The US Federal Reserve said it would monitor the inflationary impact of Trump’s tariffs after the 90-day truce ends next month
“Increases in tariffs this year are likely to push up prices and weigh on economic activity,” Fed chairman Jerome Powell said after the FOMC meeting. “This is something we know is coming, we just do not know the size of it.”
The Fed decision was in line with market expectations, with 99.9 per cent of traders expecting no change, according to data compiled by the CME Group that was based on Fed fund futures contracts on Wednesday.
“Current market pricing is for two Fed rate cuts this year on the assumption that US cyclical momentum slows given the impact of tariffs on US domestic demand,” said Michael Krautzberger, chief investment officer for public markets at Allianz Global Investors, in a research note on Monday.
“If global trade wars escalate in July after the 90-day US tariff pause ends or if inflation risks dissipate somewhat, we think Fed rate cut expectations could be brought forward once again.”
