Fed Will Slow Down

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Fed Will Slow Down

Fed Will Slow Down Due To Stagflation

number of Fed speakers were scheduled this week, and they said the same thing. The outlook remains uncertain, and many are pessimistic about the inflation situation.

Many believe that growth will take a hit this year and even lead to stagflation. In addition, everyone also agreed that there is need to wait for more data before changing the policy.

25% Tariff On Imported Cars

The biggest shock recently came with the announcement of a 25% tariff. This will be imposed on all imported cars and their parts coming into the USA. If things continue like this, the Fed will have no choice but to delay the rate cuts by a few more months.

If we look at the data, the PCE inflation is a little higher than its value in the last year. Meanwhile, the economic growth will likely stay weak, and the unemployment will rise.

One important theme is uncertainty. Chair Powell made several references to it during the press conference, the Fed included it in the FOMC meeting statement, almost all participants noted that their forecasts were more uncertain than normal, and it has since been strewn all over Fedspeak.

The Fed's uncertainty index is increased for growth, unemployment, and inflation (see chart below). It is calculated by subtracting the percentage of officials who said that uncertainty around their projection was lower than the typical level in the previous 20 years from the percentage who said that it was greater.

The Fed's messaging, particularly when talking about the outlook risks, has the odor of stagflationhigher inflation and slower GDP. Nevertheless, Austan Goolsbee, the president of the Chicago Fed and a voting member of the FOMC, was right to place any worries about stagflation in the right context:

All of this shows that tough times are ahead for the US economy and the Federal Reserve will also have to make some major changes to its policy.

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