The US Federal Reserve voted unanimously to keep the Fed funds rate on hold at its meeting overnight, leaving the upper bound unchanged at 4.50% for the third time in a row. The decision had been widely anticipated so of more interest was the statement and press conference from Chair Jerome Powell, both of which talked up the uncertainty stemming from the policies of US government under President Trump, and the impact that tariffs may have on both inflation and jobs. Powell acknowledged that the hard data has held up to date, but warned that the impact of the administration’s policies will likely become clearer down the line, and as such the administration would remain on hold for now.
Powell acknowledged that the White House was moving into a next stage of trade negotiations with other countries which made the outcome on inflation even harder to predict. It has been reported this morning that President Trump’s signposted ‘big announcement’ which is set to be announced will be a new trade deal with the UK. On the other hand, signalling around trade talks with China has been more mixed, with Trump saying that he is unwilling to preemptively reduce tariffs, ahead of Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer’s trip to Switzerland for negotiations. In other news, the White House has said that it will not enforce the AI diffusion rule, a Biden-era policy which puts countries into three different categories for the export of chips, when it takes effect on May 15. The government plans to introduce its own policy which it is claimed will be less bureaucratic.
German factory orders surprised to the upside for March as they expanded 3.5% m/m, compared with flat growth in February and beating the predicted 1.3%. On an annual basis orders were 3.8% higher, compared to a 0.2% y/y decline in February. The sharp rise in orders was broad based across different sectors and likely illustrated businesses looking to get ahead of any potential price rises that might have arisen from the US government’s introduction of wide-ranging tariffs in April.
Today’s Economic Data and Events
15:00 Bank of England bank rate. Forecast: 4.25%
16:30 US initial jobless claims, week to May 3. Forecast: 230,000
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