New forecasts following US election – ABN AMRO
Growth & inflation tariff impact to drive Fed-ECB divergence. Growth and inflation forecasts in light of the US election result last week are being updated, ABN AMRO’s macro analysts note.
Fewer cuts by the Fed, more rate cuts by the ECB
“While the election count has not fully concluded, the Republican party looks on course to win a House majority, to accompany the presidency and the Senate majority. By controlling all three branches of government, president Trump therefore has significant power to enact his policy platform.”
“It remains highly uncertain how far Trump will go with his tariff plans, and so there is naturally high uncertainty around our new forecasts. But broadly speaking, the main outcomes of the plans are likely to be: 1) much lower eurozone growth and inflation than in our prior baseline. 2) significantly higher US inflation, and (ultimately) lower growth.”
“This combination is likely to mean fewer interest rate cuts by the Fed, but more rate cuts by the ECB; this will in turn continue to weigh on the euro, which has already weakened significantly in recent weeks as markets moved to price in a Trump victory.”
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FXStreet Insights Team
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