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Kevin Warsh wasted no time putting his mark on the Federal Reserve, signaling potential changes that could make the central bank less communicative about its outlook, while fellow policymakers appeared to lean more in favor of a potential rate hike.
Warsh slashed the length of the Fed’s policy statement, eliminating any language hinting at future moves. He announced five task forces to reexamine key operations, including communications and management of the balance sheet. Warsh also refrained from submitting a forecast on where he expects rates to be in the future, a signal that the quarterly compilation of forecasts from Fed officials – known as the “dot plot” – may be headed for the scrap heap.
That said, the dot plot did show 9 of 18 members penciling in a rate hike versus zero in March. That “shows the Fed has gone well beyond signalling ‘two-way risk’ on interest rates, to a clearly more hawkish position,” said James Knightley, chief international economist at ING, in a note. That forecast and Warsh’s remarks served to push up short-term Treasury yields and saw the U.S. dollar surge. Fed funds futures traders priced in a roughly 39% probability of a 25 basis point rate hike at its July meeting, up from 8.5% on Tuesday. The probability of at least one hike by year-end rose to 87% from around 60%. At the same time, Warsh emphasized that no committee member feels bound by their projections, joking that forecasts were written with pencils – “those kind with big erasers.” For his part, Warsh has signaled that the Fed is set to move away from the era of “forward guidance,” in which the central bank attempts through statements, forecasts and speeches to guide market expectations on monetary policy.
We took a close look at what an uncertain rate path, particularly one that leans toward the potential for a rate hike, and less forward guidance means for the farm economy. Check it out here: The Warsh Fed era begins: What’s at stake for the fragile farm economy?
Restoring fertilizer flows will be slow going: A full reopening of the Strait of Hormuz is unlikely to result in an immediate rush of fertilizer flows through the waterway, Bloomberg reported, noting that shipowners are waiting for more details to assess the safety of transits. The Gulf region is home to major fertilizer producers, while the strait had accounted for around a third of global trade in urea, before the start of the Iran War. Large volumes of urea and other fertilizer products remain trapped behind the strait.
The report said there are over 40 vessels laden with fertilizer in the strait, according to tanker-tracking data compiled by Bloomberg and Kpler. A trickle of ships have made it out since the conflict began, but weekly exports are down 90% from pre-conflict levels, Kpler data show, with flows falling from nearly 600,000 tons a week in late February to 60,000 tons in early June. Also, fertilizer cargoes are likely to sit behind oil tankers and LNG carriers when it comes to determining the first shipments to move, the report said.
Longtime CME leader Duffy to resign: Terry Duffy, the long-time leader of CME Group who oversaw the CME’s transformation into a global derivatives powerhouse, will step down on March 1. The company said Lynne Fitzpatrick, president and chief financial officer, will take over on March 1. Duffy, 67, has served as chairman since 2002 and CEO since 2016, the Wall Street Journal said – a tenure that saw CME take over its bigger crosstown rival, the Chicago Board of Trade and the New York Mercantile Exchange.
From shock to glut: A recovery in crude supply if the U.S.-Iran peace deal holds and the Strait of Hormuz opens is set to outstrip the recovery in consumption, the International Energy Agency said Thursday in its monthly report. The Paris-based energy watchdog now expects global oil demand to fall by 1.1 million barrels a day this year, versus its its previous forecast of a 420,000-barrel-a-day decline, on the back of high prices and severe supply disruptions, the Wall Street Journal reported. In 2027, demand is forecast to rise by 2 million barrels a day, as trade flows normalize, oil prices fall and the economic outlook improves, the report said, while oil supplies are set to surge by around 8 million barrels a day.
Bayer wins a court battle: Bayer AG prevailed in a legal fight that brought the company a step closer to getting a Missouri state court to approve a $7.25 billion settlement of thousands of lawsuits alleging its Roundup weedkiller caused cancer. A federal judge in St. Louis denied a bid by opponents to derail the settlement by transferring the case to a federal judge in San Francisco who has expressed skepticism over the deal, Bloomberg reported. The ruling sends the settlement back to a state court for approval.
Beef tallow for Brazilian biodiesel? Cargill is studying beef tallow as a potential biodiesel feedstock in Brazil, Reuters reported, citing a trader for the firm. U.S. tariffs on Brazilian beef tallow are at 10% and could rise, which has “opened eyes” to the need to seek out new markets for tallow, the trader said.