Economy

This article is an on-site version of our Unhedged newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersThe possibility of a conflict between the incoming Donald Trump administration’s policies and the Federal Reserve’s price stability mandate has been a topic of discussion since before the election. We have long known — in broad, blurry outline — what the new president’s policy aspirations are. Lower taxes, lower immigration, higher tariffs, a smaller current account deficit. Yesterday came the first intimations — again, broad and blurry — of what the central bank response to all of that might be.The open market committee cut its policy rate by a quarter point, as expected. But the rub was not in their action, but in their expectations. The Summary of Economic Projections, last seen back in pre-election September, showed a 50 basis point increase in the anticipated policy rate for the end of next year. It now stands at 3.9 per cent, a bit more than two rate cuts from where we stand today. The expectation for 2025 inflation rose 40 basis points, to 2.5 per cent. More significantly, perhaps, the committee’s uncertainty about inflation increased dramatically. The range of members’ 2025 inflation projections, from lowest to highest, was 30 basis points in September. Now it’s 80.The natural question, faced with this change, is how much the election altered the committee’s outlook. Several journalists asked away, focusing on the inflationary impact of tariffs. Powell’s answer, somewhat disconcertingly, had two distinct aspects. First he said this:This is not a question that’s in front of us right now. We don’t know when we will face that question. What the committee is doing right now is discussing pathways and understanding the ways in which tariffs can drive inflation in the economy . . . that puts us in [a] position, when we do see what the actual policies are, to make a more careful, thoughtful assessment of what might be the right policy responseThis sounds sensible. Then he said this:Some people [on the committee] did take a very preliminary step and start to incorporate highly conditional estimates of economic effects of policy into their forecasts at this meeting and said so in the meeting. Some people said that they didn’t do so, and some people didn’t say whether they did or not …Some did identify policy uncertainty [as a reason] for writing down more uncertainty about inflation. And the point about uncertainty is its kind of common sense thinking that when the path is more uncertain you go a little bit slower. It’s not unlike driving on a foggy night or walking into a dark room full of furniture.In the letter, the two statements are consistent. Together they say that while possible Trump policies did not enter into the rate decision, they did enter into the SEP. In spirit, though, they are inconsistent, because in central banking, expectations are policy. This was visible in the market reaction yesterday. Faced with a Fed that is worried about Trumpy inflation, and thinking more hawkishly as a result, the S&P 500 fell 3 per cent, two-year bonds rose 14 basis points, and 10-year bonds rose 10 basis points. Small-cap stocks, darlings of the Trump Trade, fell hard and have now given up all their post-election gains:Have the Fed members made a mistake, thinking they know what Trump’s policies will be, and how they will impact the rate trajectory? And in so doing, did they show some political bias? On both fronts, I’d say they probably have. Everyone seems to think they know what the second Trump administration will do. But the president’s mercurial leadership style, his heterogenous cabinet picks, and his party’s narrow margins of control in both houses of Congress mean confidence on this topic is foolish. Arguments that tariff and immigration policy must cause persistent inflation are a bit wobbly, compound the overconfidence problem, and smell of motivated reasoning.Before condemning Powell and his colleagues, however, remember three things.One: the committee also had good non-political reasons to increase their inflation expectations. The last two consumer price index inflation readings have been discouraging, and growth has continued to come in hotter than expected. Indeed, plenty of pundits have argued even today’s cut was a mistake (imagine the market reaction if the committee had stood pat!). Some rewriting of the 2025 expectations was already in order; don’t overstate the political aspect.Second: no plan survives contact with the enemy. We are still in the realm of expectations. The real battle between Trump fiscal policy and Fed monetary policy has not been joined, and when it is, the picture will change. It need not be bloody. Chair Paul Volcker and president Ronald Reagan had a lively tug of war in the 1980s, and the country was just fine.Finally: do not overread the market’s reaction. Stock valuations are historically high and the bull market has been running for a long time. Expectations that the Fed will cut rates next year are entrenched. In this environment, it will not take much of an increase in rates expectations to whipsaw the stock market. That is something Trump and Powell will both have to keep in mind.Cars and 2025 We promised our 2025 predictions would come today, but in the face of yesterday’s consequential Federal