Gold bars to be exempt from tariffs, White House clarifies
Investing.com - A "meaningful deceleration" in the U.S. and global economy due to President Donald Trump’s aggressive trade policies has yet to "play out," although it could materialize in upcoming inflation data, according to analysts at Morgan Stanley (NYSE:MS).
In a note to clients, the brokerage said some of its clients are beginning to question if Trump’s sweeping tariffs "really matter all that much," given relatively benign price pressures in recent months.
Data has suggested that U.S. inflation has remained widely muted, even as economists warn that the duties could drive up prices and weigh on broader economic growth.
On Friday, May’s personal consumption expenditures price index -- an inflation gauge closely monitored by the Federal Reserve -- was little changed, although it remained above the Fed’s 2% target level on an annualized basis.
But caution still remains, perhaps most notably from many rate-setters at the Fed. Chair Jerome Powell suggested in a Congressional testimony last week that it was still prudent for the central bank to maintain a wait-and-see approach to future policy actions, citing uncertainty around the impact of Trump’s tariffs on inflation and economic growth.
The Morgan Stanley analysts flagged that, even though there has not been clear evidence of rising inflation, the tariffs could still take "about three months before they show through."
"With tariffs trickling in in February and March and then stepping up notably in April, it is simply premature, in our view, to expect inflation to have picked up meaningfully yet," the analysts wrote. "We do expect the next two prints, however, to show the upward trend in prices."
They added that they do not expect the Fed to slash interest rates this year, even though financial markets are broadly anticipating one at the central bank’s September gathering.
"For us to be right, the higher inflation has to show meaningfully before that meeting," the analysts said.