US Outlook: Trump policy mix still mildly stagflationary

We expect tariffs to have only a modest impact on both real economic growth and price inflation. Admittedly, we do see annualised GDP growth slowing to around 1.5% in the second half of this year, but it should gradually recover from the second half of 2026 onwards. We expect core PCE inflation to end this year a little above 3% which, given the lingering threat of a more persistent pick up, will prevent the Fed from cutting interest rates until early next year.