Fed’s Waller Highlights a Path to 2025 Rate Cuts; U.S. Jobs Data, ECB Policy Decision Eyed This Week By Vicky Ge Huang
A short-lived bump in tariff-driven inflation could pass quickly enough to allow U.S. interest-rate cuts later this year, especially if tariffs themselves ease, Federal Reserve governor Christopher Waller said.
Stanley Fischer, one of the most influential economists of recent decades and a former vice chairman of the Fed, has died at the age of 81.
The Fed’s preferred gauge of consumer prices ticked up just slightly in April, a modest increase that lowered the 12-month inflation rate.
U.S. jobs data for May will be the focus of the week ahead as investors look to see the extent to which tariffs are affecting jobs and what that might mean for interest rates, alongside ISM data on U.S. manufacturing and services sector activity.
A decision by the European Central Bank will also be closely watched, where a rate cut is widely expected. The Bank of Canada also announces its latest policy decision and is expected to leave rates unchanged.
Read more .
Top News Fed’s Waller Highlights a Path to 2025 Rate Cuts
New trade barriers are likely to push up prices in the short term, Federal Reserve governor Christopher Waller said in a speech at a conference in Seoul, South Korea, on Monday morning local time. But the inflation probably won’t stick around as stubbornly as it did in the early 2020s , in part because labor-market tightness and government stimulus are no longer pushing the economy to its limits, Waller said.
That could put the Fed in position to cut interest rates later this year not because the economy is faltering, but because inflation will be under control, Waller said.
“I would be supporting ‘good news’ rate cuts later this year” assuming that tariffs level are moderate and inflation and unemployment look healthy, Waller said, according to a published text of his speech.
Stanley Fischer, Groundbreaking Economist and Fed Vice Chair, Dies
Stanley Fischer, one of the most influential economists of recent decades, has died. He was 81. Fischer served as vice chairman of the Federal Reserve from 2014 to 2017.
The Fed’s Targeted Inflation Rate Eased in April
Consumer prices increased by 0.1% last month according to the personal-consumption expenditures price index, the Commerce Department said Friday.
ECB Set to Cut Rates Again and Keep Options Open
The European Central Bank is set to lower its key interest rate Thursday, a cut that investors expect to be among the last in this sequence unless the eurozone economy is threatened by recession.
U.S. Economy Trump Says Steel and Aluminum Tariffs Will Double to 50%
President Trump said he would double tariffs on imported steel , a move he said would bolster the domestic industry and protect U.S. jobs.
Why the U.S. Economy Will Muddle Through Trump’s Tariffs. Probably. U.S.-China Trade Truce Risks Falling Apart Over Rare-Earth Exports China Hits Back Against Trump Claims That It Broke Trade Truce American Consumers Are Still Gloomy on the Economy
American households still felt gloomy about the economy in May, a month when changing tariff policies made it difficult to forecast prices.
Goods Trade Deficit Plummets in April
The U.S. trade deficit for goods shrank substantially in April, as new tariffs weighed on imports. Goods imports fell by 20% to $276.1 billion, while exports rose 3.4% to $188.5 billion, the Commerce Department said.
Mortgage-Market Questions Key to Public Offering for Fannie, Freddie
The Trump administration wants to sell shares in two government-controlled companies that are crucial for getting a mortgage. First it needs to figure out what it wants the mortgage market to look like.
Financial Regulation JPMorgan’s Jamie Dimon Predicts ‘Crack in the Bond Market’
JPMorgan Chase Chief Executive Jamie Dimon delivered a dire warning for the markets , predicting a crisis unless the U.S. takes steps to address its spiraling national debt.
Forward Guidance Monday (all times ET)
9:45 a.m.: U.S. Manufacturing PMI
10 a.m.: ISM Report On Business Manufacturing PMI
10 a.m.: Construction Spending – Construction Put in Place
Monday
10 a.m.: Job Openings & Labor Turnover Survey
10 a.m.: Manufacturers’ Shipments, Inventories & Orders (M3)
11 a.m.: Global Manufacturing PMI
1 p.m.: Peter McColough Series on International Economics event with Federal Reserve Governor Lisa Cook
3:30 p.m.: FRB Dallas President Lorie Logan speaks at Fed Listens: Roundtable with El Paso community leaders event
4 p.m.: Domestic Auto Industry Sales
Commentary Pension Funds Won’t Save the Bond Market
Pension funds are in a healthier financial state than they have been in many years. That is good news for their beneficiaries, but not great for the long-term bond market, or the private-equity industry, Telis Demos writes for The Wall Street Journal.
Only a slice of Americans in private employment these days have the benefit of a corporate defined-benefit retirement plan. Yet corporate pension funds still represent a major force in the markets, with more than $3 trillion in assets, according to Federal Reserve data.
Pension funds have been a driver behind the growth and success of the private, alternative investment industry. And they are key players in the market for corporate and government bonds because they have long future payout obligations that can match those securities’ long duration. So when they start to change what they do, it is a big deal.
Research Trump Aggressively Lobbys Powell for Lower Interest Rates
President Trump has taken an aggressive approach to lobbying Fed Chair Jerome Powell for lower interest rates, imploring him in speeches, private discussions and on social media to ease monetary policy. It’s unusual for presidents to be so forthright, but it’s not at all rare for elected officials in the U.S. and overseas to try to persuade central bankers to lower rates, University of Texas at Austin economics professor Carola Binder tells The Wall Street Journal. “Politicians want control over economic policy, and if you have a system to keep some of that control away from them, it’s just designed to be contentious,” Binder says. The wisdom of central-bank independence lies in removing the temptation for politicians to score quick electoral wins by meddling with rates, she says. – Matt Grossman
G-10 Bond Yields Seen Shifting Lower on Dovish Policy Rate Outlook
The skew for G-10 policy rates leans very dovish through 2026, and this dovish skew suggests that the likely direction of G-10 rates is much lower, Morgan Stanley Research analysts say in a note. They expect the 10-year U.S. Treasury yield to reach 4.00% by the end of 2025 and to just above 3.00% by the end of 2026, they say. With that, U.S. Treasurys are “significantly outperforming” German Bunds, U.K. gilts and Japanese government bonds, according to Morgan Stanley analyst expectations, as the Federal Reserve cuts rates much more than forwards price in 2026, they say. The 10-year U.S. Treasury yield trades flat at 4.418%, according to Tradeweb. – Emese Bartha
Basis Points A retaliatory measure on foreign governments tucked into President Trump’s tax bill has investors on edge . Canada’s economy picked up the pace of growth in the first three months of the year as businesses braced for the disruption of a bruising trade war with the U.S., though domestic activity weakened and hints at what lies in store in the new tariff era. A conservative historian who had flaunted his ties with President Trump won Poland’s presidential election Sunday in a close, high-pressure race that drew the largest turnout since the country shook off Communism in 1989. Factory activity slowed across much of Asia in May as uncertainty over U.S. tariffs continued to cause steep declines in new orders, purchasing managers surveys show. South Korea’s exports fell in May , with shipments to the U.S. shrinking for a second consecutive month as President Trump’s sweeping tariffs hurt global trade. About Us
WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to [[email protected]].
This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
06-02-25 0718ET
