President-elect Donald Trump’s outlook on tariffs could bring inflationary pressure to the US economy, raising questions about the Federal Reserve’s monetary policy path. Federal Reserve Chair Jerome Powell suggested this could result in fewer interest rate cuts than anticipated.
On Market Domination, Nomura chief economist for developed markets David Seif explains why Trump’s proposed tariff policy is "a game changer" for Fed policy.
Seif predicts the Fed will implement one rate cut in December, followed by another in March 2025, adding that "that’s gonna be it for 2025." He cites two key factors: "We’re already seeing a decent amount of strength in the economy," and the likelihood that tariffs will create inflationary pressure by mid-2025 that "forces the Fed" to limit further cuts.
Regarding the implementation of tariffs, Seif believes Trump’s actions will align with his campaign promises. "This is Trump’s second term," he notes, emphasizing that tariffs were a "centerpiece" of Trump’s campaign. Given that Trump has surrounded himself with pro-tariff politicians, Seif expects him to "hit the ground running."
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