Fed Ponders If Tariff Hit Is Less, Or Just Later, Than Expected

Economic

Forex

Summary:

Tuesday marked the 250th anniversary of the Battle of Bunker Hill, where an American officer ostensibly told the revolutionary forces not to fire against the British until the “whites of their eyes” were visible.

Something similar may be characterizing the Federal Reserve and its wait for confidence that tariff hikes won’t feed through to inflation. For the fourth straight policy meeting on Wednesday, Chair Jerome Powell and his colleagues are expected to hold fire on rate cuts.

While the hard data have, to the surprise of many, failed to show any broad upswing in prices from Trump’s jacked-up import duties, policymakers and private economists alike expect that to materialize at some point. The question then would be whether the impact would be transitory. After flubbing its call on transitory inflation in 2021, the Fed is naturally loath to make the same mistake twice.

“The wait-and-see approach has served them well up until this point,” said Brett Ryan, senior US economist at Deutsche Bank AG. “Why deviate from it now when there’s no pressing reason to do so and with still upside risk to the inflation outlook?”

Last week’s consumer price index report made, arguably, for a tough messaging assignment for Powell in his Wednesday press briefing. The core gauge, which excludes food and energy costs, rose by 0.1% — a figure entirely matching the Fed’s price-stability target. It was the fourth consecutive month that prices undershot forecasts and suggested policymakers had finally achieved the “soft landing.”

“At the moment, the key question is whether the lack of a powerful economic response so far to tariff increases means that the fallout will be less than expected or will simply hit a month or two later originally expected,” Stephen Stanley, chief economist at Santander US Capital Markets, wrote in a note. (He said he’s in the latter camp.)

The Fed’s key document to watch Wednesday will be the Summary of Economic Projections. That’ll contain the first update to Fed officials’ estimates for growth, inflation, unemployment and interest rates since Trump announced his “reciprocal” tariffs in April.

Last time, Fed policymakers penciled in two rate cuts by year-end, and investors will be on watch to see whether that median forecast gets pared back to just one.

With the conflict involving Iran putting about a fifth of global crude supply at risk, Bloomberg Economics has taken a look at the implications should the price of oil jump to $100 a barrel, after having crossed $70.

Crude prices have topped $100 for a sustained period once before, starting in 2011. Any such move now would prove less impactful than then, Jamie Rush, director of global economics, wrote Tuesday. There are at least two factors to consider. First, the oil intensity of GDP has dropped — taking the US as an example, it’s fallen by about about a quarter since 2011. Second, the relative cost of oil compared with everything else has gone down.

“The amount of oil burned to produce the goods and services we consume has fallen dramatically in recent decades,” Rush says. And on the second point, “what matters to businesses and consumers is not the dollar cost of oil, but what you have to give up to buy it,” he says. “If the general level of prices and energy usage had been the same in 2011 as they are now in the US, $100 oil would have felt more like $54 oil.”

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Michelle

Economic

Forex

The U.S. and European Union are running out of time to strike a deal on trade tariffs — and analysts say several key sticking points could make an agreement impossible.

Negotiations have been slow since both the U.S. and EU temporarily cut duties on each other until July 9. If a deal is not agreed by then, full reciprocal import tariffs of 50% on EU goods, and the bloc's wide-spanning countermeasures are set to come into effect.

"We're talking, but I don't feel that they're offering a fair deal yet," U.S. President Donald Trump told reporters Tuesday, further dashing hopes of an imminent agreement.

So what's holding things up between the two sides, which had a relationship worth 1.68 trillion euros ($1.93 trillion) in 2024?

Big tech regulation

One bone of contention flagged by experts was the EU's regulation of especially Big Tech companies. The bloc has faced regular criticism from the U.S. after imposing landmark rules on tech giants regarding transparency, competition and moderation.

"Trump's administration actively seeks to use trade negotiations to force the EU to capitulate and weaken the regulatory environment," Alberto Rizzi, policy fellow at the European Council on Foreign Relations, told CNBC.

"However, to Europeans any interference into its domestic regulation of digital platforms is not acceptable and would run counter to its commitment to fight disinformation and hate speech," he added.

Philip Luck, director of the economics program at the Center for Strategic and International Studies (CSIS), echoed the concerns, but said the EU could potentially surrender some ground without undermining their principles.

But the parties "haven't gotten down to that level of conversation yet," he said.

Taxation

Taxes are another major area of disagreement between the U.S. and the EU, Rizzi said, noting that Trump sees tariffs as accounting for supposedly unfair taxes placed on U.S. companies and goods by European countries.

That includes so-called value-added taxes, or VAT, which are levied on each stage of the supply chain as a product's value changes. While very common globally, the U.S. doesn't operate VAT, and Trump has billed it as a trade barrier — and a justification for tariffs.

