Fed Watch – 3/14/2025

The below transcript is a literal translation of the podcast audio that has been machine generated by Notta.

Hello, I’m Brian Beaulieu. Thank you for joining us for this March 14, 2025 edition of Fed Watch.

CPI data came out this week, as did the PPI, as did some employment data, and the whole world seems to be on this recession craze, looking for every little nuance. I was reading today that Jack Daniels reports that NIP sales are up considerably because consumers are pinching pennies. Maybe, maybe they just like to have a NIP when they’re reading the news because the news is truly awful. I think it’s probably investors who are taking a NIP every time they look at what’s going on on Wall Street and seeing that their wealth is being eroded on a daily basis. But maybe it is a recession.

Certainly, we saw that at least one CEO survey has their confidence levels at the lowest we’ve seen since November 2012. The good news is, and I went back and I looked, nothing bad happened following that November 2012 really bad CEO number. So CEOs can get into a funk, we’ll see a slowdown, which is what we anticipate anyways. But as we saw in 2013, that slowdown does not turn into an overt downturn, although that still exists, right, because of the 25% increase in imports we saw in January because of the tariffs.

This is getting to be one of the most damnable times to be an economist. I mean, I started off as an economist under Jimmy Carter way back then, so I’ve seen a lot coming. I’ve seen the Federal Reserve intentionally put our economy into a recession. That was in 1980, Paul Volcker. Thank you, Paul. But I’ve never seen an administration so callous about the state of the economy and what those actions are doing to the economy. It’s really, and I know a lot of history, it’s really unprecedented. So no wonder the Federal Reserve is going to sit on their hands and not decide to move much one way or the other.

The marketplace did though. We saw those interest rates come down a little bit more. The 30-year fixed rate mortgage is at 6.65%. So down a little bit, staying below seven, which is good news. And the US government 10-year bond yield was down to 4.9%. to 7%, so just two basis points above the long-term average, that’s an improvement also. It could have been in response to the PPI producer price index. That one 12 rate of change came down 2.1%. Last month it was 2.9%, so that’s a big drop, but it is still up from where it was one year ago. One year ago, the PPI was only at 1.0% rate of inflation. So it’s more than doubled in the last year. So, I don’t know why you would get particularly excited about that, we are worse off now than we were back then.

Core PPI is at 3.3%, that’s a little bit better than last month where it was running 3.4%, but a year ago, core producer price index was at 2.8%. So we’re still worse off inflation-wise than we were a year ago. Same thing with the CPI, the CPI, all items came in at 2.8% rate of inflation, that’s down from three. Yay, a little bit of breathing room there, but the core is still above 3.8, it’s at 3.1%. And that is an improvement, it’s not where the Fed needs it to be. And we’re all still on pins and needles about what’s gonna be going on with booze and wine and steel and aluminum and everything else.

One thing that caught my eye with the PPI was that we saw quite a jump in ethanol price and gasoline. Not so much, but ethanol had a 2.9% jump, we had commercial electric power go up in price, natural gas to electric utilities was going up in price, jet fuel was up, plastic materials were also up. So we’re seeing some energy push on these materials and that’s something to keep an eye on.

We updated our food dashboard. And that’s, it’s too soon to see any definitive trends, but once you know that we’re watching that in terms of the producer price index and the consumer price index and the import numbers from Canada and Mexico, nothing definitive to report there.

Still a mixed view, lock these interest rates, lock and load folks. And we’re still thinking all this noise, this chaos dissipates as we round the bend in the middle of this year that we should have all this tariffs stuff solidified. At least we just need to know, the world needs to know what the rules are. And then we can go about laying plans, confidence comes back, et cetera.

Just hang in there. keep running your businesses the way you need to run your businesses to meet customer demand and the demand is going to get stronger as we go through this year. Thanks for watching this edition of Fed Watch. Happy Pi day.