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Federal Reserve Governor Michelle Bowman said Monday she would favor an interest rate cut at the next policy meeting in July so long as inflation pressures stay muted.
Bowman’s comments are similar to those from fellow Governor Christopher Waller, who told CNBC on Friday that he also thinks the Fed could consider cutting in July.

Michelle Bowman, incoming vice chair for supervision at the US Federal Reserve, arrives for a Psaros Center for Financial Markets and Policy event at Georgetown University in Washington, DC, US, on Friday, June 6, 2025.
Bloomberg | Bloomberg | Getty Images

Federal Reserve Governor Michelle Bowman said Monday she would favor an interest rate cut at the next policy meeting in July so long as inflation pressures stay muted.
In remarks for a speech in Prague, Bowman became the second central banker in recent days to suggest that President Donald Trump’s tariffs are likely to have a temporary and muted impact on prices, thus paving the way for lower rates.

“Should inflation pressures remain contained, I would support lowering the policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market,” she said in prepared remarks. “In the meantime, I will continue to carefully monitor economic conditions as the Administration’s policies, the economy, and financial markets continue to evolve.”
Bowman’s comments are similar to those from fellow Governor Christopher Waller, who told CNBC on Friday that he also thinks the Fed could consider cutting in July.
Trump has been pressuring the Fed to lower interest rates as a way to save financing costs on the nation’s ballooning national debt. However, the Federal Open Market Committee at its meeting last week voted to hold its key interest rate in a target between 4.25%-4.5%.
For her part, Bowman said she supported the change in approach the post-meeting statement took noting that policy uncertainty has diminished and the focus is now tilting towards potential labor market weakness.
Economists had worried that Trump’s tariffs would spike inflation, but measures have shown little if any impact so far. At the same time, the president has softened his rhetoric and opened the door to negotiations with major trading partners.

“I think it is likely that the impact of tariffs on inflation may take longer, be more delayed, and have a smaller effect than initially expected, especially because many firms frontloaded their stocks of inventories,” Bowman said. “As we think about the path forward, it is time to consider adjusting the policy rate.”
Trump has said he thinks the Fed should lower by at least 2 percentage points. Bowman’s remarks did not mention how much she thinks the rate should be lowered, and Waller said there is no need for such dramatic cuts.
The FOMC next meets July 29-30. Traders are assigning just a 23% probability to a move at the meeting, with a likelihood of about 78% that the Fed will cut in September, according to the CME Group’s FedWatch gauge measuring futures market pricing.

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President Trump, aware of how high gas prices could affect his popularity, demanded on social media that the U.S. “KEEP OIL PRICES DOWN.”President Trump on Monday began to confront the potential economic blowback from his military strikes on Iran, which threatened to send oil and gas prices soaring at a moment when U.S. consumers are already facing significant financial strains.The mere prospect of rising energy costs appeared to spook even Mr. Trump, who took to social media to push for more domestic drilling while demanding that companies “KEEP OIL PRICES DOWN”; otherwise, they would be “PLAYING RIGHT INTO THE HANDS OF THE ENEMY.”“I’M WATCHING!” the president added.By midday Monday, global oil markets appeared relatively muted, two days after Mr. Trump dispatched U.S. bombers on a mission to disable three Iranian nuclear sites. Prices rose over the weekend before ultimately settling, as Washington — and the rest of the world — braced for the possibility that Tehran may still retaliate.In one worst-case scenario, Iranian leaders could look to shutter or otherwise impede access to the Strait of Hormuz, the narrow waterway that serves as the critical entrance point to the Persian Gulf. The world ships substantial amounts of oil and liquefied natural gas through the passage, so any interruption to commerce could cause energy prices to surge globally.A spike in energy costs could prove especially difficult for American consumers and businesses this summer, given that it could arrive at about the same time that Mr. Trump plans to revive his expansive, steep tariffs on nearly every U.S. trading partner. Many economists expect those levies to push up prices after years of high inflation.In April, the president announced, then suspended, those sky-high duties, seeking to quell a global market meltdown over his disruptive and legally contested campaign to remake global trade. But Mr. Trump has not wavered in his plan to implement the tariffs on July 9, and many economists expect companies — which pay the duties when they source foreign products — to pass the added costs down to their customers.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

