Fed minutes: Trade policy weighs on economic activity more than expected

Odaily Planet Daily reported that the minutes of the Federal Reserve meeting mentioned that the staff's forecast for real GDP growth in 2025 and 2026 was lower than the forecast at the March meeting because the announced trade policies meant that actual economic activity would be more of a drag than the policies assumed by the staff in previous forecasts. Trade policies are also expected to lead to slower productivity growth, reducing potential GDP growth in the coming years. As the drag on demand is expected to kick in earlier and be larger than the response of supply, the output gap is expected to widen significantly over the forecast period. The labor market is expected to weaken substantially, with the unemployment rate forecast to be above staff estimates of the natural rate of unemployment by the end of this year and to remain above the natural rate through 2027. (Golden Ten)