According to Zhitong Finance APP, inflation is undoubtedly a major concern for the U.S. economy in 2024, and this issue is expected to persist into 2025. Deutsche Bank Chief Economist Matthew Luzetti predicted in an interview that although economic growth will gradually slow down, the pace will still be above the Federal Reserve's target level. Despite a decline in the inflation rate, the annual rate remains stubbornly above the Federal Reserve's 2% target due to core price increases exceeding expectations. In November, the core Personal Consumption Expenditures (PCE) index and the core Consumer Price Index (CPI) rose by 2.8% and 3.3% year-on-year, respectively, with inflation rates in the service and housing sectors still high.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20241230/1735529144272777.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="image.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20241230/1735529144272777.png"/>
Figure 1
Luzetti pointed out that the service sector is the main driving force behind inflation, including core services such as healthcare, insurance, and airfare, while housing inflation is expected to decline next year but may still remain at a certain level.
It is understood that the Federal Reserve, in its Summary of Economic Projections, expects the core inflation rate to reach 2.5% next year, up from the previous forecast of 2.2%, and to drop to 2.2% and 2.0% in 2026 and 2027, respectively.
This forecast is generally in line with Wall Street's expectations. Among the 58 economists surveyed by Bloomberg, most expect core PCE to slow to 2.5% in 2025, but the slowdown in 2026 is expected to be modest, with most economists predicting that the core PCE reading will be above the Federal Reserve's 2.4%.
Nancy Vanden Houten, Chief U.S. Economist at Oxford Economics, warned that the Trump administration's policies on tariffs and immigration could be a major part of the inflationary risk. Economists generally believe that policies proposed by Trump, such as imposing high tariffs on imported goods, reducing corporate taxes, and restricting immigration, could pose inflation risks and further complicate the Federal Reserve's future interest rate path.
Federal Reserve Chairman Jerome Powell stated at the press conference following the last interest rate decision that the central bank expects &#34;significant policy changes,&#34; but the extent of policy adjustments remains uncertain. He emphasized the need to observe the specific content and impact of these policies, noting that the Federal Reserve is &#34;thinking about these issues,&#34; and once policies are implemented, there will be &#34;a clearer picture.&#34;
<h2>Economists Warn About U.S. Economic Outlook</h2>
Nobel laureate and Columbia University professor Joseph Stiglitz stated that the U.S. economy has achieved a soft landing, with price stability and a low unemployment rate. However, he warned that this situation will end on Trump's inauguration day.
Stiglitz believes that the tariff policies promised by Trump will lead to inflation and may trigger an inflationary spiral, with rising prices prompting workers to demand higher wages, and other countries potentially taking retaliatory measures.
BNP Paribas has a more pessimistic forecast for 2025, expecting the Federal Reserve to pause its easing cycle next year, as the introduction of tariffs could lead to a significant rise in inflation from the end of 2025 to 2026
The company expects that by the end of next year, the CPI will stabilize at 2.9%, and by the end of 2026, it will rise to 3.9%.
Minneapolis Federal Reserve President Neel Kashkari views potential retaliatory measures from other countries as a &#34;tit-for-tat&#34; trade war, which could lead to inflation remaining high in the long term.
Bank of America's global fund manager survey shows that expectations for a &#34;no landing&#34; scenario have reached their highest level in eight months.
In the United States, Congress is typically responsible for setting tariffs, but the president has the authority to impose certain tariffs in special circumstances, and Trump has vowed to do so. It remains unclear which policies will become priorities after Trump takes office or whether he will fully commit to the promises already made.
Luzetti expects lower and more targeted tariffs to be imposed next year, with more targeted tariffs on Europe. He believes that a universal baseline tariff will not be implemented.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20241230/1735529200330124.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="image.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20241230/1735529200330124.png"/>
Figure 2
Luzetti believes that regardless of what tariffs Trump chooses to implement, inflation will rise over time. Therefore, he expects the Federal Reserve to implement zero interest rate cuts next year. He points out that the inflation rate will not be lower than 2.5% next year, and the Federal Reserve will not be satisfied with this, so it will not continue to cut rates. However, the economy is expected to remain quite resilient.
Throughout 2024, the U.S. economy has maintained resilience. Retail sales exceeded expectations again in November, GDP remained strong and above trend levels, and the unemployment rate continued to hover around 4%. Despite uncertainties in the future and a bumpy road to a 2% inflation rate, inflation has already eased.
Luzetti stated that the economy has gained robust growth momentum, and there are now quite a few favorable factors. The Federal Reserve just lowered interest rates by 100 basis points this year, laying a solid foundation for growth next year

Inflation is a major concern for the U.S. economy in 2024 and is expected to persist into 2025. Deutsche Bank AG Chief Economist Matthew Luzetti pointed out that despite a slowdown in economic growth, it remains above the Federal Reserve's target. The core PCE and CPI year-on-year rates are 2.8% and 3.3%, respectively. Trump's tariffs and immigration policies may exacerbate inflation risks, affecting the Federal Reserve's interest rate decisions. Federal Reserve Chairman Powell stated that future policy changes will be significant, but the specific impacts remain to be seen

- Inflation is a significant concern for the U.S. economy in 2024, expected to persist into 2025, with core inflation rates remaining above the Federal Reserve's 2% target.  
- Deutsche Bank's chief economist forecasts a gradual economic slowdown, yet growth will exceed the Fed's goals, while service and housing inflation remain high.  
- Economists warn that proposed tariffs and immigration policies under the Trump administration could exacerbate inflation risks, complicating the Fed's future interest rate decisions.

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The shadow of inflation is hard to dissipate, and Trump's policies become a key variable for the U.S. economy in 2025