This article is an on-site version of our Trade Secrets newsletter. Premium subscribers can sign up here to get the newsletter delivered every Monday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersFor a second week running I’m going to avoid talking about Donald Trump as the first subject in this newsletter, not least because he’s been too busy bombing Iran to go off on any new tangents on trade. Obviously, if Iran closes the Strait of Hormuz, the implications for oil prices and the global economy could be enormous. But absent that, the conflict is just another “everything’s awful but globalisation is surviving” for the voluminous scrapbook. It’s still a couple of weeks until Trump’s supposed July 9 deadline for concluding talks with other governments, set when the bogus so-called “reciprocal tariffs” were imposed on April 2 and then suspended for 90 days a week later. His “90 deals in 90 days” are proving (surprise!) elusive. He also signed an executive order last week supposedly implementing part of the nonbinding UK deal agreed in May, but the bit on steel (SURPRISE!) is still up in the air. Ahead of a big financing for development conference in Seville next week, today’s main pieces are on the need to fund the green transition and the gaps opening up in development finance thanks to savage aid cuts, as well as more evidence on how the private sector just isn’t going to fill them. Charted Waters, where we look at the data behind global trade, is on how not to do it if you’re an emerging market, in the form of the mess Venezuela is making of everything.Get in touch. Email me at [email protected] resist the heat from aid campaignersHolding a development conference in Seville (aka “la sartén de España” — the frying pan of Spain) in July is certainly one way of reminding everyone about the imperatives of climate change. The temperature is currently forecast to hit a challenging 47C on the first day of the gathering.As I’ve written before, there’s a deep sense of doom in the aid and development world. The Trump administration’s vandalism of US aid programmes is killing thousands of people, and the other big donors (the UK, France) have also been cutting development assistance and redirecting it away from where it’s going to do the most good.The one bright spot is that financing conditions for lower-income countries in general have been relatively benign in recent months, largely because the dollar has been soft and US bond yields have stayed quite low. But that doesn’t help countries without bond market access or whose debt burdens are so heavy that easier external financing considerations are beside the point.I got some fairly weighty pushback recently for being too optimistic about low-income countries and sovereign debt loads. Fair enough. I might well have suggested that more boats were being kept at elevated levels by a buoyant financing tide than is actually the case. (I’ll come back to this in a future newsletter.)But what’s really clear is that while campaigners are winding up to deliver a repeat of the big calls for sovereign debt relief from 20 or 25 years ago, governments aren’t really listening. 2025 is a once-a-quarter-century “jubilee year” as declared by the Catholic church, where biblically-inspired tradition has it that debts are forgiven. The Vatican has made a big push for another round of write-offs just as it did in 2000, which inspired the Jubilee 2000 debt relief campaign.In case anyone thinks this is just papal wokery, as the Trump administration presumably does, the previous drive was led by Pope John Paul II, no one’s idea of a squishy liberal. The social studies institution he founded, the Pontifical Academy of Social Sciences, has joined forces with Columbia University, last week publishing a chunky report calling for reform of the global financial system.But it’s really not clear anyone’s listening. The OECD, which records these things, said aid fell last year after five years of growth, with falling expenditure on Ukraine meaning overall levels were reduced rather than redirected elsewhere.Trump is not George W Bush, who embraced the aid cause with religious fervour. Keir Starmer is neither Tony Blair nor Gordon Brown, who both made a big deal over pushing for debt relief. Indeed, present-day Blair and Brown aren’t their former selves either: both have been shamefully silent over their party’s decision to cut the UK’s aid budget. China has been very active in development finance for decades, but a lot of it is commercial lending.The strong and active political and public consensus from 25 years ago in favour of aid in the big donor countries hasn’t endured. That’s no one’s fault in particular — it’s hard to keep a mass movement going without an immediate goal. But I’d say the pope’s up against it.Intruding into private fantasiesIn the meantime, in a world where official aid doesn’t materialise, we’re left hoping that private finance will. As I said above, external borrowing conditions haven’t been too bad this year. But governments managing their public debt is not the same as the long-term investment financing needed for the green transition. And private finance hasn’t appeared despite decades of hopium: the shortage of appetite for risk or long-term investment in environments of uncertain policy has deterred it. There’s no particular reason it should materialise now.There’s a new report out today from the research and campaign organisation Oil Change International which gives a granular look at “blended finance”, where public money is used to coax in private