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Investors Brace for Stagflation, Anticipate Slow Fed Rate Cuts in 2025

A recent survey reveals investor concerns over a stagflation scenario featuring slow economic growth and high inflation, alongside significant uncertainty over trade policies. The Federal Reserve is expected to maintain interest rates through June, with only two rate cuts forecasted by year-end. Despite these challenges, the economy shows resilience, with cautious optimism for the stock market moving forward.

Investors Brace for Stagflation, Anticipate Slow Fed Rate Cuts in 2025

Stagflation Concerns Loom Amid Fed Rate Speculations

Despite some easing in the economic outlook, a recent survey of 28 economists, fund managers, and analysts reveals investor apprehension over sluggish growth paired with persistent inflation, suggesting a stagflation scenario ahead. Heightened uncertainty around trade policy and tariffs continues to cloud optimism.

Mixed Signals on Growth and Recession Risks

The probability of a recession within the next year has notably dropped to 38%, down from 53% last month. Yet, it remains elevated compared to early 2025 levels before major tariff announcements. On the growth front, GDP is forecasted to expand around 1.13%, a modest improvement from previous estimates but still less than half of earlier hopes voiced earlier this year.

Trade Policy: A Heavy Cloud of Uncertainty

The survey highlights lingering doubts regarding U.S. trade policies, with 71% of respondents expressing substantial uncertainty. Recent geopolitical tensions, especially in the Middle East, compound these concerns, amplifying volatility for markets already on edge.

Despite these hurdles, over half of those surveyed (54%) expect a new trade agreement to be reached within roughly five months, potentially easing tariff pressures. However, experts warn that even the best-case trade scenarios could prolong elevated tariffs, fueling inflation.

Federal Reserve’s Rate Strategy: Patience Expected, Cuts Delayed

Investor consensus suggests the Federal Reserve will hold interest rates steady through June and likely refrain from cuts until September. Analysts predict two rate reductions in 2025, lowering the funds rate to approximately 3.9% by year-end, followed by only a single modest cut in 2026.

There is some divergence in views on how the Fed might respond if inflation rises alongside sluggish growth—about 54% foresee rate cuts in such a scenario, while nearly 40% expect the Fed to maintain current rates.

Tariff-Driven Inflation Debates

Opinions are split on tariff impacts: 43% believe tariffs will trigger one-time price hikes, while 32% worry they could spark broader, persistent inflation. Furthermore, 61% anticipate tariff-related inflation will intensify in the coming months beyond current levels.

Economic Resilience Amid Challenges

Despite these risks—including elevated interest rates, budget deficits, and trade tensions—the economy continues to show surprising resilience. Consumers remain active spenders, and businesses are investing heavily in forward-looking sectors like artificial intelligence, life sciences, and defense technology.

The stock market outlook reflects cautious optimism: the S&P 500 is projected to rise 1.7% this year to about 6,133, with a stronger 10% gain anticipated by the end of 2026. However, 58% of survey participants consider current equity prices overvalued.

Looking Ahead

  • Trade resolution is key to alleviating inflation pressures and restoring investor confidence.
  • The Federal Reserve is expected to adopt a cautious approach, balancing slow growth with inflation risks.
  • The market remains alert to geopolitical and policy shifts that could disrupt recovery momentum.
Fed Minutes Reveal Concerns Over Inflation and Trade Policy Impact on Economy
Fed Minutes Reveal Concerns Over Inflation and Trade Policy Impact on Economy

Federal Reserve officials expressed worries that tariffs could worsen inflation, complicating interest rate decisions as economic uncertainties grow. Despite solid growth and balanced labor markets, the Fed kept rates steady between 4.25%-4.5%, opting for caution until fiscal and trade policy impacts become clearer. The minutes highlighted the need for robust policy amid evolving trade negotiations and inflation dynamics.

Fed Chair Powell Assures Trump of Non-Political Basis for Rate Decisions
Fed Chair Powell Assures Trump of Non-Political Basis for Rate Decisions

Federal Reserve Chair Jerome Powell met with President Donald Trump at the White House, emphasizing that monetary policy decisions will continue to rely on objective economic analysis rather than political influence. The central bank reaffirmed its commitment to address inflation, growth, and employment based on incoming data. Despite Trump's calls for lower rates, the Fed maintains a cautious stance amid tariff uncertainties and expects to hold rates steady for the near term.

