Federal Reserve

US hiring slowed sharply in June, and the Federal Reserve's hesitation on rates suddenly looks less like caution and more like patience with a plan. Nonfarm payrolls came in well below expectations, gold climbed on the back of falling rate-hike odds, and Wall Street is now pricing in the kind of easing cycle that makes the last eighteen months of elevated borrowing costs look like a policy overshoot. The tension worth watching: equity markets are still pricing near-perfection, which means the rally is now running ahead of the earnings story. Consumers are already feeling the squeeze from prior tightening, with analysts flagging that real spending power is thinning. For UK investors with dollar-denominated assets, a Fed cut cycle into a softening US economy reprices the growth premium they have been holding onto.

The FTC and NLRB rulings confirm that most US independent agency commissioners serve at presidential pleasure. UK firms with US operations should update their assumptions about antitrust and labour enforcement consistency for the remainder of this administration.

US consumer spending accelerated in May even as inflation hit its highest reading in three years, a combination that looks resilient on the surface but masks a deteriorating real-income picture. When nominal spending rises alongside a three-year inflation peak, households are buying the same goods for more money, not expanding their consumption. The Federal Reserve now faces its most uncomfortable data pairing since 2022: a labour market that has not broken and a price level that has not cooperated. For UK investors with US equity exposure, the implication is straightforward: rate cut pricing that had been drifting toward September should be treated with scepticism until the next PCE print lands.

Alan Greenspan has died at 100. He ran the Federal Reserve for 18 years across five presidencies, gave us 'irrational exuberance' as a concept and near-zero rates as a habit, and spent his final decades defending both decisions against a financial crisis that vindicated his critics more than his supporters. The 'Greenspan put' outlived him and still operates, in spirit if not in name, every time the Fed pivots on market distress.

Fixed income markets are positioning for the strongest consumer price reading in years, with traders betting the data will force the Federal Reserve to stay restrictive longer than expected. The positioning reflects growing concern that inflation could reaccelerate just as new Fed Chair Kevin Warsh settles into the role. Bond prices are already pricing a scenario where rates stay higher, with yields climbing on expectations of a hawkish pivot. The trade hinges on whether incoming data validates fears that the Fed is behind the curve on persistent inflation pressures. A hotter-than-expected print would likely trigger a sharp selloff in duration and cement expectations that rate cuts are off the table for the foreseeable future.

Ed Yardeni is telling the Fed to drop its easing bias or watch the bond market do the tightening for them. With the 2-year yield 25 basis points above the fed funds rate and 30-year bonds crossing 5% for the first time since 2007, markets are already pricing tighter conditions whether the Fed likes it or not. The warning matters because Yardeni's research is widely followed, and his bond vigilante call suggests investors are losing faith in the central bank's inflation-fighting resolve.

The former Fed governor returns to lead monetary policy as inflation pressures persist.

The US Attorney closed the criminal investigation into Jerome Powell last Friday, three days before his likely final meeting as Fed Chair. Powell confirmed he will stay on the Board of Governors until the probe is "fully resolved," giving Kevin Warsh a clean handover around May 15th. The Fed held rates at 3.75% as CPI hit a two-year high of 3.3%, driven by Iran conflict energy costs. With GDP revised down to 0.5% in Q4, Powell faces classic stagflation dynamics on his way out. Markets have priced out any 2026 rate cuts.

US Attorney closed criminal probe into Fed Chair Powell last Friday; he stays on Board of Governors post-transition to Kevin Warsh around May 15th.

The UAE's central bank governor pitched a currency swap arrangement with Treasury Secretary Bessent and Fed officials in Washington, framing it as insurance against worst-case scenarios rather than an immediate bailout. The Strait of Hormuz closure has hammered the country's dollar revenue streams from oil exports, forcing Abu Dhabi to raise $10 billion through private bond placements last month. UAE officials warned they could be forced to use yuan for oil sales if facing dollar shortages, threatening the petrodollar system's stability. Trump indicated Washington was considering the arrangement, which would mark a notable departure from the Fed's traditionally selective swap line policy.

Central banks paused after late-2025 easing cycles, with the Fed holding at 3.5-3.75 percent despite two FOMC members dissenting for cuts. The Bank of Canada kept rates at 2.25 percent, flagging 'bidirectional uncertainty' from energy volatility and US tariff threats. Markets had priced 96-97 percent odds of holds across Fed, BoC, and Bank of Japan decisions this week. The pause reflects elevated inflation risks from Middle East war driving energy prices higher, with Canadian CPI already ticking up to 2.4 percent in December from prior 2.2 percent readings.

Kevin Warsh rejected accusations he would be Trump's 'sock puppet' at the Federal Reserve, defending his potential nomination during Senate questioning.

Trump publicly demanded Jerome Powell step down by May or face termination, escalating his war with the Federal Reserve before he even takes office. Powell's term runs until 2026, and Fed chairs have legal protections against political firing. The threat triggered a 0.3 percent dollar rally as traders bet on more aggressive pro-growth policies. Powell has already signaled he won't resign voluntarily, setting up the first constitutional test of Fed independence since the 1970s.

Taiwan's life insurers have quietly become the world's largest foreign holders of US corporate bonds, owning over $400 billion in American debt. Their hedging strategy shifted dramatically last year, moving from currency swaps to direct dollar holdings as Fed rate cuts became inevitable. This pivot gives Taiwanese insurers more flexibility than European peers locked into expensive hedges. The move also explains why US corporate bond yields have stayed compressed despite rising Treasury rates.