Bank of America: If Trump sets off the tariff bomb, the Fed may end rate cuts

According to Golden Finance News, Bank of America expects that due to concerns about inflation, the Trump administration’s aggressive tariffs may force the Federal Reserve into a wait-and-see mode. Aditya Bhave, the bank’s US economist, said in a report to clients on Wednesday that “increasing signs indicate that inflation is on the rise”, and considering the timing of the government’s transition, the Fed may have completed its last interest rate cut of this cycle. “Even before we consider fiscal easing or tariffs, inflation is already a concern. These policy changes will pose an upside risk to the Fed’s core PCE forecast (our forecast is 2.8% by the end of 2025),” Bhave said. He was referring to the personal consumption expenditures price index, which is the Fed’s preferred measure of inflation. “Therefore, if Trump announces high import tariffs shortly after his inauguration, the Fed may not cut rates further,” he added.