The latest CPI year-over-year growth rate in the U.S. has risen to 3%, with core CPI also increasing to 3.2%. Amid a recovering inflation environment, the planning for increased tariffs has led the Federal Reserve Chairman to state that interest rate cuts will be difficult in the near term. However, the dollar has not been able to reach new highs. Will the euro, yen, and pound continue to recover? Our focus may shift towards the impact of inflation and tariffs on the economy.

As tariffs are seen as a double-edged sword, the high inflation that reignites rate hike expectations supports the dollar, while encouraging the new government to utilize tariffs to reduce trade deficits and lower inflation through energy production. However, with consumers snapping up goods and rising service costs, the distance to the Fed's 2% target seems to widen, and the next rate cut has now been postponed to the second half of 2025.

Despite this, investors may remain perplexed as to why the dollar has not risen with these trends. It seems the market has absorbed the information regarding the unlikely rate cuts, instead focusing on the effects of tariffs and inflation on consumer spending risk. If businesses are not optimistic enough to invest heavily, consumers will have to increase spending, which may raise recessionary pressures.

Thus, monitoring key economic indicators is crucial, as we observe changes in GDP from Q4 2024, where GDP growth is expected at 2.5% and private consumption at 3.2%, but capital expenditure remains low at 1.7%. These phenomena may indicate early warning signs for the economy.