US Federal Reserve Reaffirms Independence Amid Trump’s Rate Cut Pressure
US Federal Reserve Reaffirms Independence Amid Trump’s Rate Cut Pressure

Following a rare public statement, the US Federal Reserve has reaffirmed its non-partisan role in setting monetary policy. This comes after Chair Jerome Powell met with President Trump, who has been pressuring the Fed to reduce interest rates. The Fed emphasized that decisions will be made based on objective economic data, maintaining its independence despite political pressures.

May Jobs Report Forecast: Hiring Growth Slows to 125,000 Amid Economic Uncertainty
May Jobs Report Forecast: Hiring Growth Slows to 125,000 Amid Economic Uncertainty

The May employment report is forecasted to show a slowdown in job growth to 125,000, down from April's 177,000, reflecting cautious business sentiment amid tariff-driven economic uncertainty. Mixed data show softening optimism but resilient labor demand. The report's outcome will be pivotal for assessing Federal Reserve monetary policy amid ongoing inflation risks and economic pressures.

Fed Governors Bowman and Waller Push for Rate Cuts Amid Economic Concerns
Fed Governors Bowman and Waller Push for Rate Cuts Amid Economic Concerns

In a rare double dissent, Federal Reserve Governors Bowman and Waller advocate for cautious interest rate reductions, arguing that delaying cuts risks economic slowdown and labor market weakness. Their stance challenges the prevailing "wait and see" approach, emphasizing tariffs as a temporary inflation factor and calling for a measured policy response amid intensifying political pressures on the Fed.

Trump Urges Apple to Manufacture iPhones in the US, Threatens Tariffs
Trump Urges Apple to Manufacture iPhones in the US, Threatens Tariffs

President Trump is urging Apple to manufacture its iPhones in the United States, threatening a 25% tariff on products made overseas, including in India. This push follows a conversation with Apple CEO Tim Cook and broadens to encompass all smartphone manufacturers. Industry experts warn that relocating production to the U.S. could dramatically increase costs for consumers. The debate surrounding tariffs continues as the White House remains unclear about their implementation.

Mallikarjun Kharge Critiques 11 Years of Modi Government's Failures
Mallikarjun Kharge Critiques 11 Years of Modi Government's Failures

On the 11th anniversary of the Modi government, opposition leader Mallikarjun Kharge sharply criticizes the ruling administration for rising unemployment, inflation, and unfulfilled promises. He emphasizes the negative impact on youth, farmers, and marginalized communities, asserting that the initial promises of 'good days' have shifted to feelings of despair among the populace.

European Companies Reduce Investments in China Amid Economic Slowdown
European Companies Reduce Investments in China Amid Economic Slowdown

European companies are scaling back investments and cutting costs in China amid a slowing economy and heightened market competition, according to the 2025 Business Confidence Survey by the European Chamber of Commerce in China. Overcapacity in industries like electric vehicles and rising trade tensions with Europe and the U.S. are contributing to declining profits and lowered business confidence across nearly 500 surveyed firms.

Fed Governor Warns Tariffs Could Reverse Inflation Gains and Impact Labor Market
Fed Governor Warns Tariffs Could Reverse Inflation Gains and Impact Labor Market

Federal Reserve Governor Lisa Cook cautions that tariffs implemented under the Trump administration may undermine recent gains in reducing inflation and pose risks to the labor market. Despite inflation hovering near the Fed's target, Cook stressed that trade-related price pressures and persistent inflation expectations complicate further progress. The Federal Reserve is expected to hold interest rates steady in the upcoming June policy meeting amid uncertainty, with officials divided over the magnitude and timing of tariff impacts on future monetary policy adjustments.

Fed Holds Rates Amid Stagflation Concerns, Inflation Forecast Rises in 2025
Fed Holds Rates Amid Stagflation Concerns, Inflation Forecast Rises in 2025

The Federal Reserve maintained interest rates between 4.25%-4.5%, while revising inflation forecasts upward to over 3% for 2025 and lowering growth estimates to 1.4%. Chair Powell highlighted the delayed effects of tariffs on prices, implying inflation pressures may increase. Market reactions were muted. Geopolitical uncertainties persist with potential U.S. military decisions on Iran and challenging U.S.-EU trade negotiations continuing.

