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MNI US Macro Weekly: Turn Of The Year Brings Some Twists

January data brought a major upside CPI surprise and a downside miss in retail sales.

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MACRO ANALYSIS: MNI US Macro Weekly: Turn Of The Year Brings Some Twists

We've just published our US Weekly Macro Wrap (PDF HERE). This week's macro highlights:

  • Sequential price pressures in the January CPI report exceeded all expectations, but the hawkish impact was blunted 24 hours later by relatively benign PPI details.
  • The week ended with a notably soft retail sales report, one that means that Q1 2025 goods PCE growth will have to be reconsidered to the downside absent a big reversal to the upside in February and/or revisions.
  • In other net dovish releases, the NY Fed consumer survey saw inflation expectations bely the sharp climb in the partisan-disrupted U.Mich equivalent the week prior whilst manufacturing production disappointed.
  • President Trump has also announced plans to announce reciprocal tariffs but details were lacking and the Commerce Department is due to report on a plan in April.
  • Fed Funds implied rates are ending the week at lows, with 41bp of cuts priced for 2025 vs 26bp post-CPI. 
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UKRAINE: Zelenskyy-Vance Meeting Set To Get Underway Shortly

A key meeting between US Vice President JD Vance and Ukrainian President Volodymyr Zelenskyy is set to get underway momentarily on the margins of the Munich Security Conference in Germany. 

  • The meeting could provide some clarity over the US position with regards to a peace settlement in Ukraine, following a series of contradictory statements from Trump administration officials.
  • Rubio said yesterday: “…there’s a lot of sensitive issues to talk about: territorial claims, arms control and things of that nature, language and cultural matters, all that is going to have to be worked through.”
  • AP notes that Zelenskyy said earlier today "he will only agree to meet in-person with Russian leader Vladimir Putin after a common plan is negotiated with [Trump]." He added he believes Trump is the "key to ending the conflict."
  • CNN reported yesterday that the contradictions are creating “uncertainty and anxiety” among US allies, particularly European allies who fear being sidelined from negotiations that will impact their security.
  • The meeting comes after a combative speech from Vance that touched more on cultural issues than the war in Ukraine. The speech is likely to add to recentUS-EU tensions and was panned by German Defence Minister Boris Pistorius as "not acceptable."
  • CNN reports that the US team is not expected to meet any Russian officials in Munich, noting that Trump told reporters yesterday that "Russia is going to be there with our people".

SECURITY: Time Running Out For New Iran Nuclear Accord - Grossi

IAEA Director General Rafael Grossi told Reuters "time is running out" to strike a nuclear accord to rein in Iran's nuclear programme. Speaking at the Munich Security Conference, Grossi said, "Tehran continues to accelerate its enrichment of uranium to near weapons grade".

  • Reuters adds Grossi, "had still not been able to have political consultations with the new US administration on the Iran issue, but that he would likely delay issuing a comprehensive report on [Iran's] nuclear activities beyond March because it would add little value to what had already been reported."
  • Grossi: “I think we are running out of time, but it doesn’t mean that we can’t do it fast. The IAEA is there and has all the information and elements, but when it comes to the policy it’s up to the countries."
  • Grossi's comments come amid growing speculation that Israel could attempt to capitalise on a period of Iranian political and military weakness to strike its nuclear facilities.
  • US intelligence, cited by various outlets including the Washington Post and Wall Street Journal, concluded that "Israel would push the Trump administration to back the strikes, viewing him as more likely to join an attack than former President Joe Biden".
  • David Ignatius at WaPo writes: “Israel wants to seize the moment. If Iran won’t agree to a Libya-style abandonment of its nuclear facilities, Israel is prepared to bomb those facilities — with or without US support, the officials said.”

US: MNI POLITICAL RISK - Trump Outlines Plan For Reciprocal Tariffs

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  • US President Donald Trump unveiled plans for a ‘reciprocal’ tariff regime aimed at redressing imbalances in US trade relationships. Trump directed the departments of Commerce, Treasury, and Homeland Security - along with the USTR and White House aides - to undertake a review to ensure "fairness and balance" across the international trading system. Commerce Secretary-designate, Howard Lutnick, told reporters Trump could act immediately when studies are completed by April 1.
  • French President Emmanuel Macron said Trump’s return to the White House should compel the EU to devise a new approach to defence and the economy.
  • The European Commission said the EU will react "firmly and immediately against unjustified barriers to free and fair trade..."  
  • A senior lawmaker from Germany's CDU said Europe could "go to zero" tariffs on all US goods.
  • India agreed to boost oil and gas imports from the US in a bid to soften tariffs.
  • The House Budget Committee cleared the first procedural hurdle towards legislating Trump’s agenda.
  • Senior Republican senators will only support a reconciliation package that includes a permanent extension of  2017 tax cuts.
  • Vice President JD Vance will deliver a key speech at the Munich Security Conference, ahead of a meeting with Ukrainian President Volodymyr Zelenskyy.
  • Treasury Secretary Scott Bessent signalled more measures against Iranian oil exports.
  • Chart of the Day: US allies are in the crosshairs of Trump's tariff plans.

Full article: US Daily Brief

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