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Friday, Apr 18, 2025
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US Federal Reserve Reduces Economic Growth Projection Due to Tariff Uncertainty
The central bank has lowered its projections for US economic growth while increasing its forecasts for price growth, attributing these changes to heightened uncertainty stemming from trade policies.
The US Federal Reserve has downgraded its projection for economic growth in the US while raising its forecast for inflation.
The central bank now anticipates a 1.7% increase in US gross domestic product (GDP) for this year, a decrease from its previous estimate of 2.1% made in December.
Furthermore, policymakers foresee inflation rising at an average rate of 2.7% this year, up from an earlier prediction of 2.5%.
After its most recent policy meeting, the Fed has kept the benchmark interest rate steady between 4.25% and 4.5%.
A closely monitored 'dot plot' suggests that there may be two rate cuts within this year.
The heightened uncertainty regarding the economic outlook is linked to trade policies, including tariffs set by the US government.
The Fed chair mentioned that some of the rise in inflation expectations is attributable to these tariffs.
The central bank aims for a 2% inflation rate, and while price growth has decreased from its peak, it still exceeds this target.
The Fed's decision arrives as the Bank of England is anticipated to maintain UK interest rates at 4.5%.
The announcement has caused a modest reaction in financial markets, with Wall Street experiencing a slight uptick following the news.
The central bank now anticipates a 1.7% increase in US gross domestic product (GDP) for this year, a decrease from its previous estimate of 2.1% made in December.
Furthermore, policymakers foresee inflation rising at an average rate of 2.7% this year, up from an earlier prediction of 2.5%.
After its most recent policy meeting, the Fed has kept the benchmark interest rate steady between 4.25% and 4.5%.
A closely monitored 'dot plot' suggests that there may be two rate cuts within this year.
The heightened uncertainty regarding the economic outlook is linked to trade policies, including tariffs set by the US government.
The Fed chair mentioned that some of the rise in inflation expectations is attributable to these tariffs.
The central bank aims for a 2% inflation rate, and while price growth has decreased from its peak, it still exceeds this target.
The Fed's decision arrives as the Bank of England is anticipated to maintain UK interest rates at 4.5%.
The announcement has caused a modest reaction in financial markets, with Wall Street experiencing a slight uptick following the news.