Fed’s Rate Cut Hopes Shadowed by 1970s Inflation Risks and Market Worries
Fed’s Rate Cut Hopes Shadowed by 1970s Inflation Risks and Market Worries

Federal Reserve Governor Christopher Waller’s suggestion of a possible interest rate cut in July has stirred market hopes for monetary easing. However, rising energy prices, inflation concerns fueled by prolonged tariffs, and shifting labor market dynamics, especially the impact of AI on recent graduates, complicate the outlook. Historical parallels to the 1970s signal caution as stagflation risks increase amid geopolitical tensions and fiscal policy challenges.

Vance Joins Trump in Criticizing Fed’s Reluctance to Cut Interest Rates
Vance Joins Trump in Criticizing Fed’s Reluctance to Cut Interest Rates

Vice President JD Vance has joined former President Trump in pressing the Federal Reserve to lower interest rates following recent inflation data showing only slight increases. The move highlights growing political pressure on the Fed, which has kept rates steady despite inflation levels slightly above the 2% target. Market analysts note the Fed faces a tough choice balancing easing concerns with economic uncertainties, with a rate decision due next week.

Trump Rebukes Fed Chair Powell, Demands Sharp Interest Rate Cut
Trump Rebukes Fed Chair Powell, Demands Sharp Interest Rate Cut

Frustrated with the Federal Reserve's reluctance to reduce interest rates, President Donald Trump sharply criticized Chair Jerome Powell, calling him a 'numbskull' and estimating a $600 billion annual saving from a two-point rate cut. Recent easing inflation data has intensified calls for monetary easing, yet markets expect a rate cut only by September. Despite earlier threats, Trump now says he will not fire Powell, though he questions why such action would be problematic. Officials continue to push the Fed amid debates over timing and policy impact.

Federal Reserve Holds Rates Steady, Signals Two Cuts Later in 2025
Federal Reserve Holds Rates Steady, Signals Two Cuts Later in 2025

The Federal Reserve maintained its benchmark interest rate at 4.25%-4.5% but anticipates two rate cuts in 2025. Updated forecasts reveal slower GDP growth at 1.4%, with inflation remaining elevated and unemployment slightly rising. Despite political pressure, the Fed adopts a cautious wait-and-see approach amid signs of economic softening and fiscal challenges.

US Fed Holds Interest Rates Steady Amid Tariff Fears, Revises Growth Outlook
US Fed Holds Interest Rates Steady Amid Tariff Fears, Revises Growth Outlook

Amid escalating trade tariffs and geopolitical uncertainty, the US Federal Reserve kept interest rates unchanged, revising growth expectations down to 1.4% and inflation up to 3.0%. Despite President Trump’s criticism, the Fed remains committed to independent, data-driven decisions, signaling a watchful yet steady monetary policy in 2025.

Fed’s Waller Pushes for Possible Rate Cut as Early as July Amid Inflation Concerns
Fed’s Waller Pushes for Possible Rate Cut as Early as July Amid Inflation Concerns

Federal Reserve Governor Christopher Waller recently proposed that policymakers consider cutting interest rates in July, emphasizing the need to act swiftly to counter potential labor market weaknesses. While most Fed members prefer to wait, Waller downplays tariff-related inflation risks and urges early easing. Market expectations currently signal no rate cuts until September, reflecting ongoing uncertainty over the central bank's policy direction.

Trump Repeatedly Insisted: 'Iran Can't Have Nuclear Weapons' Over 50 Times
Trump Repeatedly Insisted: 'Iran Can't Have Nuclear Weapons' Over 50 Times

Former President Donald Trump repeatedly emphasized that Iran should never be allowed to acquire nuclear weapons. Across his presidency and campaign trail, he made more than 50 declarations underscoring this stance, portraying a nuclear-armed Iran as a global threat and a key foreign policy challenge.

Bomb Threat Forces Saudi Plane with 442 Hajj Pilgrims to Make Emergency Landing in Indonesia
Bomb Threat Forces Saudi Plane with 442 Hajj Pilgrims to Make Emergency Landing in Indonesia

A Saudia Airlines plane carrying 442 Hajj pilgrims from Jeddah to Jakarta was forced to make an emergency landing in North Sumatra, Indonesia, after an emailed bomb threat. Passengers were safely evacuated, and authorities are conducting thorough checks while the airline plans alternative arrangements to resume the journey.