Gregory Daco

Top leaders at the Justice Department are rallying behind a US attorney’s legal fight with Federal Reserve Chair Jerome Powell and the White House isn’t opposing it, amping up the clash with major implications for who will lead the central bank. bloomberg.com/news/articles/…

WSJ: Arab governments were furious about Israel’s attack and the U.S. failure to head it off, officials said. They had aggressively lobbied the Trump administration to stop U.S. and Israeli strikes on Iranian energy infrastructure and now feel a target has been put on their backs, they said… America’s Arab allies are now fuming that they don’t seem to have any influence with the Trump administration despite heavy investments of time and money.

The gap between Brent crude and WTI is the widest since 2013, when taking out a couple days of wild price moves in April 2020. Brent is almost $20 more expensive than WTI as the Iran war disproportionately hits European oil supplies.

ECB projects higher inflation & lower growth due to war effects on commodities, real incomes & confidence 🔥 Inflation 2026: 2.6% (was 1.9%) 2027: 2.0% (was 1.8%) 🔥 Core inflation 2026: 2.3% (was 2.2%) 2027: 2.2% (was 1.9%) 📉 GDP 2026: 0.9% (was 1.2%) 2027: 1.3% (was 1.4%)

3⃣ Middle East conflict will have a material impact on near-term inflation through higher energy prices 4⃣ Medium-term impact depends on intensity & duration of the conflict & how energy prices affect consumer prices & economy 5⃣ ECB well positioned to navigate this uncertainty

🇪🇺ECB holds key rates steady at 2% 1⃣ Middle East conflict has made outlook significantly more uncertain, creating upside risks for inflation & downside risks for growth 2⃣ Determined to ensure that inflation stabilises at 2% target in the medium term ecb.europa.eu/press/pr/date/…

European gas prices surge nearly 20% in the wake of the attacks on the Ras Laffan Industrial City

Bank of England "ready to act" "Committee will continue to monitor closely the situation in the Middle East & impact on global energy supply & energy prices. It stands ready to act as necessary to ensure that CPI inflation remains on track to meet 2% target in the medium term"

...The MPC is alert to the increased risk of domestic inflationary pressures through 2nd-round effects in wage and price-setting, the risk of which will be greater the longer higher energy prices persist"

🇬🇧Bank of England voted 9-0 to maintain Bank Rate at 3.75% with hawkish tilt "Conflict in the Middle East has caused a significant increase in global energy & other commodity prices CPI inflation will be higher in near term Alert to increased risk of inflationary pressures"

The national average price of gasoline in the U.S. has reached $3.90 per gallon, while diesel has climbed to $5.09 per gallon. It now looks like gasoline will hit $4/gal next week and could head toward $4.10/gal and beyond.

Goldman Sachs estimates that the Jones Act waiver would reduce refined fue prices in the East Coast by $0.6 to $0.8 per barrel. That's ~0.5% of the cost of a barrel of gasoline (~$120 a barrel)

BREAKING: Qatar says that its Ras Laffan industrial city, home to a massive LNG plan, was hit by Iranian missiles. "Emergency response teams were deployed immediately to contain the resulting fires, as extensive damage has been caused." Note the wording: "extensive damage"

The Fed's SEP revealed higher growth & inflation in 2026, which do not appear entirely sensible or internally consistent Presumably, some officials incorporated + inflation & - growth from Middle East conflict; others anticipate + growth & - inflation from AI-related productivity

Who let the hawks out? linkedin.com/pulse/who-let-…

Breaking down the Fed decision with @joshuahlipton and Stephanie Aliaga on @YahooFinance: « Governor Waller not dissenting is actually a sign that more and more Fed policymakers are going to want to be in that wait-and-see posture, seeing how the data evolve... »

"Governor Waller not dissenting is actually a sign that more and more Fed policymakers are going to want to be in that wait-and-see posture, seeing how the data evolve...," EY economist @GregDaco says.

@colbyLsmith @Claudia_Sahm #Powell "We did talk about alternative scenarios but I wouldn't bring it in here. It is very uncertain. I want to remember that we don't know."

@colbyLsmith @Claudia_Sahm #Powell: "I would reserve the term stagflation for a much more serious set of circumstances. That is not the situation we're in. What we have is some tension between the goals. We're trying to manage our way through it. Nothing like what they faced in the 1970s"

#Fed Chair #Powell: "The implications of developments in the Middle East for US economy are uncertain. We will remain attentive to risks to both sides of the dual mandate..."