FED: Powell: Feels Like We Don't Need To Be In A Hurry
Powell says that the Fed isn't in a hurry: "We don't have an FOMC meeting until May 6 and 7, so that's really a process [of forecasting and analysis] that lasts several weeks, but, and we're not quite at that stage yet, but we're kind of thinking ahead to that and and and working through all of that. I will say, though, it feels like we don't need to be in a hurry. It feels like we have time...It's not clear at this time what the appropriate path for monetary policy will be, and we're going to need to wait and see how this plays out before we can start to make those adjustments."
- Powell says the dual mandate variables "may be" in tension. "I'd say that's not what we're seeing right now, but the effects at the margin right now would be for higher inflation and perhaps higher unemployment, but that's a marginal effect" - he says, contrasting this to the stagflation in the 1970s.
- Asked about how long he expects to be waiting to get clarity on gov't policy, Powell: "it's hard to say exactly when you'll know, but ... that learning process is ongoing... there will be important fiscal legislation coming up fairly soon, and there'll be significant regulatory changes. You have to really look at all of that to see what the overall effect will be. So I can't give you a date, but all of that is now kind of coming into into place at at sort of the speed you would expect policy changes to be, and then we'll begin to see the real economic effects as the year goes on...there's a lot of waiting and seeing going on, including by us, and that just seems like the right thing to do at a time of elevated uncertainty."
- On the "soft" vs "hard" data: "sometimes the surveys are very negative, but they keep spending ... That's been happening, really, for a while. People spent right through the pandemic, and they spent right through this time of higher inflation. They kept spending, and forecasters kept thinking like us, that they would that consumption would slow down. But that's that's a really critical thing after that, business investment is a big chunk, and you look at that and that is also susceptible to sentiment."
- Asked about how he feels about his job security with his term as Chair ending next year, Powell laughs and says, "I fully intend to serve all of my term."
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PORTUGAL: No Confidence Vote Will Not Succeed Without PS Backing
Prime Minister Luis Montenegro has confirmed that he will move forward with a confidence motion in his gov't. The vote will effectively prove a piece of political theatre rather than a sincere attempt to draw out the opposition after the centre-left Socialist Party (PS) confirmed that it would abstain. The remaining opposition parties hold fewer seats than the minority centre-right Democratic Alliance (AD) led by Montenegro.
- The censure vote, the second in under two weeks, comes amid a scandal involving Montenegro's family-owned firm Spinumviva. In late-Feb Expresso reported that the Solverde Casinos and Hotel group pays Spiunumviva EUR4,500/month for compliance and consumer protection services. Two casino concessions currently held by Solverde have to be renewed by the gov't in 2025. In an effort to downplay the story, Montenegro confirmed in an address on 1 March that Spinumviva was now wholly under the control of his children.
- It remains to be seen whether the minority gov't can weather the storm. Opinion polling shows little change in support for the AD, PS or the right-wing nationalist Chega! since the March 2024 election. As such, Pedro Nuno Santos' PS may seek to draw out the issue to see if it can significantly damage Montenegro's standing rather than ousting the gov't immediately and risking another hung parliament.
US: CANADA: Trudeau Will Reject Unfavourable Compromise On Tariffs - Bloomberg
Bloomberg reporting that Prime Minister Justin Trudeau will not lift retaliatory tariffs on the US unless President Donald Trump removes a 25% tariff imposed on Canadian imports on Tuesday morning. The report comes after comments from Commerce Secretary Howard Lutnick raised optimism that a deal could be struck on partial tariff relief during a call between Trump and Trudeau today.
- Lutnick told Bloomberg Television Trump is mulling temporary relief: "...our expectation is that it'll be categories... It will be 25 percent but it'll be, there will be some categories left out. It could well be autos, could be others as well,"
- A Canadian government official said Trudeau would oppose a 'middle ground' floated by Lutnick that would only offer a partial rollback of American tariffs, continuing a hawkish posture from Ottawa since the tariff announcement.
- Lutnick, and Trump's key trade advisor Peter Navarro, have both stressed that the measures against Canada and Mexico are fentanyl measures rather than trade measures, leading to optimism that action on the border will lead to another reprieve from tariffs. However, the bar set by Lutnick appears difficult to achieve in the short-term: “We need to see material reduction in autopsy deaths from opioids…"
- WSJ notes: "Trump hasn't, so far, indicated he plans to roll back either the taxes on Canadian and Mexican imports, or the extra 10% tax on Chinese goods," adding he, "would move forward with his plan on reciprocal tariffs, adjusting U.S. levies to match those of other countries."
US TSY OPTIONS: Corporate Bond Update: Republic of Armenia 10Y Launched
- Date $MM Issuer (Priced *, Launch #)
- 03/05 $Benchmark Mars 2Y +75a, 3Y +85a, 5Y +100a, 7Y +110a, 10Y +120a, 20Y +135a, 30Y +145a, 40Y +155a
- 03/05 $1.5B Axon 5NC2, 8NC3
- 03/05 $1B *KommuneKredit WNG 5Y SOFR+44
- 03/05 $750M #Republic of Armenia 10Y 7.1%
- 03/05 $500M Acadia Health 8NC3
- 03/05 $500M Forestar Group 8NC3