"However, the EU value-added tax treats domestic and foreign goods exactly in the same way and in Europeans' eyes, taxation is a purely domestic issue that should not be part of any trade discussion," Rizzi said. "Taxation is a red line for the EU in trade discussions."

Mismatched worldviews

A much broader issue between Washington and Brussels appears to be a fundamental lack of trust and alignment on negotiations and their goal.

Jacob Kirkegaard, non-resident senior fellow with the Peterson Institute for International Economics, went as far as saying that "there's only really one sticking point, which is that Trump wants tariffs on the EU, and the EU is not having it."

CSIS's Luck struck a similar tone, flagging that, philosophically, the U.S. and EU have starkly different views going into the talks.

"This [U.S.] administration views these negotiations through a lens of how partners can concede to concessions to help us. They do not view this as a traditional reciprocal trade conversation, where we give something and they give something," he explained.

The EU has a much more traditional view, he said, as demonstrated by its zero-for-zero tariffs suggestion — which faced pushback from the White House.

European politicians are "proud people who think of themselves as being on a equal footing to the United States" who can't make "constant" concessions, nor do they feel like they should have to, Luck said.

Will there be a deal?

The U.S. appears unlikely to accept a zero-for-zero agreement or one where tariffs are lowered for both parties, Luck said.

It's also doubtful the EU can secure a deal like the U.K., which agreed to certain quotas and tariffs on some critical sectors.

That's because firstly, the bloc would likely not accept similar conditions to the U.K., Luck added, but also "because this [U.S.] administration has much bigger, sort of fundamental complaints about European policy."

He does, however, see a scenario where the EU may agree to a lower tariff, such as the 10% currently in place — but only because it has to.

Rizzi also suggested that perhaps a "limited deal that scales back or freezes tariffs on specific sectors" could happen. But, he noted, this does not mean a broad agreement is imminent.

Others are even more pessimistic.

"I'm very skeptical that a deal will happen," Kirkegaard, who is also a senior fellow at Bruegel, said.

"I think it is much more likely that there's no deal, the EU then retaliates, and then we'll have to see whether Trump does with what he did with China: that he retaliates again, and maybe the EU retaliates again."

He warned that de-escalation — and a deal — might only be possible when a certain, very high, threshold of economic pain is met.

Source: CNBC

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Glendon

Political

Iran’s Supreme Leader Ayatollah Ali Khamenei rejected U.S. President Donald Trump’s demands for unconditional surrender in a statement read by a television presenter on Wednesday.

This marks Khamenei’s first public comments since Friday, when he delivered a speech after Israel began bombarding Iran.

"Intelligent people who know Iran, the Iranian nation, and its history will never speak to this nation in threatening language because the Iranian nation will not surrender," Khamenei stated.

The Supreme Leader emphasized that neither peace nor war could be imposed on the Islamic Republic, adding a direct warning to the United States.

"The Americans should know that any U.S. military intervention will undoubtedly be accompanied by irreparable damage," he said.

According to a Reuters report on Wednesday, President Trump and his team are evaluating several options, including potentially joining Israel in strikes against Iranian nuclear facilities.

Source: Investing

Risk Warnings and Disclaimers

Add to Favorites

Michelle

Economic

Forex

Federal Reserve to Keep Rates Unchanged in June 2025

The Federal Reserve is expected to leave interest rates unchanged during its June 2025 meeting, with a 98% probability according to Polymarket.

Economic stability hinges on the Federal Reserve's rate decision, affecting traditional and cryptocurrency markets. Market consensus anticipates no immediate changes, aligning with the broader economic outlook.

The Federal Reserve's Federal Open Market Committee, chaired by Jerome Powell, is expected to keep the fed funds rate stable between 4.25%–4.50%. This forecast is supported by prediction markets and bond futures, which suggest minimal volatility in both crypto and traditional markets. Key players in the financial industry express that this predictable decision reflects ongoing economic stability efforts.

Derek Tang, Co-founder, LHMeyer, stated: "It’s hard for the Fed to have a lot of certainty about its forecast right now, because so many things could change between now and the end of the year."

Maintaining current rates has immediate effects on markets. Crypto tokens like Bitcoin and Ethereum generally remain stable in the absence of significant Fed surprises. Bond traders are gearing up for potential rate cuts later in the year, particularly around September 2025. Stability in cryptocurrency and traditional markets is likely amid consistent Federal Reserve policies. This pause in rate adjustments aligns with historical precedents where crypto markets see minimal disruption unless unexpected changes occur.

Cryptocurrency experts and market analysts have largely integrated these expectations into their forecasts. Lindsay Rosner of Goldman Sachs emphasized proximity to economic targets for 2025. These views underscore maintained regulatory stances with minimal adjustments anticipated in the rate context. Official Federal Reserve updates will be released soon after the current meeting, detailing economic outlooks and policies heading into the third quarter of 2025.

