Officials at the US Federal Reserve cut their US economic growth forecasts and raised their projections for price growth as they kept interest rates on hold while Donald Trump bids to overhaul the global economy with sweeping tariffs.
Policymakers at the central bank expect inflation to increase by an average rate of 2.7% this year, according to projections released on Wednesday, up from a previous estimate of 2.5%.
They expect US gross domestic product (GDP) – a broad measure of economic health – to rise by 1.7% this year, down from an estimate of 2.1% in December.
Fed officials maintained the benchmark interest between 4.25% to 4.5% following their latest two-day policy meeting. The Bank of England is also expected on Thursday to announce that it will keep UK rates on hold at 4.5%.
Trump, who returned to the White House in January after promising to rapidly bring down prices for millions of Americans, has roiled businesses and investors in the US and across the world with the erratic rollout of an aggressive tariff strategy.
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Many economists warn the Trump administration’s plans to impose or increase US tariffs on goods from overseas risk raising prices further.
The president has insisted, however, that hitting trading partners and economic rivals with such duties will help him to rebalance the global stage to America’s advantage – and raise funds for the US federal government.
The Fed is targeting a 2% inflation rate. While price growth has fallen dramatically from its peak at 9.1% – the highest level in a generation – three years ago, it has yet to fall below the central bank’s target.