Institution: High Tariffs or Triggering Fed's "Recessionary" Rate Cut

BlockBeats News Update, April 23: A report from CICC stated that considering two scenarios. One is if the U.S. fails to make substantive progress in trade negotiations with its partners, and 90 days later the effective U.S. tariff rate remains high. In this case, the income effect will dominate, leading to weakening economic demand, prompting the Fed to cut rates starting in July, with a total cumulative rate cut of up to 100 basis points for the year.

The other scenario is if the negotiations are successful, tariffs are reduced, and under the dominance of substitution effects, the demand shock is relatively mild. However, inflationary pressures are more sustained, leading the Fed to delay its easing pace, with only a slight rate cut once in December. For the market, although monetary easing comes earlier in the first scenario, this "recession-style" rate cut reflects deteriorating economic fundamentals and may instead suppress risk assets. (FXStreet)