Trump's Fed Pick Stalls as GOP Senator Vows Blockade

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

Moody's has upgraded Israel's credit outlook to stable from negative, signaling renewed confidence in the nation's financial stability. The ratings agency affirmed Israel's sovereign rating at Baa1, citing a significant reduction in geopolitical risk as the primary driver for the improved forecast.

The Rationale Behind the Upgrade

The decision follows a series of key developments that have eased regional tensions. Moody's pointed to the end of military conflict with Iran in June 2025 and the establishment of ceasefires with Hamas in Gaza (2025) and Hezbollah in Lebanon (2024).

While the agency notes that Israel's geopolitical environment will likely remain fragile, it assesses that the risk of resuming large-scale ground operations has receded. This reduction in immediate conflict risk was central to the outlook revision.

Economic Resilience and Future Projections

Israel's economy and public finances demonstrated notable resilience during the recent conflicts and are now positioned for a rebound. Moody's projects the economy will expand by 5.0% in 2026, followed by steady growth of 3.0-3.5% in the years after.

On the fiscal front, government deficits are expected to shrink from the highs recorded in 2024 and 2025. This should allow the country's debt-to-GDP ratio to stabilize at around 68%.

Balancing Strengths Against Lingering Risks

The affirmation of the Baa1 rating balances the positive outlook with the lingering financial costs of past conflicts. Compared to forecasts made before October 7, 2023, Moody's expects government debt to be approximately 18 percentage points higher over the medium term.

However, Israel's fundamental credit strengths remain intact, providing a strong buffer. These include:

• A track record of robust GDP growth.

• Continued investment in its vital technology sector.

• Strong access to capital markets, which helps limit borrowing costs and mitigate fiscal pressure.

The country's local and foreign-currency ceilings remain at Aa3, four notches above the sovereign rating, reflecting this balance between elevated geopolitical risks and a diversified, stable economy.

Potential Triggers for Future Rating Changes

Looking ahead, Moody's outlined specific conditions that could lead to further rating actions.

A durable reduction in geopolitical risk, paired with a faster-than-expected fiscal consolidation, could create upward pressure on the rating. Conversely, a renewed escalation in regional tensions or a weakening of Israel's economic and fiscal prospects could lead to downward pressure.