Tariffs and the Inflation Trap: Why Policy Missteps Could Rekindle Price Pressures

Janus Henderson’s Head of Global Asset Allocation, Ashwin Alankar, assesses the growing risk of a second inflation wave triggered by premature Fed easing and tariff-related supply disruptions.

• Sticky U.S. inflation remains elevated at 3.3%, despite a 2.7% headline CPI, limiting the Fed’s room to cut rates without reigniting inflationary pressures.

• A convergence of dovish monetary policy and renewed trade frictions could mirror the 1970s policy error, forcing the Fed into a no-win choice between credibility and recession.

• The Fed’s $6.7 trillion balance sheet heightens the fragility of the current inflation equilibrium.

Could a misstep now set the stage for another inflation spiral? Delve into the full report for scenario analysis and historical parallels.