March 31st Financial News
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2025-03-31Trump presses advisers for tariff escalation, U.S. February PCE inflation surges beyond expectations……
[Quick Facts]
1. Trump presses advisers for tariff escalation.
2. U.S. unveils new mining agreement for Ukraine with stricter demands.
3. Canadian tourists skip trips to U.S. and other countries may follow.
4. Daly: still sees two rate cuts this year.
5. U.S. February PCE inflation surges beyond expectations.
[News Details]
Trump presses advisers for tariff escalation
Four sources told The Washington Post that U.S. President Donald Trump is urging senior advisers to adopt a more aggressive stance on tariffs. Despite pressure from Wall Street and Capitol Hill allies for a softer approach, Trump continues to push for radical measures to transform the U.S. economy fundamentally. Advisers are deeply discussing the scope of import tariffs, which could impact trillions of US dollars in trade.
U.S. unveils new mining agreement for Ukraine with stricter demands
The U.S. has submitted a new draft mining agreement to Ukraine, with demands significantly exceeding the previously revealed agreement. The latest draft also excludes any security guarantees for Ukraine. According to reports from Reuters and other media outlets, the new version mandates that Ukraine transfer revenue from natural resource development by both state-owned and private enterprises into a joint fund managed by the U.S. International Development Finance Corporation. The fund's board of directors consists of five members, three of whom are appointed by the U.S. The agreement stipulates that the U.S. has the "priority right" to purchase Ukraine's resource extraction rights, and proceeds from the fund must first be used to repay all funds provided by the U.S. since 2022, with Ukraine paying an annual interest rate of 4%. Only after debt repayment can Ukraine utilize the fund's earnings for reconstruction and other matters.
Canadian tourists skip trips to the U.S.; other countries may follow
Trump's trade policies, annexation rhetoric, high-profile visa arrests, and lengthy processing times have strained U.S. relations with traditional allies. Data shows Canadian flights back from the U.S. to Canada in February dropped 13% year-over-year, and road trips fell 23%. Germany, the UK, France, Denmark, and Finland have issued travel warnings for U.S. destinations, potentially worsening the U.S. tourism deficit of $50 billion.
Daly: still sees two rate cuts this year
San Francisco Federal Reserve Bank President Mary Daly said on Friday that local business and community leaders expect tariffs to increase their costs and are currently strategizing about how to mitigate these impacts. They also anticipate some tariffs will be relaxed or exceptions will emerge over time.
The labor market's strength, stable economic growth, and declining inflation are reasons policymakers are waiting before cutting rates, to observe how businesses adapt to tariff costs.
Inflation has fallen from its peak, and last year's Fed rate hikes have made previously delayed projects feasible for implementation.
The Fed has no reason to rush judgment because policy is in a good place, and the economy is in a good place. Thus, the Fed needs time to assess the full impact, including the scope, magnitude, and timing of the final tariff packages, as well as their economic effects.
Her interest rate path projection remains unchanged from last year, and with insufficient information for adjustment, two rate cuts this year remain a "reasonable" expectation.
U.S. February PCE inflation surges beyond expectations
Data from the U.S. Commerce Department showed the core PCE price index rose 2.79% YoY (vs. 2.7% expected), a new high since last December, and 0.4% MoM (also above expectations).
Core service costs, excluding housing and energy, grew 0.4% MoM (vs. 0.2% prior), driven by services' highest contribution to PCE growth in a year.
The personal savings rate unexpectedly rose to 4.6% (vs. 4.3% prior), reflecting a "save more, spend less" behavior pattern. This, combined with a 0.4% MoM rebound in real personal consumption expenditures (vs. -0.5% prior), paints a picture of defensive consumer sentiment amid inflationary pressure.
The data confirms the Fed's long-standing concern about the "last-mile" dilemma: as the deflationary benefits from commodity price declines fade, wage-price spirals in the service sector become harder to contain. President Trump's proposed tariffs could further exacerbate price pressures, already strained by his aggressive trade policies that have eroded business and consumer confidence. Growing signs of household financial strain further fuel fears of stagflation or recession.
[Today's Focus]
UTC+8 15:00 Germany's February real retail sales data
UTC+8 16:00 ECB governor Panetta speaks
UTC+8 16:00 ECB governor Villeroy speaks
