| I’m Chris Anstey, an economics editor in Boston. Today, we’re looking at Maria Eloisa Capurro’s reporting on the Fed’s upcoming policy meeting. Send us feedback and tips to ecodaily@bloomberg.net. And if you aren’t yet signed up to receive this newsletter, you can do so here. As Federal Reserve policymakers head to the conclusion of their third gathering of the year, their preferred inflation gauge is running at 2.6% — still notably above the 2% target — while the unemployment rate has been holding at 4.2%, still historically low. Keeping in mind the US central bank’s dual mandate of price stability and maximum employment, there’s nothing obvious in the latest economic data to suggest Chair Jerome Powell ought to revise his guidance that the Fed’s in “no hurry” to cut rates. In fact, says Jonathan Pingle, chief US economist at UBS, based solely on incoming data, “it looks like they are on track to nail the soft landing.” With tariff hikes clouding the outlook, however, that outcome “is probably going to escape Chair Powell’s term,” he said on Bloomberg TV Tuesday. (Powell’s chairmanship concludes in May 2026.) Pingle is in line with the consensus forecast of economists, which sees sufficient weakening in the job market to become apparent by the time of the September Fed meeting to persuade policymakers to cut. Pricing in futures markets currently points to a quarter-point rate reduction at the Fed’s July meeting. The US team at Bloomberg Economics, led by Anna Wong, expects “Powell to push back against market pricing and signal a renewed priority on price stability.” Wong and her colleagues highlighted that officials including Richmond Fed President Thomas Barkin and Fed Governor Adriana Kugler have voiced concerns about inflation expectations. “Add to that the solid April payroll print and there’s little pressure for a near-term cut,” Wong and her colleagues say in their report, available here for Bloomberg terminal clients. That’s not where US President Donald Trump is, however. Just last week, he renewed his criticism of Powell, arguing that “inflation is basically down” and that the Fed chief was “not really doing a good job.” Assuming an unchanged Fed decision at 2 pm Wednesday in Washington, Fed watchers may quickly turn to the president’s social media feed for his latest take. The Best of Bloomberg Economics | - Secretary Scott Bessent repeated that the Treasury is on the “warning track” toward exhausting its capacity to stay within the federal debt limit.
- In US city halls and state capitols, officials are bracing for Trump and Elon Musk’s aggressive cost-cutting campaign.
- After German data showed factory orders rose more than expected, new Chancellor Friedrich Merz is heading to Paris and Warsaw.
- Prime Minister Mark Carney told Trump that Canada won’t become the 51st US state, using a real estate analogy to make his point.
- The UK government faced a political backlash after a trade deal with India, and is in intensive talks about an accord with the US.
- Container liners are starting to sever shipping routes that link the US and China across the Pacific because of Trump’s trade war.
Deutsche Bank’s chief US economist and head of US rates research last week met with more than 50 clients in five European countries, and offered a summing up of perspectives they encountered. The bottom line was a sort of counterpoint to Bessent’s view of the US as the “Schelling point” of global finance (see yesterday’s newsletter.) “The most popular market discussion point was dollar asset allocations. Unanimously investors believe they have become overallocated to dollar assets and signaled their intention to reduce exposure over time,” Matthew Luzzetti and Matthew Raskin wrote in their note Monday. “The general view was that this reduction in allocations will take place gradually, mostly in a passive way, rather than rapidly via active sales.” While Europeans have had long-standing concerns about the US fiscal trajectory, last month’s bond-market volatility made these worries “more tangible,” the duo wrote. If Congress enacts fiscal legislation this summer that reinforces projections for no reduction in the US budget deficit, that “could be a catalyst” for a renewed selloff in longer-dated Treasuries, “along with potentially disorderly moves,” they wrote. | 
