This week, the Federal Reserve will provide new economic projections reflecting Trump administration’s policies.
A Shift from Stability to Uncertainty
Previously, the U.S. economy was seen as being in a 'sweet spot' with balanced growth. However, recent developments have brought increased uncertainty, reflected in stock market volatility and dampened forecasts. 'A soft landing is still likely,' says Beth Ann Bovino, chief economist at U.S. Bank, but trade wars and inflationary pressures add complexity to the situation.
Market Reactions and Interest Rate Policy
Recent market turmoil underscores these concerns. The S&P 500 briefly entered a technical correction, dropping 10% from its record high in February. At its upcoming meeting, the Fed is expected to hold the interest rate steady at 4.25%-4.50%. Investors currently expect three rate cuts.
Updated Economic Projections
In December, the Fed projected 2.1% growth for the year, but new tariff measures could alter these forecasts. Some analysts draw parallels with 1930s tariffs that worsened the Great Depression. Concerns about inflation and growth are rising.
Recession risks are increasing, but the exact economic trajectory remains unclear. The Federal Reserve’s responses will shape future economic conditions.
