Morning Bid: Fed Faces Tougher Policy Road Ahead

The U.S. Federal Reserve’s task became more complicated yesterday. Revised data showed second-quarter GDP growth at 3.8%, the fastest pace since Q3 2023. Shortly after, President Donald Trump announced a new round of tariffs — including 100% duties on branded pharmaceuticals and 25% tariffs on heavy-duty trucks.

While details remain uncertain and exemptions are likely, the mix of resilient economic growth and renewed inflationary pressure has tempered expectations for aggressive monetary easing. Markets, which had priced in an 80% probability of a 50-basis-point rate cut by December, now see that likelihood at closer to 60%. Attention is turning to today’s release of PCE inflation data.

Even if rates continue to decline, political uncertainty, fiscal imbalances, and inflation fears could push long-term yields higher. That, according to Joachim Klement of Panmure Liberum, could weigh on the ongoing AI investment boom.

This week also brought a series of speeches from Fed officials, including Chair Jerome Powell, Governor Stephen Miran, and San Francisco Fed President Mary Daly. Meanwhile, Atlanta Fed President Raphael Bostic, speaking on the Market Musings podcast, suggested the Fed should move away from its fixed 2% inflation target in favor of a range, describing the current approach as an “illusion of precision.”

In commodities, Ukrainian drone strikes on Russia’s energy infrastructure continue to draw attention. Ron Bousso of ROI Energy warns that overly effective attacks could provoke a strong response from President Trump.

Elsewhere, the outlook for seaborne coal appears increasingly divided: domestic demand in China, India, and Indonesia remains strong, while international markets show signs of gradual decline, according to Clyde Russell of ROI Asia Commodities.

On renewables, Gavin Maguire of ROI Energy Transition highlights countries beyond China that are likely to shape future global emissions trends.

Finally, in metals, Andy Home of ROI Metals notes that traders are betting the nickel price has reached its bottom, signaling potential stabilization ahead.


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