April 2025

If Canada is able to play its cards right, there are enormous and highly economic long-life oil assets that can be exploited. It would require pipelines to the west coast but there is an increasing national acceptance for those kinds of projects due to antagonism from the United States.

This is just a headline from a wire for the moment but it highlights how China is aggressively trying to shore up trading relationships, particularly for commodities.

This article was written by Adam Button at www.forexlive.com.

• We will be moving away from goals for the balance of the year, perhaps we can resume next year
• Tariffs are higher than we expected even in our upside case
• To the extent it takes longer for tariffs to hit, that risks higher inflation expectations
• Our role is to make sure this is a one-time increase in prices only
• CEOs he spoke with yesterday say uncertainty and imports are ‘a huge issue’
• Notes that covid shortages of chips led to disruption of autos and it contributed to inflation
• We are still at full employment
• Tension between goals would be a difficult position for the Fed
• We could well be in that situation and it will be a very difficult judgement
• There isn’t a modern experience for how to think about high tariff rates — these are higher that Smoot-Hawley

The stock market is selling off on his comments

This article was written by Adam Button at www.forexlive.com.

• Growth likely slowed in Q1
• Economy solid despite heightened uncertainty and downside risks
• Inflation is a bit above 2% goal, has come down a great deal
• So far larger than expected tariffs likely mean higher inflation and slower growth
• Sharp decline in business, household sentiment and elevated uncertainty reflect trade policy concerns
• Labor market solid, broadly in balance, not contributing to inflation
• PCE prices likely rose 2.3% in the 12 months through March
• Admin policies still evolving, effects remain uncertain
• We may find both sides of mandate challenged, if so, we would consider how far economy is from each goal and potential time horizons for those gaps to close

These comments don’t sound like anything different from the Fed press conference. The initial reaction is stock market selling as many were hoping for a dovish shift like Waller.

I think that final line about gaps closing could be viewed dovishly as inflation shocks are likely to be more of a one-off while economic weakness tends to snowball.

FX moves have been minimal.

This article was written by Adam Button at www.forexlive.com.