Central banks activity

The minutes of Kevin Warsh first FOMC meeting were released yesterday and they revealed that some voting members were advocating for hikes this year, while at the same time, acknowledged that if inflation were to come down as oil pressure recedes, they will lean into rate cuts. In other words, there is no clear path forward. Interestingly, in the minutes it was mentioned that part of the inflation measures were due to AI, specifically on equipment (chips). Go figure that one. As for the rest of the central banks, life appears to be much simpler, and they are simply hiking, with a few notable exceptions (Mexico, Brazil, Turkey, etc). The latest one to hike has been New Zealand, but the EU hiked last month, and so did Japan. They might be doing some heavy lifting for the Fed. Trump has announced he will be asking $1.5Tn for defense spending for 2027, which will contribute to the deficit increase, which is already very high. The Fed is trapped, and although the bias and the wording point to a hike, cuts might be more likely, with inflation running hottter than normal.

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