US Federal Reserve Chairman Jerome Powell testified on February 12, 2025 at Capitol Hill, Washington, DC, before the House Financial Services Committee on the six-annual monetary policy report to Congress.
Nathan Howard | Reuters
Federal Reserve officials cut economic outlook in the latest forecast released Wednesday, confirming that the US economy is growing at a rate of less than 2%.
Rate Setting The Federal Open Market Committee downgraded its collective outlook for economic growth to 1.7% from its final forecast of 2.1% in December. In the meantime, authorities hiked the inflation outlook, increasing the annual core price of 2.8%, up from the previous estimate of 2.5%. The move suggests that central banks are looking at the risk of a stag scenario where inflation rises as economic growth slows.
In a statement, the FOMC said “the uncertainty regarding the economic outlook is increasing,” adding that the Fed is “attention to risks on both sides of its dual mission.”
The fear of slowing the economy and remelting inflation has increased dramatically as President Donald Trump’s aggressive tariffs on major US trading partners are expected to raise the prices of goods and services and dentists’ consumer spending.
“Inflation is now beginning to rise. We are partially considering tariffs and partially thinking about further progress over the year,” Chairman Jerome Powell said at a press conference. “Overall, it’s a solid situation. Research data from both households and businesses demonstrates significant concerns about uncertainty and negative risks that have risen significantly.”
For now, the Fed expects to make two rate cuts for the remainder of 2025, even if an inflation outlook is raised.
The so-called DOT plot showed that both voters and non-voters FOMC members showed that by the end of the year, the benchmark Fed fund ratio, which is 3.9%, corresponded to the target range of 3.75% to 4%. The central bank had not changed its significant interest rates in the 4.25%-4.5% range on Wednesday.
Still, their views are leaning towards more Hawkish in rate forecasts as the four members have not seen interest rate changes in 2025. The January meeting does not foresee an official formula that will not change to interest rates this year.
The Fed’s latest targets include:
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– CNBC’s Jeff Cox provided the report.
