Defending the economy or contains inflation

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Your guide to what the American elections mean 2024 for Washington and the world

Donald Trump’s tariff shocked the global markets-and left the American Federal Reserve with a thorny problem: reduce interest rates to help prevent acute economic slowdown, or keep it high to anticipate a new inflation.

The market is bias towards discounts. After the collapse through the stock markets that followed the President, the President announced “Tahrir Day”, traders are now betting on reducing the federal reserve. Rates Four or five times this year – a height of three before Trump’s Great Detection.

However, the letter was from the Federal Reserve Chairman Jay Powell more honest to the rates. The definitions will have a “continuous” effect on American inflationHe said on Friday, which makes it difficult for the central bank to start mitigating.

It is a difference that can partially define the American economy this year. The Wall Street banks are already wrestling with the problem because it reviews its targets for inflation this year, but it cuts its predictions to grow – so that the US warning can stumble in the recession if Trump does not retreat from the edge of definitions.

This means the procedure from the Federal Reserve to low rates. Trump agrees.

Shortly before the Powell spoke on Friday-with S&P in the labor of a quick sale-the president said in fact it would be a “perfect time” for the chair to reduce borrowing costs. The president said: “He has always been late, but now he can change his image, quickly,” the president said. “Reducing interest rates, Jerome, and stop playing policy!”

Many economists believe that the problem is less clear. By 2.5 percent, Personal consumption expenditures are still 2 percent higher than the FBI’s goal by 2 percent – and officials expect the customs tariffs to accelerate a pace again.

“The federal reserve is in a very difficult situation at the present time,” said Sarah House, senior economists in Wales Vargo. I expected the central bank to retain 4.25 percent to 4.5 percent for “as long as possible”.

Adriana Kogler, the FBI ruler, said on Monday that maintaining long -term inflation expectations should be a “priority” and claimed that the front loading of goods such as cars against the background of tariff ads may enhance short -term growth.

Larry Fink, CEO of Blackrock, said on Monday that he was more anxious about inflation, saying he saw a “zero opportunity” of discounts in the short term.

He said: “I am concerned about inflation if I really enter all the definitions.”

Federal Reserve officials also indicated that there are clear signs that these economic support may reflect and any impact on Trump’s commercial shock on prices fades, the central bank will remain in “waiting and vision.”

Adam Busin, head of the Peterson Institute for International Economics, said that the federal reserve will not “judge” the impact of tariffs or Trump’s financial plans, such as deep tax cuts.

“Whether it will work or not, it is clear that this is the line that Powell and the leadership of the Federal Reserve to move in this political situation.” He added that the federal reserve “can be said, and it should be said, waiting until September” before cutting.

The markets believe that it will be much early, with a reduction either 0.25 or 0.5 percentage points at the Federal Reserve meeting in June-is an accelerated timetable compared to the quarter-reduction in July that traders expected only last week.

Nevertheless, economists say that the central bank will give priority to price pressures above the risk of stagnation – especially after its battle during the past two years to suppress one of the worst increases in living memory.

“In this environment, where this batch is also for inflation, it is unlikely that the Federal Reserve) is proactive and reduces insurance,” said Claudia Siham, a former Federal Reserve official, who is now the major economist in New Conservation.

The price lists can struggle to develop a clear strategy in view of the “unconfirmed” view in particular.

He added that the danger imposed on the federal reserve is awaiting a “clear demonstration” for the impact of the tariff on the economy is that it may act after it is too late. “Waiting for what might be a long wait for a long time.”

Many depend on Trump and the severity of the definitions. On Monday, he suggested that he link the largest sources in the world, China, while also indicating his openness to trade deals with countries like Japan.

If you stick to the harshest definitions, the impact on consumer demand may be severe enough to dispel any concerns about prices and put all the focus on the health of the economy.

“The balance of possibilities is that this does not end up in inflation in the longest term,” said Krishna Jh, at Evercore ISI.