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DWS Expects Federal Reserve to Keep Rates Unchanged but With Hawkish Bias
Christian Scherrmann, Chief US Economist at DWS, said geopolitical tensions involving Iran have rapidly been reflected in economic data. In March, headline CPI rose nearly 1 ppts Y...
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DWS Expects Federal Reserve to Keep Rates Unchanged but With Hawkish Bias
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Christian Scherrmann, Chief US Economist at DWS, said geopolitical tensions involving Iran have rapidly been reflected in economic data. In March, headline CPI rose nearly 1 ppts YoY to 3.3%, while consumer confidence fell to a record low. Core inflation has shown no signs of being affected by energy prices, and long-term inflation expectations may remain stable. The current situation is likely to prompt the Federal Reserve to look past market volatility and keep interest rates unchanged at the April Federal Open Market Committee (FOMC) meeting. However, to ensure inflation expectations remain anchored, this decision will likely be accompanied by a hawkish stance.

Scherrmann noted that as no updated Summary of Economic Projections or dot plot will be released at this meeting, media attention may focus on Federal Reserve Chair Jerome Powells economic views and whether he will respond to recent remarks by potential successor Kevin Warsh. Regarding the scale of potential rate cuts under Warshs leadership, the outcome of earlier hearings disappointed doves. The meeting indicated that balance sheet reduction and corresponding rate cuts would be a long-term process rather than a short-term tactical adjustment. In addition, it remains unclear whether the disinflationary and growth effects driven by artificial intelligence (AI) can be sustained.

Related NewsEIA Crude Oil Stocks Change for Apr/17 in the United States is 1.925M, higher than the previous value of -0.913M. The forecast was -1.2M.
Regardless of who becomes the next Federal Reserve Chair, Scherrmann said the immediate priority is to assess whether rising oil prices will trigger second-round effects on core inflation and whether tariff-related price pressures have peaked or begun to ease. These two indicators are prerequisites for initiating rate cuts later this year. A third key indicator is the labor market, which remains relatively resilient. However, Powells potential successor appears to place limited emphasis on promoting employment under the Federal Reserves dual mandate. (sl/j)



This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation.

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