Mexico Weighs Options on US Tariffs Over Cuba Oil

President Donald Trump’s choice of Kevin Warsh to lead the Federal Reserve has hit a significant roadblock from within his own party. Republican Senator Thom Tillis announced he will block the confirmation and any other Fed nominee until a Justice Department investigation into current Fed Chair Jerome Powell is resolved.

Tillis, a Republican from North Carolina, stated on X that he would "oppose the confirmation of any Federal Reserve nominee, including for the position of Chairman," until the inquiry is concluded with full transparency. His opposition creates a major hurdle for the White House, highlighting a growing rift within the Republican party over the president's attempts to influence the central bank.

Figure 1: Senator Thom Tillis (R-NC), pictured here at a World Economic Forum meeting, is leading the opposition to President Trump's Federal Reserve nominee.

The Standoff: Tillis vs. Trump

President Trump quickly fired back at the senator, labeling his stance as "obstructionist" and suggesting it explains "why he's no longer a senator." Tillis, who will not seek re-election in 2026 but remains in office until early next year, stood his ground.

"If he doesn't approve, we just have to wait until somebody comes in and we'll approve it, right?" Trump remarked at the White House.

Tillis, however, framed his move as a defense of institutional integrity. "This proves how the separation of powers works: one senator can prevent the most powerful man on the planet from potentially undermining the credibility and the independence of the Fed," he told reporters. "I don't consider that obstruction. I consider that doing my job."

As a member of the Senate Banking Committee, which oversees Fed confirmations, Tillis's vote is critical. The committee has a narrow 13-11 Republican majority, meaning a single Republican defection could stall the nomination before it reaches the full Senate.

At the Heart of the Dispute: The Powell Investigation

The conflict centers on a Department of Justice inquiry into Fed Chair Jerome Powell. The probe reportedly stems from remarks Powell made to the committee last year regarding cost overruns on a renovation project at the Fed's Washington headquarters.

Earlier this month, Powell was served with a grand jury subpoena. He has denied any wrongdoing, calling the investigation a "pretext" to pressure the central bank on monetary policy. President Trump has been openly critical of Powell and has demanded significant interest rate cuts to stimulate the economy.

On Friday, Trump encouraged the probe, stating, "He's either incompetent, or he—or somebody—is a crook, and we'll find out."

Tillis dismissed the inquiry as a "bogus potential investigation." He is not alone in his concerns; Senator Lisa Murkowski of Alaska has also previously indicated she would not support a Trump Fed nominee while the investigation is active.

A Divided Republican Party on Fed Independence

Tillis’s threat to block Warsh is the latest development in an ongoing clash with the president. The North Carolina senator has become more outspoken since announcing his retirement, notably breaking with Trump on a tax-and-spending bill over concerns about its impact on his home state.

While Republican senators have generally given Trump’s nominees wide latitude, a small but influential group has consistently emphasized the need to protect the Fed's independence from political pressure. This concern has grown amid administration criticism and investigations into both Powell and Fed Governor Lisa Cook, whom Trump previously attempted to fire.

Despite the opposition, Warsh's nomination has supporters. Senator Tim Scott, the Republican chair of the banking committee, welcomed the choice and promised a "thoughtful, timely confirmation process." Senator Bernie Moreno of Ohio called the pick "phenomenal" and predicted Warsh "will restore independence to the Federal Reserve."

Democratic Opposition and an Uncertain Path Forward

Democrats on the committee are expected to uniformly oppose the nomination. Senator Elizabeth Warren, the committee's senior Democrat, described the move as "the latest step in Trump's attempt to seize control of the Fed."

"Donald Trump said anybody who disagrees with him will never be Fed Chairman. Former Fed Governor Kevin Warsh... has apparently passed the loyalty test," Warren said in a statement.

The timeline for Warsh's confirmation hearing remains unclear. White House economic adviser Kevin Hassett acknowledged on CNBC that the legal issues surrounding the Fed could complicate any Senate approval process until they are settled. "That it is an issue that should get resolved quickly," Hassett said.

Source: Bloomberg

The United States is encouraging India to resume purchases of Venezuelan oil, a strategic move designed to help Delhi replace crude imports from Russia. Sources indicate that India has already committed to significantly reducing its intake of Russian oil in the coming months, responding to increased U.S. tariffs on the trade.

India is reportedly on track to slash its Russian crude imports by several hundred thousand barrels per day. This shift aligns with Washington's broader effort to curtail the oil revenues funding Russia's war in Ukraine.

India Ramps Down Russian Oil Imports

Following the 2022 invasion of Ukraine, India became a major buyer of discounted Russian oil. However, that trend is reversing. Indian Oil Minister Hardeep Singh Puri recently confirmed that the country is actively diversifying its crude sources as its reliance on Russian imports declines.

The reduction is expected to be sharp:

• January: Imports stood at approximately 1.2 million barrels per day (bpd).

• February: Projections show a drop to around 1 million bpd.

• March: A further decline to 800,000 bpd is anticipated.

Sources suggest these imports could eventually settle between 500,000 and 600,000 bpd, a move that could also help India secure a favorable trade deal with the United States.

