From Yahoo Finance: 2025-03-20 17:03:00

Post-Fed rally fades as global caution mounts. U.S. markets struggle for direction as investors cool optimism around economy and tariff-related price rises. Wall Street’s bullish momentum fizzles out as Treasuries and dollar rise, indicating ‘risk-off’ tone. Gold holds ground at new highs. Warnings from global central banks abound.

Key market moves: Wall Street closes weak, European stocks post steeper losses, New Zealand dollar sinks, UK’s 2-year gilt yield spikes, Gold hovers near record high, Turkey’s central bank hikes rates. Markets take a tempered view on Fed’s economic projections as Powell faces criticism from Trump. Concerns grow over potential impact of reciprocal tariffs on world growth and markets.

Investors weigh transitory vs stagflation battle lines. U.S. financial markets fate hinges on tariff-driven inflation being ‘transitory’ for Fed to cut rates or risk ‘stagflation’. Powell’s base case sparks rally, but revised economic projections suggest higher inflation and slower growth. ‘Team transitory’ may need a lot to align for long-term victory.

Powell’s use of ‘transitory’ raises concerns given past inflation failures. Trump’s 2018 tariffs had temporary impact on inflation. Fed’s credibility at stake if future price hikes prove stickier. Boston Fed paper warns Trump’s proposed tariffs could have deeper, longer-lasting inflation impact. Fed officials cautious. Federal Reserve officials raised their median 2025 inflation outlook and some also raised projections for 2026 and 2027, with 18 out of 19 seeing price risks skewed to the upside. However, growth projections were lowered more than inflation outlooks, with risks still tilted to the downside.

The 2025 growth outlook dropped to 1.7% from 2.1%, marking potential stagflation risks. This could complicate the Fed’s reaction function, with the bar for rate cuts getting higher. Market-moving events tomorrow include data releases from Japan, South Korea, Malaysia, New Zealand, Thailand, UK, and Eurozone, along with speeches from Fed and NY Fed Presidents.

Stagflation risks are on the rise, complicating the Fed’s response function, with potential hurdles for rate cuts. Market-moving events tomorrow include various economic data releases and speeches from Fed officials. Articles recommended for further insight cover topics like tariffs, trade upheaval, and market reactions.

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