Last week, the Federal Reserve opted to hold interest rates steady, doused in escalating economic uncertainty. This pause came with a cautionary note highlighting "increased uncertainty around the economic outlook." At the same time, across the Atlantic, the European Union is preparing its own, €26 billion retaliation plan. This response is targeted specifically at pending U.S. tariff escalations scheduled for early April. Lifting Germany’s green energy plan provides a historic investment in green energy, with €100 billion allocated to a new Climate Transformation Fund. To their credit, the US Securities and Exchange Commission (SEC) is already mobilizing its Crypto Task Force. To help inform their approach, they’ll be hosting a series of industry roundtables to shape the regulation of crypto assets.
The Federal Reserve’s recent announcement to continue holding interest rates steady signals an encouraging resolve to remain cautious in the face of mixed and tumultuous economic indicators. The Federal Reserve’s strange, opaque warning is actually quite illuminating when viewed as a case study in the fragility of the U.S. economy. Though not in crisis, the economy is susceptible to trade-policy fatigue and a falling confidence from consumers and companies alike. Nonetheless, personal spending is projected to increase modestly by 0.5% in February in this uncertain environment. This is consistent with the earlier consumption forecast of 1.2% (annualized) increase in consumption in the first quarter.
The transatlantic divide is worsening 1 Tensions between Europe and the United States have reached a boiling point. The EU has prepared to retaliate massively if U.S. tariffs increase in April. Central to this plan is a substantial investment in green initiatives, including €100 billion dedicated to a new Climate Transformation Fund. The EU’s strategy is decidedly more activist/proactive in constantly pushing for defense funding. The still €150 billion defense fund is still unresolved because of bigger budgetary disputes.
The United States is currently threatening to raise tariffs on European spirits to 200%. If passed, this move would significantly increase the complexity of the transatlantic economic landscape. Even with these headwinds overall though the U.S. economy continues to exhibit resilience, ending last week on a positive note in the markets. The S&P 500 rose by 0.5%. This boom was propelled by robust advances in the financial services and oil & gas extraction sectors, both of which soared by well over 3%.
The United Kingdom’s economic indicators in general are coming under intense scrutiny. This comes on the heels of the hawkish hike from the Bank of England (BoE). With the UK budget and Consumer Price Index (CPI) at the forefront. This ruling provided a definitive path forward through the Clean Water Act for the region’s economic policy going forward.
In Germany, Merz’s €500 billion defense and infrastructure mega-package has been locked down. While this ambitious plan circumvents the country’s debt brake restrictions, this still leaves the €150 billion EU defense fund in limbo.