged by 0.8% mom, significantly outpacing expectations of 0.4% mom, reflecting strong wage growth and robust labor market. But personal spending only rose 0.4% mom, slightly below forecasts of 0.5% mom, hinting at a more measured pace of consumption.

                   

                  Full US personal income and outlays release here.

                  Canadian GDP grows 0.4% mom in Jan, but Feb flatline tempers momentum

                    Canada’s GDP expanded by 0.4% mom in January, outpacing expectations of a 0.3% mom gain. Growth was broad-based, with 13 of 20 sectors contributing.

                    Goods-producing industries led the charge, rising 1.1% mom, the strongest monthly gain since October 2021, as all major components saw expansion. Services-producing industries posted a more modest 0.1% mom increase.

                    However, early estimates for February point to a flat reading, suggesting a pause in momentum. Strength in manufacturing and financial services was offset by pullbacks in real estate, oil and gas, and retail trade.

                    Full Canada GDP release here.

                    Swiss KOF rises to 103.9, robust economic outlook

                      Switzerland’s KOF Economic Barometer rose to 103.9 in March, beating expectations of 102.6 and up from revised 102.6 in February. The index has remained above its medium-term average since the start of the year, reinforcing the view that the Swiss economy “remains robust”.

                      KOF noted that improvements were broad-based, with stronger signals coming from manufacturing, services, and construction. Private consumption indicators also showed improvement while foreign demand remains unchanged.

                      Full Swiss KOF release here.

                      UK retail sales rise 1% mom in Feb with broad-based gains

                        UK retail sales volumes jumped 1.0% mom in February, far surpassing market expectations for -0.3% mom decline.

                        The gain was driven by strong performances across all non-food store categories, including department stores, clothing, and household goods, suggesting consumers were more willing to spend on discretionary items. The only notable drag came from supermarkets, where sales volumes dipped slightly following a solid increase in January.

                        Looking at the broader trend, sales volumes rose 0.3% in the three months to February compared to the previous three-month period, and were up 2.0% from the same period a year earlier.

                        Full UK retail sales release here.

                        German Gfk consumer sentiment improves marginally to -24.5

                          Germany’s GfK Consumer Sentiment for April ticked up slightly from -24.6 to -24.5, falling short of expectations at -22.2.

                          According to Rolf Bürkl of the NIM, the minor improvement may reflect “lessened pessimism” following recent elections and the hope for a stable new government. However, willingness to save continues to signal significant uncertainty among German households.

                          Bürkl emphasized that “fast formation of a government and the early adoption” could play a key role in boosting consumer confidence and spending ahead.

                          Full German Gfk consumer sentiment release here.

                          Tokyo CPI core rises to 2.4%, driven by soaring food and rent prices

                            In Japan, Tokyo’s CPI core, which excludes fresh food, rose from 2.2% yoy to 2.4% yoy in March, surpassing expectations of 2.2% yoy. Even more notable was the rise in the core, core measure, which strips out both food and energy—climbing from 1.9% yoy to 2.2% yoy, signaling broader-based inflation. Headline inflation also ticked higher to 2.9% yoy from 2.8% yoy.

                            The key driver behind the spike was food prices, which surged 5.6% yoy, the fastest pace since January 2024. A standout was the massive 92.4% yoy jump in rice prices, the steepest rise since 1976.

                            Adding to the inflationary pressure was the services sector, where prices rose 0.8% yoy, up from 0.6% yoy in February. Rent prices, a key component, increased by 1.1% yoy, the sharpest rise since 1994.

                            BoJ opinions highlight tariff risks, but path to further hikes still intact

                              The Summary of Opinions from BoJ’s March monetary policy meeting revealed growing concerns over the fallout from US trade policy, particularly the risk that new tariffs could negatively impact Japan’s real economy.

                              One board member warned that downside risks from the US have “rapidly heightened”. I f tariff issues worsen, it could have a “negative impact” on Japan’s real economy. BoJ should be “particularly cautious” when considering further interest rate hikes if trade tensions escalate.

                              Other members echoed similar concerns, citing elevated uncertainty from tariff threats, global supply chain disruptions, and stiff competition from low-priced Chinese products.

                              The tone suggests policymakers are carefully monitoring how these factors affect inflation expectations, wage growth, and investment—particularly among SMEs.

                              A separate opinion suggested that as underlying CPI inflation edges closer to the 2% target, BoJ should prepare to shift from accommodative to “neutral” policy.

                              Overall, BoJ still sees a path toward rate normalization—contingent on its inflation outlook materializing—but recent developments in global trade and domestic firm performance will dictate the pace and timing of the next move.

                              Full BoJ Summary of Opinions here.

