The US economy is expected to grow at a slower pace than initially thought, according to the Federal Reserve’s latest projections. The central bank cut its economic growth outlook from 2.1% in December to 1.7%. However, officials also raised their inflation outlook to 2.8%, citing increased uncertainty and concerns about stagflation.
The FOMC attributed the downgrade to President Trump’s tariffs on key trading partners, which are expected to raise prices and reduce consumer spending. Fed Chair Jerome Powell warned that there may be a delay in further progress this year due to the tariffs.
Despite the downgraded growth outlook, the Fed still expects to make two rate cuts for the remainder of 2025. The median projection indicates that the benchmark fed funds rate will rise to 3.9% by the end of the year, with some officials predicting no interest rate changes in 2025.
The FOMC’s latest targets are as follows:
Source: https://www.cnbc.com/2025/03/19/stagflation-fed-sees-higher-inflation-and-an-economy-growing-by-less-than-2percent-this-year.html