US-EU: Trump-EU Has Called To Set Up Trade Meetings
President Donald Trump posts on Truth Social, saying the EU is seeking meeting dates to discuss tariffs following his threats of a 50% levy and subsequent delay to 9 July. Trump's comments come in the wake of reports that EU member states have been pushing for an acceleration in talks. FT wrote on 26 May, "Several EU governments have signalled they want a quick deal with the US to head off Donald Trump’s threat of 50 per cent tariffs on the bloc, urging the European Commission to keep talking to Washington rather than taking the path of confrontation."
- Italian PM Giorgia Meloni is reported to have spoken with Trump directly before holding a call with Commission President Ursula von der Leyen, while other national leaders also spoke to VdL in the wake of Trump's 50% tariff threat.
- While Trump's actions may spur swifter action at the EU level, their aggressive nature risks pushing the EU to look towards China as a more reliable trading partner in the future. Bloomberg reports that "Top trade officials from the European Union and China are planning to meet again early next month, another sign that both sides are stepping up engagements as they try to push back against tariff pressure from Donald Trump." Chinese Commerce Minister Wang Wentao and European Trade Commissioner Maros Sefcovic will meet for the third time in 2025 on the sidelines of a WTO meeting in Paris in June.
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US TSYS: Extraordinary Measures And Cash Look Sufficient To Head Off X-Date
Treasury has about $164B in "extraordinary measures" available as of April 23 to avoid hitting the debt limit, per its regular report out Friday. That's out of a maximum total of $375B (they have used $211B).
- With Treasury cash looking healthy (around $600B), that's a fair amount of dry powder to get through the summer months to wait out the debt limit impasse. Tax receipts have looked strong with tariff revenues also starting to boost cash flows, further reducing the near-term urgency to adjust bond issuance.
- This has also helped push back analyst “x-date” expectations to later in the summer/September. We expect to hear from Treasury about its own x-date assumptions next week.
US TSYS: Treasury Market Trading Stayed Orderly In April: Fed Report
Liquidity across financial markets including the Treasury market deteriorated after President Trump's April 2 reciprocal tariffs announcement but market functioning was generally orderly, according to the Federal Reserve's semiannual report on financial stability, released Friday. (PDF link is here)
- Treasury market liquidity has been poor for years and yields were particularly volatile in early April, contributing to a deterioration in market liquidity, the Fed said.
- Nevertheless "trading remained orderly, and markets continued to function without serious disruption," according to the report, which looked at information available as of April 11.
FED: Ex-Gov Warsh: Fed Has Failed To Satisfy Price Stability Remit
From our Washington Policy Team - Some fairly sharp words today from ex-Fed Governor Warsh on the central bank (who for what it's worth is seen by betting markets as by far the frontrunner for the next Fed Chair):
- The best way for the Federal Reserve to safeguard its independence is for policymakers to avoid expanding the institution's role over time, including wading into policy areas that are outside its core mission, former Fed Governor Kevin Warsh, a leading contender to replace Jerome Powell as chair next year, said Friday.
- "I strongly believe in the operational independence of monetary policy as a wise political economy decision. And I believe that Fed independence is chiefly up to the Fed," Warsh said in a speech at a Group of Thirty event on the sidelines of the IMF meetings. "Institutional drift has coincided with the Fed’s failure to satisfy an essential part of its statutory remit, price stability. It has also contributed to an explosion of federal spending." His speech made no mention of Trump's tariffs or the appropriate monetary policy to deal with them.
- He said the ideas of data dependence and forward guidance widely adopted by Fed officials are not especially useful and might even be counterproductive.
"We should care little about two numbers to the right of the decimal point in the latest government release. Breathlessly awaiting trailing data from stale national accounts -- subject to significant, subsequent revision -- is evidence of false precision and analytic complacency," he said.
"Near-term forecasting is another distracting Fed preoccupation. Economists are not immune to the frailties of human nature. Once policymakers reveal their economic forecast, they can become prisoners of their own words. Fed leaders would be well-served to skip opportunities to share their latest musings."
