Austan Goolsbee, the current President of the Federal Reserve Bank of Chicago, recently underscored this critical point. He said that the bar to changing Federal Reserve policy has been raised significantly. His comments, made Thursday, highlighted the difficulties that today’s trade wars make in trying to raise or lower policy rates. The latest comments from Goolsbee follow a series of market reactions and economic indicators that reflect the current financial landscape.
Goolsbee’s cautionary words are welcome, given how much the markets and the Trump administration seem to want lower interest rates. She also noted how the current tariffs still exceed most possible post-tariff outcomes. Further complicating matters is President Trump’s announcement just last week that he will be suspending some tariffs. The tariffs already imposed, most consequentially those on China and other countries that matched U.S. tariffs with their own, have enormous consequences. These three factors are dominant in the Federal Reserve’s current policy-making calculus.
The recent timing of Goolsbee’s comments is unfortunate due to significant market advances, particularly in electric vehicles. Take the GBP/USD currency pair for example, which scored heavy gains, closing only pips away from the key mark of 1.3000. This movement is another example of how outside forces, like executive trades negotiations and privileged tariff policies, can impact currency valuations.
On the crypto side of things, Cardano appeared to find a floor near $0.62 on Thursday. The digital asset’s sharp recovery in the previous day was largely attributed to President Trump’s decision to pause tariffs for a period of 90 days. Unfortunately, this pause had no impact on China or other countries. They still went ahead and imposed reciprocal tariffs to retaliate against the U.S. tariffs imposed April 2.
This bond market sell off is not just a calamitous streak, it is glaring at wider financial malaise. This ongoing example demonstrates that the impact of trade tensions reach far beyond the United States. The strong results of yesterday’s 10-year treasury auction helped take some stress off fears about market liquidity. Despite these positive outcomes, analysts continue to express concern about the potential long-term effects of these trade dynamics on interest rates and economic growth.
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Those are the authors’ own views and opinions expressed in this piece. Financial markets are on edge as they react to daily developments regarding trade and tariff policies. As always, stakeholders are reading between the lines of Goolsbee’s comments to determine what they mean for future Fed actions.