Central Bankers Show ‘Full Solidarity’ With Fed’s Powell | Bloomberg Brief 1/13/2026

Bloomberg Brief - January 18, 2024 Summary

Key Concepts:

• Geopolitical Risk: Rising tensions with Iran and potential trade war escalation with China.
• CPI Data: December Consumer Price Index release and its potential impact on Federal Reserve policy.
• Bank Earnings: JPMorgan Chase’s Q4 earnings report and its implications for the financial sector.
• Fed Independence: Concerns surrounding political interference in the Federal Reserve’s operations.
• Rare Earths: US efforts to reduce reliance on Chinese rare earth dominance through potential trade agreements.
• Airline Earnings: Delta Airlines’ Q4 earnings report and industry outlook.

1. Market Overview & Geopolitical Tensions

The broadcast began with a snapshot of pre-market trading, noting lower futures despite a recent three-day record streak for the S&P 500 (up 0.2% yesterday). Bond yields were slightly rising (10-year at 4.193%, 2-year at 4.355%), and oil prices increased (WTI above $60, Brent above $64) due to escalating tensions with Iran. President Trump announced a potential 25% tariff on goods from countries doing business with Iran, sparking concerns about disrupting the US-China trade agreement. China’s embassy in Washington responded with accusations of “coercion” and vowed to protect its rights. The potential impact extends beyond China to include India, the UAE, Turkey, and the EU. Brendan Murray (Bloomberg) clarified that while the tariff threat is “effective immediately” according to Trump, its actual implementation remains uncertain, mirroring past instances with Venezuela and India (50% tariff due to ties with Russian oil).

2. Bank Earnings & Regulatory Concerns

JPMorgan Chase’s earnings report kicked off bank earnings season, with a particular focus on its credit card business following President Trump’s calls for interest rate caps. Charlie Wells (Bloomberg) highlighted the strong fundamentals of the banking sector, citing a robust deal pipeline and growth in equity trading (up 31%). However, expense management is a key concern, as evidenced by recent job cuts at Citi (1000 jobs) and BlackRock (around 250 positions). The broadcast also addressed concerns about Federal Reserve independence, triggered by accusations from Fed Chair Powell that the Department of Justice launched an investigation in a politically motivated manner. Republican senators, including Thom Tillis, Dave McCormick, and John Thune, expressed opposition to the investigation and warned that it could complicate the confirmation of future Fed nominees. Alistair Bull (Bloomberg) noted that the DOJ’s response is crucial, and a potential off-ramp could involve releasing documents demonstrating no wrongdoing.

3. Global Trade & Strategic Alliances

The discussion extended to efforts to counter China’s dominance in rare earth minerals. Scott Bessant is leading a US initiative to form a trading club with European, Australian, and South Korean nations to secure alternative rare earth supplies. This aims to “derisk” from dependence on China and ensure access to essential materials for high-tech manufacturing. The potential legality and implementation of such a club were raised. Additionally, Japan’s Prime Minister Fumio Kishida is considering calling a snap election to secure a mandate for her hawkish diplomacy and economic stimulus policies, potentially impacting the yen (currently at 158.9 against the US dollar) and Japanese government bonds. Rosalind Matheson (Bloomberg) explained that a stronger mandate would allow Kishida to pursue her policies more aggressively.

4. Economic Data & Inflation Outlook

Abigail Watts (UBS) predicted an above-consensus December CPI reading, anticipating the strongest monthly increase since January. She attributed this to distortions from the timing of the CPI sampling and a catch-up effect from November’s potentially weaker data. Watts expects the annual inflation rate to rise from 2.6% to 2.9%. While acknowledging the weaker-than-expected nonfarm payrolls data, she believes the Federal Reserve may delay interest rate cuts until Q3, contingent on future inflation data. She emphasized the importance of monitoring fiscal policy, particularly tax refunds, as a potential driver of economic growth.

5. Other Notable News

• Morgan Stanley Bonuses: Morgan Stanley is increasing bonuses for its Asian bankers by approximately 20% following a record $0 billion in regional revenue.
• China ETF Market Scrutiny: Chinese regulators are scrutinizing the trading patterns of foreign firms in its $859 billion ETF market.
• Orsted Wind Farm: A US judge ruled that Orsted can resume work on a wind farm off the coast of Rhode Island, reversing a suspension by the Trump administration.
• UBS CEO Succession: UBS CEO Sergio Ermotti plans to step down in April 2027 after leading the integration of Credit Suisse.
• Delta Airlines Earnings: Delta Airlines is the first major carrier to report earnings, with expectations of an upbeat forecast.
• Central Bank Solidarity: Eleven central banks, including the ECB, Riksbank, and RBA, issued a joint statement in support of Fed Chair Jerome Powell and emphasizing the importance of central bank independence.

Notable Quotes:

• President Trump: “Effective immediately, any country doing business with Iran will pay a tariff of 25% on any and all business being done with the US.”
• Alistair Bull (Bloomberg): “The ball is in the Department of Justice's court… the narrative has been framed by Jerome Powell. He’s come out and said that this is an assault on the independence of the central bank.”
• Abigail Watts (UBS): “We’re expecting a 44 basis point rise in the CPI and that should lead to the annual rate of inflation moving up from 2.6% to 2.9% in the December data.”

Synthesis/Conclusion:

The Bloomberg Brief highlighted a complex interplay of geopolitical risks, economic data, and regulatory concerns. Rising tensions with Iran and the potential for trade conflicts are creating market uncertainty. Bank earnings are providing a mixed picture, with strong performance offset by concerns about expense management and regulatory interference. Inflation remains a key focus, and the Federal Reserve’s path forward is contingent on upcoming data releases. The broadcast underscored the importance of monitoring these developments closely as they shape the economic landscape in the coming months.