Washington's Geopolitical Pivot on Oil Sanctions

This policy shift comes after the U.S. implemented a complex web of sanctions. The Trump administration imposed 25% tariffs in March 2025 on countries, including India, for buying Venezuelan oil. This was part of a campaign against Venezuelan President Nicolas Maduro, who U.S. forces captured on January 3. Since then, Washington has been directing the government in Caracas with plans to control the nation's oil industry indefinitely.

More recently, U.S. tariffs on Indian goods rose to 50% in August after an additional 25% was levied over its purchases of Russian oil. These pressures, combined with logistical challenges from Western sanctions, have prompted Indian refiners to seek alternative suppliers.

It remains unclear whether the new flow of Venezuelan oil would be sold directly by state oil company PDVSA or managed by third-party trading houses like Vitol or Trafigura. The White House and U.S. Treasury Department have not commented on the matter.

How Indian Refiners Are Responding

The shift away from Russian crude is already visible across India's refining sector. Data from December showed India's Russian oil imports falling to a two-year low, which in turn boosted OPEC's share of the Indian market to an 11-month high. Refiners are increasingly turning to suppliers in the Middle East, Africa, and South America.

Several key players have already adjusted their purchasing strategies:

• Hindustan Petroleum, Mangalore Refinery and Petrochemicals, and HPCL-Mittal Energy Ltd have reportedly stopped buying Russian oil entirely.

• Reliance Industries, which operates the world's largest refining complex, will purchase up to 150,000 bpd of Russian oil starting in February.

• State-owned refiners Indian Oil Corp and Bharat Petroleum Corp have slowed their purchases, according to officials at the recent India Energy Week conference.

Federal Reserve Vice Chair Michelle W. Bowman is signaling a crucial shift in focus toward protecting the U.S. workforce, highlighting growing risks in the labor market. Speaking on Friday, Bowman emphasized that her attention is turning to the potential for a rapid deterioration in employment, even as the central bank recently held interest rates steady.

A New Focus on Labor Market Stability

Bowman expressed concern that the current "low-hiring, low-firing" environment could quickly transform into significant layoffs if broader economic activity weakens. This pivot suggests the Fed is becoming increasingly sensitive to employment data as it weighs its next policy moves.

The Vice Chair pointed to slowing private payroll growth, which averaged just 30,000 per month in the final quarter of last year, as a key reason for her cautious stance.

The Path for Future Monetary Policy

Regarding future interest rates, Bowman laid out a plan to reduce borrowing costs. "Looking ahead to 2026, my Summary of Economic Projections includes three cuts for this year," she stated during her remarks at the Southwestern Graduate School of Banking.

Despite this forward guidance, she described the latest decision to pause rate hikes as a "close call." The central bank is currently balancing its desire to shield the job market against the need for clearer economic data, particularly in the wake of the recent government shutdown.

After cutting rates by 75 basis points last year, Bowman argued the Fed can afford to "keep policy powder dry" while awaiting more accurate signals.

Inflation Outlook and Final Warning

While the labor market remains a primary concern, Bowman remains confident that inflation will eventually return to the Fed's 2% target. She attributed its current elevation to the one-off effects of tariffs, which she expects to wane over time.

Ultimately, her message underscored the fragility of the current economic stability. Bowman warned that the central bank must be prepared to adjust policy swiftly if the "jobless expansion" begins to stall.

"History tells us that the labor market can appear to be stable right up until it isn't," she cautioned, highlighting the potential for an abrupt downturn.

Federal Reserve Vice Chair Michelle Bowman has clarified her stance on monetary policy, stating that while she still anticipates the need for interest rate cuts, she voted to hold rates steady this week to allow for more data analysis.

Speaking at a graduate banking event in Hawaii on Friday, Bowman confirmed her expectation for three quarter-percentage-point rate reductions this year. She framed the Federal Reserve's recent decision not as a shift in strategy, but as a tactical choice about the timing of the next move.

Why Wait? A Call for More Data

Bowman explained that the debate at this week's meeting centered on the pace of easing policy. After cutting rates by three-quarters of a percentage point over the last three meetings of 2025, the central bank faced a choice: continue cutting immediately or proceed more cautiously throughout the year.

Her vote to pause was driven by a desire to assess incoming information, particularly given the data gaps caused by last fall's government shutdown. While her long-term view remains unchanged—that weaker job market conditions and inflation moving toward 2% warrant looser policy—she noted some recent signs of stabilization in the labor market.

"The labor market is fragile," Bowman said. While she considered voting for a cut to protect against further deterioration, she ultimately felt it was prudent to wait. "We can afford to take time and 'keep policy powder dry' for a little while in order to carefully assess how the lower degree of policy restraint is flowing through to broader financial conditions and strengthening the labor market."

The Pause Won't Be Permanent

Despite her vote for a hold, Bowman stressed that the current policy stance should not be considered long-term. She signaled that any pause in rate cuts should be brief.

"We should also not imply that we expect to maintain the current stance of policy for an extended period of time," she stated, indicating a readiness to act at upcoming meetings. The Fed's next policy meeting is scheduled for March 17-18.

The Federal Open Market Committee voted 10-2 on Wednesday to keep the federal funds rate in its current 3.50%-3.75% range. The two dissenting votes came from Fed Governors Christopher Waller and Stephen Miran, who both favored an immediate rate cut. Bowman had been seen as a potential dissenter, but her comments reveal a more nuanced, data-dependent approach to the timing of policy adjustments.

Source: Yahoo Finance