onlyTrustedInfo.comonlyTrustedInfo.comonlyTrustedInfo.com
Notification
Font ResizerAa
  • News
  • Finance
  • Sports
  • Life
  • Entertainment
  • Tech
Reading: Why a former Fed chief says the China trade deal creates more problems for Powell and the central bank
Share
onlyTrustedInfo.comonlyTrustedInfo.com
Font ResizerAa
  • News
  • Finance
  • Sports
  • Life
  • Entertainment
  • Tech
Search
  • News
  • Finance
  • Sports
  • Life
  • Entertainment
  • Tech
  • Advertise
  • Advertise
© 2025 OnlyTrustedInfo.com . All Rights Reserved.
Finance

Why a former Fed chief says the China trade deal creates more problems for Powell and the central bank

Last updated: May 13, 2025 8:00 pm
Oliver James
Share
4 Min Read
Why a former Fed chief says the China trade deal creates more problems for Powell and the central bank
SHARE
  • The Fed risks being behind the curve when the economy turns, Bill Dudley said.

  • The former New York Fed chief said the US-China trade deal extends tariff uncertainty, delaying action.

  • “If the US enters a recession, I’d expect rate cuts of 200 to 300 basis points,” Dudley said.

Investors are celebrating easing trade tensions between the US and China this week, but one former central banker warns that it could derail monetary policy.

To Bill Dudley, the former president of the New York Federal Reserve, this week’s tariff de-escalation could create more headaches for the Fed, and cause it to mistime interest rate cuts.

If officials wait too long and the economy stumbles into a recession, this would force them to cut rates by 200 to 300 basis points, he wrote in Bloomberg. And yet, the latest trade deal, which dials back tariffs for 90 days, could compel the Fed to hold back on taking action until the impact of the trade war is clearer.

“They have to wait, and because they are waiting, they’re probably ultimately going to be late,” Dudley reiterated in a separate Bloomberg TV interview. “But it’s not the Fed’s fault. I would behave exactly the same way in this set of circumstances.”

Though stocks are enjoying a streak of gains thanks to trade optimism, few economists expect improving relations to completely reverse the risk of tariff-fueled inflation. Even if duties come down, tariff rates are still high enough to spur price growth this year.

Investors should also understand that the US-China deal doesn’t mean the trade war is over: instead, it has diminished reciprocal rates to more digestible levels for 90 days to allow for negotiations. In other words, the pause only extends uncertainty, it doesn’t kill it, Dudley wrote.

Dudley cited that the average effective tariff rate will likely end up at 17.8%, enough to increase price levels and unemployment by 1.7 and 0.35 percentage points, respectively.

Both estimates are the opposite of what the Fed wants. In the near term, Dudley expects that it will have to hold off and remain patient, keeping an eye on inflation expectations — cutting too early might support economic growth, but it risks exacerbating price growth.

“Being patient, though, also entails risks,” he wrote. Rising unemployment could lead to more layoffs as spending slows, eventually precipitating a recession. The Fed will know its late if it’s responding after a sizable unemployment rate increase, Dudley told Bloomberg TV.

“It probably won’t get much clarity on inflation, growth and trade policy until September. If at that point it needs to reduce rates, it’ll have to move aggressively to arrest the deterioration in the labor market — especially given that the tariff-induced supply shock will undermine the effectiveness of monetary policy,” he wrote.

“If the US enters a recession, I’d expect rate cuts of 200 to 300 basis points.”

Read the original article on Business Insider

You Might Also Like

Grand Theft Auto VI delayed again, this time until May 2026

High-yield savings rates today: May 12, 2025 | Earn up to 4.40% APY

Bitcoin Could Soar by Nearly 1,500% in 5 Years, According to This Growth Investor

US stock futures little changed as investors await US-China trade talk news

May jobs report released: Employers added 139K jobs; unemployment held steady

Share This Article
Facebook X Copy Link Print
Share
Previous Article Trump’s tariffs have launched global trade wars. Here’s a timeline of how we got here Trump’s tariffs have launched global trade wars. Here’s a timeline of how we got here
Next Article Supreme Court revives suit against cop who fatally shot driver stopped for unpaid tolls Supreme Court revives suit against cop who fatally shot driver stopped for unpaid tolls

Latest News

R. Kelly Seeks Trump Pardon, Attorney Says Singer Has Been ‘Punished’ to Solitary Confinement and ‘Has Spiders Crawling All Over Him’
R. Kelly Seeks Trump Pardon, Attorney Says Singer Has Been ‘Punished’ to Solitary Confinement and ‘Has Spiders Crawling All Over Him’
Entertainment June 11, 2025
‘Outlander’ Star Richard Rankin Makes His Next Career Move and It’s Another Historical Drama
‘Outlander’ Star Richard Rankin Makes His Next Career Move and It’s Another Historical Drama
Entertainment June 11, 2025
First-Time Homebuyers Moved Into Their Dream Home. The Former Owners Left Them an Unexpected Surprise (Exclusive)
First-Time Homebuyers Moved Into Their Dream Home. The Former Owners Left Them an Unexpected Surprise (Exclusive)
Entertainment June 11, 2025
Stephen King Calls New Horror Movie ‘Scary As Hell’ in Glowing Review
Stephen King Calls New Horror Movie ‘Scary As Hell’ in Glowing Review
Entertainment June 11, 2025
//
  • About Us
  • Contact US
  • Privacy Policy
onlyTrustedInfo.comonlyTrustedInfo.com
© 2025 OnlyTrustedInfo.com . All Rights Reserved.