A significant reduction in U.S.-China trade barriers may ease the risk of a severe supply-driven inflation shock. However, Deutsche Bank economists caution that inflation remains persistent enough to keep the Federal Reserve from rushing into rate cuts.
While the trade war is de-escalating, "policies are likely to keep inflation at uncomfortably high levels for the Fed," the analysts note.
- "This announcement therefore reinforces our view that the Fed is going to be slow to cut rates this year."
Deutsche continues to expect the Fed’s first rate cut to come no earlier than December.
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Earlier:
- Goldman Sachs expect a Federal Reserve rate cut now in December, instead of in July
- ICYMI - Citi forecasts a July Federal Reserve rate cut instead of in June
