Fed’s NEW Forecast (Uncut) 03-20-2025

Fed’s NEW Forecast: Rise in Unemployment, Inflation Increase and Slow Growth

Is the Federal Reserve giving up on its inflation fight as recession fears rise? The Fed’s pause on interest rate changes officially continues. While it quietly cuts 2025 growth outlook, it raises inflation forecast and it raises unemployment projection. Things are getting really interesting as the Federal Reserve’s hold on rates gives it more time to deal with the uncertainty related to new trade and new economic policies of the Trump administration.

Following the Federal Reserve meeting that was held on March 19, interest rates remain unchanged. Jerome Powell indicated that there is now more uncertainty related to short-term and long-term economic outlook here in the United States. To that end, the Federal Reserve substantially reduced growth projections for 2025 in line with all those red flags that I discussed last week and earlier this week on my channel.

The Fed effectively expects the U.S. economy to continue slowing down, ultimately impacting employment numbers, something to be really, really aware of. Powell forecasts unemployment to increase in the coming month. And you know that if the Federal Reserve is openly telling you these things, then really don’t hold your breath for any positive news in the near term.

So let’s take a quick look at the key points of the Fed’s press release first. And then in the second half of the video, I’ll walk you through Powell’s key commentary that he made. I thought he made some really interesting points that you may want to be aware of.

First of all, the Fed acknowledges that inflation remains elevated and there’s really not much that it can do. In addition to that, the Federal Reserve says uncertainty around economic outlook has increased. Powell mentioned recent surveys of consumers and businesses that point to heightened uncertainty in economic outlook.

This is because everyone is worried and it’s clear that if we’re not in a recession already, which arguably we have been for a while, we will soon get to that point. Slowly but surely, we’re getting there. And the associated risks are related to flip-flopping on trade policies.

They’re related to associated market volatility, national debt levels hitting the moon as we send billions overseas in military aid and then bomb Yemen and threaten Iran with war all at the same time. The Federal Reserve continues. Beginning in April, the committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion.

This relates to the Fed’s reduction in the size of its balance sheet, specifically by letting its holdings of assets such as U.S. Treasury securities or mortgage-backed securities mature or be sold without reinvesting the proceeds. As these securities mature, the Fed no longer buys new ones to replace them if and when the Fed needs to stimulate the economy, as you may know, it then purchases these securities. Now Powell is telling us that they’re further going to slow down monthly redemptions.

The committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the committee’s goals. Effectively, the Federal Reserve says, depending on what happens, we’ll leave all options on the table. Anything is possible.

We are unlikely to cut rates because inflation is high and we think it will remain high. But we will see what happens next with the trade policies, with all these restrictions, with protectionism. There’s just too much uncertainty for us to know what we’ll do.

That is effectively what the Fed is telling us. Jerome Powell’s commentary was quite interesting and I want to go over some key points next. Powell said that he expects the unemployment rate to rise from 4.3% to 4.4%. Also the Fed raised PCE inflation forecast from 2.5% to 2.7%. And it also raised core PCE inflation forecast from 2.5% to 2.8%. In our summary of economic projections, the median participant projects GDP to rise 1.7% this year, somewhat lower than projected in December, and to rise a bit below 2% over the next two years.

The median projection for the unemployment rate in the SEP is 4.4% at the end of this year and 4.3% over the next two years. Some near-term measures of inflation expectations have recently moved up. The median projection in the SEP for total PCE inflation is 2.7% this year and 2.2% next year, a little higher than projected in December.

Effectively, Jerome Powell appeared to admit that the Fed knows inflation will remain much higher and the U.S. economy will continue to weaken. Fed Chair Jerome Powell also says that the chance of a recession has increased in the past two months. Take a look.

You know, there’s always an unconditional probability, possibility of a recession. It might be broadly in the range of one in four at any time. If you look back through the years, it could be within 12 months of one in four chance of a recession.

So the question is, is whether that, whether this current situation, those possibilities are elevated. I will say this, we don’t make such a forecast. If you look at outside forecasts, forecasters have generally raised, a number of them have raised their possibility of a recession somewhat, but still at relatively moderate levels, you know, still in the region of the traditional, because they were extremely low.

If you go back two months, people were saying that the likelihood of a recession was extremely low. So has moved up, but it’s not high. With respect to tariffs, Jerome Powell said, quote, tariffs tend to bring growth down and inflation up.

And this is something that I agree with. This is what I’ve been trying to mention, trying to discuss on a weekly basis since early January. Trump’s aggressive tariff regime will bring nothing but more pain to an already struggling U.S. economy.

There’s just not much that you can do to prepare as a consumer. Unfortunately, prices will rise because the U.S. imposes tariffs on its own imports across the board. It chose to act, the United States chose to act according to political agenda, not economic reasoning.

And so the end consumer will pay the price. Consumers will be the ones stuck with a higher bill. There’s just no other way to put it.

The Fed remains in a wait and see mode. Nobody knows what will happen, but the increases in unemployment projections, the increases in inflation expectations are definitely those red flags that we need to be aware of and also try to plan accordingly. Thanks for watching.

I hope this quick update was interesting. I certainly tried not to bore you too much, but I do hope that these quick updates help put things in perspective and help you understand what’s going on on a daily basis. Remember to show your support, like, subscribe, and share.

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