While stability is currently expected across both types of markets, any deviation from this prediction could result in immediate ripples affecting financial assets worldwide. As the Federal Committee convenes, stakeholders remain alert to the nuances that could shift economic dynamics and market trajectories. Experts highlight that consistent policies could pave the way for potential technological and financial innovation in the near future.

Source: CryptoSlate

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Daniel Carter

Central Bank

Economic

Policy rates left unchanged

Bank Indonesia held its policy rate steady at 5.5%, in line with both our expectations and the Bloomberg consensus. In the accompanying statement, BI emphasised that global economic conditions and the stability of the Indonesian rupiah (IDR) remain key considerations for the future path of interest rates.

As anticipated, the central bank maintained a cautious stance amid ongoing tariff uncertainties and rising geopolitical tensions in the Middle East, which could trigger a risk-off for emerging market currencies like the IDR.

However, the overall stance remained dovish as the governor repeatedly highlighted that the domestic economy needs support and bank lending rates need to come down.

Growth and inflation dynamics support further rate cuts

We believe the macro environment remains well-positioned for BI to cut rates later this year to support economic growth, following a slowdown in first quarter GDP to 4.9% year-on-year, down from 5.0% in the previous quarter. The deceleration was primarily driven by weaker investment activity, reflecting heightened uncertainty surrounding tariff policies.

To cushion the economy, the government has rolled out a fiscal stimulus package worth US$1.5bn, including doubled wage subsidies, transport fare discounts, and direct cash and food assistance. While these measures may help stabilise near-term consumption, they are unlikely to spur a meaningful recovery in capital expenditure.

Meanwhile, CPI inflation has eased toward the lower end of BI's target range and is expected to hover around 2% for the year, primarily driven by lower food prices and weaker growth. While higher crude oil prices are a risk to CPI inflation, the magnitude of impact is relatively low when compared to the rest of the region. A 15% increase in oil prices could add about 0.2% to CPI inflation, leaving enough room still within BI's target of 1.5-3.5%.

With real policy rates still close to 4%, BI is still likely to deliver considerable easing of 75bp by the first quarter of 2026. Rising risks to growth from tariffs and an uncertain investment climate, combined with domestic policy uncertainty, increase the risks of higher-than-expected rate cuts.

BI may use windows of currency strength to cut rates more opportunistically

We remain less concerned about Indonesia's current account balance, even as export growth slows, given that import demand is also likely to weaken. While FDI inflows remain subdued, portfolio investments – particularly in the bond market – picked up pace in May.

The recent appreciation in the IDR appears to be less driven by direct BI intervention, as FX reserves remained largely unchanged, suggesting the central bank is comfortable with current levels – provided depreciation pressures are contained by positive foreign inflows and a weaker USD backdrop.

Looking ahead, while the sustainability of large inflows into Indonesian bonds remains uncertain due to persistent fiscal risks, the broader USD weakening trend should offer support. In this context, BI may use windows of currency strength to cut rates more opportunistically.

Source: ING

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Energy

AI Surge Triggers LNG Race in Southeast Asia

Amid surging electricity demand from next-generation data centers and population growth, global energy giants are turning to Southeast Asia’s gas reserves to bridge the widening supply-demand gap. Malaysia and Indonesia are at the heart of this pivot, as the region’s leaders emphasize local production and energy resilience to power digital transformation and industrial growth.

At the Energy Asia 2025 Conference in Kuala Lumpur, Shell announced a fresh investment of RM9 billion ($2.12 billion) in Malaysia over the next two to three years. The move aligns with projections showing a 20% decline in regional gas production by 2035, which Shell CEO Wael Sawan emphasized must be backfilled — primarily through LNG, given the region’s gas-centric infrastructure.

The surge in LNG interest comes at a time when AI technologies, particularly data centers, are placing unprecedented pressure on national grids. According to Petronas CEO Tengku Muhammad Taufik, global electricity demand from data centers could more than double to 945 TWh by 2030, significantly reshaping regional energy priorities.

European, Japanese, and U.S. Firms Deepen Strategic Stakes

Beyond Shell, other major players are moving fast. TotalEnergies has increased its stake in Malaysian gas assets via a deal with Petronas, reflecting the French firm's broader shift toward profitable conventional fuels after a period of energy transition volatility in Europe. TotalEnergies CEO Patrick Pouyanne cited Southeast Asia’s population growth and economic expansion as core drivers for the investment.

Meanwhile, Italy’s Eni and Petronas are finalizing a joint venture agreement covering gas exploration across Malaysia and Indonesia, due for signing before year-end. Japan’s Inpex is also reinforcing its regional footprint, pursuing exploration in six blocks offshore Sarawak and Sabah, while simultaneously pushing forward with Indonesia’s Abadi LNG project.

