Satyam Panday, chief U.S. and Canada Economist, S&P Global Ratings, said, “We look ahead to the first major inflation reading of 2025 this week. We estimate the headline consumer price index (CPI) rose 20 basis points (bps) in January, resulting in an unchanged year-over-year rate of 2.9%. Core CPI inflation likely ticked down to 3.1% on a year-over-year basis, the lowest 12-month percent change since May 2021. The near-term balance of risk around inflation suggests the higher than 2% inflationary impulse in the economy.”
In the recent report, “How Might Trump’s Tariffs Affect U.S. Growth, Inflation and Rates?” S&P Global concludes:
- For now, its economic forecast for the United States remains unchanged. However, if the U.S. follows through on the tariffs it announced for Canada and Mexico, and if they stay in place, we think it would be a significant enough development to cause a change in our baseline U.S. forecast.
- The new tariffs – by its rough estimate – could cause a one-time 0.5% to 0.7% rise in U.S. consumer prices, assuming the tariffs remain in place through 2025. Its rough estimate also sees U.S. real GDP over the next 12 months being 0.6% lower than what S&P Global is currently forecasting.
- In this scenario, the Federal Reserve would pause its rate-cutting cycle earlier than is currently forecast.
S&P Global Ratings believes there is a high degree of unpredictability around policy implementation by the U.S. administration and possible responses – specifically with regard to tariffs – and the potential effect on economies, supply chains and credit conditions around the world.