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

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

Bitget2025/02/12 06:42

Former Vice Chairman of the Federal Reserve and current Pimco Global Economic Advisor, Clarida stated that the market may have underestimated a possibility: inflation will not stagnate this year, but instead begin to significantly decline to 2%. This could be due to smaller than expected increases in actual tariffs and limited transmission effects, lower than many people's expectations.

At the same time, uncertainties about trade policy details and Trump administration's ambitious tax, spending and deregulation agenda might pose obstacles for economic growth. In such circumstances, financial markets may start pricing in more rate cuts based on past Fed policy methods. Whether or not the Fed would cut rates under these scenarios I described depends on whether it judges that inflation expectations remain stable.

Of course, an increase in policy uncertainty might ultimately not pose too much of a hindrance to growth prospects or financial conditions. It is worth noting that foreign manufacturing only accounts for part of products; a large amount of product added value comes from sales, marketing, logistics and intellectual property rights. Deregulation as well as policies related to trade and immigration (which affect supply-demand simultaneously) could further complicate monetary policy environment.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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