Powell Won, but the Fed Might Still Lose By Vicky Ge Huang
Federal Reserve Chair Jerome Powell, in an extraordinary two-minute video released earlier this year, said the criminal investigation into his testimony about the central bank's building renovations was being used as cover by the Trump administration to pressure the Fed into lowering interest rates. Powell's bold move had its intended effect-rallying bipartisan support for the Fed-but even those who cheered his defiance aren't sure the central bank can prevail in a longer war against sustained presidential pressure. Meanwhile, policymakers continue to gauge the fallout from the Middle East conflict: Minneapolis Fed President Neel Kashkari said Tuesday that one or two rate cuts later this year could be appropriate if inflation cools, but that the war could create conditions that would justify an extended pause. And Kraken tells the WSJ that its banking unit has won access to the Fed's core payment systems-the first such approval in crypto history.
Top News Powell Won, but the Fed Might Still Lose
For eight years, Federal Reserve Chair Jerome Powell's rule for dealing with Donald Trump was simple: Don't make eye contact. Then, on a Sunday night in January, he decided to look the president straight in the face.
After receiving subpoenas concerning his testimony months earlier about the Fed's building renovations, Powell released a bold video dismissing that explanation. "Those are pretexts," he said, stone-faced, and accused Trump's Justice Department of threatening him with an indictment because the Fed hadn't cut interest rates as fast as the president demanded.
Powell's gambit had its intended effect, rallying bipartisan support to the Fed, which, for now, has preserved its independence.
But even those who cheered his defiance in the skirmish aren't sure the Fed can win a longer war
against sustained presidential pressure. Powell's term as chair ends in May, and the qualities that made his stand possible don't automatically transfer to his successor.
Fed's Kashkari: Too Soon to Know Middle East War's Inflation Impact
Minneapolis Fed President Neel Kashkari said in an interview Monday that the Fed's current interest-rate setting, in a range between 3.5% and 3.75%, is close to a neutral level that neither spurs nor slows economic activity.
He said he didn't think a restrictive setting was needed for the economy because, before the latest outbreak of war, inflation had been on track to cool gradually. "Before Iran, it seemed like things were gently heading in the right direction," he said.
Kashkari said the war could complicate that picture , though it was too soon to say how. He drew a parallel to Russia's full-scale invasion of Ukraine in 2022, which sent a commodity shock around the world and showed how such shocks can be more persistent.
Fed's Williams Says Cooling Inflation Could Allow for Future Rate Cuts
Recent interest-rate cuts have left monetary policy well calibrated , but cooler inflation could allow for more easing in the future, New York Fed President John Williams said Tuesday.
Speaking at a financial conference in Washington, Williams outlined a forecast of steady economic conditions this year, with moderate economic growth and declining unemployment and inflation. He said that at 3.5% to 3.75%, the Fed's current rate target is appropriate for now, but indicated that if price increases cool, he could support additional cuts.
Financial Regulation The First Crypto Firm to Win Access to Fed's Core Payments System
Crypto just took a big step closer to becoming integrated into the mainstream financial system.
Kraken told The Wall Street Journal that its banking unit has won access to the Federal Reserve's core payment systems , making it the first crypto firm to be able to move money on the same rails used by thousands of banks and credit unions.
The approval of the so-called master account at the Fed will allow the unit, Kraken Financial, to handle transactions more quickly and seamlessly for big clients and professional traders, the company said.
While Kraken isn't getting the full range of services that banks enjoy with the Fed-such as payment of interest on reserves held at the central bank-the approval marks a major win for the crypto industry, which for years had been rebuffed in its efforts to tap in to the Fed system.
Key Developments Around the World Iran Conflict Spurs Rebound in U.S. Borrowing Costs
The U.S.-Israeli attacks against Iran have halted a weekslong rally in U.S. government bonds, pushing the yield on the 10-year Treasury note back above 4% and threatening higher borrowing costs for businesses and consumers . The fight has sparked turbulence in stocks, a development that might normally cause investors to seek safety in bonds. But it has also fueled a jump in energy prices. And for now, that has been more important for investors, raising fears of a resurgence in inflation that drags on debt prices.
Why American Frackers Aren't Rushing to Pump More Oil
The Middle East is on the cusp of a prolonged conflict that could push oil prices to heights not seen in four years. For now, American drillers are sitting this one out .
