In this timely analysis, PIMCO economists Tiffany Wilding and Allison Boxer examine the Federal Reserve’s cautious stance as trade tensions reshape the U.S. economic outlook.
Key Insights:
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No Rush to Cut: Fed likely to wait for clear labor market weakness before reducing rates, potentially until late summer or fall.
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Tariff Impact: Higher tariffs risk stagflation—slower growth with temporarily elevated inflation, complicating monetary policy.
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Inflation Expectations Rising: Worryingly, short and long-term inflation expectations are creeping back to pandemic-era highs.
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Historical Playbook: History suggests tariffs in high-inflation periods push central banks to hold or hike, not cut.
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Strategic Patience: The Fed is in a “good place” now, but tough decisions loom as economic data evolve.
Next Step:
Gain actionable insights into how the Fed’s path forward may reshape asset allocations, access the full report.
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