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The US central bank has slashed its expectations for economic growth this year as it eyes challenges on several fronts amid Donald Trump’s escalating trade war.
The Federal Reserve announced, as was widely expected, that it would keep its main interest rate at its current target range level of 4.25%-4.5% following the latest meeting of its Federal Open Markets Committee.
The statement that accompanied that decision showed slightly elevated expectations for inflation but also a forecast that the annual rate of economic growth this year had been cut from 2.1% to 1.7%.
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The reduction partly reflected weaker consumer spending, the Fed said, adding that could be partly explained by the threat of rising prices due to the tariff agenda.
The central bank admitted rising uncertainty over its dual mandate which covers employment as well as inflation.
At a news conference to accompany the decision, Fed chair Jay Powell said: “The economy is strong overall”, adding that labour market conditions were “solid”.
But on the question of rising goods inflation he said: “A good part of it is coming from tariffs”, adding that it was too soon to split non-tariff and tariff-related inflation in the data.
The core message was that it was too early to predict the impact overall.
Policymakers said risks had increased, with a near unanimous sentiment in saying the outlook for the year was muddled but it stopped short of directly blaming the protectionist policies being pursed by the Trump White House.
The Fed revealed its hand less than 24 hours before the Bank of England was expected to follow suit by also holding off on any fresh rate cut amid risks of surging prices due to the growing trade war uncertainty.
The Fed meeting took…
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