Now the Federal Reserve President has sounded another dire warning. He argues that unintended consequences from tariffs could have far greater repercussions on the U.S. economy. He noted that the proposed tariffs were extremely disproportionate. This would likely dampen labor market conditions and push inflation higher. This warning arrives at a time when fears that inflation will be long-term, rather than transitory, have gained an inflated foothold.
The impacts of the tariffs are expected to ripple through the economy for at least three years. Consequently, long-run inflation expectations are still up in the air, and economists and policymakers are still struggling to figure out possible revisions to their projections. Market participants and financial analysts are listening intently to the comments of this POTUS’ new Federal Reserve President. They are just beginning to assess the potential economic impact.
What remains is the much broader market context, which has changed. The minimal improvement in global risk sentiment has further pressured the precious metals complex, notably gold. The gold price retreated after setting a new all-time high earlier this Thursday. Traders reacted to increasing optimism for U.S. trade negotiations. Yet the precious metal’s movement goes beyond just domestic economic factors; it heavily weighs the international developments that continue to shape investor confidence.
The U.S. dollar has started to regain some ground. This increase comes on the heels of a widespread increase in investors’ risk-seeking behavior. The EUR/USD currency pair recently retreated from its recent six-month peak at 1.3292, hit earlier this week. This decline happened at a time when the U.S. dollar was on a massive upswing. This shift reflects traders’ caution ahead of the upcoming European Central Bank (ECB) interest rate decision and Christine Lagarde’s press conference.
Market expectations still lean towards a 25 basis point ECB rate cut before the Easter break. This maneuver and the forthcoming ripple effect will go a long way towards skewing market forces. Traders are making bets on who they expect to win before the forthcoming verdict. Main unknowns include how all of these developments will affect inflation, jobs in the U.S., and other economy-wide effects.
Swissquote Bank Ltd expressly states that it has no duty to provide such updates. They are unlikely to maintain it up-to-date as well. Recipients must not treat this report as a substitute for their own discretion. The economic landscape is ever-so quickly shifting, so what we need to do is not think creatively, but think critically.