Deutsche Bank: The Federal Reserve may delay interest rate cuts due to Trump's tariff policy, and inflationary pressures cannot be ignored
ChainCatcher news, according to Jinshi reports, Trump has promised to implement comprehensive tariffs on imported goods upon returning to the White House. During his first term, Federal Reserve staff simulated a similar scenario and concluded that inflation would accelerate but would not last long. Ultimately, they determined that tariffs were a drag on the economy and recommended lowering interest rates as the best remedy.However, there are two main obstacles to taking this approach now. First, the Federal Reserve has not fully overcome the post-pandemic price increase issue. Second, the Federal Reserve has faced severe criticism for describing that price increase as "transitory." Therefore, Powell and his colleagues are least willing to downplay the price surge, believing it will not be persistent.Justin Weder, an economist at Deutsche Bank in the U.S., stated, "Even a price increase viewed as transitory could prompt the Federal Reserve to raise interest rates, or at least keep them on the sidelines, preventing them from cutting rates significantly as they originally hoped. They must acknowledge the actual inflation rate. Perhaps they can avoid terms like 'transitory' or 'temporary' and instead say something like 'inflation is rising due to tariff effects,' clearly indicating that this is a result of tariffs and not necessarily demand-driven."
