U.S.’s jolt continues, and markets start to price interest rates

The situation in markets has led to the first time since December, markets estimate more interest rates than the Fed. What happens in the US, and how will the markets be affected?

The data indicate economic slowdown

U.S. President Donald Trump’s policy around the tariff appears to be a wave, last Saturday, Trump ruled that the tariffs on Mexico and Canada, who were previously rejected, will take effect on Tuesday in light of the non-reluctance of the steps the states made to prevent drugs from entering the US. Trump also declared another 10% tax on China.

Trump’s economic policy has resulted in heavy concerns about the economic performance in America, with consumers watching higher inflation in the coming years, and business sentiment also began to plummet. Macro data is now indicative of economic slowdown in the US in a variety of channels, and the markets in response have dropped following the concern of Wall Street investors.

Already last week, the metrics were painted in red, just a few days after breaking a value in the S&P 500. In the market’s falls put Wall Street into repair, a 10% decrease from its previous peak.

The current data continues to indicate the direction the US is going to: This weekend it has been announced that the Fed’s estimate of growth (GDPNOW) is 1.5% in the first quarter of the year. This is a figure that if it is fulfilled, it will first happen (except Corona) since 2014.

Although the volatile product assessment and tends to become a more reliable assessment only at later stages of the quarter, it is consistent with other metrics that show a slowdown in growth. By comparison, before the consumer expense report was published on Friday, the Fed’s product estimate indicated 2.3% growth in the quarter.

In addition, the bond market also priced slower growth. The 3-month American bond yield rose over the week of the 10-year bonds, a trusted historical indicator of recession in the year or this year and a half. The bond yields reflect expectations for growth and interest rate policy. When they go under short -term interest rates, a phenomenon known as a “opposite return curve”, which tends to be a preliminary sign of growth in growth.

In the market, three interest rates are chosen by the end of the year, the first of which is expected to occur in June.

The Trump administration is actually optimistic

As a result of the changes in the economic image, the market begins to expect more sharp interest rates than the Fed in December. Remember, interest rates have been standing since the beginning of the year in 4.25%-4.5%, after three depreciations of 1%at the end of 2024. The Fed watches one or two in the coming year, when the Fed officials have often noted the uncertainty around Trump’s policy.

Fed emphasized the decision to wait as much as possible to see inflation reaches the destination, which stands at 2%. Trump’s policy, it seems, cools the economy in the US, and while the economy slows down, the slowdown in the economy can bring dismissal in the country. Fed trusts high levels of employment, along with low inflation. An increase in the U.S. unemployment rate will lead the feed to lower interest rates.

On Friday, the preferred inflation index fell at its core to 2.6%, the lowest figure in the last round of price increases. Inflation did not diminish beyond this level, despite the high interest rate. If the index decreases over the next few months, in parallel with the economic slowdown from which they fear markets – the Fed will be able to signal a more accelerated reduction in interest rate.

At the same time as concerns about the markets, the Trump administration is actually optimistic: Finance Minister Scott in St.

“We are still living under Bidenfellation at the moment,” said St. on Friday after the publication of the PCE index data, referring to the Trump administration claim that former President Joe Biden caused prices to rise with his economic policy.

“In the coming months, between 6 and 12 months, as we reduce regulation, we will increase American energy drilling and bring certainty to the 2017 tax cuts, we can quickly return to a 2% target of the Federal Reserb,” ​​he said in St..