Reserve meeting, they will have to wait. We did get a lot of responses on people’s favourite cars, though. They showed Unhedged readers are a sundry bunch. One reader emailed simply “Ferrari 286 GTB”; another talked lovingly of a 2008 Toyota Rav4. Some kept it current with electric cars from Tesla and BMW; others went old school with the Volkswagen T4 camper van or the now-extinct Lancia Kappa. The automobile industry is struggling, but people sure do love their cars. Email us with the worst one you’ve ever owned: robert.armstrong@ft.com and aiden.reiter@ft.com.One good watchFrom Frankfurt, with love.FT Unhedged podcastCan’t get enough of Unhedged? Listen to our new podcast, for a 15-minute dive into the latest markets news and financial headlines, twice a week. Catch up on past editions of the newsletter here.Recommended newsletters for youDue Diligence — Top stories from the world of corporate finance. Sign up hereFree Lunch — Your guide to the global economic policy debate. Sign up here More

Donald Trump is still weeks away from taking the oath of office, but the president-elect’s vow to enact a sweeping policy overhaul is already looming large over the Federal Reserve.The US central bank trimmed interest rates by a quarter of a percentage point on Wednesday in its third consecutive reduction, but officials’ projections for half as many rate cuts next year as they had forecast in September triggered big market swings.Fed chair Jay Powell said that while the more cautious outlook for rate cuts was prompted by signs that progress on getting inflation down to the central bank’s 2 per cent target had stalled, some officials had also begun to include assumptions about Trump’s policies in their forecasts.“Pretty much every prong of [Trump’s] policy looks like it’s going to threaten their mandate,” said Julia Coronado, a former Fed economist who now runs MacroPolicy Perspectives, referring to the central bank’s aims to keep inflation low and stable and maintain a healthy labour market.Coronado added that the Fed’s message was clear: “We are not in Trump 1.0 any more. This is Trump 2.0, we have above-target inflation and we need to get ahead of this.”Trump’s threats to impose tariffs, carry out mass deportations and slash taxes and regulations could have wide-ranging economic implications, said investors and analysts. Some economists are concerned that the overhaul will lead to higher inflation, lower growth and more volatility.Economists acknowledged the groundwork for a shift to a more gradual pace of rate cuts next year was already taking shape before Trump’s election win in early November. Inflation readings in September and October came in higher than anticipated, supplanting fears about the labour market’s health that had bubbled over the summer.The Fed’s preferred inflation measure, the core personal consumption expenditures price index, rose at an annual rate of 2.8 per cent in October and is forecast to have accelerated to 2.9 per cent in November, according to a FactSet survey of economists.Powell noted these shifts on Wednesday and also made clear that after December’s cut, the Fed had entered a “new phase” in which it needed to be much more “cautious” about its actions given interest rates were now closer to officials’ best estimates of a “neutral” level that neither slows nor accelerates growth.While the Fed’s policy settings were still “meaningfully restrictive”, Powell made clear that more cuts would depend on further progress on inflation.But Powell also signalled a marked shift in the way the Fed was considering the changes that Trump has vowed to enact, diverging from his stance in the aftermath of November’s election that the Fed would not “speculate” or “assume” anything about what the next administration would do.This was most visible in the revised set of officials’ economic projections published by the central bank alongside the rate decision. Rather than a full percentage point worth of reductions for next year, which was forecast in September, most officials projected only half a point. They also scaled back their estimates for 2026 and 2027.Officials also sharply raised their median forecasts for inflation. The “central tendency” for the core PCE price index — which excludes the three highest and three lowest estimates — jumped to a range of 2.5-2.7 per cent. That is up from 2.1-2.3 per cent in September.The scale of adjustments cascaded through financial markets on Wednesday, sending the S&P 500 index down nearly 3 per cent, pushing the dollar to a two-year high and elevating yields on US government debt. Asian equities came under pressure early on Thursday.Dean Maki, chief economist at hedge fund Point72, called the Fed’s shift “striking” and said it was rooted in speculation about Trump. “It’s hard to see why they would have expected so much higher inflation if they are not incorporating things like tariffs into the forecasts.”JPMorgan strategists echoed that sentiment. “Below the surface, we can see tariff concerns could be seeping through to [the] Fed’s psyche,” they said.Speaking to reporters on Wednesday, Powell acknowledged that some officials had taken a “very preliminary step” to incorporate “highly conditional estimates of economic effects of policies into their forecasts at this meeting”.Asked directly about how the Fed was thinking about its policy response to tariffs, the chair said the committee was “discussing pathways” and working to better understand how such policies would affect the economy.