Bank of America: If Trump detonates the tariff bomb, the Fed may stop cutting interest rates
On January 9, Bank of America predicted that due to concerns about inflation, the Trump administration's radical tariffs could force the Federal Reserve into a wait-and-see mode.
In a report to clients on Wednesday, Aditya Bhave, the bank's U.S. economist, said "there are increasing signs that inflation is on an upward trend," and given the timing of the government transition, the Federal Reserve may have completed its last rate cut of this cycle.
Bhave said that inflation is already a concern before considering fiscal easing or tariffs. These policy changes will pose upside risks to the Federal Reserve's core PCE forecast (our forecast is 2.8% by the end of 2025). If Trump announces high import tariffs shortly after taking office, the Federal Reserve may not cut rates further. (Gold 10)
