Global trust shaken, Fed faces tough choices: Julius Baer’s Mark Matthews

The US Federal Reserve is caught in a tough spot as the economy faces both rising inflation and slowing growth, driven by the ripple effects of an escalating trade war. According to Mark Matthews, Managing Director at Bank Julius Baer & Co., tariffs are likely to push prices higher while dragging demand lower, limiting the Fed’s room to act.“There will be a conundrum for the Federal Reserve,” he said.

Matthews believes the sharp sell-off in global markets reflects deeper damage to investor confidence. While history suggests markets often recover from such “flash crashes,” the loss of trust across borders and businesses could slow the bounce back. “There’s no doubt there has been very deep damage to a loss of trust among countries in the world,” he said.

On the US-China standoff, he feels both nations are unlikely to drag it on for long, as the economic cost is too steep on both sides. “I can’t believe the Americans and the Chinese are going to play this game of chicken for very long,” he said.Also Read: Will markets recover anytime soon? What Arvind Sanger and Matt Orton think

Matthews also stated that India may weather the storm better than most emerging markets. Low foreign ownership, declining crude prices, and a relatively insulated economy put it in a stronger position, though heavy retail participation could still trigger volatility.

For the entire interview, watch the accompanying video

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