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The federal reserve system reduced the US growth forecast and raised its views of inflation, stressed concerns that Donald Trump's tariffs would knock the largest economy in the world.
The latest Fed projection set has shown that officials are now expecting HDP to be expanded by 1.7 %this year, with a price prognosis to rise by 2.7 %. Politics creators maintained the main interest rate at the end of a two -day meeting on Wednesday.
Fed Chairman Jay Powell acknowledged reporters after the meeting inflation and economics.
“It is clear that some of them, a good part,” it is related to the impact of Trump's tariffs, Powell said, adding that “they tend to reduce growth and push inflation up”. He also said that Fed “He didn't have to be in a hurry” to move rates due to “unusually increased” uncertainty.
Progress to inflation was “probably delayed”, Powell said. The Fed fought to push the inflation back to its 2 % goal and stop the most serious seizure of price pressures in decades.
The Fed also announced that it would slow the pace of its quantitative tightening program, reducing the amount of US treasury debt, which allows you to start its balance from $ 25 billion to $ 5 billion every month.
US stocks hit their maximum of the day after the Fed's decision, with the S&P 500 by 1.2 % and the technologically heavy composite of NASDAQ gained 1.5 %.
The US government debt has also gathered and shifted a ten -year revenue of the Ministry of Finance by 0.04 percentage points to 4.26 %.
Ed al-Hussaine in Columbia Threadneedle Investments said: “The good news for the risk is that the Fed expects higher inflation but not sufficiently high to change its pace cuts.”
New projections mean a significant shift since December, when officials in the Federal Committee for the Open Market, the Central Bank Policy panel, prognosis grow 2.1 % for 2025, and estimate that carefully monitored personal consumer expenditures would end the year by 2.5 percent.
The meeting came to the US economy at a decisive period because Trump has committed a deep reduction in federal expenditure and wide tax cuts. He also imposed steep new tariffs on imports from foreign countries, which caused a global trade war.
Surveys have shown us that consumers and businesses are dedicated to fees that have depressive demand and increased price pressures.
The new Fed predictions “basically signaled that we are in a stagflation economy with lower growth and higher inflation,” said Torsten Slok, Chief Economist of the Investment Company Apollo.
“On the one hand, stagflation for the Fed is a very complex challenge for the Fed – they should listen to growth, which means they should reduce rates or listen to higher inflation, which means they should be tourist rates?”
The FOMC statement on Wednesday, after US rates maintained the target range for funds funds Benchmark between 4.25 % and 4.5 %, said: “The uncertainty of economic outlook has increased.”
The latest so-called Dot Plot projections show that Fed officials generally expect one more or two-quarter cuts this year-tie as in December-Poté, which in 2024 reduced rates by a 1 percent point. However, four FOMC members are now expecting no cuts against one in December this year.
By the end of 2025, investors expect cuts between two and three quarters.
Fed Governor Christopher Waller voted against the decision to slow quantitative tightening, with the current decline in $ 25 billion a month.
All members of the FOMC vote supported the decision to suspend rates.
