United States: The Federal Reserve has lowered its economic growth forecast, warning that President Donald Trump’s tariffs are “clearly” driving up prices. The central bank, which kept interest rates unchanged at 4.3 percent, said it monitored the influence of White House policies before making any adjustments.
Trump, who has previously criticised the Fed, urged it to cut rates, arguing that tariffs were beginning to ease their economic impact. Trump stated that, “The Fed would be much better off cutting rates.”
Fed Chairman Jerome Powell acknowledged that while the economy remains healthy, uncertainty is “remarkably high.” He attributed rising goods prices partly to tariffs and warned that they could slow growth. The Fed now expects inflation to reach 2.7 percent by year-end, up from the 2.5 percent forecast in December, while growth projections have been reduced to 1.7 percent from 2.1 percent.
Despite maintaining rates, the Fed’s outlook suggests a rate cut is likely by the end of the year. It also announced a slowdown in asset sales, effectively providing more economic support.
Following the Fed’s announcement, US stock markets rose, with the S&P 500 closing more than 1 percent higher. However, concerns persist over inflation and a potential economic downturn.
While the White House has downplayed the tariff impact, some economists warn that inflation could become a long-term challenge if consumer expectations shift. Investment strategist Lindsay James stated that, “Inflation remains a primary risk and is showing signs of becoming unanchored from the 2 percent target.”
Powell reaffirmed the Fed’s cautious approach, stating that, “We’re well-positioned to wait for further clarity and not in any hurry.”
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