President Donald Trump has been dealt a blow to his agenda for the economy as the Federal Reserve has opted to keep interest rates at their current level and downgraded gross domestic product (GDP) for the United States.
The US central bank’s Federal Open Market Committee (FOMC) voted to keep the country’s base rate at a range of 4.25 per cent to 4.5 per cent.
Furthermore, the Fed slashed their growth forecasts and raised their projections for further inflation in 2025 amid “uncertainty” as a result of the Trump administration’s global trade war.
President Trump has launched sweeping tariffs on allies, such as Mexico and Canada, as well as launched import taxes on global industries such as aluminum and steel; which has impacted the UK.
The US Federal Reserve has opted to keep interest rates at their current level and downgraded GDP growth in the face of Trump’s tariff threats
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With its latest forecast, the Federal Reserve now expect GDP to grow by 1.7 per cent this year, with prices forecast to rise by 2.7 per cent.
This comes amid ongoing concern over Trump’s tariff agenda and sweeping cuts to Government spending being spearheaded by Elon Musk under the Department for Government Efficiency (DOGE).
Just three months ago, the FOMC forecast 2.1 per cent growth in 2025 and expected inflation would end up at around 2.25 per cent.
However, the committee cited that “uncertainty around the economic outlook has increased” amid stock market volatility and consumer apprehension.
Despite its revised forecast, Federal Reserve officials shared that they still see another half percentage point of rate cuts through the year.
As the central bank opts to move in quarter percentage point increments, this would mean two base rate cuts from the Fed in 2025.
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