Fed minutes: Trade policy weighs on economic activity more than expected

Odaily News The Fed minutes mentioned that the staff's forecast for real GDP growth in 2025 and 2026 is lower than the forecast at the March meeting because the announced trade policies mean that actual economic activity will be dragged down more than the policies assumed by the staff in previous forecasts. Trade policies are also expected to lead to slower productivity growth, thereby reducing potential GDP growth in the coming years. Because the drag on demand is expected to start earlier and be larger than the response of supply, the output gap is expected to widen significantly over the forecast period. The labor market is expected to weaken significantly, and the unemployment rate is forecast to be above the staff's estimate of the natural unemployment rate by the end of this year and remain above the natural unemployment rate until 2027. (Jinshi)