“It puts us in position, when we finally do see what the actual policies are, to make a more careful, thoughtful assessment of what might be the appropriate policy response,” he said.A cut at the Fed’s next meeting, in January, was “absolutely off the table”, said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, citing the inclusion of language in the policy statement that has been used in the past to signal a prolonged pause.Derek Tang, an economist at research group LHMeyer, expects the Fed to hold off on additional cuts until June and eventually deliver a total of three for the year. That forecast hinges on inflation expectations staying in check.Tang said he was also worried about the labour market weakening more than expected should Trump’s policies dent growth, which could create complications for the Fed.“People may be underweighting the scenario where the labour market does weaken and the Fed is now caught between higher inflation but also trying to stop the economy from entering a recession,” said Tang. “It’s a double whammy.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.As precious gifts go, olive oil, gallium and container ships don’t quite hold the same festive symbolism as gold, frankincense and myrrh. Yet as Christmas approaches, let us appreciate the true magi of globalisation in 2024: consumer rights activists from Spain, mineral dealers from Japan and shipbuilders from China.The year has seen the usual stream of warnings that trade is about to collapse. There are fewer follow-up stories detailing how systems coped, how markets reacted and how problems moderated or disappeared. I may repeatedly harp on this particular theme but someone has to be a counterweight to the catastrophising about globalisation, and it turns out it’s me.So let’s have a look at the crises that didn’t happen or eased this year. First up are the sharp increases in global olive oil prices, which more than doubled between mid-2022 and mid-2023, after droughts in Europe. Spain, the world’s largest exporter and one of its biggest consumers of olive oil, where it goes by the name of oro líquido (liquid gold), was understandably distressed.What happened? Imports to Spain from Tunisia increased. Households modified their habits, switching from more expensive virgin to less expensive non-virgin blended types, or to sunflower oil. The consumer group FACUA put pressure on supermarkets by running a daily price comparator. Mercadona, the bellwether supermarket chain, repeatedly cut prices from July despite global markets remaining tight. A litre of its standard oil has now fallen from €8 to less than €6. The government helped by cutting VAT on olive oil sales.Some content could not load. Check your internet connection or browser settings.Food costs pushed Spanish consumer price inflation higher than in some other European countries, but it’s a rich country and dearer oil did not exactly throw millions of households into abject poverty. Olive oil production is recovering from the drought and is expected to increase by a third in the 2024-25 harvest. By all accounts Spanish cuisine has, happily, survived.Of course, climate change threatens crop production worldwide. It’s a colossal failure by humanity not to have addressed it. But its effects are mitigated by open markets and smart scientists. The threat of a global food crisis after Russia’s full-scale invasion of Ukraine in 2022 receded further this year, thanks to more bounteous harvests. Crop scientists and innovative agriculture have delivered consistently rising yields.So, what other catastrophes were avoided? Last year ended with trade economists frantically googling “Houthi” to discover exactly who had bunged up the Suez Canal and driven up freight rates. As of this week, according to the specialist news service TradeWinds, the Houthis are reportedly considering running seminars on shipping security — astonishing brass neck if true.More importantly, having initially fallen back early in the year, freight costs then shot higher again in the summer. The increase triggered a fresh round of the kind of warnings last seen in the Covid days of 2021 and 2022 that global shipping would permanently be affected. In the event, shipping industry experts say, it turned out to be a one-off burst of companies rebuilding inventories. Freight rates have fallen since, despite the global volume of containers being carried increasing.Some content could not load. Check your internet connection or browser settings.Some content could not load. Check your internet connection or browser settings.The shipping industry is bracing itself for the possibility of a big reduction in China-US traffic if president-elect Donald Trump imposes high tariffs on imports from China. But the experience of his first term was those imports being replaced by goods from south-east Asian countries such as Vietnam, often adding another stage in the value chain. Shipping lines would have to adjust their routes, originating more journeys in Vietnam, but that’s a question of redirecting the same ships, not a fundamental rewiring of global trade. In any case, a stream of container vessels ordered in