Powellarization Ahead Of T-Day

The FOMC maintained the Fed Funds rate target, continuing balance sheet runoff. Two Fed Governors dissented, favoring rate cuts, a rare occurrence indicating growing polarization. Fed Chair Powell cited a strong economy and above-target inflation, but acknowledged slowing growth, particularly in consumer spending. Business investment is supporting the economy's supply side, but demand is lagging, potentially creating an output gap and disinflationary pressures. Trump criticizes Powell for slow rate cuts and plans to appoint dovish Fed Governors. Tariffs remain a key policy tool, with impending deadlines and threats of further measures. Trump announced new trade deals with South Korea and sanctions on Brazil and threats to India over trade and geopolitical alignments. These agreements appear to be directed by the US, influencing global production and trade flows. Australia may suffer as its traditional markets are taken by US exports, while its own market access remains uncertain. The Reserve Bank of Australia's decision to hold rates contrasts with market expectations, leaving Australia vulnerable to trade shocks. The situation suggests a dynamic and potentially volatile global trade landscape dictated by US economic policy.