President Trump's Inflation Challenges Deepen Amid Rising Consumer Prices
January's Consumer Price Index (CPI) exceeded expectations, complicating President Trump's inflation-taming efforts. The report rattled markets, leading to increased bond yields and heightened skepticism among investors regarding interest rate cuts.
Trump vs. Fed: Collision Course Ahead
Despite Trump's renewed calls for lower rates, Federal Reserve Chair Jerome Powell has maintained a cautious stance, signaling no immediate intentions to ease interest rates. Veteran economist Nouriel Roubini warns that even a delay in rate cuts could put Trump on a "collision course" with the Fed.
Tariffs as an Inflationary Risk
Roubini and Moody's Analytics chief economist Mark Zandi caution that Trump's proposed tariffs could exacerbate inflationary pressures by disrupting supply chains and increasing consumer costs. Goldman Sachs warns that tariffs pose a significant downside risk to earnings growth, with a 5% increase in tariffs projected to reduce S&P 500 earnings by 1% to 2%.
Market Constraints on Trump's Policy
Despite concerns over the potential consequences of Trump's policies, Roubini believes that "guardrails" such as market discipline, Fed independence, and bond investors will prevent "bad policy from becoming really bad." Bond investors, in particular, are seen as a primary check on Trump's actions.