                              Fed’s Barkin: It’s “zero visibility” fog, pull over and turn on your hazards

                                Richmond Fed President Tom Barkin noted that the fast-moving policies of the new administration, particularly around tariffs, have created a “dense fog” of uncertainty. While acknowledging that recent high inflation could amplify the impact of new tariffs, he noted that the ultimate effect remains unknowable given the lack of clarity on final tariff rates and the responses of global actors.

                                Barkin warned that this heightened uncertainty is already weighing on sentiment. He explained that for consumers and businesses to spend and invest, “they need to have a certain level of confidence”. Without that, demand may quiet, particularly as markets navigate the unknowns tied to policy shifts and geopolitical developments.

                                “It’s not an everyday ‘forecasting is hard’ type of fog,” he said, but rather one that demands a cautious approach—“a ‘zero visibility, pull over and turn on your hazards’ type of fog.”

                                In this context, Barkin reiterated that the Fed’s current moderately restrictive stance remains appropriate. “We are waiting for the fog to clear,” he concluded.

                                Fed’s Collins Advocates “active patience” with interest rates

                                  Boston Fed President Susan Collins expressed her full support for Fed to keep interest rates unchanged last week, noting that continued economic uncertainty and inflation risks warrant a cautious approach.

                                  Collins said that with upside risks to inflation still present, it would likely be appropriate to maintain current policy settings “for a longer time”. She stressed the importance of “active patience” and flexibility as Fed monitors the evolving economy.

                                  One of the key factors now clouding the outlook is tariffs. Collins acknowledged that new tariffs will almost certainly raise inflation in the near term. However, the longer-term implications depend heavily on how other countries react and whether businesses pass costs onto consumers. These elements could determine whether the inflationary shock is temporary or more persistent.

                                  US initial jobless claims falls to 224k vs exp 225k

                                    US initial jobless claims fell -1k to 224k in the week ending March 22, versus expectation of 225k. Four-week moving average of initial claims fell -5k to 224k. Continuing claims fell -25k to 1856k in the week ending March 15. Four-week moving average of continuing claims rose 2k to 1870k.

                                    Also released, goods exports rose 4.1% mom to USD 178.6B, seasonally adjusted, in February. Goods imports fell -0.2% mom to USD 326.5B. Trade balance reported USD 147.9B deficit, larger than expectation of USD 134.6B.

                                    Q4 GDP growth was finalized at 2.4% annualized. GDP price index was finalized at 2.3%.

                                    ECB’s Wunsch: April rate pause should be on the table

                                      Belgian ECB Governing Council member Pierre Wunsch suggested that pausing rate cuts in April should at least be “on the table”, and highlighted how tariff-induced stagflation poses a policy dilemma.

                                      Wunsch warned that tariffs would complicate ECB’s path forward: “To the extent that tariffs will impact the economy … this will have an impact on our decision-making,” he noted.

                                      While downplaying the immediate importance of April’s tariff development, Wunsch stressed that “It’s going to have an impact over the medium term.”

                                      In contrast, Latvian Governing Council member Martins Kazaks suggested that if ECB’s baseline scenario holds, a “gradual reduction in rates in the future” could be expected.

                                      BoC minutes: Rate cut driven by tariff threats, signals no guidance amid uncertainty

                                        BoC’s March 12 Summary of Deliberations revealed that the decision to cut the policy rate by 25 bps to 2.75% was driven primarily by “tariff threats and elevated uncertainty”.

                                        Governing Council members acknowledged that, under normal circumstances, holding the rate at 3% would have been appropriate. However, the impact of steel and aluminum tariffs, additional tariff threats, and the unpredictable stance of the US administration had begun to materially affect business and consumer decisions. This was “significantly weakening the near-term outlook”.

                                        Looking ahead, BoC emphasized the complexity of the situation and the fluid nature of trade tensions. “It would not be appropriate to provide guidance on the future path for the policy interest rate,” the minutes noted.

                                        Full BoC minutes here.

                                         

                                        Fed’s Musalem: Persistent tariff inflation could delay cuts or force hikes

                                          St. Louis Fed President Alberto Musalem warned that while the initial effects of import tariffs may be short-lived, their broader inflationary impact could linger. He stressed concern that underlying inflation may be influenced more persistently than expected, and if so, Fed might have to consider a tighter policy stance.

                                          Although this isn’t his baseline scenario, Musalem emphasized that the Fed must remain vigilant to second-round effects from tariffs.

                                          He noted that if inflation stays above the 2% target and the economy remains strong, the current “modestly restrictive” monetary stance would need to be maintained longer.

                                          More significantly, “If the labor market remains resilient and the second-round effects from tariffs become evident, or if medium- to longer-term inflation expectations begin to increase actual inflation or its persistence, then modestly restrictive policy will be appropriate for longer or a more restrictive policy may need to be considered,” he said.