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MNI: GERMANY JAN PPI -0.1% M/M, 0.5% Y/Y

MNI:AUSTRALIA JAN UNEMPLOYMENT RATE +4.1%

GERMANY: Economy Ministry Lowers 2025 Growth Forecast As Expected

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GERMANY: Kukies Considers Potential Non-Implementation Of 2024 Suppl' Budget

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FED: Powell: Need To See How Trump Policy Plays Out; No QT News (3/3)

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As largely expected, Powell steered clear of any conclusions on Trump administration policy. Asked about public comments from President Trump "demanding" the Fed to lower rates, he declined to answer, saying that he's had no contact with the White House.  He noted that the Fed staff provided macroeconomic scenarios from

  • On tariffs, he said that the range of possibilities is very wide, "we don't know how long, how much, what countries", about retaliation, or how it will transmit to consumers.
  • Powell says there's nothing in the data yet to show an impact from immigration policy shifts under the new administration, but there are anecdotes of nascent labor shortages in sectors such as construction. Additionally he speculated the recent fall in immigration flows may be offset by slower job creation, lowering the "breakeven rate" at which raw payroll gains produce higher unemployment.
  • Powell did acknowledge regarding inflation expectations that "you see expectations moving up a little bit at the short end, but not at the longer run, which where it really matters...and those could be related to... some of the new policies ... where the committee is very much in the mode of waiting to see what policies are enacted."
  • On this point, Powell promoted a patient approach: "kind of not be in a hurry to to get to a place of understanding what our policy response should be until we see how it plays out."
  • On broader labor market risks, Powell pointed out that there's a low hiring rate, so if layoffs rose, then unemployment could rise quickly. But overall he characterized the labor market as solid, even if "we don't think we need it to cool off anymore."
  • While MNI had thought the FOMC would discuss balance sheet policy at this meeting, that didn't seem to be the case although we will have to wait for the minutes in 3 weeks' time to be sure. Powell said simply that the most recent data show bank reserves are still "abundant" with the Fed funds rate steady, but he had "nothing to say about particular dates" on ending QT - "as always we stand ready to adjust policy in light of economic and financial developments."
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As largely expected, Powell steered clear of any conclusions on Trump administration policy. Asked about public comments from President Trump "demanding" the Fed to lower rates, he declined to answer, saying that he's had no contact with the White House.  He noted that the Fed staff provided macroeconomic scenarios from

  • On tariffs, he said that the range of possibilities is very wide, "we don't know how long, how much, what countries", about retaliation, or how it will transmit to consumers.
  • Powell says there's nothing in the data yet to show an impact from immigration policy shifts under the new administration, but there are anecdotes of nascent labor shortages in sectors such as construction. Additionally he speculated the recent fall in immigration flows may be offset by slower job creation, lowering the "breakeven rate" at which raw payroll gains produce higher unemployment.
  • Powell did acknowledge regarding inflation expectations that "you see expectations moving up a little bit at the short end, but not at the longer run, which where it really matters...and those could be related to... some of the new policies ... where the committee is very much in the mode of waiting to see what policies are enacted."
  • On this point, Powell promoted a patient approach: "kind of not be in a hurry to to get to a place of understanding what our policy response should be until we see how it plays out."
  • On broader labor market risks, Powell pointed out that there's a low hiring rate, so if layoffs rose, then unemployment could rise quickly. But overall he characterized the labor market as solid, even if "we don't think we need it to cool off anymore."
  • While MNI had thought the FOMC would discuss balance sheet policy at this meeting, that didn't seem to be the case although we will have to wait for the minutes in 3 weeks' time to be sure. Powell said simply that the most recent data show bank reserves are still "abundant" with the Fed funds rate steady, but he had "nothing to say about particular dates" on ending QT - "as always we stand ready to adjust policy in light of economic and financial developments."