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The federal reserve has reduced its American growth forecasts and has raised its inflation prospects, stressing the concerns that Donald Trump’s prices will eliminate the greatest economy in the world.
The latest Fed projections have shown that officials expected that the GDP is 1.7% of GDP this year, prices that should increase by 2.7%. Political decision -makers kept the main interest rate of the central bank on Wednesday at the end of a two -day meeting.
The president of the Fed, Jay Powell, recognized that journalists after the meeting that Trump’s plans to impose radical prices on American trade partners had affected the prospects for the inflation of the Central Bank and the Economy.
“It is clear that some of them, a good part of it,” are linked to the impact of the president’s prices, said Powell, adding that such measures “tend to reduce growth and push inflation.” He also said that the Fed did not “need to be in a hurry” to change rates given the unusual “uncertainty”.
Inflation progress has been “probably delayed at the moment,” added Powell. The Fed fought to push inflation to its target by 2% and interrupt the most serious access to prices in decades.
In an article on his Truth social platform at the end of Wednesday, Trump renewed her pressure on the central bank, calling the Fed to reduce borrowing costs to compensate for the new prices he plans to unveil next month.
“The Fed would be much better to reduce reduction rates while American prices are starting to pass (facilitating!) The path of the economy,” wrote the president. “Do the right thing.”
The FED also announced that it slowed down the pace of its quantitative tightening program, reducing the amount of debt from the US Treasury, it allows you to exceed its balance sheet each month from $ 25 billion to $ 5 billion from April.
American actions have reached daily heights following the Fed decision, the S&P 500 increasing by 1.1% and the NASDAQ composite rich in technology gaining 1.4%.
The Debt of the United States government has also rallied, pushing the yield of the treasury to 10 years of reference down 0.04 percentage points to 4.25%.
Ed al-Hussainy at Columbia Threadneedle Investments said: “The good news for the risk is that the Fed expects higher inflation but not high enough to change their rate reduction rate.”
The new projections marked a significant change compared to December, when managers of the Federal Open Market Committee, the Central Bank Policies Policy Committee planned growth of 2.1% for 2025 and estimated that closely observed personal consumption expenses would end the year at 2.5%.
The meeting occurred at a crucial time for the US economy while Trump promised in -depth reductions in federal spending and large tax reductions. He also imposed new raid import prices, causing a world trade war.
Surveys have shown that American consumers and companies were concerned about the samples, which have a depressed demand and an increase in prices.
The new Fed forecasts “have been essentially indicated that we are in a stagflation economy, with lower growth and higher inflation,” said Torsten Slok, chief economist of the Apollo investment group.
“On the one hand, stagflation is a very complex challenge for the Fed. Should they listen to growth, which means that they should reduce rates, or should they listen to higher inflation, which means that they should be hiking rates? “
A FOMC declaration on Wednesday, made after the American prices maintained the target range of the rate of federal reference funds between 4.25% and 4.5%, said: “Uncertainty about economic prospects has increased.”
The latest so -called dot plot projections show that FED officials expect one or two more quarter drop drops this year – the same thing in December – after lowering the rates of a percentage point in 2024. However, four FOMC members no longer expect any reduction this year, against one in December.
Investors expect discounts of two to three quarters by the end of 2025.
The governor of the Fed, Christopher Waller, voted against the decision to slow down the quantitative tightening, saying that the current decline of $ 25 billion per month has remained appropriate.
All members of the Voting FOMC supported the decision to keep the rates pending.
