The recent resilience of the US labor market has led to a notable increase in long-term US yields, raising concerns about potential economic repercussions. As the new administration considers additional fiscal stimulus and tariff hikes, analysts warn that this could exacerbate existing inflationary pressures. The Federal Reserve may have room for one more rate cut in the first half of the year, but a significant shift towards accommodative monetary policy is unlikely until 2026, as the economy may start to suffer from the effects of "Trumpnomics." The UK is already feeling the impact of rising yields, grappling with its chronic current account deficit and a recent fiscal expansion, leaving the government with few options to manage increasing debt servicing costs. Meanwhile, the Euro area is also experiencing rising long-term rates, which could complicate the region's economic recovery. Analysts suggest that the European Central Bank should respond promptly to these tightening financial conditions.
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