Richmond Fed President Tom Barkin said in a speech yesterday that “there’s not a strong case to push rates higher when inflation is under control”. At the same time “there’s not a strong case to move lower when growth remains healthy.” And, “it makes sense to remain patient” on monetary policy.
He noted that there was a short term sentiment shock at the end of last year and the beginning of this year. The significant drop in business, consumer and investor confidence was only fueled by “overreacting” to international uncertainty, financial market volatility and the government shutdown.
He added that business contacts told him the economy is “sound but not spectacular”. And, consumers are ready to resume spending once the environment settled. Though business recovery looks to be slower and they’re worried about political polarization and international markets and trade. Barkin noted “confidence—especially business confidence—is fragile.”
On monetary policy, he emphasized: “In a volatile environment, rate moves can indicate more than stimulation or restriction. They are also taken as signals on the health of the economy. Counter-intuitively, then, rate moves can send unintended messages.”
Full speech Sentiment and the Real Economy.
Canada Freeland: With steel tariffs in place, ratification of USMCA would be very, very problematic
Despite all the talks and rumors that the US is close to lifting steel and aluminum tariffs on Canada and Mexico, Canadian Foreign Affairs Minister Chrysita Freeland left no hints on the progress after she met US Trade representative Robert Lighthizer yesterday.
Freeland acknowledged that there were discussions regrading the tariffs but and details were provided. Instead, she just noted “Canada believes in the new [USMCA] agreement that we reached with the United States and Mexico,” and “we very much hope it can be ratified in all of our countries, although the domestic processes are up to each country.” She emphasized, “when it comes to Canada, it is certainly the case for us that as long as the tariffs remain in place, ratification would be very, very problematic.”
Mexico’s chief North American trade negotiator Jesús Seade said earlier this week “Very quickly we have made a tremendous progress and I’m looking to an early resolution on the basis of lifting the tariff, no quotas. We were getting close to an agreement.” Mexican Secretary of Economy Graciela Márquez Colín also said “if we get similar proposals we might go into a trilateral, but that’s just a possibility”. But Freeland said she would “leave it to the Mexicans and the Americans to comment.”
US Treasury Secretary Steven Mnuchin told a Senate Committee yesterday that “the president has instructed us to try to figure out a solution” on steel and aluminum tariffs.” And, “this is a very important part of passing USMCA which is a very important economic agreement for two of our largest trading partners… I think that we are close to an understanding with Mexico and Canada. I’ve spoken to the finance ministers. Ambassador Lighthizer is leading the effort on this, but I can assure you it is a priority of ours.”