An expected decline in interest rates could be stalled if the prospective tariffs of Donald Trump’s second White House administration bleed into markets and shore up inflation, UBS CEO Sergio Ermotti warned Tuesday.
“Something that I’ve been saying for a while, inflation is much more sticky than we have been saying,” he told CNBC’s Andrew Ross Sorkin. “The [truth] of the matter is that we need to see also how tariffs will play a role in inflation.”
“Tariffs will probably not really help inflation to come down. And therefore I don’t see rates coming down as fast as people believe,” he said.
Markets have been on alert for the next trade steps of the newly inaugurated Trump, who has threatened to impose 25% tariffs on Mexico and Canada, while also floating a separate set of retaliatory trade measures against China in a bid to pressure Beijing to force ByteDance’s sale of TikTok.
Historical ally Europe is also on the look-out for potential U.S. protectionism in commerce, as Trump progresses his “America First” agenda.
Inflation has been cooling in most major global economies, after a period of heated price growth propelled by the Covid-19 pandemic and an energy crisis driven by the war in Ukraine. Europe, the U.K. and the U.S. all finally began their respective cutting cycles last year.
This breaking news story is being updated.
