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Soft Trade Prices and Weak Manufacturing Still Point to Dovish Fed Policy Path
Tuesday, April 15, 2025
A new set of U.S. economic data released today, including Export Prices, Import Prices, and the Empire State Manufacturing Index, continues to signal a cooling inflation environment and persistent weakness in manufacturing activity. While the results do not point to an immediate shift in monetary policy, they collectively offer further evidence that the Federal Reserve may soon face fewer obstacles in adopting a more dovish stance.
These three indicators, all released on April 15, 2025, show a combination of minimal trade price growth and ongoing contraction in manufacturing, albeit with some improvement from the previous month. This combination reinforces expectations that the Fed could begin considering rate cuts later this year, should upcoming data continue to reflect subdued inflation and fragile economic activity.
Import and Export Prices Show Minimal Inflation Pressure
Trade price data for March was underwhelming across the board, highlighting continued weakness in global trade dynamics and a lack of inflationary momentum in import and export flows:
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Export Prices MoM : 0.0%
Consensus: 0.0%
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Import Prices MoM : -0.1%
Consensus: 0.0%
The fact that export prices were flat after a moderately strong reading in February suggests that pricing power for U.S. goods abroad has diminished. This could reflect weaker external demand or adjustments in global commodity prices, but most importantly, it shows that export-related inflationary pressures are not present at this stage.
Meanwhile, import prices declined by 0.1%, marking a slight reversal from the previous month’s 0.2% gain. Lower import prices often reflect weaker global inflation, stronger domestic currency influence, or a rebalancing of supply chains. Regardless of the exact driver, the takeaway remains consistent: imported inflation is not feeding into the U.S. economy, at least not in any meaningful way.
For the Federal Reserve, which is highly sensitive to any indicators of rising inflation, this data delivers a reassuring message. Neither U.S. exports nor imports are experiencing price growth that would necessitate a hawkish policy response. On the contrary, these readings strengthen the broader disinflationary narrative that has been unfolding over the past several months.
Empire State Manufacturing Index Improves, But Still in Contraction
In contrast to the price data, the Empire State Manufacturing Index for April showed some improvement:
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Actual: -8.1
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Previous: -20.0
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Consensus: -14.5
Although the index remains negative, indicating that manufacturing activity in New York state is still contracting, the reading is significantly better than the previous month’s extremely weak level of -20.0. It also came in well above market expectations of -14.5.
This suggests that while manufacturing conditions remain challenging, the pace of decline may be moderating. Businesses may be adjusting to tighter credit conditions, higher borrowing costs, and slowing demand with more resilience than initially feared.
That said, a reading of -8.1 is still indicative of contraction. The regional manufacturing sector is not yet expanding, and the modest rebound should not be mistaken for a true recovery. Rather, it implies stabilization at a low level, which does not justify tighter monetary conditions.
For the Fed, this is a critical nuance. A persistent negative reading in a key manufacturing survey, even if improving, continues to reflect economic softness, especially in interest rate–sensitive sectors such as industrials and capital goods. If such weakness is confirmed in other regions or national indicators, the case for continued monetary restriction would be further weakened.
Synthesis of the Data: Neutral to Dovish Bias Strengthens
When taken together, today's three indicators offer a coherent picture of a U.S. economy that is not overheating. Inflationary risks from international trade are minimal, and while there is some improvement in manufacturing sentiment, the broader environment remains sluggish and fragile.
This is precisely the type of environment in which the Federal Reserve may begin shifting toward a more accommodative stance, assuming inflation data continues to show progress toward the 2% target. While the Fed is unlikely to act solely based on one day’s releases, the tone of the data helps tilt the policy narrative in a dovish direction.
In particular:
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Import and Export Prices reinforce the idea that headline inflation will continue easing in the months ahead, as there is no cost-push pressure coming from trade.
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Empire Manufacturing signals that economic activity is not rebounding strongly enough to warrant concern over growth-driven inflation.
The Fed has consistently emphasized the importance of incoming data in shaping its rate policy. Today’s releases, though not explosive, quietly support the idea that maintaining elevated rates much longer may not be necessary, especially if more data confirms these trends.
Market Implications: Risk Assets Find Support
Even in the absence of any major surprise, today’s data carries meaningful implications for market participants who are closely watching the Fed’s every move.
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Interest Rates
Lower import prices and a still-negative manufacturing index may contribute to downward pressure on Treasury yields, especially on the shorter end of the curve. As investors interpret today’s data as reducing the likelihood of further Fed hikes, expectations for rate cuts in the second half of the year could firm up. -
Equities
Stocks — particularly in rate-sensitive sectors like technology and consumer discretionary — could find renewed support if market participants view today's numbers as reducing monetary policy risk. Although the data is not robust enough to drive a rally on its own, it adds to a broader narrative that favors a less restrictive Fed. -
U.S. Dollar
With import prices falling and manufacturing still under pressure, the U.S. dollar may weaken modestly against major peers, reflecting declining rate differentials and lower expectations for continued Fed hawkishness. -
Commodities
Lower trade prices suggest that global demand remains soft, which may weigh slightly on industrial commodities. However, the broader effect would likely depend on upcoming global data rather than this release alone.
Conclusion: Small Data, Subtle Shift — But Directionally Dovish
While none of the data released today is dramatic or game-changing, the collective signal is clear: the economy remains on a soft footing, and inflationary pressures from trade are nonexistent to mild. Combined with a still-contracted manufacturing sector, albeit improving, the outlook for monetary policy remains neutral to dovish.
This creates an environment where the Federal Reserve may feel increasingly comfortable preparing the ground for future rate cuts, especially if broader inflation readings continue to soften and employment data shows no significant overheating.
Today’s releases may not prompt immediate action, but they add to the slow, cumulative shift in policy expectations. For markets, this means that the risk of unexpected hawkish moves is diminishing, while the path toward eventual easing becomes slightly more defined.
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