funds. The researchers calculate that the world in 2023-24 spent only 38 per cent of the $5.7tn needed to do the green transition properly, and rich countries plus China accounted for 85 per cent of that.Official assumptions have been that each dollar of concessional public finance pulls in between $4 and $7 of private money. OCI finds that in recent years it’s only been $1.12, and from 2015-24 only 24 per cent of blended finance for the energy transition was private money. Even if governments meet their promises for climate aid, low- and middle-income countries excluding China will reach only two-thirds of the level needed to keep global temperatures within the 1.5C target.Within the overall green transition for all countries, which two sectors have managed to reach even 50 per cent of the financing requirement? Electric vehicles and renewable energy. And what do they have in common? Rich governments have shovelled consumer subsidies (Bidenomics and the EU Green Deal) at them. QED. Public subsidies work.Now, let’s be fair about this: the international financial institutions themselves are well aware of the problems with private financing. Last October I wrote about the difficulties of getting private finance for developing-country infrastructure. The next month (I’m recounting a chronological sequence here, not claiming some causal link) Ajay Banga, president of the World Bank, dropped by the FT and told us: “It is not a panacea for everything. This idea that the trillions are waiting in the private sector to rush into the development of a poor emerging market country — that’s not what I’m telling you.”Yet what are the institutions supposed to do? Unless they start doing some tricky financial juggling with their balance sheets, which is likely to make shareholder governments very nervous, they can’t make the global pot of climate assistance bigger by force of will. They can make the case for more aid from rich governments and, like Oil Change International, they can present good evidence that public money is a non-negotiable part of the green transition for emerging markets. Banga is obviously right; OCI is obviously right. But governments aren’t delivering.Charted watersThere are a few emerging markets that can be relied on to do badly however benign the external environment, and Venezuela in recent times is certainly one of them. Inflation has surged after the government was forced to abandon an exchange rate peg in October. It has now taken to going after people who diss its policies and the economy, which is bound to work.Trade linksThe FT’s Free Lunch column argues that Trump’s immigration policies could hurt the US economy more than his tariffs. Whatever trade deal Trump reckons he’s put together with China, Chinese companies are still busy reducing their dependence on exports to the US.China has said it will cut tariffs on imports from almost all African countries, in an attempt to burnish its not-exactly-spotless record as a friend to the developing world.Meanwhile, China definitely isn’t flavour of the month in Brussels, which has cancelled a meeting ahead of a leaders’ summit next month because of the lack of progress on resolving various trade disputes.The think-tank Center for a New American Security looks at the prospects for the Asia-Pacific Quad group (Australia, India, Japan and the US) to expand its role, including in trade.Trade Secrets is edited by Harvey NriapiaRecommended newsletters for youChris Giles on Central Banks — Vital news and views on what central banks are thinking, inflation, interest rates and money. Sign up hereFT Swamp Notes — Expert insight on the intersection of money and power in US politics. 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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The rise in average prices charged by UK businesses was the slowest in more than four years in June, as companies continued to shed jobs and economic activity remained subdued, according to a closely watched survey.The S&P Global flash UK PMI index of monthly growth of price charged by businesses fell to 53.2 in June, from 55.4 in the previous month, the lowest since January 2021. The latest reading was well below a peak of nearly 70 registered in 2022 and was close to 50, indicating no change, and could strengthen the case for the Bank of England to cut interest rates further at its next meeting in August.“Rate setters will be relieved to see that the ‘awful April’ of indexed and government-set price increases, payrolls tax hikes, and a large jump in the minimum wage are demonstrating limited persistence so far,” said Elliott Jordan-Doak, economist at Pantheon Macroeconomics. He said easing output price growth was consistent with services inflation slowing from 4.7 per cent in May to a projected 3 per cent in six months.The data “should reassure the bank that it can continue cutting interest rates at the current pace of one 25 basis points rate cut per quarter”, given that employment is falling, he added. Markets are split on whether the BoE will cut rates from 4.25 per cent at its next meeting on August 7, after holding steady in June. Since summer 2023, the BoE has delivered four rate cuts.The survey, conducted from June 12-19, also showed input costs rising more slowly, but still outpacing output prices, suggesting little evidence of higher energy prices pushing up input prices.The survey’s headline composite output index, a measure of monthly growth in the private sector, rose only marginally to 50.7 in June from 50.3 in the previous month.