other, nullifying the positive or negative effects.

In terms of monetary policy that is dependent on data, this kind of ebb and flow, plus the consideration of lags, makes life difficult for the Fed, even those with a rate-cutting bias.

unorthodox governance. The point of the whole story though, is not about the accuracy of the prediction, but rather to show the ebb and flow of the effects of fiscal and monetary policymakers, the lags with which they take effect, and how during some periods they may counter each

see negative impulses from fiscal policy and immigration effects without a countering positive impulse from financial conditions. Having said that, the resulting negative impact from all the sources may be small. Hopefully, the resilience of the US economy may see us through this era of

combined positive impulses from financial conditions and fiscal policy, tapering lower towards the end of 2026. So much so that these combined may not be able to counter the negative impulses from tariff and immigration effects.

From 2027 onwards, we might

policy, producing an overall positive growth impulse. These combined are countered by the negative impulse from tariff effects, resulting in the total impulse being slightly negative and close to zero.

In 2026, it is projected that there is a greater increase in the

Tariffs Rig Up Markets Purposefully

come at the expense of real household income. Either way, it suggests softer demand conditions ahead as the economy continues to adjust to the new tariff regime. // MS

through August suggests we may see a larger positive change in unit prices in the second half of the year. This could create a narrative of moderately firmer hiring and better profitability, though it would

costs into payrolls and margins, it may contribute to an environment where passing on tariff costs to consumer prices becomes more difficult. The outlook though, calls for greater pass-through to prices in coming quarters; recent firming in consumer prices from June

Lack of tariff pass-through to consumer prices doesn't automatically boost domestic demand; less employment or layoffs could slow consumer demand while lower profitability weighs on business spending. Indeed, if nonfinancial companies continue absorbing tariff-related

Efforts to cut unit labour costs included slower hiring, reduced hours worked, boosting productivity in the quarter. If firms persist in absorbing via lower profits and labour costs over prices, earnings for tariff-exposed sectors may suffer, with downside risks to employment.