U.S. Economic Growth Faces Potential Decline Amid Tariff Impact, Says Fed Official

According to PANews, Federal Reserve official Musalem has indicated that the U.S. economy may experience a significant decline in growth, potentially falling below trend levels. This downturn is attributed to the impact of new import tariffs, which are expected to raise prices, affecting both businesses and households. Musalem stated, "I do not have a recession as a baseline, but I believe economic growth could be significantly below trend," estimating a growth rate of around 2%. He noted that "both upward and downward risks will materialize," with higher-than-expected tariffs exerting pressure on prices, declining confidence, and recent stock market volatility potentially curbing spending and impacting household wealth. These factors combined are likely to slow economic growth. Musalem, who holds voting rights on interest rate policy this year, emphasized that the monetary policy response will depend on the evolution of inflation and unemployment in the coming months. Key considerations include whether price shocks persist and if inflation expectations remain aligned with the Federal Reserve's 2% inflation target.