The US Federal Reserve has reduced its growth forecast for the American economy, citing concerns over President Donald Trump’s tariffs that are reportedly driving up prices. In its latest projections released on Wednesday, the Fed maintained interest rates unchanged, aiming to observe the impact of White House policies. The benchmark interest rate stayed at approximately 4.3%, a level it has held since December.
Fed Chairman Jerome Powell noted that while the economy remains generally healthy, there is heightened uncertainty. Tariffs, which act as taxes on imports, are expected to slow economic growth and complicate the Fed’s efforts to stabilize prices. Powell remarked, “Clearly some of it, a good part of it, is coming from tariffs.”
Since January, Trump has introduced numerous tariffs alongside calls for significant tax cuts, deregulation, and reduced government spending. Economists have warned these measures could temporarily increase prices and create business uncertainty. Analysts suggest these concerns have contributed to a stock market sell-off, with the S&P 500 dropping 10% since February.
Trump acknowledges potential short-term disturbances from his tariffs but insists they will foster long-term growth. The Fed now anticipates inflation to reach 2.7% by year-end, up from the previous estimate of 2.5%. Growth projections for this year have been lowered to 1.7% from 2.1%. Although interest rates remained steady this week, forecasts indicate the Fed may still cut rates by year-end.
The Fed also plans to decelerate the sale of assets like government debt, providing additional economic support. Following the announcement, leading US stock indexes, including the S&P 500, rose by over 1%. Trump, who has previously criticized the Fed, did not immediately comment on the meeting. However, Kevin Hassett of the National Economic Council downplayed tariff concerns, respecting the Fed’s independence.
— news from BBC.com
