Markets (^GSPC, ^IXIC, ^DJI) were beginning to celebrate the possibility of a soft landing until tariffs threw progress off course.
BNP Paribas chief US economist James Egelhof joins Market Domination to explain how the new US trade policy could push inflation even higher and derail the Federal Reserve's progress.
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We had this inflation report which everybody seems to be now looking past because it doesn't reflect our tariff reality.
Yeah.
Um, but does it sort of give us a good base at the very least to then lay maybe some of these tariff price increases on top of?
Yeah, I think it's the story of what could have been. So reading this together with the payroll's print that we got last week, shows you that the Fed had accomplished what many of thought was impossible. It has brought us to the brink of the soft landing. Now, the tariffs change everything.
So we're snatching victory from the jaws or something like that.
Defeat from the jaws. Snatching victory from the jaws of defeat. Something like that.
So, Powell is remaining year in office isn't going to reach the promised land of the soft landing. The world is going to take a different path now as a result of tariffs. But it does, it does show you the strong foundations that the economy is going into the tariff shock with, to your point.
So, so where does, let me ask you this, James, where do you see core PCE inflation peaking then this year? If the current tariff remain in place?
Well, it's highly uncertain because if the tariffs are going on and off with, with great alacrity, it makes it hard to have a steady forecast. But we expect quite a bit of inflation. We expect tariffs to not just be a one-time price shock, but also to be amplified through wages into services and other prices as well. So we think inflation could peak in the, in the fours or higher depending on, depending on the tariffs that go on and how the economy responds to them.