Inflation

According to the latest forecast from JPMorgan, the U.S. tariff policy may lead to a painful scenario of stagflation — a toxic mix of stagnant growth and persistent inflation. This warning comes as the bank revises its 2025 U.S. GDP growth estimate down from 2% to just 1.3%.
In its semiannual economic outlook, JPMorgan stated that there is now a 40% probability of a recession in the second half of next year.

Economy Suffers Between Rising Prices and Slowing Growth
Stagflation — a nightmare scenario reminiscent of the 1970s — involves high inflation, weak growth, and rising unemployment, and is notoriously difficult to address using traditional policy tools. JPMorgan now sees this risk rising due to new tariffs introduced in April, which are likely to drive up both import and domestic production costs.
“The stagflationary impulse from higher tariffs was a key driver in our downward revision of the GDP forecast,” the bank stated. “We continue to see elevated recession risks.”

Bond Markets React – and the Fed May Delay Rate Cuts
Fears surrounding the impact of tariffs are already being reflected in bond markets. Yields on 2-year U.S. Treasuries have risen to 3.8%, while 10-year yields are nearing 4.3%, indicating investors are reassessing inflation and interest rate expectations.
Despite this volatility, JPMorgan expects some stabilization by year-end:

🔹 2-year bonds: yields to drop to 3.5%

🔹 10-year bonds: expected to decline to 4.35%
However, the bank also warns of rising term premiums — the extra yield investors demand for holding long-term debt — which could increase by 40 to 50 basis points due to concerns over U.S. fiscal sustainability and waning interest from foreign buyers, including China, Japan, and the Federal Reserve itself.

Rate Cuts? Not Until December — and Slowly
While some market participants are betting on the Federal Reserve beginning rate cuts later this year, JPMorgan remains cautious. With inflation still “sticky”, and tariffs adding upward pressure, the Fed is unlikely to act before December 2025.
🔸 The bank expects a gradual rate-cutting cycle of 100 basis points, extending into spring 2026.
Should the economy weaken more than anticipated, the Fed may need to respond more aggressively. But for now, JPMorgan is preparing for a measured, step-by-step recalibration.

Falling Dollar, Stronger Emerging Currencies? Likely
JPMorgan also offered a bearish outlook on the U.S. dollar, arguing that the greenback could weaken as foreign economies outperform the U.S. thanks to pro-growth international policies. Meanwhile, the U.S. leans toward protectionism and potentially isolationist policies, which may weigh on domestic expansion.
⚠️ The bank warns that the sheer size of the U.S. bond market may become harder to sustain if foreign buyers continue to pull back from U.S. assets.

Tech and AI Keep Equities Afloat
Not all outlooks are grim, though. JPMorgan remains bullish on U.S. equities, citing several reasons for optimism:

🔹 Strong consumer spending

🔹 Robust tech sector earnings

🔹 Persistent investor demand for stocks
Unless there’s a major geopolitical or political shock, JPMorgan believes that technology and AI-driven growth will continue to support equity markets.

#JPMorgan , #Inflation , #US , #economy , #worldnews

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Federal Reserve Chair Jerome Powell has not ruled out the possibility of interest rate cuts in 2025. Speaking before the House Financial Services Committee, he emphasized that any policy changes will depend on incoming economic data – particularly inflation and the effects of trade tariffs.

🏛 Fed Takes a Wait-and-See Approach
According to Powell, there is currently no plan for an immediate rate cut. Although the U.S. economy is navigating turbulent conditions, the central bank is choosing to wait for clearer signals. “We are well-positioned to wait and see how inflation evolves,” Powell stated, noting that June and July inflation data will be crucial.
Tariffs imposed in recent years could continue to affect consumer prices, which is why the Fed remains open to various scenarios. “The impact may be smaller than expected – but we need certainty,” he added.

📉 Inflation and Tariffs as Key Unknowns
Powell acknowledged that the full effects of previous tariff measures are not yet evident. The Fed needs more time to assess whether higher import duties are driving prices upward or if the market is adjusting to the changes. Only then can a decision on rates be made.

💵 Dollar’s Strength Remains Unshaken
Despite concerns about the economic effects of tariffs, Powell dismissed speculation about the U.S. dollar’s global status. “Talks about the dollar’s decline are exaggerated,” he said. He noted that recent volatility in U.S. Treasuries did not harm the dollar’s position as the world’s reserve currency.

🧮 Concerns Over U.S. Fiscal Trajectory
Powell also acknowledged that the country’s debt path is unsustainable. While avoiding direct commentary on fiscal or immigration policy, he stated that the current fiscal course “is not healthy in the long term.”

🔥 Schiff Warns of Economic Crisis Ahead
Economist Peter Schiff holds a starkly different view from Powell. He has long criticized the Fed’s monetary policy, arguing that inflation is not being driven by tariffs, but by the Fed’s own actions — particularly the prolonged period of ultra-low interest rates.
Schiff warns that the U.S. is headed for a combination of recession and high inflation — stagflation — and even suggests hyperinflation is possible. He fears global investors could begin to exit U.S. markets, further weakening the dollar. “All the inflationary chickens the Fed let loose over the last decade are coming home to roost,” Schiff remarked.

#JeromePowell , #Fed , #Tariffs , #Inflation , #GlobalMarkets

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,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“