No. of Recommendations: 1
The FED is in a tough spot: higher inflation and lower growth. The FED has said inflation is the top priority, but has to judge if the tariff effects are temporary. A one-time tariff increase is in theory a temporary rise in inflation.
The tariffs will get dropped. Either by Trump or the 2027 Congress.
Federal Reserve chief says Trump tariffs likely to raise inflation and slow US economic growth, April 4, 2025
" Powell said that the tariffs, and their likely impacts on the economy and inflation, are “significantly larger than expected.” He also said that the import taxes are “highly likely” to lead to “at least a temporary rise in inflation,” but added that “it is also possible that the effects could be more persistent.”
“Our obligation is to ... make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said in remarks delivered in Arlington, Virginia.
Powell’s focus on inflation suggests that the Fed will likely keep its benchmark interest rate unchanged at about 4.3% in the coming months. Wall Street investors, meanwhile, now expect five interest rate cuts this year, a number that has increased since President Donald Trump announced the tariffs Wednesday. "
https://apnews.com/article/tariffs-inflation-econo...More Fed rate cuts are expected now compared to a few months ago.
https://www.atlantafed.org/cenfis/market-probabili...The CME market is pricing in a 95% probability of at least 75 bps drop in the Fed rate this year. (From 425-450 current to 350-375 or lower.)
https://www.cmegroup.com/markets/interest-rates/cm... 