..listening to this Powell speech, you can gather that Powell is in no hurry to cut rates, that their moves would be measured and calibrated based on what outcomes would arrive (on inflation and growth) when the fog is cleared on where tariffs land and for how long.
..now Trump 2.0 has kept that fog for another 3 months (90 day pause) and any outcome from those tariffs would only be possibly known 3 months later. So effectively Trump has delayed a Powell move on rates for up to 6 months, and unless something in the market blows up before then, a likely rate cut is now deferred to the final quarter of this year.
...RBA's Michelle Bullock would have listened to this and come to the same conclusion as me. Would she be prepared to pull the trigger on rates pre-emptively? Local markets may have gone ahead of themselves penciling in a 50bps cut this May, which I think is being too hopeful.
...remember that I said that when the Fed starts to cut rates in earnest, that would be when the US economy is already in very bad shape (recession), save as except for the bond market or basis trade blowing up, we may yet have a short reprieve before reckoning.
Fed Chair Jerome Powell: "While uncertainty remains elevated, it is now becoming clear that tariff increases will be significantly larger than expected and the same is likely to be true of the economic effects, which will include higher inflation and slower growth." https://x.com/unusual_whales/status/1911223057693462891
Not only has Trump 2.0 likely failed to deliver
1.material tariff revenues,
2.major concessions from other exporting countries, and
3.broad interests to invest in America (to avoid those 'now negligible' tariffs)
but it has also failed to
4. persuade/convince/arm-twist Powell into submission on rate cuts
Instead, Trump 2.0 coercive approach in their tariff policy has
1. shaken the US Treasuries/bond market
2. resulted in over $6T losses in the US equity market and more in the global markets
3. set a possible permanent divorce in US-China trade and foreign relations, with an unsettling US-China trade war still in play
4. resulted in a re-calibration of regional trade ties with traditional US allies seeking new cooperation with China
5. negatively shaken foreign investor trust and confidence in holding US assets
6. resulted in increasing backlash against US products/services in the global market with American businesses suffering
a. lost contracts (e.g defence) b. farm product boycotts c. significantly reduced incoming tourism d. boycott on American products (e.g Tesla and more)
7. increased cost of production for many business sectors dependent on imported production components -that won't help US export competitiveness
