Fed expects US GDP growth to slow and inflation to accelerate

The Federal Reserve (Fed) expects the US economic growth to reach 1.7% in 2025, down from the December’s estimate of 2.1%. The Fed also raised its core inflation forecast up to 2.8% from 2.5%. The changes indicate growing concern regarding the US stagflation, CNBC says. 

The Federal Open Market Committee’s (FOMC) statement highlights the rising uncertainty around the economic outlook. Donald Trump’s aggressive tariff policies on key US trading partners may result in more expensive goods and services, as well as a reduction in consumer spendings. 

The Fed chairman Jerome Powell thinks the current price growth may be partly due to the imposition of import duties. Besides, he expects a delay in progress in reaching the Fed’s inflation target this year. 

The US central bank still projects two rate cuts in 2025, despite the raised inflation outlook. The regulator officials think the benchmark fed funds rate will reach 3.9% by the end of this year.