Fed Cuts Growth Forecast Amid Escalating Tariff Fears

The US central bank has lowered its economic growth forecast, citing President Donald Trump’s tariffs as a clear driver of rising prices. The Federal Reserve, which kept interest rates unchanged, stated it is closely monitoring the impact of White House policies. This decision, widely anticipated, maintains the benchmark interest rate at approximately 4.3%, a level held since December.

Following the announcement, President Trump urged the Fed to cut rates, stating on Truth Social, “The Fed would be MUCH better off CUTTING RATES as US Tariffs start to transition (ease!) their way into the economy.” Fed Chairman Jerome Powell acknowledged the economy’s underlying health but warned that tariffs are likely to impede growth and price stability efforts, noting recent increases in goods prices. Powell indicated that progress on these fronts is likely delayed.

Since January, Trump has introduced new tariffs while advocating for significant cuts to taxes, regulation, and government spending. Economists have long cautioned that such policies could lead to short-term price increases and heightened business uncertainty, contributing to a recent stock market sell-off. While Trump admits potential “disturbance” from tariffs, he insists they will foster long-term growth.

The Fed now projects inflation to reach 2.7% by year-end, up from previous estimates of 2.5%, and anticipates growth of just 1.7%, down from 2.1%. Despite holding rates steady, the bank’s forecasts suggest a rate cut is still expected later this year. The Fed also plans to slow its asset sales, providing further economic support. Goldman Sachs Asset Management notes the Fed is currently in a “wait and see mode” as it assesses whether the recent economic slowdown intensifies.

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