Moody's Chief Economist: Trump's tariffs may lead to stagflation in the U.S. economy, and the Federal Reserve may raise interest rates

ChainCatcher news, according to Jinshi Data reports, U.S. President Trump has initiated actions to impose tariffs on Canada and Mexico. Moody's Chief Economist Mark Zandi believes that the U.S. economy may fall into stagflation.

Recent data reflects that U.S. consumers and businesses are already worried about the economic outlook and are reducing spending. This effect will lead to a significant slowdown in the economy, while the impact of tariffs will cause high inflation, thus the U.S. economy may fall into stagflation. If true, this would be the first time the U.S. has experienced stagflation in 50 years.

The Atlanta Fed's GDPNow model shows that the U.S. economy may contract by 2.8% in the first quarter. If true, this would be the first contraction since the first quarter of 2022. In the face of stagflation, the Federal Reserve may raise interest rates, similar to former Fed Chairman Volcker's aggressive rate hikes in the early 1980s, sacrificing the economy to curb inflation.