Deutsche Bank sees Fed rate cut only by December amid trade uncertainty

With global markets increasingly nervous over renewed trade tensions and resilient US data, Deutsche Bank believes the US Federal Reserve is unlikely to cut interest rates before December. The next FOMC meeting is scheduled for July 30.Sameer Goel, Global Head of EM and APAC Research at Deutsche Bank, said the US economy has shown surprising strength despite persistent global uncertainty and rising tariff threats. “What we are seeing is a front-loading of exports to the US, as companies rush to ship goods before higher tariffs kick in,” he noted.
This has helped maintain momentum in US activity levels, but Goel warned the second half of the year could see a slowdown as the effects of tariffs start to bite.
He added that financial conditions in the US remain easy—looser than they’ve been since early 2022—which has helped buffer the economy. While corporate investment plans remain solid and consumer balance sheets are healthy, sentiment is gradually weakening. “We think the US will avoid a recession, but growth will slow. A rate cut is likely only in December unless there is a sharp weakening in the labour market.”Read Here | Fed unlikely to cut rates before December, says ING’s James Knightley

Recent tariff announcements by US President Donald Trump—ranging from 25% to 50% on about 15 countries—have been issued via letters, not executive orders. The formal implementation has been deferred to August 1, softening immediate market reactions.
Still, threats of 10% tariffs on all imports, 50% on steel and aluminium, and additional levies on BRICS countries, Russian crude, and pharmaceuticals have added to the uncertainty.Impact on Asia to Deepen in H2

Louis Kuijs, Chief APAC Economist at S&P Global Ratings, pointed out that the unpredictability of US trade policy is complicating investment decisions across Asia. “Uncertainty over where and how much to export, or where to build factories, is definitely weighing on the region—especially in export-oriented economies,” he said.

Chetan Ahya, Chief Asia Economist at Morgan Stanley, highlighted a lag between the announcement of tariffs and their reflection in data. “Even earlier tariff hikes haven’t fully shown up in growth numbers yet. That’s partly because shipments made just before tariffs are imposed often don’t attract the new duties,” he explained.

Ahya estimated that while the US Customs data shows an average tariff rate of around 10%, the effective rate based on last year’s import values is closer to 13.5%. “There’s also a delay in the corporate response—many firms are still executing projects planned before the tariff hikes. The real impact on capex and trade should start showing from Q3 onwards.”

For Asia specifically, Morgan Stanley is tracking capital goods import data closely for signs of slowdown. “We expect July and August numbers to reflect weakening capex trends. New tariff threats only reinforce the downside risks.”

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