Is Uncertainty a Greater Threat to the Economy Than Inflation?

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The real threat to the economy might not be inflation itself – it’s the chaos surrounding what comes next.

That was the bold opening message from the Head of Balance Sheet Risk at a global risk management consultancy, as she kicked off her session at Risk Americas.

With policy signals flickering and consumer resilience faltering, the speaker made the case that unpredictability in Washington and beyond is now the biggest variable keeping risk managers awake at night.

“Everyone’s tracking the daily data drops – CPI this, PPI that,” the speaker told Risk Americas, CeFPro’s flagship U.S. conference event. “But if you zoom out, you start to see the bigger risk: policy unpredictability, especially around trade and tariffs.”

She pointed to the sudden policy shifts following the recent elections and their impact on inflation expectations and market volatility: “It’s not just what tariffs do – it’s what people think policymakers might do next.”

With a decade of experience in consumer credit modeling, the executive emphasized how inflation disproportionately hurts low-income borrowers.

“If you're serving subprime segments, you're already seeing the hit – especially in auto and bank card delinquencies,” she warned.

Current data shows 90-day delinquency rates in auto lending rival those of the Great Recession, a signal that consumer strain is deepening even as headline inflation cools.

The expert also took aim at conventional wisdom on trade policy. 

“We love to talk about reshoring and bringing manufacturing back,” she said. “But the data says our comparative advantage is services. Meanwhile, our biggest export? Trash. That’s not a path to reindustrialization.”

She argued that tariffs on intermediary goods could backfire, increasing costs for domestic manufacturers and constraining capital investment – trends already visible in recent declines in gross private investment and business sentiment indices.