Former Vice Chairman of the Federal Reserve: The market may underestimate the potential for cooling inflation this year

Golden Finance reported that Clarida, former vice chairman of the Federal Reserve and current global economic advisor at Pimco, stated that the market may underestimate a possibility: that inflation will not remain stagnant this year, but will begin to decrease significantly to 2%. This may be due to the small actual tariff growth rate, limited transmission effects, which are lower than many people’s expectations. At the same time, the uncertainty of trade policy details and the ambitious tax, spending, and deregulation agenda of the Trump administration may pose resistance to economic rise. In this case, the financial markets may start pricing in more interest rate cuts based on the Fed’s past policy approach. I believe whether the Fed will cut interest rates in the scenario I described will depend on its judgment of whether inflation expectations remain stable. Of course, the increased policy uncertainty may ultimately not pose too much resistance to the rise prospects or financial conditions. It is worth noting that foreign manufacturing accounts for only a part of the product, and a large amount of product added value comes from sales, marketing, logistics, and intellectual property. Relaxing regulations and policies related to trade and immigration (which simultaneously affect supply and demand) may further complicate the monetary policy environment.