Core Viewpoint - The risk of stagflation in the U.S. economy is re-emerging, with inflation expected to rise and economic growth to slow down in the second half of the year [1][2]. Group 1: Inflation Drivers - Tariff impacts are not fully realized yet, as U.S. companies imported heavily in Q1 to avoid high tariffs, leading to high inventories. Once these inventories are depleted, companies will have to resume imports, likely passing tariff costs onto consumers [2]. - Immigration policies have tightened, leading to labor shortages in key sectors such as construction, agriculture, and elder care, which may push up wage levels and contribute to inflationary pressures [2]. - Moderate fiscal policy expansion is anticipated to contribute 0.4 to 0.5 percentage points to GDP growth over the next 12 months, increasing inflation risks [2]. Group 2: Economic Growth Projections - U.S. GDP growth is projected to be below trend levels, with estimates of 1.3% for this year and 1.2% for next year [3]. Group 3: Long-term Fiscal Concerns - The rapid passage of the "Big and Beautiful" bill, which makes the temporary personal income tax cuts from 2017 permanent, is expected to increase the budget deficit by over $3 trillion over the next decade. This is unusual given the already low unemployment rate [5]. - The U.S. budget deficit is projected to remain above 6% of GDP in the coming years, with government debt reaching about 100% of GDP, and interest payments consuming 3% to 4% of GDP, which is unsustainable [5]. - Changes in the buyer structure of U.S. debt, with reduced purchases from foreign central banks and increased sensitivity from private investors, may lead to greater volatility in bond yields [5]. Group 4: Global Economic Outlook - Other regions are expected to experience slower growth but easing inflation, providing more room for central banks to cut rates. Asian exports are anticipated to decline further in the second half of the year, while Germany's fiscal and infrastructure spending may take time to support economic growth [6]. Group 5: Currency and Monetary Policy - The Nomura team holds a "soft dollar" stance due to stagflation pressures in the U.S., despite current interest rate differentials favoring the U.S. The dollar is considered significantly overvalued, and the persistent trade deficit may limit its performance [7]. - Concerns about the potential appointment of a "shadow Fed chair" by Trump could add uncertainty to monetary policy, as this individual might influence market expectations and complicate the current Fed chair's policy-making [8].

Core Viewpoint - The risk of stagflation in the U.S. economy is re-emerging, with inflation expected to rise and economic growth slowing down in the second half of the year. The Federal Reserve is likely to be cautious regarding interest rate cuts, which may occur later and be smaller than market expectations [2][3]. Group 1: Causes of Rising Inflation - The impact of tariffs is not fully realized yet, as U.S. companies imported significantly in the first quarter to avoid high tariffs, leading to high inventory levels. Once these inventories are depleted, companies will need to import again, potentially passing on tariff costs to consumers [4]. - Stricter immigration policies have led to labor shortages in key sectors such as construction, agriculture, and elder care, which may drive up wage levels and contribute to inflationary pressures [4]. - Moderate fiscal policies are expected to contribute 0.4 to 0.5 percentage points to GDP growth in the next 12 months, increasing inflation risks [4]. Group 2: Economic Growth Projections - U.S. GDP growth is projected to be below trend levels, with estimates of 1.3% for this year and 1.2% for next year [5]. Group 3: Long-term Fiscal Concerns - The rapid passage of the "Big and Beautiful" bill, which makes the 2017 temporary personal income tax cuts permanent, is expected to increase the budget deficit by over $3 trillion in the next decade. This level of fiscal stimulus is unusual given the already low unemployment rate [8]. - The U.S. government debt has reached about 100% of GDP, with interest payments consuming 3% to 4% of GDP, which is unsustainable. The buyer structure of U.S. debt has shifted, with foreign central banks reducing their purchases, leading to increased volatility in bond yields [8]. - Long-term solutions to the debt issue may require fiscal consolidation, which could involve spending cuts, tax increases, or new tax sources. Alternatively, forced purchases of more government bonds or quantitative easing by the Federal Reserve could lead to inflation [8]. Group 4: Global Economic Outlook - Outside the U.S., other regions are expected to experience slower growth but easing inflation, providing more room for central banks to cut rates. Asian exports are anticipated to decline further in the second half of the year, while Germany's fiscal and infrastructure spending may take time to support economic growth [9]. - The Nomura team holds a "soft dollar" stance due to stagflation pressures in the U.S., despite current interest rate differentials favoring the U.S. The dollar is considered significantly overvalued, and the persistent trade deficit will constrain its performance [9]. Group 5: Monetary Policy Uncertainty - The potential for the Federal Reserve to maintain low interest rates could lead to rising inflation, causing foreign investors to lose confidence in U.S. assets, which may result in higher long-term interest rates and a weaker dollar [11]. - The possibility of appointing a "shadow Federal Reserve Chair" by Trump could create additional uncertainty in monetary policy, complicating the current Fed Chair Powell's role and the FOMC's decision-making process [11].

