Fed Cuts Interest Rates but Sees Years of Sub-2% Growth

The Federal Reserve cut its benchmark interest rate by 0.25 percentage point to 4%–4.25%, its first reduction since late 2024.

Chair Jerome Powell said the move was “risk management,” pointing to slower hiring and still-high inflation.

The Fed projects weak growth for years ahead. Policymakers see GDP rising just 1.6% in 2025, 1.8% in 2026, and below 2% in 2027.

Inflation is expected to ease only gradually, while unemployment holds near 4.5%. One governor, Stephen Miran, dissented, preferring a deeper cut.

Powell noted unemployment had already climbed to 4.3% in August, with job gains averaging only 29,000 a month.

Critics argue the Fed’s models are flawed. The bank underestimated inflation’s persistence, misjudged supply shocks, and has repeatedly adjusted forecasts after the fact.

President Donald Trump has attacked Powell directly, questioning both his competence and the Fed’s independence.

Fed Cuts Interest Rates but Sees Years of Sub-2% Growth

Treasury Secretary Scott Bessent offers a far more optimistic outlook. He argues that Trump’s sweeping tax reforms, deregulation, and tariffs will spark an investment boom, particularly in factories and infrastructure.

He expects growth to reach around 3% once those measures take hold, sharply higher than the Fed’s cautious forecast.

This split underscores a deeper question: can the Fed still read the U.S. economy correctly? Its official projections suggest weakness, yet the Treasury insists new policies will unlock stronger expansion.

For businesses, households, and global investors, the difference matters. If the Fed is right, growth will limp along under 2% for years. If Bessent is right, the U.S. could re-enter a faster growth cycle.

The answer will shape not just America’s outlook, but borrowing costs, currencies, and trade across the world.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error

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