Weekly house view | “Liberation Day”
The week in review
The US Federal Reserve left rates unchanged last week and maintained a cautious policy stance, citing high uncertainty. The decision to hold steady earned the Fed a rebuke from President Trump, who said it would be better off cutting rates as tariffs start to take effect. Chair Jay Powell said the Fed did “not need to be in a hurry” to move rates given “unusually elevated” uncertainty. The Fed left its rate projections unchanged and lowered its 2025 growth projection (from 2.1% to 1.7%) while raising its 2025 core PCE inflation projection (from 2.5% to 2.8%). US stocks snapped a 4-week losing streak, with the S&P 500 gaining 0.5%i on the week and the tech-heavy Nasdaq up 0.2%ii. The benchmark 10-year Treasury yield fell to 4.3%. In the UK, the Bank of England kept its rate at 4.5%, acknowledging ongoing disinflation and wage progress. Surveys indicate weak UK growth, especially in employment, but wage growth is moderating. In Europe, the SNB cut its policy rate by 25 basis points to 0.25%, reflecting geopolitical and trade uncertainties. The week saw elevated geopolitical uncertainty, with the US hitting Iran with targeted sanctions, Trump bombing Yemen’s Iran-aligned Houthis, renewed fighting in Gaza, and Turkish President Erdogan’s main rival arrested. Oil rose on expected tighter supply, with WTI up 1.3%. Russian President Putin agreed to a 30-day halt on energy facility strikes, but no full Ukraine ceasefire.
Quote of the week
“There are so many things we don’t know,” Fed Chair Powell told a news conference on Wednesday, and “uncertainty is remarkably high.”
Key data
US retail sales increased 0.2% on the month in February, better than the downwardly revised decline of 1.2% the prior month but below expectations. The so-called control group, which strips out noncore sectors and feeds directly into GDP calculations, rose a better-than-expected 1%. Overall, this suggests consumption managed to rebound partially after Jan weakness.
In China, industrial production climbed 5.9% in the first two months of the year from a year ago, but private demand remains weak.
Japanese CPI rose 3.7% year-on-year in February, easing from a two-year high of 4% in January.