JPMorgan Chase: Trump’s New Tariff Policy May Increase Inflation Pressure, Fed Year-End Rate Cut Still Uncertain
Following the release of the latest October Consumer Price Index (CPI), David Kelly, Global Chief Strategist at JPMorgan Chase, recently expressed his views in an interview, suggesting that the Federal Reserve (FED) might implement a small interest rate cut in December, but this remains uncertain due to factors such as impending tariff policies and fiscal plans.
CPI Shows Slower Growth; Uncertainty Remains for FED’s December Rate Cut
The overall U.S. Consumer Price Index (CPI) for October rose 2.6% year-over-year, while the core CPI, which excludes food and energy, increased by 3.3% annually, aligning with market expectations. Kelly noted that the FED is still monitoring subsequent CPI and PCE data, and FED Chair Jerome Powell has previously stated that a single data point is insufficient to determine policy direction. Kelly believes that the market has already anticipated another small rate cut by the FED, but there are still many data points to consider.
Trump’s Strengthened Tariff Policy and the “Trade War” Slow Global Economy
Kelly pointed out that the new tariff policies from the Trump administration could impact market inflation expectations and have a greater effect on “low-income households.” He also warned that the “trade war” could lead to a global economic slowdown and increase inflationary pressures. Higher tariffs would raise import prices, affect consumer spending, and subsequently slow down global trade.
New Fiscal Plans May Boost Long-Term Inflation; Fiscal Deficit Peak Expected in 2026
Kelly further stated that the market expects these fiscal stimulus plans (such as tax cuts) to be gradually implemented over the next few years, with a significant impact on the economy by 2026. He emphasized that a larger fiscal deficit may emerge at that time, potentially increasing long-term inflationary pressures.
Kelly believes that the market is gradually absorbing these potential factors that could influence the U.S. economy, particularly for investors with substantial holdings in U.S. stocks, who should be wary of these warning signs.
Corporate Tax Rates May Be Lowered Again; Investors Need to Monitor FED Policies
Despite rising inflation risks, Kelly also noted that the market is eagerly anticipating the Trump administration’s plan to reduce corporate tax rates for U.S. manufacturers, potentially lowering them from the current 21% to 15%. Kelly indicated that such tax cuts could significantly boost corporate earnings and possibly drive the U.S. stock market.
However, he added that with the Republican Party winning seats in both chambers of Congress by a “narrow margin,” the passage of the tax rate reduction policy remains uncertain. Given the numerous uncertainties, Kelly also advised investors to closely monitor changes in FED policies to balance their investment portfolios and mitigate risks.
