Key Inflation Measure Rises
The Federal Reserve’s key inflation measure rose more than expected in February, with the core personal consumption expenditures (PCE) price index increasing by 0.4% for the month and 2.8% year-over-year. Consumer spending grew by 0.4%, slightly below expectations, while personal income saw a stronger-than-expected rise of 0.8%. Stock market futures and Treasury yields briefly declined following the report, as investors assessed the impact on potential Fed interest rate cuts. With inflation still above the Fed’s 2% target and uncertainty surrounding tariffs, officials are likely to maintain a cautious stance on monetary policy.
Trump Announces Automotive Tariffs
President Donald Trump announced a 25% tariff on all cars not made in the U.S. and certain auto parts, set to take effect in April and May. Auto stocks reacted negatively, with General Motors falling over 7%, while Ford and Stellantis saw smaller declines, though Tesla remained mostly unchanged. The tariffs are expected to increase vehicle prices significantly, with Goldman Sachs estimating cost hikes of $5,000 to $15,000 for imported cars and $3,000 to $8,000 for U.S.-made cars with foreign parts. While the United Auto Workers union supports the move, industry experts warn of potential economic repercussions, urging a careful approach to avoid price hikes and disruptions in the North American supply chain.
Germany’s Fiscal Stimulus Could Spur European Market Growth
Germany’s new fiscal spending package, featuring over €1 trillion in defense and infrastructure spending, is aimed at offsetting uncertainties stemming from the diminishing U.S. security umbrella. The plan proposes reforms to the debt brake—excluding defense spending above 1% of GDP from debt limits—along with a €500 billion fund for infrastructure investment over the next 10 years, and an extension of the debt brake limit for state budgets. If enacted, it would be the largest fiscal stimulus since post-Cold War reunification, potentially helping Germany emerge from a two-year recession while also boosting military investment. For investors, this aggressive fiscal approach could spur long-term growth in European equities, particularly in defense and industrial stocks, even as bonds might face headwinds from increased debt issuances and higher borrowing costs.