recent years, mainly from Chinese shipyards, has started to come into service.Finally, another chapter of a long-running saga was written in 2024 by more announcements of restrictions on critical minerals, apparently designed to hobble strategic rivals by depriving their industries of key inputs. Two weeks ago, China said it was banning exports of antimony, germanium and gallium to the US, tightening up on restrictions it imposed last year.The problem with this as a threat is that, according to customs data, the US has this year already essentially stopped importing germanium and gallium from China. And yet the American semiconductor producers that use the minerals haven’t noticeably ground to a halt. China continues to export to other countries, notably including Germany and Japan, suggesting that gallium ends up in the US via one route or another.In any case, germanium and gallium aren’t uniquely found in nature in China: they’re extracted from zinc and aluminium ores. If prices are high enough, supply will come. The mining company Rio Tinto is looking to set up gallium production in Canada. There will no doubt be more globalisation scares next year, some of them well founded. Of course Trump’s accession to the White House massively increases the genuine threat from governments’ interference in the trading system. But the countervailing forces remain, having had another good year. High prices induce more supply. Blocks on trade spur the creation of new routes. Consumers in high-income countries can absorb shocks. Flexible economies can adjust. All is not lost, and Christmas is coming up. God bless us, every one.alan.beattie@ft.com More

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SINGAPORE (Reuters) – The dollar flirted with a two-year peak on Thursday after the Federal Reserve signalled a slower pace of rate cuts in 2025, while the yen slid to a one-month low ahead of a policy decision by the Bank of Japan (BOJ) later in the day.The hawkish tilt from Fed Chair Jerome Powell and his team sent traders heavily dialling back on easing expectations next year and in turn sparked a broad dollar rally, sending currencies like the Swiss franc, the Canadian dollar and the South Korean won tumbling to milestone lows in early Asia trade on Thursday.”We think (the) decision marks the start of an extended pause from the FOMC, even if it is a little too early to say this explicitly,” said Nick Rees, senior FX market analyst at Monex Europe.”We now expect U.S. rates to stay on hold, at least through the first half of 2025. If right, then an upward adjustment in market expectations should support dollar upside over the coming months.”The Swissie bottomed at a five-month trough of 0.90215 per dollar, while the Canadian dollar sank to its lowest in over four years at 1.44655 per U.S. dollar.The won tumbled to its weakest level in 15 years.In stark contrast, the dollar index steadied at 108.15, near Thursday’s two-year top of 108.27.Powell said on Wednesday more reductions in borrowing costs now hinge on further progress in lowering stubbornly high inflation, with his explicit – and repeated – references to the need for caution from here on jolting markets globally.With the Fed’s final policy meeting of the year out of the way, focus now turns to those of the BOJ and the Bank of England (BoE) concluding later on Thursday, where both are expected to stand pat on rates.The yen sank to a one-month low of 154.88 per dollar ahead of the outcome, extending its 0.84% fall in the previous session.A more measured pace of Fed cuts next year is set to keep rate differentials between the U.S. and Japan wide for some time to come and the yen under pressure.”We expect that the BOJ will stand pat at the December meeting. Not because it can afford to pause and assess. But rather because it cannot afford to hike prematurely at this juncture,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho (NYSE:MFG) Bank.”Despite sticky inflation, household confidence remains fragile. Crucially, rate hikes ahead of Trump 2.0 tariffs threaten to amplify potential demand shocks.”The euro meanwhile rose 0.18% to $1.0370, nursing its 1.34% drop in the previous session. Sterling was pinned near a three-week low at $1.25775.Down Under, the Aussie fell to its lowest in over two years at $0.6200, while the New Zealand dollar bottomed at $0.5614, also its weakest level since October 2022.The kiwi was further pressured by data on Thursday that showed New Zealand’s economy sank into recession in the third quarter, cementing the case for more aggressive rate cuts. More

