Federal Reserve assessing rate cuts amid economic transition

The Federal Reserve is facing challenges as the economy transitions, with markets expecting a more dovish policy. Deutsche Bank analysts noted a shift towards potential rate cuts due to recession fears, despite a solid economy indicated by strong CEO confidence. Analysts highlighted concerns about tariff-driven inflation complicating the Fed's decisions. Elevated inflation expectations pose risks, and the labor market may face sharp declines if unemployment rises, which could lead to significant job losses. Deutsche Bank suggests two possible outcomes: the economy could remain strong, keeping rates steady, or job cuts and trade uncertainty could worsen the labor market, prompting the Fed to implement deeper rate cuts.