Trump’s tariff delays get in the way of Fed rate reductions, Deutsche Bank says
Despite the president’s pressure on Jerome Powell and the Fed to cut base fees, Donald Trump himself appears to be the biggest obstacle in such a way of movement.
Since winning the Oval Office President Trump pushed Powell The Federal Open Market Committee (FOMC) has cut interest rate times multiple times, reducing its current level to 4.5% from 4.25.
Despite the president’s rage, Powell has refused to do so. Certainly, analysts suspect this continues to be the case in the face of continuing uncertainty about the foundations of the American economy.
There is uncertainty about customs Quoted by the FOMC as a deterrent for cutting. The reason for the FOMC is that the impact of inflation on economic sanctions is still unknown. Managing inflation is one of the Fed’s orders.
Such, Voting members may have wanted to see how consumers and businesses react. Tariffs that appear completely before lowering the base rate can make prices even higher as lower rates can lead to increased economic activity.
Last week, Trump did little to solidify America’s position on tariffs. After closing at the end of the 90-day suspension announced after the “liberation date” in April, The president once again pushed the deal deadline on August 1st.
The proposed level of tariffs are shifting at a daily basis even for countries that have not yet applied trade with the US. For example, the European Union would face a 50% increase. It’s well above, only a few months ago, being threatened by 20%.
Overnight, President Trump shared a series of letters sent to foreign governments, setting sanctions he faces for not agreeing to the deal. Laos and Myanmar face 40% duties, according to the President’s Post on True Society, Japan and South Korea are currently facing a 25% hike on all products.
American investors don’t seem to be excited about the update from the oval office. The S&P 500 fell 0.8% yesterday Nasdaq 0.9% decrease Dow Jones is down 0.9%. The S&P Futures contract was a commercial contract this morning.
Despite being hit hard by Trump’s trade rebalancing efforts, Asia remained relatively flat in trading this morning. The Nifty 50 and Nikkei 225 charted a small boost while Hong Kong’s Hang Sing Index increased by more than points.
Perhaps now paralyzed by threats from the whole Atlantic, Europe remained relatively mild with London’s FTSE and German DAX marking minor gains.
UBS analyst Paul Donovan suggested that foreign markets no longer believe Trump’s threat.
Delayed discussion
The problem close to Trump’s home is that changing tariff expectations are doing little to persuade Powell to cut back.
As mentioned in a memo sent by Jim Reid of Deutsche Bank luck This morning: “After sending the post, the president signed an executive order effectively delaying the new tariff rate until August 1st, extending the current 10% tariff rate and giving more time to meet trade demand from the White House.
“The President said the August 1 deadline is “not 100% solid,” and that he is open to the deal and “maybe a bit dependent.” ”
Reed continued: “It came when (White House Advisor) Peter Navarro wrote in the Subsack Post that Chairman Powell’s policies caused “acute financial pain” for American households and that if Powell “will not voluntarily adjust the course, the board must act decisively to prevent further economic harm.” ”
“The face value, the latest tariff letter and the fact that deadline appears to be pushing forward on August 1st means extending uncertainty, but it means that the Fed cuts in September will be more difficult unless there is strong evidence of a deterioration in the economy.”
Reduce your expectations
On the contrary, last night Goldman Sachs raised the S&P outlook to +3% (6400), +6% (6600) and +11% (6900) on all forecasts for the three, six and 12 months.
The equity team reasoned: “Previously earlier than expected, it has supported the revised S&P 500 Forward P/E forecast 22x (from 20.4x) with a deeper Fed easing and lower bond yields, the continued fundamental strength of the biggest stocks, and the willingness to examine investors’ weakening of recent revenue declines.
They added: “Our economists’ revised Fed forecast began this September and continued with two more quarterly cuts in 2026.”
Here is a snapshot of the action before the New York Opening Bell:
- S&P Futures was flat this morning.
- The S&P 500 index lost 0.79% yesterday.
- Korean Cospi increased by 1.81% this morning.
- Hong Kong’s Hang Sen was 1% rose.
- China’s CSI 300 increased by 0.84%.
- Japan’s Nikkei 225 increased by 0.26%.
- The UK FTSE 100 was flat with early trading.
- Bitcoin sits at $108K.
- The Stoxx Europe 600 fell slightly with early trading.