Fed Halts Rate Cuts; Tariffs to Boost Inflation by 2025

The Federal Reserve has concluded its rate-cutting cycle, according to Bank of America, and the impact of tariffs on inflation is expected to become apparent in the second half of the year. The bank's analysts predict that Trump's trade, fiscal, and immigration policy agenda will trigger moderate inflation, with these changes reflected in inflation figures by the end of 2025.

Bank of America also reiterated its position that the Fed's rate-cutting cycle has ended, with inflation "above target," and overall and core CPI expected to rise by 0.3% month-on-month in January. The bank wrote: "If our forecast for January CPI is correct, then the Fed's reason to stand still will be further strengthened."

The analysts pointed out that any additional tariffs in the coming weeks could accelerate the timetable for inflation to rise. They added that market-based inflation indicators are still within historical ranges, but a key question remains whether policy changes will affect long-term inflation expectations.

As the impact of tariffs on inflation becomes more apparent, investors and policymakers alike will be closely monitoring the situation. The Federal Reserve has indicated that it will be data-dependent in its policy decisions, and any significant changes in inflation could influence the central bank's future actions.

The global economy is facing a complex set of challenges, with trade tensions and fiscal policies adding uncertainty to the outlook. As the second half of the year approaches, investors and policymakers will be watching closely to see how these factors play out and what impact they have on inflation and economic growth.