Fed Slashes Growth Forecast, Raises Inflation Outlook Amid Stagflation Fears

Federal Reserve officials have significantly lowered their economic growth projections to below 2% while simultaneously increasing their inflation outlook.

Growth is now expected at just 1.7% (down from December’s 2.1% projection), while core inflation is forecast at 2.8% annually (up from 2.5%). This combination of slowing growth and rising inflation has sparked stagflation concerns.

Fed Chair Powell acknowledged that inflation “has started to move up” partly due to tariffs, and noted “significant concerns about downside risks” despite an overall “solid picture.”

The Fed kept interest rates unchanged at 4.25%-4.5% and still projects two rate cuts for 2025, though their stance has become more hawkish with four members now favoring no changes to rates this year, up from just one member in January. President Trump’s aggressive tariffs are expected to raise prices and reduce consumer spending.