Core Viewpoint - U.S. Treasury Secretary Becerra suggests that Federal Reserve Chairman Powell should resign from the Board of Governors when his term as chairman ends in May 2026 to avoid market confusion [1] Group 1: Federal Reserve Leadership - Becerra emphasizes that traditionally, the Fed chair resigns from the Board upon leaving the chair position, indicating that Powell's potential continued presence could lead to market chaos [1] - Powell's current term as a Fed governor extends until January 2028, which raises questions about his future role after his chairmanship ends [1] - The process for nominating the next Fed chair has already begun, with many strong candidates both inside and outside the Fed [1]

Core Viewpoint - President Trump is pressuring the Federal Reserve to lower interest rates and has called for an investigation into Chairman Powell, suggesting he should resign due to alleged misleading testimony [1][3][4]. Group 1: Pressure on the Federal Reserve - Trump has repeatedly criticized Powell for not lowering interest rates, claiming that the government is incurring high interest costs due to the Fed's inaction [4][6]. - The Federal Reserve has maintained its benchmark interest rate since December, despite Trump's pressure, with Powell stating that future rate cuts depend on upcoming economic data [6][8]. Group 2: Allegations Against Powell - The Director of the Federal Housing Finance Agency, Bill Pulte, has called for Congress to investigate Powell, accusing him of providing deceptive testimony regarding the Fed's headquarters renovation costs [3][4]. - Powell has defended himself against these allegations, stating that the reports about the renovation were misleading and inaccurate [3][6]. Group 3: Potential Successors for Powell - Trump has mentioned having "two or three candidates" in mind to replace Powell as Fed Chairman, although he has not disclosed their identities [9][10]. - Speculation includes former Fed Governor Kevin Walsh and current White House officials, but the White House has not confirmed any names [10][11]. Group 4: Impact on Market and Dollar - The potential for a "shadow Fed Chair" could undermine the independence of the Federal Reserve and create market instability due to conflicting policy signals [13][15]. - Concerns over the U.S. economic slowdown and rising debt interest costs have led to a significant depreciation of the dollar, which has fallen over 12% against a basket of currencies since January [19].

Core Points - The article discusses the abrupt termination of trade negotiations between the U.S. and Canada by Trump, coinciding with his call for Fed Chair Powell to resign, highlighting escalating trade tensions and political interference in economic matters [1][21][34] Trade Relations - Canada plans to implement a 3% digital services tax on U.S. tech companies, expected to generate approximately CAD 2 billion annually, which Trump perceives as a direct attack on the U.S. [3][6] - Trump's reaction included a complete halt to trade negotiations and a threat to impose tariffs on Canadian goods within a week, leading to a significant drop in the Canadian dollar [5][6] - Canada has previously responded to U.S. tariffs by imposing a 25% tariff on U.S. automobiles not compliant with the USMCA and has also levied tariffs on U.S. goods worth about $43 billion [11][13] Economic Impact - The breakdown of U.S.-Canada trade talks is expected to negatively impact the Canadian economy, particularly the labor market, as indicated by Barclays forex strategist Skylar Montgomery Koning [7] - The Canadian trucking industry, which relies on cross-border trade for about 70% of its cargo, is experiencing a decline in orders, leading to layoffs [19] Federal Reserve Dynamics - Trump has expressed dissatisfaction with Powell's leadership, labeling him as "stupid" and "stubborn," and indicated a preference for a successor who is more inclined to lower interest rates [21][23] - Powell's term has 11 months remaining, but Trump may announce a replacement sooner, which could undermine the Fed's independence and create uncertainty in U.S. monetary policy [25][36] Global Economic Uncertainty - The escalation of the U.S.-Canada trade conflict could disrupt global supply chains, leading to shortages and price increases, affecting U.S. exports and employment [34][36] - Other countries, including the EU and Mexico, may respond with their own tariffs, further intensifying global trade tensions [36][38]

