The minutes of the Federal Reserve's last meeting noted that fighting inflation remains a priority before considering interest rate cuts. The document highlighted the upside risk to prices and the need for more sustained progress before easing monetary policy. It also warned that factors such as trade and immigration policies could hinder the disinflation process, justifying a more cautious approach. In parallel, the Fed is considering pausing or reducing quantitative tightening until the debt ceiling situation is resolved.
In terms of economic activity, preliminary PMI indices for February showed mixed signals. The manufacturing PMI rose to 51.6 from 51.2, suggesting a slight expansion in the industrial sector. However, the services PMI fell to 49.7 from 52.9, indicating a contraction, while the composite PMI declined to 50.4 from 52.7, reflecting a general slowdown in the economy. Despite these data, stock markets remained solid, with the S&P 500 and Nasdaq posting new all-time highs on Wednesday, buoyed by optimism around corporate earnings. However, downwardly revised consumer data released on Friday cooled the market and the major U.S. indices generated negative returns for the week.
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