Thu, 20 Mar 2025

Thu, 20 Mar 2025 Fed cuts US growth forecast as tariff fears increase

The US president, who has previously criticised the central bank, called on it to cut interest rates.
The US Federal Reserve has downgraded its growth forecast, citing President Donald Trump's tariffs as a major factor driving up prices. The central bank kept interest rates unchanged at 4.3%, but warned that the tariffs are likely to slow growth and make it harder for them to keep inflation stable. Fed Chairman Jerome Powell acknowledged that the tariffs have had a clear impact on prices, saying "a good part of it" can be attributed to tariffs. He also noted that progress may be delayed due to the uncertainty caused by Trump's policies. Despite this, the Fed still expects growth to reach 1.7% this year, down from 2.1% previously anticipated. Inflation is forecast to rise to 2.7% at the end of the year, up from 2.5% in December. The decision has been seen as a response to Trump's policies, which have included a blitz of new tariffs and calls for tax cuts, regulation rollbacks, and government spending reductions. Economists have warned that these policies could cause prices to rise in the short-term and raise uncertainty for businesses. Trump has defended his policies, saying they will lead to long-term growth despite "a little disturbance" caused by tariffs. The central bank is expected to cut interest rates later this year as it tries to support the economy. The Fed's decision has been seen as a cautious move, with some analysts predicting that inflation remains a primary risk and could spiral out of control if Trump's policies continue.
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