Archive

US: Policy Rate Held At 4.5% (Consensus 4.5%) in Mar-25

• The Federal Reserve held the federal funds rate at 4.25%-4.50%, consistent with expectations, citing increased economic uncertainty and persistent inflation risks.
• Core PCE inflation was revised up to 2.8% for 2025, signalling ongoing inflationary pressures, while GDP growth was downgraded to 1.7%, indicating stagflationary economic forces.
• The Fed will slow balance sheet reduction from April, reflecting concerns over liquidity and financial conditions, while future rate decisions remain data-dependent.

Heavy Metal Trade War

• Volatility in US trade policy continues a cleaner tightening trend against China in the well-established tech war. Tariffs are a tool, but so are export restrictions.
• China expanded restrictions on rare earth mineral exports to license critical materials like tungsten. The West lacks friendly suppliers and struggles to develop alternatives.
• European defence investments may flounder. Japan and Korea may also suffer, so they can indirectly frustrate the US. Aggressive trade policy hits volumes as well as prices.

By Philip Rush

US Lands Some Disinflation In Feb-25

• The upwards trend in monthly US inflation of the past several months broke in February with a surprisingly steep slowing to 0.2% m-o-m, although airfares drove the downside.
• Drift in consensus expectations is not yet obviously broken, with this outcome 0.2pp above forecasts from a month ago. A rebound after Easter remains likely.
• Disinflation is unlikely to dissuade the Fed from holding rates in March. We doubt soft surveys will translate to recessionary conditions, so we still see no more Fed cuts.

By Philip Rush

Trump-ism And East Asia

• Donald Trump’s abandonment of the US-led international order and efforts to reshape global trade and finance do not bode well for East Asian economies that may find themselves forced by Washington into a Chinese sphere of influence as part of a grand bargain with Beijing.

By Alastair Newton