Federal Reserve officials are preparing to release new economic projections that will provide insight into how U.S. central bankers view the impact of President Donald Trump’s policies, including tariffs.
Top forecasters have downgraded their expectations for growth this year and increased their concerns about recession risks due to trade wars. They also expect higher inflation as Trump’s tariffs filter through global markets.
The Fed is expected to keep interest rates steady at its two-day policy meeting on Wednesday. However, policymakers are facing a complex scenario with mounting uncertainty around forecasts and tumbling stock markets.
Analysts say that the “soft landing” scenario, where the economy continues to grow and inflation ebs and flows down to the Fed’s 2% target, is still likely. But there are also concerns about shocks from trade wars, consumer expectations signaling recession fears, and inflation fears.
The Fed’s median expectation in December saw the U.S. economy growing 2.1% this year, with a slightly higher unemployment rate. However, those projections were issued before Trump’s policy plans became more concrete, including new tariffs on imports from China, Mexico, and Canada.
Economists are warning of potential risks, including a painful selloff in the stock market and rising recession concerns. Some see a 25% risk of a U.S. recession over the next 12 months.
The Fed’s policy rate is expected to remain steady, but policymakers may be facing difficult judgments about which tariff price effects will stick and which will disappear on their own. The central bank is also grappling with inflation expectations that are becoming increasingly uncertain.
Overall, the new economic projections from the Fed will provide valuable insights into how Trump’s policies are affecting the economy and what risks lie ahead.
Source: https://www.reuters.com/markets/us/fed-officials-prepare-lay-down-marker-impact-trump-policies-2025-03-17