The federal reserve reduces American growth forecasts as Trump's pricing fears increase

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The American central bank reduced its growth forecasts when it warned President Donald Trump's prices “clearly” increase prices.

The Federal Reserve published its projections for the greatest world economy on Wednesday while again keeping unchanged interest rates, saying that he wanted to see how the White House policies are taking place.

This decision, which was widely expected, maintained the benchmark interest rate of the federal reserve oscillating around 4.3%, where it has been located since December.

The president of the Fed, Jerome Powell, said that the economy still seemed to be healthy, despite a clear slowdown in feeling and “remarkably high” uncertainty.

But he warned the prices – which are taxes on imports – were likely to slow down growth and to hinder the bank's efforts to maintain stable prices, noting recent data showing an increase in the prices of goods.

“Obviously, part of this, a good part of it, comes from prices,” he said, speaking after the announcement of the Fed rates on Wednesday.

“Progress is probably delayed at the moment,” he added.

Since taking office in January, Trump has announced Blitz new prices while calling for major tax reductions, regulations and public spending.

Economists have long warned that some of these policies could lead to a price increase, at least in the short term, and increase uncertainty for businesses.

Analysts claim that the concerns have also contributed to a stock market sale, the S&P 500 down 10% of the levels of February at September for the last time in September.

Trump recognized that there could be “a little disruption” of his prices, but says that policies will lead to long -term growth.

Inflation and economic slowdown fears

The dynamics have added to the challenges that the Fed faced, which has spent much of the last three years trying to maintain stable prices and avoid the economic slowdown.

Mr. Powell said the bank assumes that prices would lead to prices, rather than a more sustained increase, but he is also preparing for a growth blow.

Forecasts have shown that political decision -makers now expect inflation to 2.7% at the end of this year, against 2.5% that they had scheduled in December.

They also expect growth of only 1.7% this year, compared to 2.1% previously planned.

Although he maintained the interest rates unchanged on Wednesday, forecasts suggest that the bank still plans to reduce rates by the end of the year.

The Fed also said that it would slow down sales assets, such as public debt, in a decision that effectively offers more support for the economy.

“For the moment, the Fed awaits and seeing the mode, because it monitors if the slowdown in recent growth is developing in something more serious,” said Whitney Watson, a global co-responsible and co-responsible for investments in fixed income and liquidity solutions at Goldman Sachs Asset Management.

In the United States, the main stock market indices increased after the announcement, the S&P 500 closing more than 1%.

Trump, who criticized the Fed in the past, has not immediately discussed the meeting.

But Kevin Hassett, director of the national economic council, a political arm of the American government, rejected concerns about the effect of prices.

“President Powell is clear that if there was a pricing effect, it is a transitional effect,” he said, adding that he respected “the independence of the Fed, as we all do in the White House”.

The Fed increased borrowing costs significantly from 2022, aimed at cooling the economy and facilitating pressures that increase prices.

Inflation, the price increase rate, has since fallen to 2.8% in February, but remains above the target of 2% of the bank.

Recent surveys also suggest that public feeling has flowed, while inflation expectations have increased, which could make job stabilization prices more difficult.

Households that expect prices to increase are encouraged to buy now. But this can fuel inflation, because companies respond to the increase in demand by increasing prices more.

“The problem that the United States is confronted is that inflation remains a main risk and shows that signs of consumer expectations are not anchored by the target of 2%,” said Lindsay James, investment strategist at Quilter.

“The main demand indicators can slow down in the United States, but inflation persists and risks spiral if the proposed economic policies are continuing.”

Mr. Powell said that the bank was observing these investigations closely, but had not yet seen any evidence in “hard data” to make the alarm on the economy.

“We are well placed to wait more clarity and not in a hurry,” he said.

Additional report by Bernd Debussman Jr

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