The US Federal Reserve Fed keeps the key interest rate stable again. It continues to be in a range of 4.25 to 4.5 percent, as the Central Bank Council in Washington announced. The key interest rate has been on this high level since December, and the Federal Reserve had not touched the key interest rate at the meeting in January. The decision is made against the background of US President Donald Trump’s aggressive customs policy, which could drive inflation up again. The central bank continues to be careful with regard to interest reductions this year – and corrects the growth forecast down.
Fear of recession
In the United States, there is concern that the US economy could slip into a recession due to Trump’s customs policy. A result of import tariffs is that goods that are imported from abroad cannot be produced immediately in the United States. You would therefore automatically become more expensive. In addition, in view of the lower competition from abroad, US companies could also increase their prices. Most recently, tariffs against Canada, Mexico and China and steel and aluminum imports were imposed. At least the tariffs for goods from Canada and Mexico took back Trump.
Trump’s latest statements are interpreted in such a way that the president no longer excludes a recession. Typical characteristics of an economic downturn are increasing unemployment, falling consumption, declining investments and general economic uncertainty. The central bank now also published its new economic forecast for the United States – and is more pessimistic than three months ago. The gross domestic product (GDP) of the world’s largest economy will grow by 1.7 percent this year (December: 2.1 percent).
Fed assumes somewhat higher inflation
The central bankers stick to their interest forecast. The Fed’s decision -makers expect a key interest rate of 3.9 percent on average in 2025. This indicates two small interest steps this year. Trump has imposed high tariffs on goods from different countries since taking office. The uncertainty about the possible consequences of the aggressive approach is one of the strongest winners and could slow down growth. The task of the Fed is to keep inflation in check. It strives for an inflation rate of 2 percent.
For this year, the central bankers are now expecting an average of 2.7 percent – so it is somewhat higher than previously assumed. In December the forecast was 2.5 percent. The core inflation, i.e. without taking food and energy prices into account, should be 2.8 percent this year (December: 2.5 percent). In their analysis, the central bankers look particularly at this value. In the opinion of experts, he reflects the general price trend better than the overall rate, since components that are prone to fluctuations are deducted.
