Fed’s Musallem Predicts Substantial U.S. Economic Slowdown in 2025

2 mins mins

Key Points:

Fed official predicts slow U.S. economic growth and rising unemployment in 2025.
Tariffs could subtract 0.8% from GDP growth over the next year.
Inflation expectations and labor market trends influence future monetary policy.

feds-musallem-predicts-substantial-u-s-economic-slowdown-in-2025 — Fed’s Musallem Predicts Substantial U.S. Economic Slowdown in 2025

Federal Reserve member Thomas Musallem stated on April 9 that America’s economy might “substantially” slow below trend levels in 2025, influenced by new import tariffs.

The U.S. economy could face a notable deceleration with a growth rate of approximately 2%, as outlined by Musallem. This situation arises amid heightened import tariffs affecting consumer costs and increasing economic uncertainty.

Tariffs Expected to Curb GDP Growth by 0.8%

Musallem’s comments highlight concerns about a slowing U.S. economy with GDP growth expected around 2%. Higher tariffs exacerbate costs in supply chains, reducing spending and business confidence. Analysts predict an increased unemployment rate due to these burdens.

Economic factors such as declining stock markets, reduced consumer spending, and inflationary pressures from tariffs are influencing the U.S.’s growth trajectory. Businesses and households adjust to these new cost structures, potentially leading to rising unemployment by mid-2026.

Market responses show volatility due to these economic tensions. Musallem confirmed the Fed’s monetary policy will hinge on inflation and employment trends. Goldman Sachs economists shared that tariffs negatively impact growth, aligning with Fitch Ratings concern over real wage harm and investment constraints.

Historical Parallels Suggest Economic Risks

Did you know?
During the 2018-2019 trade war, U.S. GDP slowed, and inflation surged due to tariffs, offering a parallel to today’s dynamics.

Musallem’s outlook is reminiscent of prior economic downturns where external shocks pressured growth. Tariffs’ historical impact on economies has been profound, with real wages and consumer sentiment serving as key indicators of future growth paths.

U.S. GDP growth is expected to slow significantly below trend, estimating it at around 2% for 2025. — Thomas Musallem, Federal Reserve Member

Expert insights stress persistent tariff effects, threatening economic stability. Data forecasts suggest GDP growth between 1.7% and 2.4%, dependent on consumer sentiment rebound. Core inflation is projected to stabilize near 3%, closely watched by the Fed for potential adjustments in interest rates by late 2025.