Lazard chief market strategist Ronald Temple said he expects the Fed to maintain its current interest rate policy through 2025, contrary to market expectations of multiple rate cuts. Temple cited ongoing inflation risks as the main reason behind his forecast, noting that Lazard’s stance differs significantly from the broader market consensus. While many analysts predict up to three rate cuts this year, Temple believes that higher U.S. tariffs would push up inflation and make quantitative easing unlikely.
“My view differs from the consensus because I expect U.S. tariffs to expand in scope and size through 2025 and increase inflation,” Temple said. He added that while inflationary pressures may not lead to rate hikes, they could prevent the Fed from cutting rates even as unemployment rises.
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The Federal Reserve is expected to keep its benchmark interest rate unchanged at its meeting this week as policymakers take a cautious “wait and see” approach. Economists say the Fed faces a tough balancing act as President Donald Trump’s tariff policies are expected to both increase inflation and slow economic growth.
The key question is whether Fed officials will ignore the short-term rise in inflation and continue to cut rates as markets expect, or wait for clearer signs that inflationary pressures are temporary, said Diane Swonk, chief economist at KPMG.
*This is not investment advice.