“The UK economy remained in a sluggish state at the end of the second quarter,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. He said the reading was consistent with GDP growth rising only by 0.1 per cent in the second quarter, a marked slowdown from the 0.7 per cent registered in the first three months.Employment fell for the ninth month in a row, as manufacturers reported another drop in overseas orders, linked to US tariffs and geopolitical uncertainty. “Although June’s composite PMI is consistent with GDP flatlining in Q2, the Bank of England will be reassured that the recent cooling in the labour market finally appears to be weighing on services prices,” said Alex Kerr, economist at the consultancy Capital Economics. More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning and welcome back. We’ll update you on developments in the Middle East, and here’s what else we’re covering: Tesla launches its first robotaxi service Vanguard’s fixed income push into EuropeThe ‘Kirklandisation’ of legal servicesDonald Trump has raised the prospect of “regime change” in Iran after US military aircraft joined Israel’s campaign and bombed nuclear facilities in the country, drawing America into another Middle East war. Here’s what we know. Donald Trump’s Truth Social posts: In a burst of social media posts overnight, the US president hailed the return of B-2 bombers to Missouri after they struck three nuclear sites in Iran. He said the damage to the sites in Fordow, Natanz and Isfahan was “monumental” and floated a scenario where the government in Tehran might collapse. “It’s not politically correct to use the term, ‘Regime Change,’ but if the current Iranian Regime is unable to MAKE IRAN GREAT AGAIN, why wouldn’t there be a Regime change???,” Trump wrote. “MIGA!,” he added.Trump’s comments directly contradicted those of his vice-president JD Vance, who told NBC yesterday: “Our view has been very clear that we don’t want a regime change. We do not want to protract this or build this out any more than it’s already been built out.” He added: “We want to end their nuclear programme, and then we want to talk to the Iranians about a long-term settlement.”How has Iran reacted? Iran’s top military commander said his forces were entitled to retaliate against US interests after Washington struck the Islamic republic. Major General Abdolrahim Mousavi said the US strikes meant his forces “are fully authorised to take any action against the US military and its interests, and we will never retreat from these steps”. Iran’s Supreme Leader Ayatollah Ali Khamenei faces the most consequential decision of his almost 40 years in power. Does he look for a diplomatic compromise with Trump, seek to escalate or try to keep the conflict contained to Israel?What’s been the reaction elsewhere: Brent crude, the international oil benchmark, rose as much as 5.7 per cent to $81.40, a five-month high, before paring gains to trade up 0.8 per cent at $77.63 in London this morning. British Airways and Singapore Airlines cancelled flights to Dubai after the US strikes on Iran. More than 150 carriers, including Air France-KLM, American Airlines and Japan Airlines, have now suspended flights in the region after airspace over Israel, Iraq and Jordan was closed because of the war between Israel and Iran. Capitals across the Gulf, meanwhile, have been shaken by Trump’s decision to launch military action after rolling out the red carpet for the US president just a few weeks ago. What’s next? US officials said there were no plans for further attacks unless Iran hit back. Trump will chair a national security meeting later today after the biggest gamble of his combined four and a half years in office. Iran’s foreign minister Abbas Araghchi travels to Moscow today where he will meet Russian President Vladimir Putin, one of Tehran’s closest allies. Iran’s exiled crown prince, Reza Pahlavi, holds a press conference in Paris. Israel has signalled it will press on with its bombing raids against Iran. Follow our live blog for the latest updates, and we have more analysis on the conflict:Inside Operation Midnight Hammer: How the US used stealth and decoys to launch a surprise attack on Iran.Where is Iran’s uranium? US and Israeli attacks hit key nuclear sites but questions remain over Iran’s stash of enriched material.In maps: Iran’s three nuclear sites targeted by US bombers.Gideon Rachman: Tehran’s grand strategy has failed, but that is no guarantee Israel and the US can succeed, writes our chief foreign affairs commentator.Join our subscriber-only webinar on Wednesday with FT journalists and guests and put your questions about the conflict to our panel. Register here. And here’s what else we’re keeping tabs on today:Federal Reserve: Michelle Bowman, vice-chair for supervision at the US central bank, speaks about monetary policy and banking at the 2025 International Journal of Central Banking annual conference, in Prague. Austan Goolsbee, president of the Chicago Fed, participates in a moderated question-and-answer session at the Milwaukee Business Journal Mid-Year Outlook 2025.The FT will hold a special online webinar today on the Trump administration’s efforts to reindustrialise the US and its focus on reshoring as the country’s industrial strategy enters a