WASHINGTON (Reuters) – President-elect Donald Trump Wednesday disrupted bipartisan efforts to avert a government shutdown as he pressured his fellow Republicans in Congress to reject a stopgap bill to keep the government funded past the end of the week.Trump instead urged Congress to pass legislation that would tie up loose ends before he takes office next month by raising the government’s borrowing authority — a politically difficult task — and extending government funding. He also said lawmakers should strip out elements backed by Democrats, whose support would be necessary for passage.Trump’s attempt to influence Congress more than a month before he takes office could complicate efforts to avert a shutdown that would disrupt everything from air travel to law enforcement in the days leading up to the Dec. 25 Christmas holiday.He warned that Republicans who vote for the current legislative package could have trouble getting re-elected.”Any Republican that would be so stupid as to do this should, and will, be Primaried,” Trump wrote on social media.It would be the first government shutdown since one that extended through December 2018 into 2019, during Trump’s first four-year White House term.Democrats currently hold a majority in the Senate, and Democratic President Joe Biden remains in power until Trump takes office on Jan. 20.The current bill would fund government agencies at current levels and provide $100 billion for disaster relief and $10 billion in farm aid. It also includes a wide range of unrelated provisions, such as a pay raise for lawmakers and a crackdown on hidden hotel fees.Trump said Congress should limit the bill to temporary spending and disaster relief and also raise the national debt ceiling now before it comes to a head next year.”Unless the Democrats terminate or substantially extend the Debt Ceiling now, I will fight ’till the end,” Trump said on his Truth Social site.Congress’s next steps were unclear. Bipartisan agreement will be needed to pass any spending bill through the House of Representatives, where Republicans currently have a 219-211 majority, and the Senate.The stopgap measure is needed because Congress has failed to pass regular spending legislation for the fiscal year that began on Oct. 1. It does not cover benefit programs like Social Security, which continue automatically.The U.S. government has spent more money than it has taken in for more than 20 years, as Democrats have expanded health programs and Republicans have cut taxes. An aging population is projected to push up the cost of retirement and health programs in the years to come. Steadily mounting debt – currently $36 trillion – will force lawmakers to raise the debt ceiling at some point, either now or when borrowing authority runs out next year. Failure to act could shock bond markets with potentially severe economic consequences.MUSK WADES INTrump’s comments came after his ally Elon Musk pressured Congress to reject the bill and said those who back it should be voted out of office.The Tesla (NASDAQ:TSLA) chief executive and world’s richest person, who spent more than $250 million to help Trump get elected, has been tasked by Trump to prune the federal budget.Unless Congress acts, the federal government will run out of money to fund operations on Saturday. The deal reached on Tuesday would have extended funding through March 14.House Republicans huddled in the office of Speaker Mike Johnson late Wednesday to determine their next move. Even before Trump and Musk weighed in, some on the party’s right flank had come out against the bill on the grounds that it spent too much money and included too many unrelated provisions.”The Speaker tried to get the votes and the necessary votes weren’t there. And then we saw what happened on social media, and a lot of folks have, you know, had second thoughts. And so now we got to recalibrate,” Representative Kevin Hern told reporters outside Johnson’s office.Republican Representative Mike Rogers (NYSE:ROG) said changes to the debt ceiling should not be included in the current negotiations.”It’s complicated enough without that,” he told reporters. Democrats said Republicans had walked away from a bipartisan deal.”House Republicans have been ordered to shut down the government and hurt everyday Americans all across this country,” House Democratic Leader Hakeem Jeffries said at a news conference. “House Republicans will now own any harm that is visited upon the American people that results from a government shutdown.” Trump in the past has sometimes voiced support for government shutdowns, and the 2018-2019 one was the longest in U.S. history, lasting 34 days.Musk has emerged as one of the biggest spenders in U.S. politics this year, and his threat could resonate with some Republicans. It likely carries less weight with Democrats who represent solidly liberal areas, or senators from both parties who will not be up for reelection for another six years. Musk tried and failed in November to influence the outcome of the Senate Republicans’ leadership contest.A wide range of government services would be disrupted if Congress does not act before Saturday, including agencies like the Pentagon and NASA that do business with Musk’s companies. More

Morgan Stanely analysts said they no longer expect a 25 basis point cut in January 2025, and that the Fed will only cut rates by 25 basis points each in March and June. “The Fed’s hawkish turn appeared to reflect the incorporation of potential changes to trade, immigration, and fiscal policy by some members that led to a firmer inflation path and, in turn, a firmer policy rate path,” Morgan Stanley analysts wrote in a note. They still expect the Fed to cut rates at least thrice in 2026, but now see a higher terminal rate of 2.6%, compared to prior forecasts of 2.4%. Morgan Stanley’s revised rate outlook comes following similar moves by several of its peers. Goldman Sachs had also signaled earlier this week that it no longer expected a January cut, citing concerns over sticky inflation and strength in the labor market.Traders were seen