Berenberg Bank: "Blonde Girl" Expelled by Trump, Is the Fed's Rate Cut Only the Last One?

Trump has expelled the "blonde girl" economy: Without immigration to support U.S. growth through expanding the labor force, productivity growth must bear all the responsibilities. However, the current environment—unfriendly to business, with tariffs and uncertainty—is unlikely to produce productivity growth above 2%.
Based on this environment, we believe there is limited room for the Fed to cut rates further. We expect it to cut by 25 basis points at the June 17, 2026 meeting, which will be the last, bringing the federal funds rate to a target range of 3.25-3.50%. After that, further rate cuts seem unlikely, as inflation remains well above the 2% target, making it difficult for Fed officials to shift policy toward easing. The Iran conflict is likely to mildly drag on short-term growth and only slightly raise core inflation. The economy is increasingly fragile: high-income consumers hold a much larger share of wealth in stocks and face less inflation pressure, and they are now driving overall consumption growth. As consumption becomes more dependent on capital owners—and the wealth of capital owners relies on the AI boom to sustain itself—the economy becomes more sensitive to any stock market corrections.
Additionally, immigration crackdowns, tariffs, and institutional erosion under the Trump administration have reduced the U.S. trend growth from 2.0% to 1.5%. The Iran war has also caused damage. However, fiscal stimulus and investments in AI will still push growth close to 2% in 2026, then slow down in 2027. Fiscal risks should not be overlooked either; the current unsustainable fiscal policies cannot last forever. The risk of a "buyer strike" in the bond market forcing significant fiscal adjustments in the U.S. is rising.
(The above analysis is from Berenberg Bank's research report on April 2, for reference only, and does not constitute investment advice.)#Gate广场四月发帖挑战