Weekly economic commentary: Tariff discussions circulate during Trump's first week

Summary

United States: Changing of the guard

• Considering a reasonably light domestic indicator schedule this week and the Fed's media blackout period ahead of next week's FOMC meeting, attention was understandably focused on the changing of the guard in Washington and the eagerly anticipated policy details from the new administration which will heavily influence the economic performance over the coming years.

• Next week: FOMC Statement (Wed.), GDP (Thu.), Personal Income and Spending (Fri.)

International: Tariff discussions circulate during Trump's first week

• International economic data flow was relatively light this week. The majority of market participants' attention has been directed toward President Trump's first few days in office, especially pertaining to tariff discussions. Foreign central banks were not particularly active this week, but the Turkish central bank and Bank of Japan met to assess monetary policy.

• Next week: China PMIs (Mon.), Bank of Canada Policy Rate (Wed.), European Central Bank Policy Rate (Thu.)

Interest rate watch: 100 basis points lower & 100 basis points higher

• No change in the fed funds rate is expected at next week’s Fed meeting. We explore how a rise in longer-dated Treasury yields could provide a restrictive offset to the Fed’s accommodative moves at the short end of the curve.

Credit market insights: Credit spread slide

• Credit spreads continued their fall last year, indicating an ongoing uptick in optimism toward the economy among market participants. While spreads have been performing better, investors still remain cautious.

Topic of the week: Impact of L.A. wildfires on shelter inflation

• The fires that have devastated Los Angeles have led to a frenzied search for rental properties in the area as residents whose homes have been lost or damaged seek new housing. The shock to the region's housing market will materially affect costs in L.A., but will the inflationary impact be felt more broadly in the national macroeconomy?

Download the Full Report!