01:43 PM EDT, 04/09/2025 (MT Newswires) -- The Federal Reserve is expected to cut interest rates three times this year even as the Trump administration's tariffs push inflation higher, Jefferies said Wednesday, sticking to its prior outlook.

Jefferies Chief US Economist Thomas Simons continues to expect rate cuts in June, July and September.

"Although tariffs may cause price-level increases, we do not think it is correct to assume that the Fed would view these price-level increases as a handcuff," Simons said in a note.

Morgan Stanley said in a note emailed Tuesday that the Fed is expected to keep its monetary policy on hold throughout this year and resume cutting interest rates in March 2026.

On Friday, Fed Chair Jerome Powell said tariffs will likely drive inflation higher and slow down US economic growth, but added that policymakers are "well positioned to wait for greater clarity before considering any adjustments" to their policy stance. His comments followed the White House's announcement of a sweeping new tariff policy earlier that week.

China on Wednesday increased tariffs on imports from the US to 84% from 34%, effective Thursday, after President Donald Trump boosted duties on the Asian country to above 100% in total.

"If inflation is increasing because of an exogenous shock that threatens to reduce real demand, it is senseless to think that the Fed will maintain higher interest rates or to increase them," Simons said.

Consumer inflation is expected to move notably higher starting next month, UBS said in a note e-mailed Wednesday. The Bureau of Labor Statistics' consumer price index report for March is due out Thursday, with a Bloomberg-polled consensus indicating 2.5% growth annually and a 0.1% increase month over month.