Federal Reserve Predicts Slower GDP Growth Due to Trade Policies

According to Odaily, the Federal Reserve's meeting minutes reveal that staff forecasts for real GDP growth in 2025 and 2026 are lower than those made during the March meeting. This adjustment is attributed to announced trade policies, which are expected to exert a greater drag on actual economic activity compared to previous assumptions. The trade policies are also anticipated to slow productivity growth, thereby reducing potential GDP growth in the coming years. The demand drag is expected to commence earlier and be more significant than the supply response, leading to a substantial widening of the output gap during the forecast period. The labor market is projected to weaken considerably, with the unemployment rate expected to exceed the staff's estimate of the natural unemployment rate by the end of this year and remain above it until 2027.