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RBA minutes flag material shift in inflation risks
Minutes from the Reserve Bank of Australia’s February meeting show policymakers concluded that risks to inflation and employment had “shifted materially”, prompting a 25 basis point rate increase while reinforcing a tightening bias without pre-committing to further action. The Board judged that, without a policy response, inflation would likely remain above the 2–3% target band for an extended period. Data since the prior meeting had generally surprised to the upside, reinforcing concerns that price pressures were more persistent and broad-based than previously expected. The cash rate was lifted by 25 basis points to 3.85%. While members discussed the option of holding rates at 3.60%, they agreed that a hike represented the stronger policy response given the evolving risk profile. The Board's decision was unanimous. The meeting minutes noted: "The forecast for inflation had been revised materially higher compared with that in the November Statement on Monetary Policy (which itself was higher than in the August Statement). "The central projection for trimmed mean inflation now peaked at 3.7 per cent in mid-2026, with headline inflation at 4.2 per cent around that time (reflecting the ending of electricity rebates)
Outlook
S&P Global’s top sustainability trends shaping 2026
Sustainability in 2026 is set to be defined by a balancing act between near-term economic and political pressures and longer-term environmental and social risks. According to S&P Global's Top 10 Sustainability Trends to Watch in 2026, businesses, governments and investors are adjusting strategies to reflect a more fragmented policy landscape, intensifying climate impacts and the rapid expansion of energy- and resource-intensive technologies such as artificial intelligence. A central theme is the shift towards a more pragmatic framing of sustainability. Corporations are increasingly linking environmental and social initiatives to risk management, operational resilience and profitability, rather than relying solely on climate or ESG narratives. This evolution comes as political cycles, regulatory divergence and economic uncertainty complicate long-term planning, especially for global firms operating across multiple jurisdictions.Geopolitics and fragmentationGlobal coordination on sustainability is weakening as multilateral approaches give way to more regional and national strategies. Divergent energy and climate policies among major economies, particularly the United States and China, are shaping trade flows, technology supply
Outlook
US budget deficit set to grow in 2026: CBO
The United States’ budget deficit will grow in fiscal 2026, the Congressional Budget Office (CBO) has projected. The deficit is set to be US$1.853 trillion, per the CBO’s forecast, widening from fiscal 2025’s $1.775 trillion. This is around 5.8% of the U.S.’ gross domestic product, a similar ratio to the previous year. Since the CBO’s previous forecast in January 2025, “three major developments have affected CBO's baseline budget and economic projections: the 2025 reconciliation act [formerly known as the One Big Beautiful Bill Act], higher tariffs, and lower immigration,” wrote CBO director Phill Swagel. The 2025 spending bill raised projected deficits by $4.7 trillion over the next decade, while lower immigration would lift deficits by $500 billion. The increase in tariffs would cut expected deficits by $3 trillion. Deficits from fiscal 2026 to 2035 are forecast to total $23.1 trillion, rising 6% from the CBO’s projection last year. In fiscal 2036, the deficit would reach $3.1 trillion and represent 6.7% of GDP. “Those sustained large deficits are historically unusual, given that the unemployment rate is projected to remain below 5 percent,” wrote Swagel. Revenues would remain largely stable as a percentage of
Outlook
Fed’s Miran defends Trump tariff impact
Federal Reserve Governor Stephen Miran has defended the Trump administration’s trade tariff policy, arguing the economic impact has been less severe than widely feared and that foreign firms, rather than American consumers, are bearing much of the cost. Speaking on Monday at the Boston University Questrom School of Business, Miran said concerns that the surge in import taxes at the start of President Donald Trump’s second term would significantly damage the United States economy have not materialised. “I think the world has been coming in my direction on a number of issues,” Miran said, referring to earlier warnings about the potential fallout from the administration’s trade actions. He noted that, at the outset of the second Trump administration, there were widespread expectations that the escalation in tariffs would weigh heavily on growth. However, he argued that assessments have shifted over time. Miran’s comments appeared to diverge from a substantial body of economic research indicating that U.S. consumers have absorbed much of the cost of higher tariffs through elevated prices. A central criticism of the policy has been that tariffs function as a tax on imports that is ultimately passed on to American househo
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Tariff strain complicates Fed inflation fight
