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Fed maintains rates, projects slower growth and higher inflation…The Federal Reserve held their benchmark interest rate steady for a second straight meeting, though they noted expectations of slower economic growth and higher inflation.
The Federal Open Market Committee voted today to keep the benchmark federal funds rate in a range of 4.25% to 4.5%, indicating it would further slow the pace at which it is reducing its balance sheet. Governor Christopher Waller, who supported holding rates steady, dissented from the decision over the balance sheet move.
“Uncertainty around the economic outlook has increased,” the committee said in an official statement. Officials also removed prior language stating that risks to achieving their employment and inflation goals were roughly in balance.
New rate projections showed a narrow majority of Fed officials anticipate a half a percentage point rate cut this year, implying two quarter point rate reductions, which is the same number as officials estimated when they last issued projections in December.
In their fresh economic forecasts, officials raised the median estimate for core inflation, which excludes volatile food and energy prices, at the end of this year to 2.8%, from 2.5%. Their outlook for 2025 economic growth cooled to 1.75 from 2.1%. Moreover, they raised their estimate for unemployment to 4.4% by the end of the year, up from the 4.3% they reported in December.
The Fed also said that beginning in April it will lower the monthly cap on the amount of Treasuries on its balance sheet that it allows to mature without being reinvested, to $5 billion from $25 billion. It will leave the cap on mortgage backed securities unchanged at $35 billion.
USDA reinstates July cattle report, county-level crop and livestock data…The U.S. Department of Agriculture is reinstating its July cattle inventory report, which it canceled last year due to budget constraints, as well as county-level estimates for U.S. crops and livestock. The cattle report is scheduled for release on July 25. Until last year, the USDA reported on the size of the U.S. cattle herd twice a year, in January and July.
Proposed U.S. port fees on China-built ships choking coal, ag exports…President Trump’s plan to revive U.S. shipbuilding using massive fees on China-linked ships visits to American ports is causing U.S. coal inventories to swell, stoking uncertainty in the embattled agriculture market as exporters struggle to find ships to send goods abroad.
Trump is drafting an executive order that would rely on funding from a U.S. Trade Representative proposal to levy fines of up to $1.5 million on China-made ships or vessels from fleets that include ships made in China.
Those potential port fees have limited the availability of ships needed to move agriculture, energy, mining, construction and manufactured goods to international buyers, according to major U.S. exporters and transportation providers in interviews with Reuters, letters to U.S. officials and comments ahead of USTR hearings next week.
Enacting and implementing those fees could cease exports of U.S. coal within 60 days, putting $130 billion worth of shipments at risk, notes Xcoal Energy & Resources CEO Ernie Thrasher. He also noted the fee structure could add up to 35% to the delivered cost of U.S. coal, making it uncompetitive on the global market.
The American Petroleum Institute also noted the proposed fees could also make it harder to export other energy products like oil, liquefied natural gas and refined fuels.
Bulk agricultural exporters could face an additional $372 million to $930 million in annual transportation costs from the fees, according to the American Farm Bureau Federation, which would represent substantial margin loss in global markets where competitiveness is often determined by mere pennies a bushel.
Russian grain exports plummet in February…Russia’s grain exports plunged by 52.3% year-over-year in February to 2.4 MMT, according to shipping data from industry sources. Russia, the world’s top wheat exporter, shipped grain to global markets at a record pace in the first part of the 2024-25 marketing-year, which began on July 1 last year, but a February export quota and bad weather led to a sharp decline in exports. Total seaborne exports have reached nearly 37.7 MMT this season, down 4.1% compared to year-ago.
For the 2024-25 crop year, Russia’s grain exports will fall by one-fifth from the prior season’s record to 55-57 MMT, after the country’s harvest was affected by bad weather, according to the Agriculture Ministry.