U.S. major ConocoPhillips signaled renewed interest in Sabah after exiting the WL4-00 project in Sarawak. CEO Ryan Lance confirmed upcoming investment plans, underscoring how shifting geopolitical risks are prompting a “local production for local consumption” strategy, particularly in Asia-Pacific markets.

Gas as the Cornerstone of Energy Transition and AI Power

With countries seeking cleaner alternatives to coal without compromising energy stability, natural gas has emerged as a key transitional fuel, offering lower emissions and reliable generation for high-load infrastructures like data centers. According to S&P Global Vice Chairman Daniel Yergin, gas now holds “a much bigger profile” than in previous years and will be essential for meeting near-term and long-term energy demands.

Analysts agree that Southeast Asia is quickly becoming the new frontier for LNG expansion, balancing affordability, availability, and clean energy goals. As LNG replaces coal across power grids, it also supports a digital economy increasingly reliant on high-intensity computing powered by AI — sectors that cannot afford intermittent supply or long renewable ramp-up timelines.

Infrastructure, Investment, and Energy Security

Despite positive momentum, the LNG boom faces logistical and regulatory hurdles. Infrastructure expansion, environmental concerns, and local policy shifts will challenge rapid deployment. However, the coordinated efforts of global energy companies and national firms like Petronas suggest a unified front in establishing the region as a gas hub for the AI era.

In summary, Southeast Asia is not just a resource basin but a strategic node in the future global energy matrix — where fossil fuel pragmatism, digital growth, and geopolitical recalibration intersect. As Shell, TotalEnergies, Inpex, and others compete for a foothold, the outcome will shape not only regional energy flows but also the pace and stability of the global AI-powered transformation.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Program Suspension Signals Funding Pressures and Structural Flaws

At least six Chinese cities, including Zhengzhou, Luoyang, Shenyang, Chongqing, and the Xinjiang region, have temporarily halted car trade-in subsidies in June, citing either funding exhaustion or administrative adjustments. This development comes just months after Beijing unveiled a ¥300 billion ($41.7 billion) stimulus effort aimed at rejuvenating household consumption through subsidies for vehicles, electronics, and home appliances. Local governments had already received ¥162 billion of this allocation by June.

The sudden pause, amid what officials call overwhelming demand, casts a shadow over the initiative’s execution. More than 4 million applications had been submitted by the end of May, a surge that exceeded government expectations and rapidly depleted initial funds. Retail sales in May reflected a 6.4% year-on-year increase, partially attributed to the subsidy campaign. However, without immediate replenishment of funds, this upward consumption trend could reverse in the coming months.

“Zero-Mileage Used Cars” Expose Exploitation of Subsidy System

One major flaw driving the premature depletion of funds has been the manipulative practice of “zero-mileage used cars”—vehicles that are technically new but registered as used to qualify for trade-in subsidies. This loophole has allowed dealerships to offload unsold inventory under the guise of second-hand sales, collecting state support while undermining the program’s intent.

Local media and regulators, including the People’s Daily and Dahe Daily, have called for greater oversight. Even Great Wall Motor’s Chairman Wei Jianjun publicly condemned the practice. In response, Beijing’s Ministry of Industry and Information Technology (MIIT) summoned automakers to demand an end to price wars and unethical marketing tactics, reflecting broader concerns over eroding industry profitability.

Stimulus Fatigue and Economic Implications

The halt in subsidies underscores not only administrative inefficiencies but also the fiscal limits of demand-driven stimulus in an economy still grappling with a housing downturn, weak wage growth, and elevated youth unemployment. While officials at the National Development and Reform Commission (NDRC) have insisted that the program will run through 2025, the lack of a clear replenishment timeline until at least July raises the risk of short-term sales contractions.

Analysts warn that cities pausing their programs may see auto sales decline in Q3, eroding part of the momentum seen earlier this year. This pause could also dent consumer confidence if buyers begin to view subsidies as unreliable or politically volatile. Moreover, continued industry-wide price wars, despite regulatory warnings, threaten to compress margins and trigger instability within China’s auto sector, the largest in the world.

Looking Ahead: Structural Reform vs. Temporary Relief

While the consumer stimulus via subsidies has been effective in the short term, the current suspensions highlight a broader need for structural reform over temporary relief. Calls for closing loopholes, improving transparency, and curbing speculative dealership behavior are gaining traction. However, unless the subsidy mechanism is recalibrated and better monitored, future rounds of funding may face similar misuse and exhaustion.

If properly managed, the next disbursement of funds—expected in July—could help sustain momentum in retail sectors. But without restoring public trust and addressing industry abuses, the program risks becoming another inefficient fiscal patch rather than a catalyst for long-term consumption revival.

In the short run, Beijing will need to balance macroeconomic stability with tighter subsidy discipline, ensuring that temporary stimulus does not lead to systemic distortion or eroded policy credibility.