"The US economy is set to face a combination of weakening growth and rising inflation, at odds with the Fed's dual mandate of maximum employment and price stability. The Trump administration's trade policy has put the Fed in a difficult position and resulted in a high degree of policy uncertainty for financial markets, households and businesses," Krautzberer says.
Michael Krautzberger, Global CIO Fixed Income at Allianz Global Investors (AllianzGI), expects the Federal Reserve to keep the federal funds rate unchanged at 4.25%-4.5%, at the Fed's meeting on May 6-7 despite US GDP in 1Q2025 turning slightly negative.
Financial markets are significantly re-pricing US growth and inflation prospects this year. The market consensus for US real GDP growth in 2025 has gone from 2.2% at the start of the year to a below-trend 1.4%, with growing fears that the US could enter recession in the coming quarters.
