U.S. stocks are at record highs, but the outlook for the world's largest economy is no clearer

U.S. stocks person powerfully rebounded aft a unsmooth commencement to the year, adjacent arsenic the outlook for the world's largest system and its involvement rates remains arsenic uncertain arsenic ever.

Economic modeling is "very difficult" close present due to the fact that "things are changing constantly," Atlanta Fed President Raphael Bostic told CNBC's "Squawk Box Europe" connected Monday, pointing to Canada's caller walk-back connected its integer services tax.

Market participants are besides closely-watching the latest advancement of U.S. President Donald Trump's "big, beauteous bill," which cleared a cardinal Senate hurdle implicit the weekend. 

From an ostentation perspective, that means focusing connected the expectations of businesses and consumers, on with the actions they are taking successful response, Bostic continued.

"The communicative determination is that we are truly starting to perceive wide signs that they're expecting to rise prices, but however precocious and erstwhile that volition hap is inactive rather unknown," helium said.

More businesses are reporting that they whitethorn not scope a last strategy connected tariffs until 2026, truthful their interaction connected maturation and terms rises "could beryllium a overmuch much extended play than I deliberation galore expect," Bostic added.

The latest Fed "dot plot," a representation of members' expectations for rates, shows the wide scope of antithetic outlooks among officials for the economy, which Bostic said "really does talk to the uncertainty that's retired there."

Fed Chair Jerome Powell past week stressed the request to clasp monetary policy until the impact of tariffs connected prices clarifies, but markets subsequently pinned their expectations connected a little Fed Funds complaint range. Data from CME Group's FedWatch instrumentality shows astir a 50% probability of 3 quarter-point complaint cuts by the extremity of the year, on with a 10% probability of a greater trim to a scope of 3.25%-3.5% from the existent 4.25%-4.5%.

Gilles Moëc, radical main economist astatine AXA Investment Managers, connected Monday said that the caller involvement complaint expectations were a absorption to the latest circular of Trump's attacks connected Powell. This again raised the imaginable of the U.S. president naming Powell's successor successful the adjacent aboriginal successful a bid to undermine his authority.

Trump has sharply criticized the Fed for holding involvement rates, and his prime would beryllium expected to beryllium supportive of complaint reductions, adjacent if this were opposed by the bulk of voting members.

"Naming the adjacent [Fed] President good up of the extremity of Powell's word – materialising the overmuch talked-about "shadow Fed" script – could beryllium the harbinger of lasting volatility" and crook overseas investors further distant from U.S. assets, Moëc said.

The S&P 500 closed astatine an all-time high connected Friday, coming backmost from early-April lows erstwhile it was down astir 18% successful the twelvemonth to date. The scale has logged large swings amid the White House's ongoing tariff story, the latest section of which introduced a framework commercialized agreement betwixt the U.S. and China that helped boost marketplace sentiment past week.

The U.S. trade woody with the U.K. meantime went into unit connected Monday, reducing tariffs connected British cars and aerospace parts, but keeping a baseline work of 10% successful spot connected astir goods.

The 2 countries person yet to finalize a woody connected alloy imports — portion broader U.S. alloy tariff policy is keeping prices elevated stateside and depressed elsewhere.

The White House remains locked successful negotiations with galore cardinal trading partners, including Canada, the European Union, Taiwan, Japan and India.

"Markets astatine the infinitesimal are I deliberation taking a precise naive presumption of what's happening connected the commercialized front," Bob Parker, elder advisor astatine the International Capital Markets Association, told CNBC's "Squawk Box Europe" connected Monday.

"We could easy beryllium having this treatment astatine the extremity of the twelvemonth oregon perchance going successful to 2026, arsenic we each cognize carrying retired commercialized agreements is precise analyzable and lengthy," Parker said. "And arsenic we saw implicit the play with Canada, determination is simply a superior hazard of commercialized negotiations failing."

He added that, with the European Union successful particular, adjacent if the July 9 deadline to scope an statement is extended, respective sticking points could spot an elevated level of tariffs enactment successful place.