Fed Rate Hikes: A Looming Threat Amidst Trump Tariffs?
Economists express concern that a rate hike from the Federal Reserve could be imminent amidst the imposition of Trump tariffs.
Economic Indicators:
* US economy exhibits a healthy 3% GDP growth rate, fueled by strong stock prices, AI investments, and defense spending.
* Trump tariffs may exacerbate economic activity and drive up inflation.
Fed's Stance:
* Apollo Global Management chief economist Torsten Sløk believes the Fed may not be finished with rate hikes if inflation rises.
* A rate hike could occur as early as the mid-June Fed meeting, followed by additional hikes later in the year.
Potential Market Impact:
* The market has not yet factored in the potential for rate hikes.
* A rate hike could force markets to lower profit estimates, as per Goldman Sachs chief US strategist David Kostin.
* Kostin estimates that sustained tariffs on S&P 500 exports could reduce earnings per share by 2-3%.
Business Response:
* Companies may absorb higher input costs, squeezing profit margins.
* Alternatively, companies may pass along the costs to customers, potentially affecting sales volumes.
* Firms may also negotiate with suppliers to minimize the impact of tariffs.
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Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinions of Yahoo Finance or its employees.