new phase. Register for free.Five more top stories1. Tesla’s robotaxi service launched yesterday in the company’s home city of Austin, Texas, involving about 10 vehicles, each with a human safety driver on board, amid regulatory scrutiny of the company’s self-driving technology. Chief executive Elon Musk has touted the self-driving taxis as the future of his flagging electric-car maker.2. Vanguard, the world’s second-largest asset manager, is cutting fees on almost half of its bond exchange traded funds in Europe as part of a push into the fixed income market and as competition among the biggest fund providers heats up. Vanguard estimates the total savings for investors will amount to about $3.5mn annually. Read more about the changes.3. Twenty-two people were killed and 63 injured when a suicide bomber blew himself up inside a packed church in Damascus, marking the first major security incident in the Syrian capital since the regime of Bashar al-Assad was toppled last December. The Syrian government said jihadi group Isis was responsible for the attack.4. Japan’s ruling party has suffered its worst result in local assembly elections in Tokyo, as residents of the capital used the vote to protest against soaring food prices and low wage growth. The results of Sunday’s poll underscored the challenge Prime Minister Shigeru Ishiba could face next month in elections for the upper house of Japan’s national parliament.5. Revolut’s chief executive is in line for a multibillion-dollar windfall if he more than triples the company’s current valuation to about $150bn. People familiar with the matter say Nik Storonsky, who founded the fintech in 2015, would see his stake increase significantly under a long-standing Elon Musk-style pay deal. News in-depthKirkland & Ellis overturned a long-standing norm in the legal industry More

This article is an on-site version of Free Lunch newsletter. Premium subscribers can sign up here to get the newsletter delivered every Thursday and Sunday. Standard subscribers can upgrade to Premium here, or explore all FT newslettersWelcome back. Businesses and investors are sensitive to developments in Donald Trump’s tariff agenda. After all, as import duties directly affect profit margins and supply chains, their economic impact feels tangible and imminent.But there is another component of the US president’s policy plans that could be just as significant — if not more so — for the world’s largest economy: his immigration crackdown. A notable fall in foreign workers in America “represents a far more sustained negative supply shock for the economy than tariffs”, says George Saravelos, head of FX research at Deutsche Bank. “But immigration garners less market attention, as the pass-through to economic activity takes longer and is harder to monitor.”So this week, I outline why Trump’s immigration policy could indeed end up scarring the US economy more than his tariffs.Right now, there are three strands to the president’s immigration agenda. “The first is shutting down illegal and legal crossings along the US-Mexico border,” says Alex Nowrasteh, vice-president at the Cato Institute. “The second is increasing deportations from the interior by empowering Immigration and Customs Enforcement. And finally, reducing legal immigration by ending refugee programmes, reducing student visas, instituting country bans and raising the barriers to acquiring visas.”All three pillars are now taking effect. Migrant encounters at the south-west land border have fallen to lows not seen since the 1960s. According to ICE, there were an average of 2,000 arrests per day in the first week of June, compared with just over 300 per day in the 2024 fiscal year under the Biden administration.Alongside last month’s disruption to student visa interviews, universities and research bodies have been threatened with funding cuts from the White House. Indeed, in March, three-quarters of postgraduate researchers and PhD students who answered a poll for Nature magazine said they were considering leaving the US. A recent decline in tourist arrivals is also indicative of the general caution over travelling stateside.Some content could not load. Check your internet connection or browser settings.Trump’s plans have led economists to lower their projections for US immigration. A forthcoming study by the Brookings Institution and American Enterprise Institute is expected to project net negative immigration to the country this year. That hasn’t happened in at least half a century of data. This will be driven by fewer arrivals, alongside deportations and voluntary exits, say the researchers.Evercore ISI expects net immigration to stay negative beyond this year, too. While there is notable uncertainty around its assumptions, the investment banking firm reckons America’s foreign-born population could drop by around 500,000 per year over the next three years. That’s before factoring in Trump’s policies regarding universities and student visas. “The increased risk of seeing applications denied or visas revoked may dissuade students from choosing the US,” says Marco Casiraghi, a director at the company. “As will less funding for research.”Some content could not load. Check your internet connection or browser settings.This is a significant problem for the US economy, because its recent growth has depended on foreign-born labour. The US labour market has been “supply constrained” since