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No Surprises from the Fed
The bond market remains steady following last week’s Federal Reserve decision to keep interest rates unchanged at 4.25%-4.5%. This pause reflects the Fed’s cautious approach amid ongoing economic uncertainty, including the impact of tariffs and inflationary pressures
Financial Markets Await Inflation Data
Looking ahead, key economic data releases this week include the U.S. Core PCE Price Index, a critical inflation gauge, and final Q4 2024 GDP figures. The PCE report will be of particular interest to the bond market after Fed estimates last week showed they expect US inflation to tick higher over the next few months.
Choppy Start to the Week for Interest Rates
Interest rates are slightly higher to begin the week on fresh tariff announcements from the White House. President Donald Trump announced a 25% tariff on nations buying oil and gas from Venezuela, starting April 2, to cut revenue for the Maduro regime. This “secondary tariff” aims to pressure China, a major buyer of Venezuelan crude, and could affect global energy trade. Following the announcement, US crude futures rose 1.1%. The implications on inflation is pushing interest rates higher to the tune of 6-8 basis points. Avg mortgage rates remain in the mid-to-high 6s.
The Week Ahead
This week promises to be eventful with several important economic data releases and events that could impact the bond market. Key highlights include:
**Monday, March 24**: Flash Manufacturing and Services PMI reports for major economies, including the U.S., will provide insights into economic activity.
**Tuesday, March 25**: The U.S. Consumer Confidence Index, New Home Sales data, and the Richmond Manufacturing Index will shed light on consumer sentiment and housing trends.
**Wednesday, March 26**: U.S. Durable Goods Orders will offer a glimpse into business investment trends.
**Thursday, March 27**: Final Q4 2024 U.S. GDP figures and Weekly Unemployment Claims will be closely watched for economic growth and labor market conditions.
**Friday, March 28**: The U.S. Core PCE Price Index, the Fed’s preferred inflation gauge, will be a critical release, alongside Japan’s Tokyo Core CPI and the University of Michigan Consumer Sentiment Index.
