Institution: The Federal Reserve will downplay the temporary inflation impact of tariffs

ChainCatcher news, Sweden's Nordea Bank points out that as risks rise, the Federal Reserve is waiting for more clarity. Trade policies and economic outlooks are seen as extremely uncertain, and the Fed hopes to wait for more definitive results. The market interprets this information as slightly hawkish, further reducing the likelihood of a rate cut at the June meeting. We agree with this market shift but expect that the Fed will ultimately focus on supporting economic growth and overlook the temporary rise in inflation. If long-term inflation expectations remain within a manageable range and align with the inflation target, the Fed should be able to disregard the temporary inflationary impact caused by tariffs.

There is also a possibility that the short-term impact of tariff uncertainty on the economy will exceed current expectations. But for now, the Fed believes that this move has a limited impact on the economy, and there are some signs of progress in trade negotiations. Inflation remains above the target, and due to tariffs, it is expected to begin rising again.