Fed Rate Cut Odds Plunge On Trump-China Tariff Walk Backs
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Time for the Fed to Do What?
"The global economy is slowing. The trade war has caused global trade to contract. This is the time the Fed should ease monetary policy. If you’re the biggest borrower in corporate America interest rates are not an issue. If you’re trying to borrow a car or credit card loan or… pic.twitter.com/zdGTHksLdd
— Danielle DiMartino Booth (@DiMartinoBooth) May 8, 2025
Powell Sinks to Trump’s Level?
The Weekly Quill — Powell Sinks to Trump’s Level
— Danielle DiMartino Booth (@DiMartinoBooth) May 9, 2025
Read on — John Meynard Keynes is often credited with saying, “When the facts change, I change my mind. What do you do, sir?” https://t.co/OvUAKZ2RiP pic.twitter.com/3KsvUuHPab
Unfortunately, that’s paywalled. But Booth has been all over Powell for not cutting rates.
My position remains as follows.
Uncertainty
This is exactly correct. No one has any idea what Trump will do, including Trump.
— Mike "Mish" Shedlock (@MishGEA) May 9, 2025
The range of outcomes includes stagflation with empty shelves to a deflationary collapse in credit. https://t.co/XTMxfDeVtO https://t.co/6y8cZthX5y
Fed Holds Interest Rates Steady at 4.25-4.5 Percent
Flashback May 7, 2025 Fed Holds Interest Rates Steady at 4.25-4.5 Percent in Unanimous Decision
No One Knows What Trump Will Do
No one know what Trump will do with tariffs, what Congress will do with the budget, or how the markets will react to whatever Trump and Congress do, so a decision to do nothing makes sense.
“The costs of waiting are low,” said Powell in the press conference.
We could easily see a significant bout of stagflation or a big deflationary crash. We could also see the first followed by the second.
I am not at all a Fed apologist, but assuming there is a Fed, hold was the right call.
Somehow “wait and see” is labeled as stooping to Trump’s level.
The irony is Trump is wildly all over the place while the Fed sure isn’t.
US and China Slash Tariffs for 90 Days with More Planned Talks
Today, I noted US and China Slash Tariffs for 90 Days with More Planned Talks
The stock market is giddy on a tariff reprieve, but what’s really changed?
Empty Shelves for Christmas Likely Avoided
One thing that’s changed is empty shelves for Christmas have been avoided.
Shipping costs that had plunged will now soar. And we will have approximately a 40 percent increase in the price of goods from China.
Fiscally nothing has changed. The budget rates to be an absolute disaster with even Republicans unwilling to cut much of anything.
The change in shipping costs, 40 percent tariffs on goods from China, and the deficit all add upward. pressure on inflation.
Bond Market Reaction
The bond market reacted appropriately today.
The 10-year treasury yield is now up 10 basis points on the day to 4.48 percent. And the 30-year long-bond is now up 8 basis points to 4.91 percent.
Ominous Looking 10-Year and 30-Year US Treasury Yield Charts
On May 3, I commented Ominous Looking 10-Year and 30-Year US Treasury Yield Charts
The technical patterns on long-dated treasuries suggest rising yields. What about fundamentals?
A bad CPI report tomorrow could easily push rates up higher.
Today, it makes perfect sense for Jerome Powell and the Fed to wait. Looking back, it made sense for the Fed to do nothing at the last meeting as well.
Powell is certainly not at Trump’s level here despite the fact we have dueling manipulators, Trump and the Fed.
More By This Author:
Under What Circumstances Might The U.S. Dollar And The Yuan Both Crash?U.S. And China Slash Tariffs For 90 Days With More Planned Talks
Zero Ships From China Headed For The US West Coast, What’s The Math?
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