Summary
United States: Hard to Get a Clear View on Restless Waters
- Amid rising uncertainty, lagging indicators show activity was stable before the tariff storm. The number of job openings was slightly higher than anticipated at the end of January, and both the CPI and PPI came in softer than expected in February. Yet, we expect a mixture of weaker hiring and stronger inflation by midyear, which would present a challenge to the FOMC. We now look for the Committee to cut 75 bps, bringing the fed funds rate target range to 3.50%-3.75% by year-end.
- Next week: Retail Sales (Mon.), Industrial Production (Tue.), FOMC (Wed.)
International: Mix of Economic News and Data from Global Economies
- This week saw a variety of economic developments and data releases from G10 and emerging economies. The Bank of Canada lowered its policy rate by 25 bps this week to 2.75% and provided accompanying commentary that was somewhat mixed, but overall somewhat dovish-leaning, in our view. The U.K. economy unexpectedly shrank in January, early results from the spring wage negotiations in Japan look encouraging and Norway saw an upside inflation surprise. Brazil’s monthly inflation data, while not coming in as a surprise, continued to point to elevated price pressures.
- Next week: China Industrial Production and Retail Sales (Mon.), Bank of Japan Policy Rate (Wed.), Brazilian Central Bank Selic Rate (Wed.)
Credit Market Insights: Why Have Mortgage Rates Remained Elevated?
- Amid high mortgage rates, purchasing and refinancing applications remain suppressed from their earlier peaks. Even with the Federal Reserve’s easing cycle being under way, mortgage rates remain high with upward pressure from the 10-year Treasury and mortgage spread.
Topic of the Week: Steel Yourself for a Section 232 Revival
- This week, the 25% tariffs on steel and aluminum imports announced by the Trump administration last month went into effect. All imports of certain steel articles and derivative steel articles are subject to the 25% tariffs under Section 232, essentially eliminating the carve-outs to the original Section 232 tariffs enacted during President Trump’s first term (with a few changes).
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