Powell Testimony and French Defiance Whipsaw Trump on Economy
(Bloomberg) -- When it comes to the economy, it’s been a mixed week for Donald Trump. While he’s likely to claim victory in his battle for lower rates after Federal Reserve Chairman Jerome Powell suggested that the central bank has room to ease, his latest campaign in the trade war was met with French defiance.
Here’s our weekly wrap of what’s going on in the world economy.
The question now is whether policy makers will cut their benchmark by 25 basis points or twice that with Powell declining to limit his options. Markets are pricing in the smaller of the reductions with more easing to come later in the year. Powell also used the opportunity to defend the Fed’s independence and his own position against attacks from President Trump. He said he wouldn’t step down from the role even if Trump attempted to fire him.
The U.S. president himself is leaving no stone unturned in ending what he deems as unfair trading practices. This week, he took the fight to France by ordering an investigation into the country’s plan to tax big technology companies that would affect U.S. giants from Apple to Amazon. The so-called 301 investigation was used to slap tariffs on China, an indication of the options at Trump’s disposal if the probe finds the French tax will hurt U.S. companies. That didn’t deter French lawmakers from passing the tax bill.
The European Commission stayed in a gloomy mood on the euro area in updated forecasts this week, and an investor survey said a recession in Germany is inevitable. That continued a pattern of pessimism that’s expected to lead to the European Central Bank throwing more monetary stimulus at the economy later this year.
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