MNI US Macro Weekly: De-Escalation Drives Dovish Drift

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Executive Summary

• Geopolitics has continued to dominate data and Fedspeak this week, driving dovish shifts on Friday with Iran announcing the Strait of Hormuz is now “completely open” for commercial traffic for the remaining period of ceasefire (ending Monday) along with talks “probably” held this weekend.
• There are 16bp of Fed cuts priced for 2026 vs 6bp at the end of last week.
• March's PPI report was much tamer than expected. Energy was unsurprisingly the biggest upside contributor to pipeline inflation but core aggregates looked softer than they did earlier in the year.
• US import prices were also far softer than expected in March, including with some downward revisions to February’s surprisingly strong report, but with non-fuel details showing further strength.
• That said, we judge analyst core PCE estimates for March are grouped around 0.26% (median)/0.27% (average) M/M vs 0.22-0.23 prior to PPI, following three months averaging 0.36% M/M.
• Weekly labor indicators were strong, with the ADP Pulse hitting a fresh high since it started in July, tracking with its strongest monthly increase since Dec 2024, along with low jobless claims.
• Early manufacturing surveys for April have seen some strong increases in manufacturing activity and also prices paid, but with limited initial feedthrough to prices received. On a related note, NFIB small business pricing plans surprisingly dropped to a joint low since Apr 2023.
• Ahead of next week’s retail sales report, consumption indicators point to strong nominal growth but much weaker volumes. Even in nominal terms, higher gas prices are expected to have dampened spending on other categories with limited growth anticipated for the control group.
• The last Fedspeak before the FOMC blackout has been mostly non-committal whilst assessing high uncertainty with the Middle East conflict (Williams, Waller, Daly). Miran now considers three or four cuts for 2026 vs four prior.
• Interestingly, the Beige Book’s portrayal of the economy in the first edition of the Middle East conflict was not substantially different, and arguably even more robust, with more districts on net reporting slight/modest growth and gains in employment, with very little change in inflation reporting.
• Fed Chair nominee Warsh’s nomination hearing is on Tuesday at 1000ET but Sen. Tillis is still set to block passage to the Senate and Senate Democrats on the committee want to delay the hearing until DoJ probes  against Powell and Cook are dropped.
• President Trump has threatened to fire Powell if he doesn’t leave once his Fed Chair term expires May 15. Powell has previously said “on the question whether I will leave while the investigation is ongoing: I have no intention of leaving the Board until the investigation is well and truly over, with transparency and finality”.