The Federal Reserve is forecasting aggressive stagflation for the remainder of 2025.
Inflation is expected to go up to 3 percent, GDP growth is expected to fall by 1.4 percent, and unemployment will rise to 4.5 percent, the Fed announced Wednesday.
This report comes as the Trump administration weighs further aiding Israel in its war on Iran, a move that could seriously destabilize the region and multiple economies, including our own. There’s also Trump’s “One Big Beautiful Bill Act,” which is expected to add $2.8 trillion to the deficit and reward tax cuts to wealthy individuals and corporations while slashing Medicaid and other social welfare programs.
Fed Chair Jerome Powell took to the podium on Wednesday to reaffirm what he’s been saying for months: This economic downturn is a direct result of President Trump’s tariffs.
“Increases in tariffs this year are likely to push up prices and weigh on economic activity. The effects on inflation could be short-lived, reflecting a onetime shift in the price level. It’s also possible that the inflationary effects could instead be more persistent,” Powell said. “Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and ultimately, on keeping long-term inflation expectations well-anchored.”
The Fed has refused to cut interest rates as a result of the projected stagflation. Trump has yet to comment on the Fed’s report.
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