Again, economic statecraft eclipses the market’s desire to just talk economic policy. While none of the big central bank decisions yesterday produced headline surprises (the BOC cut 25bps, the Fed held, and the BCB raised 100bps), statecraft was deeply entwined in what they said.
Even before we got to their meetings, the Financial Times reported a 1920’s-style headline that the Bank of England was bleeding gold as bullion floods to the US to front-run any potential tariffs. Gold bugs will point to Trump inflation risks and nod; but gold was running to the US and away from the UK (where Chancellor Reed tried to sell the markets on her go-go growth policies just months after what was seen by business a slow-slow budget).
The BOC dropped forward guidance because of the risk of 25% US tariffs in days: and while it made the statecraft-blind statement that ‘inflation is over’, the Governor implied if tariffs happen, the Bank will have to help… but by cutting or hiking into a spike in inflation and a deep recession (according to DeepSeek)?
The Fed said asset prices were high while rates were way above neutral(!) but isn’t in a hurry to cut because it has to wait to assess Trump policies. (Our Fed watcher Philip Marey’s take is here: he has now pushed back his last presumed cut in this cycle to June.) President Trump unleashed a tirade against the Fed on social media: he proposes the Fed disposes rate cuts.
However, the White House will approve of Powell saying the Fed has no problem with US banks helping their customers with crypto, and not being averse to innovation. Or more digital asset bubbles? Or economic statecraft, which will be joined at the hip given the White House has already banned all potential CBDCs as rivals to ‘Made in America’ digital assets? […]
— Read More: www.zerohedge.com
