Wall Street disagrees on impact of Trump's tariff policy on Fed's interest rate decisions

Bloomberg notes Wall Street is divided over the Federal Reserve's (Fed) future steps amid President Trump's escalating trade policies.

Chief investment officer at UBS Mark Haefele forecasts the Fed to cut rates significantly this year. In his opinion, the US central bank will have to lower borrowing costs four times to support the economy as it is slowing down due to new tariffs. The forecast is based on the expected negative impact of trade duties on economic growth.

In contrast, Morgan Stanley’s chief US economist Michael Gapen believes the Fed cannot cut rates in the near future. After analyzing the inflation, which exceeds the central bank’s targets, his team scrapped the call for a June reduction. According to Morgan Stanley, the US regulator will postpone lowering rates until next year.

Nevertheless, all experts agree on the threat of stagflation. Most of them also admit the possibility of two or three rate cuts this year, provided current economic trends persist.