the Covid-19 pandemic, partly as a result of “excess retirements”, explains Dhaval Joshi, a chief strategist at BCA Research. “Strong growth in labour supply — driven by immigration — in a supply-constrained economy explains why US GDP has grown faster than most expected over the past few years,” he says.Indeed, the impressive growth in US jobs following the pandemic has been driven by foreign workers.Some content could not load. Check your internet connection or browser settings.Without immigration, America’s population would be shrinking. “America is an ageing, sub-replacement-fertility society today, and its native-born working-age population is no longer growing,” says Nicholas Eberstadt, a political economist at the AEI. The participation rate among the US-born labour force has been stagnant in recent years and remains below pre-pandemic levels. This means lower immigration will drag the country’s annual potential growth rate notably below its recent 2 per cent level. For measure, Morgan Stanley expects it to drop towards 1.5 per cent in 2026, as Trump’s policies reduce total hours worked.Simply put, the loss of foreign workers is akin to removing an economic input. (In contrast, by raising the cost of production, tariffs mostly impact how inputs are utilised.)It would leave the US extra reliant on generating significant productivity gains, for instance from artificial intelligence, to prop up its growth.Some content could not load. Check your internet connection or browser settings.Some content could not load. Check your internet connection or browser settings.Foreign workers have an added impact on America’s economic growth potential, beyond their direct supply of labour.There were an estimated 8.3 million unauthorised workers in the US in 2022, accounting for around 5 per cent of the US workforce, according to the Pew Research Center.These workers tend to prop up core industries where there are existing shortages, including construction, agriculture and manufacturing. In some hands-on occupations, such as brick masonry and roofing, which employ a high proportion of undocumented labourers, labour-saving technologies are still limited. After taxes, this group also has over $250bn in annual spending power, according to the American Immigration Council.For these reasons, “deporting workers . . . reduces jobs for other US workers”, notes the Peterson Institute for International Economics in a recent study. Even in the think-tank’s “low” scenario, involving the deportation of 1.3 million unauthorised workers, it finds US GDP to be 1.2 per cent below baseline in 2028. The loss of labour supply also pushes up inflation.Higher-skilled foreign workers have a more significant economic role in boosting US productivity via innovation and enterprise.Despite accounting for around 5 per cent of the US workforce, high-skilled immigrants comprise a larger share of the labour pool in industries that require advanced education and specialised experience, says Goldman Sachs in a recent research note. These include information services, semiconductor design, scientific research and pharmaceuticals.NBER research estimates that US immigrants founded a fifth of venture capital-backed start-ups between 1990 and 2019. One-quarter of the aggregate economic value created by patents in companies between 1990 and 2016 came from foreign-born workers too.Some content could not load. Check your internet connection or browser settings.There is, of course, plenty of uncertainty about how Trump’s immigration policy will play out. Analysts expect the administration to fall short on its promises of “mass deportation” — which could mean targeting 1mn deportations per year — given the logistical challenges involved. Highly skilled workers and students may also be unable to find suitable opportunities abroad in the short term.Still, baseline projections from Evercore ISI, Brookings and AEI for net immigration to turn negative, at least in the near term, will generate worse outcomes for the US economy in the long run than tariffs.For measure, assuming Trump’s immigration agenda only amounted to the PIIE’s low-end deportation scenario, real GDP would still fall further from baseline when compared to his various tariff plans.This result may feel counterintuitive. That is partly because markets and businesses are so focused on the immediacy and bottom-line consequences of tariffs. But tariff and immigration shocks propagate through the economy via different channels. Tariffs are a tax on importers. In the near term, they push up prices and weaken demand by raising uncertainty. Over time they sap supply by coddling, and shifting resources to, less efficient companies. But reducing foreign workers is more akin to directly removing resources, as well as a source of demand and innovation, from the economy. It just takes slightly longer to filter through. Some content could not load. Check your internet connection or browser settings.Tariffs — and their effects — are also likely to be less permanent than a hit to labour supply. Future administrations can lower, or remove, any import duties. They can also reduce immigration barriers (although politically that may be harder). But generally trade flows and supply chains are more responsive to changes in policy, costs and economic conditions than migratory flows, at least in the short run. This means once a chunk of the labour force has been reduced, it won’t be easy to scale it back up quickly. Skilled workers, students and unauthorised immigrants could remain risk averse to committing to life in the US for some time after Trump’s second term. In the long run, it is the loss of people from abroad — and not the cost of goods from outside — that will prove far more damaging to America’s prosperity. Send your rebuttals and thoughts to [email protected] or on X @tejparikh90.Food for thoughtWhy do people follow rules even when they are given incentives not to do so? A new study finds conformism to be a significant factor.Free Lunch on Sunday is edited by Harvey NriapiaRecommended newsletters for youTrade Secrets — A must-read on the changing face of international trade and globalisation. 