Wall Street expects the Fed to rescue the economy from Trump tariffs, but an emergency rate cut now could spark more panic, analyst warns

• Investors price more price cuts this year from the Federal Reserve president Donald Trump’s tariff also raises concerns about stagnation, and even sees a reduction before a specific meeting. But the emergency dilution now may lead to more panic instead of quiet nerves, says Greg McBraide of Bankraate.

President Donald Trump’s aggressive tariff expects Wall Street increasingly recession and reduce more federal reserves, but the analyst warned that emergency reducing may start from panic.

The economists in JPMorgan have sharply reduced their economic expectations for this year due to the definitions and now they see that the gross domestic product shrinks 0.3 % instead of growth 1.3 %.

Meanwhile, Trump administration officials and the president himself have not appeared any signs of retreat from their trade war, even with the sale of the stock market scanned $ 6 trillion in the market. On Monday, Trump doubled his message that the Americans should bear some pain to achieve his goal of rebalancing trade relations.

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But the Mood in Wall Street is so desperate that the Fedwatch tool for the CME is a price for a short period in 125 points of price cuts this year, before returning it to 100 points, or the equivalent of four points.

This is a view of three discounts last week and two only earlier this year, with each other until it is expected that the Federal Reserve will start completely in 2025.

according to BloombergSWAP contracts for prices indicate that investors also see nearly 40 % of the FBI’s probability of 25 basis points next week-before the next scheduled meeting on May 7.

But Greg McBraide, the chief financial analyst in Bankraate, warned against causing more harm than it.

“Unless financial markets, such as the flow of credit, start, in the seizure, there is not much federal reserve,” he wrote on Sunday night. “Reducing the rate of emergency will not do little and panic can be increased. Any batch of a passing feeling is also in the midst of such uncertainty.”

However, McBridide acknowledged that the collapse of the stock market since Thursday is “unique, especially worrying”, but it has warned investors to resist the temptation of “knee”.

For his part, Federal Reserve Chairman Jerome Powell indicated that the central bank is not in a hurry to control monetary policy. The Federal Reserve must also fight inflation, which will be fed by definitions and the support of the labor market.

On Friday, he said that Trump’s tariff was significantly more declining than expected, and it is likely to push inflation to higher and slow economic growth, which led to a more honest tone after the tariff suggested a greater impact on inflation.

“It seems that we do not need to be in a hurry. It seems that we have time,” said Powell. “Inflation will move, and growth will slow down, but for me it is not clear at this time what path is appropriate for monetary policy. We will need to wait and see how this plays before making these modifications.”

This story was originally shown on Fortune.com

2025-04-07 16:00:00