"Inflation Reemergence from Trump Next Year... US Rate Cuts to Be Cautious"

FT Survey of 47 Economists

The Financial Times (FT) reported on the 15th (local time) that a survey of economists revealed that the policies of Donald Trump, the President-elect of the United States, could trigger inflation, preventing the Federal Reserve from significantly lowering interest rates.

In a survey conducted by FT in collaboration with the University of Chicago Booth School of Business from the 11th to the 13th, most of the 47 American economists surveyed predicted that the Federal Reserve's benchmark interest rate would be set at 3.5% or higher by the end of next year. This contrasts with the September survey, where most respondents expected it to fall below 3.5%. Tara Sinclair, a professor at George Washington University and a former U.S. Treasury official, predicted, "The Fed will hold rates steady for a considerable period after this month's rate cut," and added, "It may continue to hold steady throughout next year." She stated, "I think rates should remain in a restrictive range until it is clear that the inflation rate has returned to target."

More than 60% of the economists surveyed anticipated that Trump's policies, such as high tariffs, deportation of immigrants, and deregulation, would negatively impact U.S. economic growth. They particularly warned that if universal tariffs and high tariffs on Chinese products become a reality, inflation would intensify.

Over 80% of respondents observed that the Personal Consumption Expenditures (PCE) index, excluding food and energy, would not fall below 2% by January 2026. In the September survey, only 35% shared this view.

On Wall Street, opinions have emerged that the Trump-induced dollar strength is coming to an end. According to Bloomberg News, Morgan Stanley recently predicted in a report that the value of the dollar would fall below its current level by the end of next year. This is the 'most pessimistic scenario,' where the appeal of holding dollars diminishes as real interest rates fall and the effect of improved risk appetite is added. Sophia Drossos, a strategist at global venture capital investment firm Point72 Asset Management, analyzed, "Optimism about the dollar has already been largely priced in," and "If growth recovers in regions outside the U.S., such as Europe, it will act as a downward pressure on the dollar."

Reporter Han Gyeong-jae hankyung@hankyung.com