Monetary policy push

The European Central Bank has taken the lead among developed Market economies in lowering interest rates to support growth, perhaps without the full clear picture of inflation behavior. Since it started the cycle in 2024, it has lowered rates 7 times, and so far the Euro has strengthened vs the dollar, and the European stock market indices have performed better than the U.S. counterparts, considering the trade war shock after liberation day. Pressure is mounting on J Powell to lower rates in the US, and the president will continue to put pressure on him to lower rates, as he needs the market to recover, and with that, his approval rating in economic affairs, the only indicator he follows and cares about. For May 7th, the date of the next FOMC meeting, the probability of a cut is only 7.5%, bit for the meeting in June 18th, the market expects the aged to cut at least 25 bps, with 60% probability. By then we may have Mr Bessent tax plan and we may get a needed boost from fiscal and monetary standpoint. Until then, we’re stuck with the negotiations between China and the U.S., and the headlines news on progress or lack of it as they take place.

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