Federal Reserve's Musalem: Economic growth will be below trend levels, and inflation risks will rise

ChainCatcher news, according to Jinshi reports, Federal Reserve's Musalem stated that U.S. economic growth may "significantly" decline below trend levels, and the unemployment rate will rise within the year, as businesses and households will have to adapt to prices pushed up by new import tariffs.

Musalem said, "I don't have a baseline for a recession, but I think economic growth could be significantly below trend," estimating the growth rate to be around 2%.

He stated, "Both upside and downside risks will materialize," with higher-than-expected tariffs putting pressure on prices, declining confidence, and recent sharp declines in the stock market potentially suppressing spending, impacting household wealth, and rising prices causing effects. These factors combined lead to a slowdown in economic growth. Musalem, who has a vote on interest rate policy this year, said that the response of monetary policy will depend on the evolution of inflation and unemployment in the coming months, whether price shocks are persistent, and whether inflation expectations remain aligned with the Federal Reserve's 2% inflation target.