Market Movements - US stock index futures are all up, with Dow futures rising by 0.30%, S&P 500 futures up by 0.27%, and Nasdaq futures increasing by 0.31% [1] - European indices also show positive movement, with Germany's DAX up by 0.77%, UK's FTSE 100 up by 0.56%, France's CAC 40 up by 1.30%, and the Euro Stoxx 50 up by 0.93% [2][3] Commodity Prices - WTI crude oil has increased by 0.34%, priced at $65.46 per barrel, while Brent crude oil is up by 0.21%, priced at $66.83 per barrel [4] Economic Indicators - The core PCE price index for May is expected to show a month-on-month increase of 0.1%, consistent with April's figures, while the year-on-year increase is projected to rise to 2.6% from April's 2.5% [5] - Recent comments from Federal Reserve officials indicate a cautious approach towards potential interest rate cuts, with emphasis on waiting for clearer economic signals [6] Corporate News - Nike reported Q4 revenue of $11.1 billion, a 12% year-on-year decline, but exceeded market expectations of $10.72 billion. The company anticipates a smaller revenue decline in Q1 than analysts predicted [9] - Tesla's CEO Elon Musk has dismissed the head of North American and European operations amid declining sales, particularly in Europe, where sales have dropped by approximately 28% year-on-year [10] - Toyota achieved record global sales of approximately 956,000 vehicles in May, marking an 8% year-on-year increase, despite challenges from tariffs [11] - Boeing's proposed acquisition of Spirit AeroSystems is under scrutiny by the UK competition regulator, assessing potential impacts on market competition [12] - CoreWeave is attempting to acquire Core Scientific to expand its cloud computing capabilities, following a previous unsuccessful attempt [13]

Group 1 - The decision regarding the nomination of the next Federal Reserve Chairman is not urgent, according to White House sources, despite President Trump's potential candidates [1] - The dollar index fell by 0.7% to levels seen in early 2022, with the dollar depreciating over 10% this year [1] - Analysts suggest that the early announcement of the Fed Chairman candidate could be a factor contributing to the dollar's decline [1] Group 2 - There is a divergence in views within the Federal Reserve, with some members supporting a rate cut as early as July, contrasting with Chairman Powell's stance of maintaining current rates [2] - The concept of a "shadow Fed Chairman" has been discussed, which could indirectly influence monetary policy [2] - Market volatility indicates that even if the Fed's decision-makers focus on economic data, perceived internal disagreements can impact market reactions [2]

Group 1 - The White House has denied rumors of an imminent replacement for Federal Reserve Chairman Jerome Powell, stating that the decision is not urgent but the President has the authority to change his mind at any time [1] - Powell's term will end in May next year, and if a successor is announced early, it may be perceived as an attempt to establish a "shadow Fed chairman," potentially undermining the Fed's credibility as an independent institution [1] - Following the news, the dollar fell and bond yields dropped as investors reassessed the political risks and potential policy shifts facing the Federal Reserve [1] Group 2 - President Trump has been pressuring Powell for significant interest rate cuts, leading to expectations that he will appoint a more dovish new chairman [2] - Potential candidates for the position include former Fed governor Kevin Warsh, who is seen as politically savvy and has previously advised Trump against firing Powell [2] - Other candidates mentioned are Fed governor Christopher Waller, Treasury Secretary Steven Mnuchin, and White House National Economic Council Director Kevin Hassett [2]

Core Viewpoint - The article indicates that President Trump has not yet decided on a successor for Federal Reserve Chairman Jerome Powell and will not make a decision soon, downplaying the urgency of any potential action [1] Group 1 - A source familiar with the White House review process stated that President Trump has not made a decision regarding the replacement of Jerome Powell [1] - The source emphasized that there will not be a quick decision made by Trump on this matter [1]

Core Viewpoint - President Trump is increasingly dissatisfied with the Federal Reserve's inaction on interest rate cuts, prompting him to consider announcing the next Fed chair candidate as early as September or October [1] Group 1: Potential Candidates for Fed Chair - Trump is considering several candidates for the next Fed chair, including former Fed governor Kevin Warsh, current governor Christopher Waller, National Economic Council director Kevin Hassett, former World Bank president David Malpass, and current Treasury Secretary Scott Bessent [1] - Warsh has a hawkish policy inclination and has criticized the Fed's use of quantitative easing [4] - Waller is the first decision-maker advocating for a rate cut as early as July, believing that tariff-driven inflation is temporary [4][5] Group 2: Fed's Interest Rate Decision Dynamics - There is significant division among Fed officials regarding the timing of interest rate cuts, with some supporting a cut as early as July [2] - Powell has expressed caution regarding rate cuts, indicating that the administration's tariff policies could lead to a temporary rise in inflation, which necessitates a careful approach [2][3] Group 3: Risks of Announcing a New Fed Chair - Announcing a new Fed chair candidate prematurely could undermine the current chair Powell's authority and challenge the Fed's independence [1][5] - Candidates may face pressure to align with Trump's views, risking their credibility and effectiveness if they are seen as merely catering to the president [6]