NextFin news, On this Sunday, September 14, 2025, a top economist highlighted that the Federal Reserve (Fed) is 'desperately' trying to prevent a recession in the United States to avoid being blamed and risking its institutional independence. This statement comes amid ongoing economic challenges including inflation and trade policy uncertainties.
The economist pointed out that the Fed's dual mandate to maintain stable prices and full employment is under strain due to recent policy shifts, particularly tariffs imposed by the Trump administration. These tariffs have increased inflationary pressures and created economic uncertainty, complicating the Fed's policy decisions.
Federal Reserve Chair Jerome Powell has acknowledged that tariffs are likely to push up inflation and unemployment rates throughout 2025. He noted that the inflationary impact from tariffs could be persistent, depending on how long it takes for these costs to fully pass through to consumer prices and how well inflation expectations remain anchored.
Powell also remarked on the unprecedented nature of the current trade policies, which exceed historical tariff levels such as those during the Smoot-Hawley era of 1930. The uncertainty has led to a decline in consumer and business sentiment, contributing to financial market volatility.
Economic data indicate a slowdown in growth, with some forecasts predicting U.S. GDP growth to fall to around 1% in 2025, down from 2.8% the previous year. While some economists do not foresee a recession, others, including JPMorgan Chase's chief economist Bruce Kasman, estimate a 60% chance of recession this year due to the trade tensions and tariffs.
The Fed faces a challenging balancing act: tightening monetary policy to control inflation could further slow economic growth, while easing policy to support growth might exacerbate inflation. The Fed's approach will consider how far the economy is from its goals of price stability and full employment, as well as the time horizons for closing these gaps.
This information is based on statements from Federal Reserve officials and analysis reported by MSN Money and other financial news sources.
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