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📰 TARIFFS EXPECTED TO PUSH 2025 YEAR-END INFLATION HIGHER The U.S. could end 2025 with inflation running faster than it is now, mainly reflecting the impact of tariffs, Capital Economics’ Neil Shearing writes. Higher tariffs “may be enough to push U.S. CPI inflation back above 3% over the second half of this year, which would make life uncomfortable for the Fed officials,” he says. Shearing notes that tariffs are likely to cause “a step-change in the level of prices rather than a continuing increase in inflation,” so if they aren’t increased this year then inflation could end 2025 cooler than it started. Shearing expects the Fed to make two 25-basis-point cuts this year, more than markets are pricing.

January 13, 2025
Frank

TARIFFS EXPECTED TO PUSH 2025 YEAR-END INFLATION HIGHER

The U.S. could end 2025 with inflation running faster than it is now, mainly reflecting the impact of tariffs, Capital Economics’ Neil Shearing writes. Higher tariffs “may be enough to push U.S. CPI inflation back above 3% over the second half of this year, which would make life uncomfortable for the Fed officials,” he says. Shearing notes that tariffs are likely to cause “a step-change in the level of prices rather than a continuing increase in inflation,” so if they aren’t increased this year then inflation could end 2025 cooler than it started. Shearing expects the Fed to make two 25-basis-point cuts this year, more than markets are pricing.