Sergio Ermotti, CEO of UBS, cautioned that anticipated interest rate cuts may face delays if tariffs from Donald Trump's potential second term escalate inflation.
During an interview with CNBC, Ermotti expressed concerns about the persistence of inflation, stating, "I have been saying for some time that inflation is far more persistent than we initially thought. The key question now is how tariffs will impact inflation." He indicated that tariffs are unlikely to alleviate inflation, suggesting that rates may not decline as swiftly as expected.
In related developments, newly appointed U.S. Treasury Secretary Scott Bessant proposed a gradual global tariff plan starting at 2.5%, potentially rising to 20% over time, to allow businesses to adapt. This proposal coincides with Trump imposing a 25% tariff on imports from Colombia.
The Federal Reserve's monetary policy meeting concludes today, with expectations that interest rates will remain unchanged. Analysts note that gold markets are increasingly influenced by Trump's policies rather than immediate monetary strategies. Following Trump's remarks at the World Economic Forum advocating for global rate cuts, gold prices surged.
Economists have pointed out that Trump's calls for immediate rate cuts contradict the current economic landscape, characterized by persistent inflation. The Federal Reserve has also warned of rising inflation risks, seeking to shorten the monetary easing cycle.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, remarked that the contrasting views between Trump and the Federal Reserve contribute to market uncertainty, which may enhance gold's appeal as a safe-haven asset.