Deutsche Bank: The Federal Reserve may delay rate cuts due to Trump's tariff policy, inflation pressure cannot be ignored

According to Jinshi News, Trump has promised to impose comprehensive tariffs on imported goods when he returns to the White House. During his first term, Federal Reserve staff simulated similar scenarios and concluded that inflation would accelerate but not last for a long time. Because they ultimately determined that tariffs were dragging down the economy, they recommended lowering interest rates as the best remedy.

However, there are now two main obstacles to adopting this approach. First, the Federal Reserve has not fully overcome the problem of price increases after the pandemic. Second, it was severely criticized for describing that round of price increases as "temporary". Therefore, what Jerome Powell and his colleagues least want is to underestimate soaring prices and think they will not persist.

Justin Weidner, Deutsche Bank's economist in America said: "Even a price increase seen as temporary could prompt the Fed to raise interest rates or at least keep them on hold preventing them from making substantial cuts as originally hoped. They must acknowledge actual inflation rates. Perhaps instead of using words like 'temporary' or 'transient', say something like 'inflation rises due to tariff effects', clearly pointing out this is a result caused by tariffs rather than necessarily being demand-driven."