Stagflation? Fed sees higher inflation and economics that grows less than 2% this year

Representatives of the Federal Reserve have reduced their economic forecasts in the latest forecasts issued on Wednesday, seeing the US economy increases below 2%.

The open market federal committee, which set the rate, downgraded its collective view of economic growth to 1.7%, which is 2.1% compared to the latest projection in December. At the same time, the officials went to the inflationary forecast, seeing that prices for major growth rise at 2.8% per annum, which is 2.5% compared to the previous estimate. In these steps, the Central Bank sees the risk of stagflation scenario, where inflation increases as economic growth slows.

In his statement, Fomc noted that “the uncertainty around the economic worldview increased,” adding that the Fed “carefully treats the risks for both sides of the double mandate.”

Fears of economic slowing and inflation reaction have increased significantly as president Donald TrumpU.S. key trades are expected to raise the prices for goods and services as well as consumer costs.

“Inflation has started to move now. We are partly thinking in response to tariffs, and there may be a delay in the further progress this year,” said Fed Chairman Jerome Powell at a press conference. “Overall, this is a solid picture. Poll data both households and businesses show considerable uncertainty and significant concern about insufficient risks.”

So far, the Fed still expects to make two speed decreases for the rest of 2025, according to the average projection, even when the inflation worldview is increased.

The so-called point plot showed that 19 Fomc members, both voters and non-electors, see the Fed landmarks up to 3.9% by the end of this year, which is equivalent to the target range from 3.75% to 4%. Central Bank kept his key interest rate unchanged In the range between 4.25% -4.5% on Wednesday.

However, their opinion leaned more hawk in the bid project, and four members in 2025 did not see any changes.

Here are the last targets of the Fed:

– Jeff Cox in CNBC made a report.