The United States economy stands at a critical juncture, grappling with a delicate balance between cooling inflation, slowing growth, and rising political interference, according to a recent report by Quantace Research titled US Economy at a Crossroads: What You Need to Know.
While inflation pressures appear to be easing — with headline CPI falling to 2.4 per cent in March, the first time below 2.5 per cent since 2021 — broader economic signals remain mixed. The Atlanta Fed’s real-time GDP now-cast points to a contraction of 0.3 per cent quarter-on-quarter, indicating growth is losing altitude. Meanwhile, the labour market continues to flash warning signs, with initial unemployment claims at 215,000 and continuing claims reaching the highest level since 2022.
Retail sales rose by 1.4 per cent in March, boosted largely by consumers rushing to make purchases ahead of expected 25 per cent auto tariffs, suggesting a short-term pull-forward effect rather than underlying strength.
A major concern flagged by Quantace Research is the erosion of central bank independence. Recent comments by former President Donald Trump criticising Federal Reserve Chair Jerome Powell have triggered market volatility, driving the US Dollar Index to a three-year low and spiking gold prices to USD 3,392 per ounce. This “political-risk premium” has widened bond term premiums and heightened fears of stagflation.
Quantace’s base case scenario sees modest GDP growth of 0.8 per cent and inflation settling at 2.6 per cent by the end of 2025. However, the downside scenario — carrying a 30 per cent probability — foresees a contraction of 1.2 per cent and inflation rising to 4.1 per cent, accompanied by market stress and financial fragility.
The report noted that India’s rupee has strengthened to Rs 85.13 against the US dollar, and Indian government bonds have benefited from a relative safe-haven appeal, with ten-year G-secs easing to 6.45 per cent. Foreign portfolio investors continue to show selective risk-on behaviour, with USD 0.5 billion of equity inflows recorded in mid-April.
For Indian investors, Quantace recommends caution. Export-driven sectors such as IT and metals may face headwinds from weaker US demand, whereas domestic banks and utilities are seen as more resilient. Momentum strategies are advised to underweight US-exposed technology stocks, while gold ETFs could provide a hedge in volatile scenarios.
In conclusion, Quantace Research underscores that central bank independence is not a technocratic luxury but a fundamental pillar of market stability. Political interference risks higher inflation without growth benefits, undermining investor confidence globally