While the Trump administration has persistently argued that import levies will help relatively smaller United States-based manufacturers, it appears that these smaller companies are actually the ones bearing the brunt of the pain of higher costs that tariffs are supposed to protect them against. A recent case study of the impact levies have on a Hallmark Cards-owned Crayola paint set shows how tariffs - aimed at making made-in-America products more competitive and bringing more manufacturing onshore - have undesired outcomes. While 70% of the products Crayola sells globally are manufactured at its headquarters in Pennsylvania’s Lehigh Valley, the art supply company is currently straddling major cost increases and production challenges due to U.S. trade tariffs on imported components and raw materials.Higher cost of US importsAccording to supply chain logistics platform Flexport, a tariff of 30.1% will be placed on the brush within the Crayola set when it is sent from China to the U.S., assuming each brush costs less than five U.S. cents, while a tariff of 27.5% applies to each brush that costs more than five U.S. cents. Meanwhile, across the U.S. industry, there’s no shortage of evidence that a significant part of the hi

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Trump picks Kevin Warsh to lead Federal Reserve
United States President Donald Trump has chosen Kevin Warsh to lead the U.S. Federal Reserve when current chairman Jerome Powell’s term ends in May. I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump said in a post to Truth Social. The appointment comes as Trump has increased attacks on Powell in recent months and the worries about the Fed’s independence have increased. Warsh served as a Fed governor between 2006 and 2011 and was considered for chair during Trump’s first term. He has been an outspoken Fed critic and is expected to support lower interest rates in the near term. He even escalated his rhetoric since emerging as a contender for the top Fed job, going as far as calling for “regime change”. "Warsh will have to convince his colleagues that rate cuts are appropriate this year, an argument that is unlikely to win unless the labour market shows renewed signs of weakening or inflationary pressures ease materially later this year," economists at Deutsche Bank wrote in a research note on Friday. This comes as Powell has angered Trump for not lowering interest rates quickly enough. Federal prosecutors have also ope
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Japanese bond yields makes global market jittery
While Japan has a longstanding reputation for having the world’s most boring bond market - with interest rates stuck at zero for decades – recent developments have witnessed more pathos in the country’s bond market than Madame Butterfly on steroids. First, some of the more recent histrionics. Over the last week, Japanese bond yields spiked after prime minister Taikachi suspend the consumption tax for food for two years and called a snap election for 8 February. The market’s response was swift and sharp, with the yield on 30-year Japanese Government bonds (JGBs) spiking up to 3.89%, while the 40-year bond yield hit 4% - both their highest since issuance of these tenures began. Given the stability of Japan’s bond market, a 20-plus basis-point one-day move caused panic, with some market commentators drawing parallels with former UK prime minister Liz Truss’s fated mini-budget in 2022.Storm in a Japanese tea cup?What followed next were revelations by Bloomberg chief correspondent Ruth Carson that Japan’s yield spike was triggered by a paltry $280 million of trading – which is tantamount to one regular-sized bond market trade. Confused? Let’s drill down into what’s really going on. Japan’s finances aren’t in great sh
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Why bond investors are losing faith in Fed’s soft-landing
After three quarter-point cuts late last year, the Federal Reserve looks set to sit on its hands with rates parked around 3.5 to 3.75%, as officials signal they’ve done enough for now. Inflation has cooled, jobs are still there, and Washington is flirting with fresh fiscal sugar hits and on the surface, it all adds up to a gentle landing. However, bond investors aren’t easing into comfort; they’re stretching. The big move has been into longer-dated government bonds, a tactic known as extending duration. Duration is bond shorthand for how sensitive a bond’s price is to interest rate changes, aka interest-rate risk. The longer the maturity, the harder the price swings when rates move. Investors only take that risk when they believe rates are headed down or at least stuck. That’s the consensus trade, and it’s becoming crowded. Futures markets are now pricing less than two rate cuts next year, which is more of a polite pause than an easing cycle. Yet investment-grade corporate bonds are trading at spreads - the extra yield paid over U.S. Treasuries - aka the risk premium - last seen when dial-up internet was still a thing. At roughly 70 basis points, investors are being paid very little for taking cor
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Q1'26 Outlook: AI lifts growth; tariff risks linger
As 2026 begins, the global economy is displaying an unexpected degree of resilience. United States tariffs, political unpredictability and the structural slowdown concerns that dominated 2025 have not derailed growth to the extent many anticipated. Instead, an extraordinary boom in artificial intelligence investment, particularly in the United States, is cushioning the impact of trade frictions and reshaping the global macro narrative. Across analysis from Fitch Ratings, S&P Global Ratings and global asset manager T. Rowe Price, a common theme emerges: data-centre construction, semiconductor capacity build-out, and AI software and hardware investment are no longer abstract “future productivity” bets. They have become the single most powerful driver of near-term output, corporate spending and financial market performance. Yet, beneath the surface of this uplift, vulnerabilities remain. Growth is narrow, tariff policy is unpredictable, labour markets are fragile, and valuations, especially in AI-linked sectors, are stretched. The question for 2026 is whether the AI boom represents the early stages of a structural transformation or merely the late stages of a speculative cycle masking deeper fragilities.Fitch: World GD