The Monetary Policy Report is submitted semiannually to the Senate Committee on Banking, Housing, and Urban Affairs and to the House Committee on Financial Services. It was just released.
It in,t the Fed flagged a two-speed market with Treasury trading orderly but thin. It also noted that risk-asset liquidity took a hit when tariff worries peaked.
In a repeat from the FOMC, it said policy is “well-positioned", with inflation still “somewhat elevated” but growth wobbling.
Headlines:
Market liquidity has improved but remains highly sensitive to trade-policy headlines
Equity, corporate-bond and muni liquidity all saw meaningful deterioration earlier this year
Treasury trading stayed orderly in early April, yet depth fell back to early-2023 lows
2025’s slow start largely reflects tariff-related adjustments
New tariffs have dented household and business confidence
Broad-based slide in the dollar’s exchange value noted
Financial stability judged “resilient” despite heightened uncertainty
Current policy stance viewed as “well-positioned” for the road ahead
Tariff impact not yet visible in hard data; still too early for a full read-through
Early signs that tariffs are adding to price pressures
Inflation remains “somewhat elevated,” while the labour market is still in solid shape
