| I’m Chris Anstey, an economics editor in Boston, and today we’re looking at reporting by Craig Torres and Michael Sasso on uncertainty and the Fed. 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. - President Donald Trump suggested that his administration could strike trade deals with some countries as soon as this week.
- After an historic election win, the question for Anthony Albanese is whether he’ll do tough measures to overhaul Australia’s economy.
- Trump proposed deep cuts to domestic agencies and steep increases for national security. See the differences from his first budget.
Federal Reserve policymakers often say that their future interest-rate decisions will be “data dependent.” That’s difficult, though, when current data don’t necessarily tell you where things are headed, and there’s an unusual amount of uncertainty about tomorrow’s data points. Consider the position of Chicago-area retailer Jim Tuchler, who’s importing stockings from China and doesn’t know what they will end up costing as the final duties aren’t clear. He told Bloomberg that his e-commerce site had placed an order for “literally $80,000 worth of stockings.” That’s one possible value. “Or is it going to cost me, like, $200,000? How does one plan a business this way?” Scale that up, and the question facing Fed Chair Jerome Powell is much the same. He and his colleagues are widely expected to keep rates on hold in their two-day meeting that concludes Wednesday. Beyond that, things get murky. Trouble is, for now, Trump’s tariff policy approach is one of “strategic uncertainty.” The idea is that, if trading partners don’t have clarity on what you’re willing to accept in an agreement, that gives you more leverage. Meantime, everyone — not just trade negotiators — is in the dark. Michael Hanson at JPMorgan Research, says the house view there is for a Fed cut in September, when the worst tariff inflation should start to recede and the labor market is likely to have weakened. But he acknowledges the unusual degree of opacity arising from the trade war on questions like whether there’ll be a US recession this year. “It’s not immediately clear what the ultimate outcome is going to be,” says Hanson. “We talk about risks and distribution of risks.” The US central bank’s forecasters always have a baseline view. But this time, as they run trade shocks through their models and look at outcomes for prices, growth and employment, alternative paths are likely to carry extra weight. “More than ever, scenario analysis is really important,” says Seth Carpenter, chief global economist at Morgan Stanley. While the Trump administration has repeatedly advertised that some trade deals may get done in the next few weeks, Treasury Secretary Scott Bessent has indicated those will be more like frameworks of agreement than fully fledged commercial treaties. “One or two deals is not going to remove the relevant uncertainty,” Carpenter says. “Deals need to be durable, and left in place for a long, long time.” Which isn’t much help for fed policymakers preparing rate decisions this spring and summer. But there is more clarity on one front, with Trump insisting he doesn’t plan to fire Powell before his term as chair ends in May 2026. “Why would I do that?” he said in an interview on NBC’s Meet the Press with Kristen Welker that aired Sunday. “I get to replace the person in another short period of time.” The Best of Bloomberg Economics | - Trump plans to impose a 100% tariff on films produced overseas, extending his restrictive trade policies on US imports to the entertainment sector for the first time.
- Social Democrat Leader Lars Klingbeil was confirmed as Germany’s finance minister, with key appointments now complete.
- Indonesia’s economy grew at its slowest pace in over three years amid tepid household consumption.
- Trump’s trade war has been good for the Flexport founder’s social media following, less so for his business.
- Inflation in Switzerland slowed to zero, the weakest reading in more than four years, while in Turkey, price growth slowed slightly.
- India and Pakistan are the closest they’ve been to conflict in years, turmoil that couldn’t come at a worse time for their economies.
Beyond the Fed, rate decisions are also due from more than a dozen central banks including the UK, Poland and Brazil. The Bank of England is widely expected to cut borrowing costs. Armed with forecasts that take account of Trump’s tariff onslaught, officials will probably ease despite price pressures that have kept inflation noticeably above 2%. Poland is poised to lower borrowing costs for the first time in 19 months. That follows a shock pivot toward easing from Governor Adam Glapinski that may deliver a rate cut less than two weeks before the nation’s May 18 presidential election. The good news for Banco Central do Brasil is that inflation expectations appear to be finally leveling off. The bad news is they’re still running at alarmingly elevated levels. Analysts see BCB plumping for a half-point rate increase, to 14.75%. See here for the rest of the week’s economic events. Manufacturing jobs lost in the US as a result of rising competition from China during the 2000s were more than offset by employment growth in comparatively low-wage services sectors after 2010, according a working paper about labor-market adjustments to globalization published by National Bureau of Economic Research. But few former factory workers shifted to those growing industries, the authors found. Regions hit by the China trade shock recovered mainly because young people and immigrants took their first jobs in the region. Those new jobs were concentrated in industries such as healthcare, education, retail and hospitality that paid less than the old factory jobs, according to the authors, led by David Autor of the Massachusetts Institute of Technology. By 2019, when the study ended, two-thirds of net employment growth in places hit by global trade shifts came from jobs with earnings in the bottom third of the pay distribution. | 
