Yesterday evening, the US president arrived in Belfast for a four-day visit to the Island of Ireland where he will meet Rishi Sunak in Belfast and Michael Higgins in Dublin along with other delegates from many sides of the political spectrum. Joe Biden’s trip comes as people mark the 25th anniversary of the Good Friday Agreement and his visit also follows in the wake of the Windsor Framework which failed to revive power sharing in Stormont.
While it was hoped that an adoption of the Windsor Framework deal would allow for power sharing in Stormont to continue, the DUP’s apparent rejection of the revisions indicates that the political deadlock in the Northern Ireland Assembly will likely continue.
Crucially, the Stormont brake can only operate if there’s a sitting Assembly – a counterfactual given that the DUP have refused elect a speaker in Stormont (the pre-requisite of forming a government) while the current arrangements are in place. As such, Biden’s itinerary does not take him through Stormont, though there is speculation on whether he may attempt to ‘nudge’ the DUP back into power sharing, an issue of the utmost fragility.
Yesterday saw the first of two sessions held in the Swiss National Council (Switzerland’s lower house) where policy makers discussed the Credit Suisse-UBS deal and regulatory changes. While Parliament does not have the authority to overturn the deal (given that it’s already been signed off by Bern’s financial delegation), its symbolic rejection of the 109b CHF in government guarantees for UBS’s takeover of Credit Suisse has highlighted how contentious the deal has been within Switzerland. The Lower Houses rejection of the deal stands in contrast to the Upper House which voted in favour of it earlier in the day.
Patrick Harker on Fed’s Monetary Tightening
Yesterday, the Philadelphia Federal Reserve Bank President Patrick Harker said that while the full effect of the Fed’s monetary policy action can take a year-and-a-half to show in the wider economy, there are positive signs that monetary tightening is working. Nevertheless, Harker highlighted that progress was slow and reiterated that the challenge of getting inflation back down to their 2% target was of the utmost importance. As such, Harker maintains that interest rates ought to be raised above the current 5% level before sitting there to ensure inflation eases.
However, the Philadelphia Federal Reserve Bank President also cited that while the US banking sector is resilient, the Fed need to ensure that they do not put any undue stress on the industry by raising rates overly aggressively. Hence, all eyes will be on US CPI data released today, where investors will be hotly anticipating whether the print may change market expectations from the Fed’s rate decision on.
Today will see US CPI released where the market consensus is estimating a headline print of 5.6% on an annualised basis – unchanged from last month – and a core print of 0.4% on a month-on-month basis. Following strong non-farms data, money markets currently imply that there is around a 70% chance that the Federal Reserve will hike on 3rd May, though such markets indicate that the central bank are approaching their terminal rate.
Expectations that the Fed may tread a hawkish line were laid out when Fed Chair Jerome Powell told the Senate Banking Committee that markets may need to upwardly revise the Fed’s rate hike expectations, given a flurry of recent inflation, labour and growth data coming in hotter-than-expected. However, wider concerns over the global banking sector in the wake of SVB and Credit Suisse’s turmoil will be weighing on policy makers’ decision making today, with concerns that an overly restrictive monetary environment may destabilise markets further. Hence, following today’s pint the Federal Reserve will continue to balance a precarious tightrope. While further monetary tightening may help in their efforts to bring inflation back down to their 2% target, they will be keen not to overly tighten given current fragility in the financial markets – much of which has been attributed to the changing rate environment.
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