To West Texas oilmen, it makes little sense to add expensive rigs and boost production when the war could be short-lived and crude prices drop. What they don't want is to add to an already big glut and waste their last few sweet spots.
In a Day of Wild Market Moves, Oil Is a New Haven
Trump Predicts Oil Prices Will Drop After Iran Conflict
BOJ Governor Sticks to Rate-Hike Stance Amid Iran Tensions
Bank of Japan Gov. Kazuo Ueda reaffirmed his commitment
to further interest-rate increases amid deepening concerns over instability in the Middle East.
"While we intend to carefully monitor the impact of the situation in the Middle East, we believe it is appropriate to continue raising the policy rate and adjusting the degree of monetary accommodation if the economy and prices improve in line with our quarterly outlook," Ueda said at a parliamentary session Wednesday.
Swiss Inflation Holds Steady at Low Level as Franc Concerns Swirl
Swiss inflation was unchanged in February close to zero, a worry for the country's central bank
after it voiced increased willingness to intervene in foreign-exchange markets to halt recent gains in the franc.
Eurozone Jobless Rate Hit New Record Low in January
The eurozone unemployment rate fell to a new record low
in January, as the bloc continued to show resilience in the face of global uncertainty. It fell to 6.1% from 6.2% in December, the EU statistics agency Eurostat said Wednesday.
Trump Threatens to Cut Off Trade With Spain
President Trump lashed out at Spain on Monday, saying that the U.S. would end trade with the European country after it said it wouldn't allow the U.S. access to its bases as part of the Iran strikes.
Spain's Sanchez Reiterates Opposition to Iran War After Trump Threatens Trade Halt
China PMIs Send Mixed Signals as Markets Watch for Stimulus
Gauges of China's manufacturing and services activity sent mixed signals about the economy , showing pockets of weakness alongside improvement as markets wait for the country's leaders to set growth targets for the year ahead.
Fitch Cuts Indonesia's Outlook, Echoes Policy Uncertainty Concerns
Fitch Ratings cut Indonesia's outlook to negative from stable , adding to the chorus of concerns about policy uncertainty in Southeast Asia's largest economy.
Forward Guidance Wednesday (all times ET)
8:15 a.m.: ADP National Employment Report
9:45 a.m.: US Services PMI
10 a.m.: ISM Report On Business Services PMI
11 a.m.: Global Manufacturing PMI
2 p.m.: U.S. Federal Reserve Beige Book
Thursday
7:30 a.m.: Challenger Job-Cut Report
8:30 a.m.: Preliminary Productivity and Costs
8:30 a.m.: Import & Export Price Indexes
8:30 a.m.: Unemployment Insurance Weekly Claims Report - Initial Claims
11 a.m.: Global Services PMI
12 p.m.: Monthly U.S. Retail Chain Store Sales Index
1:15 p.m.: Federal Reserve Vice Chair Michelle Bowman speaks at New York Bankers Association event
Research Rising Oil Prices Expected to Keep Boosting Demand for Dollars
The oil rally triggered by the conflict in the Middle East is a key driver of the recent dollar rise, Monex USA's Juan Perez writes. Since crude invoices are mostly denominated in dollars, "the struggles in shipment traffic in the Strait of Hormuz will lead to higher prices and thus force more USD-borrowing," he says. Markets worry the conflict could be longer than previously thought. Perez notes that emerging-market currencies, which were doing well until last week, are now weakening against the dollar. "We keep an open mind to expect the unexpected," Perez says. - Paulo Trevisani
Policymakers Need to Tolerate Higher Inflation Through AI Adjustment, Bank of Canada Research Says
Bank of Canada policymakers might have to tolerate elevated inflation to help the economy adjust to the wider adoption of artificial intelligence, according to new central bank research. The analysis, released Tuesday, examines the impact AI might have on the labor market and productivity, and lays out the challenges ahead for the Bank of Canada. The expectation is that AI lifts potential output, or the economy's speed limit, through productivity gains, while possibly lowering the natural rate of unemployment-or the level at which the labor market fuels neither wage nor price gains. -Paul Vieira
Oil-Price Shock Could Push BOE Rates Above 4%
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03-04-26 0725ET
