Should that scenario play out, Stonehouse says there could be room for the yield curve to steepen and for the US dollar to weaken. An increase in inflation as a result of potential cuts, too, could be extremely unwelcome as inflation appears sticky in the US at well above two per cent and trending in the wrong direction. Questions as to whether tariffs result in a one-time price increase or stickier inflation remain unanswered. Stonehouse notes that owner-equivalent rent in the US is trending lower, which could help keep inflation in check over the short-term. Next year, however, he expects US GDP growth to pick up as the economy digests tariffs and the stimulus in Trump’s “Big Beautiful Bill.” That increase in growth, coupled with potentially less data-driven cuts might result in higher inflation again.
Threats to Fed independence, though, have also resulted in speculation as to whether the…
