Dow Jones / Market Watch with an article re BNP Paribas’ outlook for 2025. It appears to be gated.
- “Some argue that Trump’s policies (in particular tariffs), will not be inflationary on the basis that (i) he will not implement them, (ii) the dollar will entirely offset the impact and (iii) there will not be any second-round effects. We think this framework is misguided,”
- “We think Trump will implement – even if not in full – large swaths of his tariff threat.”
- “We envisage a permanent shock to the level of consumer prices in the U.S. [around 2 percentage points], and a temporary impact – albeit throughout our two-year forecast horizon – on U.S. inflation. But we do not expect any unanchoring of inflation expectations. In other words, we assume that in maintaining restrictive policy for longer than would otherwise be the case, the U.S. Federal Reserve keeps long-term inflation expectations in check.”
More, in brief:
- upper end of the Fed’s main interest-rate target should remain at 4.5% for all of 2025
- dollar DXY has further upside potential, particularly against CNY, MXN and CAD (Trump has called for an additional 10% tariff on goods from China and a 25% tariff on Mexican and Canadian imports)
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I think BNP Paribas are on the right track here. Do not underestimate Trump.
This article was written by Eamonn Sheridan at www.forexlive.com. Source