Weekly Macro Update: Despite All The Focus on Trade, Inflation Remains Low
Trading Troubles: The “Phase One” trade deal talks have hit a rocky patch over agriculture. While President Trump had said China would buy up to $50 billion in agricultural products, China is now leery of committing to a specific dollar amount. Meanwhile, the U.S. is asking for stronger Chinese regulation on IP protections and to open up financial markets. Additionally, questions are now being raised about whether or not Trump would be willing to roll back tariffs already in place. If China and the U.S. are not able to iron out these wrinkles soon, the markets will be disappointed after rallying on the back of the announced partial deal last month. Elsewhere, talks of a larger-than-expected trade deal between the U.S. and Turkey are heating up.
IEA Oil Forecast: The International Energy Agency (IEA) released its forecast this week stating the U.S. shale-oil production will reshape global energy markets in the years to come, bolstering the country’s influence over OPEC nations. The IEA said that even as annual U.S. production growth slows from its pace in recent years, policies already announced mean that the country will account for 85% of the increase in global oil production to 2030.
A Tale of Two Speeches: Federal Reserve Chairman Jerome Powell in his speeches to both the Joint Economic Committee and the House Budget Committee reinforced the Fed’s ‘wait-and-see’ approach, signaling a fourth rate cut is unlikely in December. However, Powell did not take a change in the fed funds rate in 2020 off the table. He noted that downside risks for the economy remain. Separately, after being prompted, Powell noted that negative rates are inappropriate for the U.S. economy.
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