ramping up bets on a January hold, with a 91.1% chance the Fed will keep rates steady, up from last week’s probability of 75.4%, CME Fedwatch showed.The Fed cut interest rates by 25 basis points on Wednesday, as widely expected. But the central bank struck a more hawkish tone than markets were expecting, as Chair Jerome Powell warned that the Fed will adopt a slower pace of cuts in the coming months. The central bank slashed its rate cut outlook for 2025, and is expected to cut rates only twice in the coming year. Powell flagged strong economic growth in the second half of 2024, and said that downside risks to the labor market had eased, necessitating a slower pace of monetary easing. The incoming Donald Trump administration could also provide more upside risks to inflation, especially amid pledges of expansionary and protectionist policies from the President-elect.  More

WASHINGTON (Reuters) – The world’s economic reckoning with the incoming administration of U.S. President-elect Donald Trump began in earnest this week, with some Federal Reserve officials penciling in estimates for higher inflation and restrictive interest rates, a surprise resignation in Canada over budgeting for prospective tariffs and a hyper focus on a potential status upgrade for bitcoin.The Fed cut rates as expected on Wednesday amid a busy year-end run of central bank meetings from Ottawa and Frankfurt to Tokyo and London that showed officials starting to deal with heightened uncertainty ahead of the world’s largest economy coming under Trump’s leadership early in the new year.Indeed, Fed officials not only dialed back projections for how much further U.S. borrowing costs can fall in the face of stiffer-than-expected inflation, Fed Chair Jerome Powell said some among them were already taking a shot at judging how Trump’s plans such as higher tariffs, lower taxes and a crackdown on immigration might affect their monetary policymaking in the months ahead.The upshot was U.S. central bankers penciled in estimates for higher growth next year than previously estimated, but also notably higher inflation. That left Powell repeatedly citing a need for “caution” about committing to additional rate cuts from here, a tone that triggered a slide in stock prices and a recalibration of market estimates for further easing: Just a single Fed rate cut is now priced in for 2025.”Some people did take a very preliminary step and start to incorporate highly conditional estimates of economic effects of policies into their forecasts at this meeting,” Powell said in response to a question about the degree to which Trump factored into officials’ thinking. “Some people said they didn’t do so, and some people didn’t say whether they did or not, so we have people making a bunch of different approaches to that but some did identify policy uncertainty as one of the reasons for their writing down more uncertainty around inflation.”Ahead of the Fed decision, rates had already been lowered last week by the European Central Bank and Bank of Canada, with both expected to deliver some additional easing in 2025 amid weakening outlooks.While ECB President Christine Lagarde was vague about further rate cuts, she went out of her way to emphasize downside risks to growth, including from prospective trade tensions with the United States under Trump.Meanwhile, rate decisions are due in the coming hours from central banks in Japan, Sweden, Norway and the United Kingdom (TADAWUL:4280). A Reuters survey of Japanese businesses published last week showed nearly three-quarters expect Trump to have a negative effect on their operating environment, something Bank of Japan officials may have to reckon with as the world’s lone developed central bank still trying to tighten policy. UPHEAVALWhile Trump may have been just at the periphery of officials’ thinking at the Fed in Washington, he was a central focus in Ottawa when Canadian Finance Minister Chrystia Freeland quit after clashing with Prime Minister Justin Trudeau on issues including how to handle possible U.S. tariffs under the next U.S. administration.Freeland exited on Monday just hours before she was due to present a fall economic update to parliament. The document showed the minority Liberal government had run up a 2023/24 budget deficit of C$61.9 billion, much higher than predicted.Freeland said the threat of new U.S. tariffs represented a grave danger after Trump last month warned he would issue levies on goods imported from Canada and Mexico of 25% unless the two U.S. neighbors limit the flow of migrants and fentanyl into the U.S.”That means keeping our fiscal powder dry today, so we have the reserves we may need for a tariff war. That means eschewing costly political gimmicks, which we can ill afford,” she wrote in a letter to Trudeau posted on X.Meanwhile, crypto market enthusiasm for Trump’s notion of establishing a strategic reserve of bitcoin was dealt a setback when Powell said the Fed had no legal authority to hold it, adding declaratively that it had no plan to seek a change in the law so that it could.”That’s the kind of thing for Congress to consider, but we are not looking for a law change at the Fed,” Powell said.The remark contributed to a broad slide in crypto-related assets, including a 5% drop in bitcoin itself, its largest decline in more than three months.  More