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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The Federal Reserve’s favoured inflation metric is expected to show a slight tick uptick in price pressures in May, with an acceleration in both core and headline measures, as the effects of Donald Trump’s tariffs begin to appear in US prices. On Friday, the Bureau of Economic Analysis will release the personal consumption expenditures index data for May, which economists surveyed by Bloomberg forecast will show a headline figure of 2.3 per cent year over year, up from 2.1 per cent the month prior. The core measure, which strips out the volatile food and energy sectors and is most closely watched by the Fed, is expected to be 2.6 per cent, a step up from the 2.5 per cent rate in April.The PCE data will follow a modest jump in consumer price pressures recorded earlier this month, which showed CPI at 2.4 per cent in May, below economists’ expectations of 2.5 per cent, but above the rate of 2.3 per cent recorded in April. An bigger acceleration in price pressures could deter the Federal Reserve from cutting interest rates any time soon. Traders in the futures market currently expect the Fed to lower borrowing costs twice this year, beginning in October.Even a muted inflation number is unlikely to signal to the central bank that the coast is clear for rate cuts, according to analysts at ING. “This is very much the calm before the storm, with tariff-induced price hikes expected to become visible from July,” they said. Kate DuguidHow is the Eurozone economy handling trade uncertainty? Investors will be looking at business data next week for clues about the health of the Eurozone economy as trade uncertainty rumbles on for the bloc. The HCOB Eurozone purchasing managers’ index, a monthly poll of supply chain managers, is expected to show a higher reading for both services and manufacturing in June, as the immediate uncertainty following Trump’s April tariff announcement has waned. However, the improvement is not expected to be sufficient to return either sector to growth. “The direction of travel is definitely up,” said Tomasz Wieladek, chief European economist at T Rowe Price. “There’s been a break in bad trade news, so people are expecting things to get a bit better.” A poll of economists by Reuters suggests that the manufacturing reading is likely to rise from 49.4 in May to 49.7, while the services figure is expected to rise from 49.7 to reach 50. A reading above 50 indicates expansion. Wieladek said he would be watching the services number particularly closely, partly because “manufacturing [data] is polluted by frontloading dynamics” as businesses make pre-emptive purchases before US tariffs come into effect. The European Central Bank cut interest rates to 2 per cent earlier this month, but took a more hawkish tone than expected about future rate cuts. Weaker than expected PMI data would bolster the case for faster rate reductions.Wieladek added that economic sentiment could deteriorate later in the year. “Trade is still a big uncertainty,” he said. “We just don’t know how this is going to end.” Emily HerbertIs activity still growing in the UK?UK PMIs are also on investors’ agenda, with surveys for June on Monday offering an indication of how the economy is holding up after a strong start to the year.Policymakers have turned to surveys such as the PMIs to estimate the pace of “underlying” growth, arguing that headline figures can be distorted by one-off effects. In the first quarter, GDP rose 0.7 per cent, driven in part by temporary factors such as stockpiling ahead of US tariff changes. Underlying growth, the Bank of England said, was closer to zero — and it is expected to remain subdued in the second quarter.Economists polled by Bloomberg expect the flash composite PMI, which tracks activity in the manufacturing and services sectors, to edge up to 50.5 in June from 50.3 in May. A reading above 50 signals expansion.Receding fears over US tariffs probably buoyed confidence in June, as they did in May. But renewed instability in the Middle East is adding fresh concerns for businesses, particularly over supply chain disruptions, rising oil prices and their knock-on effects on consumer demand and operating costs.Manufacturing is expected to stay in contraction, dragged down by trade uncertainty and continued job losses. This is likely to partially offset modest growth in services. The survey will also offer an update on inflationary pressures, with firms facing higher wage and national insurance costs since April — and revealing how far these are being passed on to consumers. Valentina Romei More