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- Has US Fed’s Rate Cut Reignite Recession Rumours? Recent Data Suggest Sluggishness In Economic Activity; Find Here State Of American Economy
1 day agoAuthor: Kanishka Birat
Credit: Maddiwar Ajit Kumar
The reactions of renowned economists on the recent interest rate cut announced by the US central Bank Federal Reserve has once again sparked recession rumours. Chief economists of finance management firms Moody’s and Aletheia Capital have spoken about recession in America.
But is it really so that US is heading towards recession? Lets decode the entire speech of Fed chair Jerome Powell about the state of US economy.
The Fed chair in his speech had said that there were chances of rise in unemployment in America. He even didn’t hesitate to add that the economy and job creation had slowed down and that the unemployment rate was albeit low but it certainly inched a bit in August 2025. All these and more were said keeping the US President Donald Trump’s tariff and immigration policies at hindsight.
GDP:
Powel said that the US GDP grew only 1.5% in H1 CY25 as against 2.5% in year ago period. While, the FOMC projected growth rate of 1.6% in 2025. Going forward the committee has forecasted rise in GDP growth rate in subsequent years of 2026 and 2027.
Consumer spending slowed down!
Albeit, Powell in his speech added that the fall in growth rate showed that there was sluggishness in the economic activity.
However all not gloom for American economy!
The FOMC has projected the America’s economy to grow at the rate of 1.6% in 2025. The committee projects higher GDP of 1.8% and 1.9% in 2026 and 2027, respectively.
The rate setting panel actually revised upwards the growth projections despite the Trump tariffs factors coming into the play.
America’s GDP to increase in next 2 yrs despite Trump tariffs:
This means the committee doesn’t think that America’s GDP would fall in next two years due to the tariffs.
Infact, the FOMC believes that both inflation and unemployment rate would decrease in next two years despite the hike in import duties.
Inflation:
The economic projections made by the committee revealed that the US inflation would increase from current levels and would be elevated towards the end of the current calendar year. But then again the annual rise in growth rate of prices would start to taper down from next year onwards.
Fed’s projections on US inflation:
Albeit, the US central bank would not be able to achieve inflation target in next two years. The Federal Reserve had set target of 2% for the annual rise rate of prices of goods and services.
What happened in past?
US inflation has continuously fallen after 2022. But thanks to ‘Trump Tariffs’ it has again started to increase. In July the inflation figures rose to 2.6% from 2.5% in same month an year ago. Recently, it has begin to rise from May 2025.
Inflation In US On Upward Trajectory Since May 2025
US GDP rose to 3.3% in Q2 CY25 from 3.0% in same quarter an year ago:
Unemployment Rate Has Constantly Upped Since July 2025: