What impact will Trump's national economic emergency plan have? American Bank economists warn that the interest rate cut cycle may have already ended.

On the evening of January 8th Taiwan time, sources indicated that Trump will announce a national economic emergency plan after taking office, which means a 10-20% tax increase on imported goods. In addition, the December Federal Reserve meeting decided to lower the benchmark interest rate target range to 4.25%-4.5%. The expected rate cut has decreased from four times in September to two times, showing that the Federal Reserve is concerned about inflation and may slow down the pace of interest rate cuts. Aditya Bhave, an economist at Bank of America, believes that if a national economic emergency plan is announced, the last rate cut of this cycle may have already taken place.

(Bitcoin slumps! The Fed is concerned about inflation and adopts a cautious attitude towards interest rate cuts, hinting at the impact of Trump's immigration and tariff policies)

Bank of America economist: If a national economic emergency plan is announced, the Fed may not further cut interest rates.

Although tariffs are not directly paid by American consumers, some of the costs will be passed on in the form of higher prices for goods. This could lead to inflation, at least in the short term. Therefore, while Trump's national economic emergency plan is driven by a desire to protect the US economy, the short-term result may be price increases. The Federal Reserve is concerned about inflation, so it may slow down or even halt its looser monetary policy.

The Bank of America, on the other hand, indicated that the Trump administration's aggressive tariffs may force the Federal Reserve to adopt a wait-and-see approach due to concerns about inflation. The bank's economist Aditya Bhave further stated: 'Signs of sticky inflation are becoming increasingly clear. In considering the timing of rate cuts, the Federal Reserve may have already made its final rate cut of this cycle this week.'

"Even before we consider fiscal looseness or tariffs, inflation is a concern. These policy changes will pose upside risks to the Fed's core personal consumption expenditure forecast (we expect 2.8% by the end of 2025)," said Aditya Bhave, referring to the personal consumption expenditure price index, which is the central bank's benchmark inflation gauge. In conclusion, he believes that if significant tariffs are announced shortly after taking office, the Fed may not further cut interest rates.

Has the cycle of declining interest rates ended as the 10-year government bond yield gradually rises?

The Federal Reserve is expected to cut interest rates twice more in 2025, according to the December meeting resolution. This is a reference value as the September estimate was four times. However, Federal Reserve Chairman Powell stated that only some committee members considered the potential impact of Trump's policies when making predictions.

In addition, US Treasury bond interest rates have been gradually rising. This Wednesday, the 10-year Treasury bond interest rate was around 4.697%, compared to around 4.178% at the end of November. This data is also one of the indicators that traders pay attention to.

What impact will Trump's national economic emergency plan have? US bank economists are warning: the interest rate cycle may have ended, first appeared in Chain News ABMedia.