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Stagflation? Fed Sees Higher Inflation and an Economy Growing By Less Than 2% This Year

May 19, 2025

by Yun Li
MSN

Federal Reserve officials slashed their economic outlook in the latest projections released Wednesday, seeing the U.S. economy growing at a pace lower than 2%.

The rate-setting Federal Open Market Committee downgraded its collective outlook for economic growth to 1.7%, down from the last projection of 2.1% in December. In the meantime, officials hiked their inflation outlook, seeing core prices growing at a 2.8% annual pace, up from the previous estimate of 2.5%. The moves suggested the central bank sees the risk of a stagflation scenario, where inflation rises as economic growth slows.

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