Key Takeaways
- San Francisco Fed President Mary Daly indicated that it will "soon be time to recalibrate policy," highlighting the tension between the Federal Reserve's inflation and labor market goals and the necessity to act without perfect certainty to protect the job market.
- Geopolitical tensions remain a significant factor, with French President Emmanuel Macron stating that Russian President Vladimir Putin would have "played" former President Donald Trump if a meeting with Ukrainian President Volodymyr Zelenskiy does not occur by Monday.
- The U.S. dollar paused as expectations for Federal Reserve rate cuts remained steady following the latest Personal Consumption Expenditures (PCE) data, while oil prices slid to a monthly loss amid concerns over glut and geopolitics.
- Argentina tightened foreign exchange rules once again for banks as its peso wavers, part of broader efforts to stabilize the currency and manage inflation ahead of midterm elections.
Monetary Policy Outlook
San Francisco Fed President Mary Daly delivered key remarks today, signaling that it will "soon be time to recalibrate policy" to align with the country's economic conditions. Daly emphasized the inherent tension between the Federal Reserve's dual mandate of achieving full employment and price stability. She also reiterated her belief that tariff-related price hikes are likely to be a "one-off" event.
Daly stressed the importance of proactive measures, stating that the Fed "can't wait for perfect certainty without risking harm to the labor market". She previously indicated that two rate cuts this year seemed appropriate, a sentiment she continues to hold. Markets are currently pricing in an 89% chance of a 25 basis-point rate cut in September, with cumulative easing of 55 basis points by year-end already factored in.
Geopolitical Dynamics and Commodity Markets
Geopolitical developments continue to capture headlines, with French President Emmanuel Macron issuing a strong statement regarding the proposed meeting between Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy. Macron warned that if Putin does not commit to the meeting by Monday, as requested by former President Donald Trump, it would signify that Putin "will have played Trump". This follows Trump's efforts to broker a face-to-face meeting between the two leaders.
In commodity markets, oil prices slid to a monthly loss, with traders weighing concerns over a supply glut and ongoing geopolitical factors. West Texas Intermediate (WTI) crude futures fell to approximately $64 per barrel, marking the first monthly decline in four and an 8.54% drop over the past month.
Currency Movements and International Finance
The U.S. dollar experienced a pause in its recent movements, as bets on Federal Reserve rate cuts remained steady following the release of the latest Personal Consumption Expenditures (PCE) data. The core PCE price index is projected to rise 2.9% year-on-year in July, indicating persistent inflationary pressures.
Meanwhile, Argentina has once again tightened its foreign exchange (FX) rules for banks as the peso wavers. These measures are part of the government's ongoing efforts to support the local currency and mitigate inflation, particularly ahead of upcoming midterm elections. The central bank issued new rules to enhance oversight of the FX market and curb volatility.
Domestic Appointments
On the domestic front, the White House announced plans to appoint one Republican and one Democratic member to the Surface Transportation Board. This move comes after President Trump recently fired Robert Primus, a Democratic member of the railroad regulator, who was expected to weigh in on a major railroad merger. The White House stated that Primus "did not align with the President's America First agenda" and intends to nominate "new, more qualified members".
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.