Fed Meeting Minutes: Trade Policy Had a Larger Drag on Economic Activity Than Anticipated

BlockBeats News, May 29th: The Federal Reserve meeting minutes mentioned that 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 imply that actual economic activity will be more severely constrained relative to the policy assumed by the staff in their earlier forecast. The trade policies are also expected to result in slower productivity growth, thereby reducing potential GDP growth in the coming years. Due to the expected earlier onset of the drag on demand and a larger response than supply, the output gap is expected to widen significantly during the forecast period. The labor market is expected to weaken substantially, with the unemployment rate forecasted to be above the staff's estimate of the natural rate of unemployment by the end of this year and to remain above the natural rate of unemployment until 2027. (FXStreet)