TARIFFS: EU Expects US Tariffs To Remain As Talks Make Little Progress-BBG
Bloomberg reports that the EU expects US 'reciprocal' tariffs to remain in place as talks between the two sides have made little progress. Christophe Barraud at BBG writes there has been little sign of the US and EU "bridging trade differences, with US officials indicating that most US tariffs on the EU will not be removed."
- Barraud: "The EU has offered to remove all tariffs on industrial goods, including cars, but the US has rejected the proposal, and instead suggested that some tariffs could be offset by increasing investments and exports."
- This comes a day after EU Trade Commissioner Maros Sefcovic met with US Commerce Sec Howard Lutnick and USTR Jamieson Greer in Washington. EU spox called the meeting a "scoping exercise, exploring areas of a potential deal in order to organise our further engagement in a structured way and to focus our minds on possible mutually beneficial solutions within particular areas."
- BBG report Sefcovic "left the meeting with little clarity on the US stance, struggling to determine the American side’s aims, according to people familiar with the discussions."
- The EU confirmed on 14 April that it was pausing countermeasures against the US to allow for further talks. These were due to come in on 15 April, and were focused on retaliating against the steel and aluminium tariffs imposed by the Trump admin in March.
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
