Federal Reserve Meeting Minutes: The drag of trade policy on economic activity is greater than expected.

ChainCatcher news, the meeting minutes of The Federal Reserve (FED) mentioned that staff forecasts for actual GDP rise in 2025 and 2026 are lower than those made in March, as the announced trade policies imply that actual economic activity will be more adversely affected than what was assumed in previous staff forecasts. It is expected that trade policies will lead to a slowdown in productivity rise, thereby reducing potential GDP growth in the coming years. Since the drag on demand is expected to begin earlier and be more pronounced than the response from supply, the output gap is expected to widen significantly during the forecast period. The labor market is expected to weaken considerably, with the unemployment rate projected 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.