This is a segment from the Forward Guidance newsletter. To read full editions, subscribe. In the world of macro, the FOMC roadshow has been sidelined as global markets and pundits are squarely focused on Trump’s trade policies and their impacts on the global economy. That creates a state of fragility with a bunch of crosscurrents. Economic activity is grinding to a halt as businesses have trouble making hiring and capital investment decisions without knowing what the outlook will be on tariffs. After some initial tariff frontrunning in January and February, the Philly Fed Manufacturing Index cratered to a multi-year low: Traditionally — as economic activity slows down — you would see a decrease in prices to rebalance economic equilibrium. However, with the looming concern of tariffs, we’re seeing a continued increase in the prices paid for goods (as measured in the Philly Fed report): So that’s growth (economic activity) down, and prices up. That’s a nasty combination for central bankers to deal with. What makes the picture even messier is contrasting this with the other side of the Fed’s dual mandate — the labor market. Initial jobless claims (the highest frequency labor market datapoint we have) continue to signal no meaningful layoffs occurring in the economy right now: To be fair, the labor market is pretty bad for those seeking a new job; but as long as you sit in your current job, there’s no meaningful layoff cycle to be seen right now. If the labor market continues to remain OK-ish as it appears in the current data, there’s no meaningful catalyst on that side of the mandate for the Fed to react dovishly to. We have a current framework of lower growth, a decent labor market, and higher prices (even if short-lived, a one-time price level increase from tariffs and not reflexive embedded inflation). This framework is forcing the Fed to continue to sit on its hands. Fed Chair Jerome Powell took to the podium yesterday and further hit home on this messaging — to the dismay of bulls looking to get the wind in the sails of their struggling bags. An excerpt from his speech: