FED: Barr Sees Policy In Good Position But May Face Conflicting Dual Mandate
Fed Governor Barr (permanent voter) offers a similar stance to Chair Powell from Wednesday’s press conference, although appears a little more concerned about the prospects of facing conflicting dual mandate goals than Powell who said it’s “not one that we face today. And we may never face it. But, you know, we have to be keeping it in our thinking now.”
Barr's full remarks on "Artificial Intelligence and the Labor Market: A Scenario-Based Approach" can be found here.
- "Given the economy’s strong starting point and the progress we have made in bringing inflation back toward our 2% objective, monetary policy is in a good position to adjust as conditions unfold”.
- "The size and scope of the recent tariff increases are without modern precedent, we don’t know their final form, and it is too soon to know how they will affect the economy”.
- “I expect tariffs to lead to higher inflation in the United States and lower growth both in the United States and abroad starting later this year. […] In my view, higher tariffs could lead to disruption to global supply chains and create persistent upward pressure on inflation.”
- “I am equally concerned that tariffs will lead to higher unemployment as the economy slows. Thus, the FOMC may be in a difficult position if we were to see both rising inflation and rising unemployment.”
- "Meanwhile, we will also be closely monitoring how technologies like artificial intelligence are being integrated into economic activity and analyzing the implications for how the economy will evolve."
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BONDS: Tnotes/Bund spread extends its wideningh bias
- Tnotes/Bund spread is slowly clearing the 175.00bps level, edging towards 10bps wider on the day.
- Next upside target is seen at 182.3bps, the 50% retrace of the Dec/Mar range.
- Govies have been more steady in the past couple of hours but they continue to see heavy two way Volumes.
(Chart source: MNI/Bloomberg).
OUTLOOK: Price Signal Summary - Bear Threat In Equities Remains Present
- In the equity space, S&P E-Minis remains intact. Scope is seen for an extension towards the 4800.00 handle next. Note that moving average studies are in a bear-mode position, highlighting a dominant downtrend and bearish market sentiment. Initial firm resistance is seen at 5554.41, the 20-day EMA. Short-term gains are for now, considered corrective.
- EUROSTOXX 50 futures remain in a bear cycle following the latest impulsive sell-off. Monday’s move down resulted in a breach of a key support at 4699.00, the Nov 19 ‘24 low (cont). This exposes 4372.46, the 76.4% retracement of the Oct ‘23 - Mar ‘25 bull cycle (cont). The contract is oversold, a recovery would allow this condition to unwind. Initial resistance is 4910.00, the Apr 7 high.
UK: FT-Reeves Says 'Imperative' To Reset EU Relations Amid Trump Tariff Barrage
Speaking to the FT, Chancellor of the Exchequer Rachel Reeves says that the trade war launched by US President Donald Trump makes it more "imperative" that the UK improves political and economic relations with the EU. On 19 May, the UK and EU hold a summit intended to 'reset' relations with the EU. Reeves says the summit will offer an opportunity “to refresh our relationship and make it easier for businesses to trade”.
- Reeves: “Many of the developments, whether it is Russia’s invasion of Ukraine or the challenges in global trade at the moment, mean that there’s an even greater imperative to improve our trading relationships with Europe.”
- While saying that the UK will not rejoin the customs union, the article says that the chancellor "has proposed that Britain should align its regulations covering established industries, such as chemicals, with Brussels rules to enhance market access."
- Reeves says she will look to negotiate further on a trade deal with the US when she visits Washington, D.C., later in April for the IMF meeting of global finance ministers.
- FT says Reeves not drawn on tax hikes/spending cuts in autumn budget. Says "Economic stability, fiscal stability, is the key underpinning for a strong and growing economy, and that’s why we are, as a government, so committed to those fiscal rules.”
