The Federal Open Market Committee held its policy rate steady in a range between 4.25% and 4.5% on Wednesday. But the Fed updated its policy statement in which it highlighted the risk of stagflation because of the significant shift in U.S. trade policy.
A loss of credibility and confidence in the policy to disrupt patterns of trade has spread from domestic financial investors to global fiscal and monetary authorities that appear to be selling Treasury securities and dollars.
As consumer products companies look to a new Trump administration, higher tariffs are most likely on the way. Businesses that prepare now, even as they wait for the tariffs to take shape, will be better positioned to maximize their margins.
The inflation shock of the past three years is abating. One reason is that expectations of future inflation continue to remain remarkably well anchored.
The Federal Reserve signaled at its meeting on Wednesday that it is done raising its policy rate and is poised to reduce it by 75 basis points next year to support the expanding economy.
