12 March 2025
If you are covering the latest US inflation rate, please find below a comment from Lindsay James, investment strategist at Quilter:
“Inflation has moderated in the US, coming in at 2.8% and slightly below expectations. This is good news and the market may be buoyed by this in the hope of interest rate cuts coming, but the fact is the rate of inflation still sits comfortably above the 2% target. From here it is somewhat of a step into the unknown for inflation as the focus is firmly on tariffs, and the fluctuating picture of fresh tariffs followed by row backs later in the day.
“Ultimately, tariffs are an inflationary economic tool and will raise prices for consumers. Whether this is a one-time price change or something more sustained remains to be seen, but Donald Trump was elected in part due to his rhetoric to bring down inflation and make things cheaper. Tariffs are the opposite policy response in order to make this happen and instead risks tipping the US economy into recession. We are already seeing weak data points emerging as a result of the policies of the Trump administration – although other elements do continue to hold up.
“Should the data turn weaker and economic growth slow down in response to tariffs, then the Federal Reserve is likely to have little choice but to cut rates. However, it could find itself in somewhat of a predicament in that GDP growth is slowing at the same time as inflation picks up again after the effects of the new tariff regime has bedded in. This will make it harder to act and is something that concerns markets just now.”
