FED: Statement on Chair Powell's Meeting with President Trump - Fed

Today’s ECB consumer survey for March saw a marked increase in 1Y and less so 3Y inflation expectations, although it continues to lag the surge seen in US measures and a milder increase in the UK. 

• ECB 1Y inflation expectations: 2.9% in March (cons 2.5) after 2.6% in Feb, pushing above the 2.8% in Dec for its highest since Apr 2024.
• ECB 3Y inflation expectations: 2.5% in March (cons 2.3) after 2.4% in Feb, nudging up to its highest since Mar 2024.
• The below charts show the stark comparison to the multi-decade highs in the US U.Mich consumer survey, where 1Y inflation expectations have surged to 6.5% (matched by the subset of those who don’t have political allegiance) in preliminary April data and 4.4% for 5-10Y out (independents also 4.4%).
• In the UK, the now stale BoE/TNS public survey saw 1Y inflation expectations rise to four tenths to 3.4% in the quarterly survey back in Feb (highest since Aug 2023) whilst 5Y expectations increased two tenths to 3.6% (highest since Nov 2019). 

• Market-based inflation expectations tell a somewhat different story though. Whilst there has been a growing and now sizeable divergence between US and EUR 1Y inflation swaps since the US presidential election in November (including EUR swaps at some of their lowest readings since 2021), 5Y5Y inflation swaps are well-anchored.
• In EUR 5Y5Y swaps specifically, the boost from EU and German defence spending/infra plans in early March has been fully reversed, in large part with the growth negative aspects of US trade policy. 

• -15,000 SFRN5/0QN5 96.12/96.25 call spd spd, 5.25 midcurve over, steepener

The SNB is working on introducing a new liquidity support framework, centred on the Extended Liquidity Facility (ELF). The ELF encompasses [the previous] Extended Liquidity Assistance (ELA) and brings liquidity support closer to standard operations, SNB Vice Chairman Martin highlights today at a speech in Geneva.

• "A key objective of the ELF is to enhance banks' access to liquidity while reducing the stigma that can be associated with such support. It allows simplified access to limited liquidity volumes, while maintaining the same requirements as under ELA for larger volumes."
• "Regulatory efforts to strengthen banks' resilience to liquidity risk are also underway. Important initiatives include increasing banks' own liquidity provisions, introducing a minimum collateral requirement for central bank support, and anchoring a Public Liquidity Backstop in law. Together, these measures will enhance the ability of banks to withstand liquidity crises."
• "The SNB's emergency liquidity assistance (ELA) framework was first formalised in 2003, incorporating lessons learned from past financial crises. This framework established three conditions for liquidity assistance: only against sufficient collateral, only to solvent banks, and only to banks or groups of banks deemed relevant for financial system stability. In 2023 and 2024, the SNB publicly announced an expansion of its framework, extending access to liquidity support to all banks in Switzerland, using mortgages and securities as collateral."
• The previous ELA was used by Credit Suisse in March 2023, support totalled to CHF168bln, against collateral including mortgages and a federal guarantee. By the end of 2023, most loans under the scheme were repaid following the merger with UBS.