Weekly economic commentary: Increased uncertainty complicates the FOMC's job

Summary

United States: February bounce more likely a head fake

• Retail sales, industrial production, existing home sales and housing starts all jumped in February, rebounding from the declines posted the month prior. On closer examination, however, the underlying data point to economic growth hitting a soft patch.

• Next week: New Home Sales (Tue.), Durable Goods (Wed.), Personal Income & Spending (Fri.)

International: Active week for foreign central bank announcements

• It was a busy week for foreign central bank announcements. The Bank of England and Bank of Japan both held rates steady, though we see the former as still on course for a May rate cut, and the latter for a May rate hike. Sweden's central bank held rates steady, while the Swiss National Bank cut its policy rate by 25 bps, and in both cases, we view the easing cycle as likely finished. Brazil's central bank raised its Selic Rate 100 bps and signaled a slower pace of tightening going forward.

• Next week: Eurozone PMIs (Mon.), Norges Bank Policy Rate (Thu.), Banxico Policy Rate (Thu.)

Interest rate watch: Increased uncertainty complicates the FOMC's job

• As widely expected, the FOMC kept its target range for the federal funds rate unchanged at its policy meeting this week. The post-meeting statement noted the obvious by stating "uncertainty around the economic outlook has increased."

Topic of the week: Thoughts on Germany's fiscal reform

• A sea change in German fiscal policy is underfoot with a massive package of fiscal stimulus measures for defense and infrastructure expected to be signed into law today. At the core of the pro-growth policy is an adjustment to the country's famously strict borrowing rules and fiscal austerity paired with a renewed energy for German rearmament.

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