According to The Kobeissi Letter, US long-term inflation expectations have surged to 3.9%, marking the highest level since 1993. One-year inflation expectations have risen to 4.9%. This shift in expectations suggests consumers anticipate worsening economic conditions and may lead to increased borrowing. The Federal Reserve has described tariff-induced inflation as 'transitory', but traders should consider the potential for elevated inflation to influence interest rate decisions and borrowing costs.

According to The Kobeissi Letter, Fed Chair Powell was questioned about the nature of tariff-induced inflation, to which he responded, 'That's the base case,' suggesting a belief in its transitory nature. This statement has reignited discussions on the Fed's inflation outlook and its implications for monetary policy and market expectations.