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Officials at the US Federal Reserve cut their US economic growth forecasts and raised projections for price growth as they kept interest rates on hold.
“Uncertainty around the economic outlook has increased,” the central bank said in a statement, as Donald Trump’s bid to overhaul the global economy with sweeping tariffs sparks concern over inflation and growth. Policymakers at the Fed expect inflation to increase by an average rate of 2.7% this year, according to projections released on Wednesday, up from a previous estimate of 2.5%.
They expect US gross domestic product (GDP) – a broad measure of economic health – to rise by 1.7% this year, down from an estimate of 2.1% in December. Officials also revised down their projections for GDP growth in 2026 and 2027, to 1.8%.
Uncertainty is “remarkably high”, the Fed chair, Jerome Powell, cautioned, as the Trump administration attempts to engineer radical economic change. “I don’t know anyone who has a lot of confidence in their forecast.” Some of the increase in the Fed’s inflation expectations was “clearly” due to tariffs, Powell said.
Fed officials maintained the benchmark interest from 4.25% to 4.5% following their latest two-day policy meeting. A closely watched “dot plot”, which shows policymakers’ predictions for the trajectory of rates, indicated that they might cut them twice over the course of this year.
“Surveys of households and businesses point to heightened uncertainty about the economic outlook,” Powell said at a news conference. “It remains [to be] seen how these developments affect future spending and investment.”
© 2015 Mutual Fund Observer. All rights reserved.
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Comments
If inflation stays above the target 2% range and growth slows, this would become stagnation.