This week, Jerome Powell is at the center of attention as he tries to balance confidence in the economy with the Federal Reserve's readiness to cut rates if conditions deteriorate.
Impact of Trump's Economic Policies on Markets
The trade war initiated by Donald Trump has negatively impacted stock markets. Stocks have been dropping for a month, Treasury yields are falling, and consumer sentiment is declining. The president publicly stated that the economy is in a 'transition period', which only fueled uncertainty.
Inflation and the Complexity of Rate Cuts Decisions
Despite consumer price growth slowing in February, the personal consumption expenditures (PCE) price index remains high, creating a dilemma for the Fed. Meanwhile, long-term inflation expectations continue to rise, reaching a 30-year high.
Fed’s Balance Sheet and Trump's Trade Wars
Investors are also looking for updates on the Fed's balance sheet reduction. Amid trading uncertainties with China, Canada, and Mexico, market uncertainty is heightened, complicating the Fed's monetary policy decisions.
In this situation, it's crucial for Powell to consider all factors, including the administration's economic policy, to avoid sharp market movements.
