Federal Reserve

US GDP could contract in Q1 as consumer spending broadly stalls on higher actual/expected inflation and fears of higher unemployment

IMF analysis suggests that the Fed is too optimistic on the likely impact of initial Trump tariffs.

The Michigan survey showed consumer unemployment expectations at recession-like levels with a tariff-driven spike in inflation expectations.

The correction under way in US equities has started from a point of extremely expensive valuations relative to earnings and bond yields.

Its impact upon stocks – and of stocks upon it – has long been scant. Investors should ignore it and those who try to predict its actions.

US public debt is likely to reach a record share of GDP as tariff revenue and economic growth are unlikely to pay for Trump policies.

Barring last-minute changes, the US is imposing punitive tariffs on its close ally Canada, Mexico, and China, with a EU tariff to come.

The Fed expects inflation will take longer to return to target, with upside risks reflecting recent firmer inflation and Trump policies.

The Fed should forecast fewer rate cuts given firmer inflation, resilient economic growth, and the inflationary impact of Trump policies.

The RBA never raised rates by as much as other countries, so it has relatively less scope to cut them in a soft economic landing.