Fed predicts slowdown but no collapse of US economy amid turbulence of Trump's early days

Jerome Powell, the chair of the US Federal Reserve (Fed, central bank), is unwilling to give in to the prevailing doom and gloom surrounding the economic policies pursued by President Donald Trump, particularly his all-out trade war. As Powell said, “We are focused on separating the signal from the noise.” At the close of the institution’s Open Market Committee meeting on Wednesday, March 19, Powell and his colleagues published deteriorating economic forecasts but certainly did not envisage a collapse, leaving interest rates unchanged.

The Fed has revised its growth forecast downward for 2025, to 1.7% from 2.1% in its December 2024 forecast. It now expects inflation of 2.7% this year, up slightly by 0.2 points – but this rebound would be short-lived, as the institution forecasts 2.2% and 2% price rises in 2026 and 2027. Finally, it’s not too worried about the labor market, as it expects unemployment to remain under control at 4.4% of the working population, up 0.1 points.

However, “uncertainty around the economic outlook has increased,” the Fed wrote in its statement. Powell strongly tempered the recession risks evoked over the past two weeks by economists and on the markets: “It has moved up, but it’s not high.” That didn’t stop him from being modest: “I don’t know anyone who has a lot of confidence in their forecast now.” Nevertheless, he considers himself “well-positioned” to react by raising or lowering rates if necessary.

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