The Federal Reserve meets next week. Expect an uncomfortable hold with debate within the Fed intensifying about whether its next move is up or down on rates. Its inflation-fighting credibility is eroding.
My take for April FOMC
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Supply chains are fast approaching COVID level disruptions in some countries. There is no Las
Vegas in global economy; what happens abroad doesn’t stay there.
The Forces of Scarcity Hitting Asia May Soon Spread Across the World www.nytimes.com/2026/04/20/w...
Good article on the divergence in prices - scarcity is a horrible economic condition.
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The cascading nature of the disruptions we are enduring have yet to be fully felt but much like we saw during the pandemic, they are mounting.
The length and duration of the disruptions are nonlinear - they compound over time.
That is lost in translation.
It has tentacles into the global economy that will be felt for some time. Many economies are suffering. Emerging Asia, where many supply chains were reshuffled from China, are hardest hit.
Worse yet, it takes time to get oil tamped back up along with refineries as well as get tankers into place.
Future & spot prices for oil are diverging. What matters most for buyers - the actual prices or spot price of oil. That is their cost. They can’t decouple but the effects of higher oil prices linger, before we get to the disruptions to global supply chains. This is not a one & done event.
Coming up on CNBC exchange with Kelly Evans & @steveliesman.bsky.social to talk CPI and the road forward for the Federal Reserve.
That boosted vehicle sales & used vehicle prices spiked in Mar - that will show up as a bump in used vehicle prices later this spring.
The war in Iran is colliding with tariff-induced price hikes and linger service sector inflation to echo the post pandemic surge in inflation.
That is due to the larger share affluent household are accounting for in spending. Tax refunds are up on tax cuts last year.
It intensified at the Mar meeting. Look for the Fed to signal optionality to raise or lower rates going forward at the conclusion of its next meeting April 29.
Note: Spending has not collapsed and proven remarkably resilient, even as individuals feel squeezed.
The dispersion of price hikes post pandemic is much higher than it was pre-pandemic, which is why inflation has persisted for so long.
Debate within the Fed flared about whether its next move will be up or down ahead of the Mar meeting.
The blow to purchasing power is the largest since June 2022 and adds insult to injury to households already struggling w/level of prices compared to incomes.
The dispersion of price gains was slightly in Mar than Feb, but that will not holds.
Service sector prices were tamer as well, but the ISM service sector prices index for March jumped to its highest level since Oct 2022, suggesting more inflation in the pipeline.
Inflation-adjusted weekly earnings contracted 0.9% during the month.
Food prices moderated but not for long, given the surge in freight costs and the rise in fertilizer, which will show up this summer.
That translates to a 44.2% gain from a year ago, its fastest pace since Nov 2022.
Prices for motor fuel - diesel & gas - jumped 21.5%, the hottest monthly gain on record. The data goes back to 1960. That translates to a 19.2% y/y gain, its hottest since Aug 2022.
🔥CPI surges on higher energy costs, with the largest monthly increase since the nearing the peak of the pandemic in June 2022.
Gains were driven by a surge in energy cost. Fuel oil jumped 30.7% during the month, its faster pace since Feb 2000.
This is tough for the Fed. The minutes to the March meeting revealed that debate over whether the next move will be up instead of down intensified. Brace for a signal for that optionality following the Fed’s next meeting in April.
Those prices are recorded prior to tariffs, although many tech behemoths got waivers on computers and computer chips to compete better in the AI arms race.
Service sector inflation cooled a bit but remains elevated and is still running more than a percent ahead of the pandemic.
The jump in recreational goods - gaming and software mostly. Information goods jumped at fastest monthly gain since Dec 1971.
There is more in the pipeline. Import prices of computers surged in Feb.
Core PCE, which stips out food & energy, advanced 0.4% and cooled a bit on a y/y basis. That provide little solace to the Fed as the 3- & 6-mo annualized gains accelerated as well.
Core goods prices jumped at their fastest pace since Jan 2022, as the pandemic-induced inflation gripped the economy.
🔥The PCE index, which the Federal Reserve targets, rose 0.4% in Feb, up a tick from the 0.3% pace in Jan. That translates to 2.8% y/y, which is same as Feb.
Measured of momentum accelerated. The 3 & 6-month annualized pace moved up, to 4.1% & 3.4 from 3.5% & 3.2% in Jan.
open.substack.com/pub/kathleen... Great conversation between Kathleen Hayes and @dianeswonk.bsky.social on inflation, jobs report, dual mandate and current state of the economy.
#Economy
Yep…
This month, I was inspired by Jackson Browne’s Running on Empty. Lots of scenarios for the economy & war in Iran.
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Listen to Marketplace radio with Sabri Ben-Achor to hear KPMG chief economist Diane Swonk on the economic outlook.
The threshold for a rate cut rose in March. The Fed could finally bring the debate about risks that the next rate move could be up or down likely to make it out of discussion in the statement in March.
Same data suggests that payroll employment will be negative for 2025 when the revisions for 2025 come out in February 2027…jobless boomlet.
Me too!
Wow. Pure moment of joy watching Artemis ll launch successfully with my family. To journey where no humans have gone before…hope springs eternal. That which binds us is greater than that which divides us. Break bread, not ties. Be kind; pay it forward.
New meaning to the Dark Side of the Moon.
