Key Takeaways
- Federal Reserve's Schmid indicates that inflation remains too high with broadening price increases, even as the labor market cools but stays healthy. He expects tariffs to have a muted effect on inflation and views current monetary policy as appropriately calibrated and only slightly restrictive.
- The Reserve Bank of New Zealand (RBNZ) is instituting a new Financial Policy Committee (FPC) structure, which will see its decisions overseen by the full RBNZ Board and is expected to be operational from early 2026. The FPC will include the RBNZ Board Chair, Governor, three other Board members, and others, authorized to make key financial stability policy decisions.
- Former President Trump is reportedly not negotiating with Congressional Democratic leaders amidst a government shutdown, despite expressing a desire to reach a deal on healthcare. The White House also announced the U.S. will acquire a 10% stake in Trilogy Metals (TMQ).
- New Zealand's NZIER Business Confidence Index has fallen to 18 from a previous reading of 22, signaling a potential softening in economic sentiment.
Fed's Schmid on Inflation, Labor, and Tariffs
A prominent voice from the Federal Reserve, Schmid, has articulated a cautious yet balanced outlook on the U.S. economy. He stated that inflation is currently too high and expressed concern over the broadening nature of price increases. Despite these inflationary pressures, Schmid noted that the labor market is cooling but remains healthy. He also suggested that monetary policy is appropriately calibrated and currently stands as only slightly restrictive.
Schmid warned that aggressively boosting demand could trigger larger price increases. Regarding trade, he anticipates that tariffs will have a muted effect on inflation, a factor he is closely monitoring along with alternative labor market and price data. Maintaining inflation credibility is considered key in balancing the Fed's dual goals.
Reserve Bank of New Zealand Overhauls Financial Stability Oversight
The Reserve Bank of New Zealand (RBNZ) is implementing significant changes to its governance structure concerning financial stability. A new Financial Policy Committee (FPC) will be established, with its decisions subject to oversight by the full RBNZ Board. This new framework is anticipated to be fully operational from early 2026.
The FPC's composition will include the RBNZ Board Chair, the Governor, three other Board members, and additional participants, and it will be authorized to make key financial stability policy decisions. This move aims to strengthen the institutional arrangements and decision-making processes within the central bank.
Trump's Political Stances and Economic Moves
In the political arena, former President Trump is reportedly not engaging in negotiations with Congressional Democratic leaders. This comes amidst a government shutdown, with Senator Schumer stating that Trump is not negotiating. Despite this, Trump has expressed a desire to reach a deal on healthcare, even suggesting that positive outcomes on healthcare could happen with Democrats and that a deal could be reached on ACA subsidies. He also warned that layoffs could occur if the Senate fails to pass a shutdown vote.
On the economic front, the White House announced its intention to acquire a 10% stake in Trilogy Metals (TMQ). Trump also stated that he has used tariffs to prevent wars and plans action on farmers this week. Internationally, he mentioned a "great call" with Brazil's Lula and plans to travel to Brazil "at some point". He also indicated he's "sort of" decided on supplying Tomahawk Missiles to Ukraine and believes Iran has sent a strong signal indicating they want a deal completed.
New Zealand Business Confidence Declines
Economic data from New Zealand shows a dip in business sentiment, with the NZIER Business Confidence Index falling to 18 from its previous level of 22. This decline suggests a more cautious outlook among businesses in the country.
Other Notable Developments
The FCC Chair announced that the FCC will vote this month on tightening restrictions on Chinese equipment posing national security risks. This indicates ongoing efforts to address cybersecurity and national security concerns related to foreign technology.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.