As tariffs drive inflation higher, the U.S. Federal Reserve shows no urgency in cutting interest rates, with rate cuts likely only starting next year, said Robin Xing, Morgan Stanley's chief China economist. Speaking with China Global Television Network (CGTN) on Saturday, Xing explained that Fed policymakers, cautious amid President Donald Trump’s tariff maneuvers, are expected to maintain their wait-and-see approach this year, according to Morgan Stanley's projections. "A few months ago, a lot of people in the market were expecting aggressive rate cuts. But we think there will be some inflationary pressures driven by tariffs, and the first decision to maintain the current interest rate level is influenced partially by the anticipation of that tariff-induced inflation. Despite this could be transitory, the Fed is quite cautious about this persistence of inflation, which could complicate their policy decisions. Therefore, while the Fed is not immediately constrained by trade-related price pressures due to its view that inflation could be temporary, I think they are also trying to be very cautious on cutting policy rates even before the tariffs impact the data," said the economist.
"If you think about the tariffs, eventually they will create downsides for the economic growth, because corporates will take a pause on cap tax. With the trade uncertainty, consumers will probably spend less. That means despite the near-term inflationary impact from tariffs, eventually U.S. economic growth could decelerate with tariffs' impact. That's why we are not expecting any rate cuts for this year," he continued.
Xing detailed Morgan Stanley's forecast for the Fed's monetary policy trajectory, emphasizing the anticipated timeline and broader economic implications.
"We think the Fed will start cutting rates in every single FOMC meeting starting March 2026. So next year, the U.S. is likely to cut rates by a cumulative 170 basic points for next year. That's our view on the Fed's trajectory, which is near-term inflationary pressure due to tariffs, but over the medium term, you will see more economic downsides created by the tariff uncertainty. And the Fed will cope with monetary easing next year," said Xing.
Fed rate cuts likely next year as tariff impact deepens: economist
Visiting Chinese Foreign Minister Wang Yi said Saturday China is willing to work with Lesotho to strengthen exchanges on governance experience, enhance coordination in multilateral affairs, and advance the China-Lesotho strategic partnership.
Wang, also a member of the Political Bureau of the Communist Party of China Central Committee, made the remarks when meeting with Lesotho Prime Minister Sam Matekane in the capital of Lesotho.
During the meeting, Wang congratulated Lesotho on the 60th anniversary of its independence this year, and spoke highly of Lesotho government's efforts to prioritize economic development and steer the African country onto a path of sustainable growth. Since the Beijing Summit of the Forum on China-Africa Cooperation (FOCAC) in 2024, the two sides have advanced cooperation under the 10 partnership action plans unveiled at the summit, successfully implementing a number of key projects to effectively promote Lesotho's development and revitalization, Wang said.
China stands ready to work with Lesotho to strengthen exchanges on governance experience, enhance coordination in multilateral affairs, and push for greater development of the China-Lesotho strategic partnership, he added.
Calling on the two sides to firmly support each other, Wang said that China will accelerate the implementation of its zero-tariff policy for African countries, including Lesotho, expand bilateral trade, investment and industrial cooperation, facilitate broader access of Lesotho's specialty products to the Chinese market, and continue to support Lesotho's national development.
China will continue to stand firmly with African countries, uphold justice for the Global South, including Lesotho, oppose unilateralism and acts of bullying, and work together to build a community with a shared future for humanity, Wang said.
On his part, Matekane said during the meeting that Lesotho cherishes its friendship with China and the strategic partnership between the two countries, and expressed gratitude for China's valuable support for the development of African countries, including Lesotho.
Lesotho firmly adheres to the one-China principle and resolutely supports China in safeguarding its core interests, he said, noting that his country stands ready to strengthen strategic mutual trust with China, expand people-to-people exchanges, jointly implement the outcomes of the FOCAC Beijing Summit, and deepen cooperation in areas such as infrastructure, manufacturing and energy.
Matekane stressed that China's zero-tariff policy for African products will inject new impetus into Lesotho's development. He also expressed Lesotho's willingness to strengthen solidarity and cooperation with China on multilateral platforms such as BRICS to jointly address global challenges.
On the same day, Wang also held talks with Lejone Mpotjoana, minister of foreign affairs and international relations of Lesotho.
China, Lesotho to strengthen exchanges, advance cooperation
China, Lesotho to strengthen exchanges, advance cooperation
