This is shocking stuff from Goldman Sachs’s chief economist Jan Hatzius. Perhaps he is just conveying his research, but I would have thought Goldman Sachs would not want to be associated with this.

Anyway, this might upset some folks, but here goes:

  • Jan Hatzius, at the European Central Bank annual conference in Sintra, Portugal, outlined the impact from Trump’s proposal of a 10% tariff on all imports. He then assumes, all other countries reciprocate, use the tariff revenue for tax cuts, and that the ensuing trade war lifts trade policy uncertainty to levels at the peak of Trump’s first presidency. Taken together, Hatzius says that would lift U.S. inflation by 1.1 percentage points. European inflation would only rise a tepid 0.1 points.
  • In the U.S., however, rates would rise by 130 basis points, because of the large inflation effect.

Info via Market Watch (appears ungated)

130bp is a hair over 5 25bp rate hikes. Yeah, its from last week but ICYMI, like I did.

Given Trump's chances have surged following Biden's awful performance in the first debate, getting scenarios for Trump's next presidency has taken on increased importance.

Fed Funds roller coaster.

Fed Jerome Powell rollercoaster