Fitch Ratings: We now expect Fed to cut just once this year
In the Global Economic Outlook (GEO) report published on Tuesday, Fitch Ratings said that they have lowered the United States (US) economic growth forecast to 1.7% from 2.1% in December's report and cut the 2026 growth projection to 1.5% from 1.7%.
Key takeaways
"We expect world growth to slow to 2.3% this year, well below trend and down from 2.9% in 2024."
"Fiscal easing in China and Germany will cushion the impact of higher US import tariffs, but growth in the eurozone this year will still be a lot weaker than forecast in the December GEO."
"Tariff hikes will result in higher US consumer prices, reduce real wages, and increase companies’ costs, and the surge in policy uncertainty will take a toll on business investment."
"With the tariff shock estimated to add 1pp to US near-term inflation, we believe the Fed will delay further easing until 4Q25."
"We now expect the Fed to cut just once this year, but then expect three more cuts in 2026 as the economy slows and tariff levels stabilise."
Market reaction
The US Dollar Index (DXY) clings to modest daily gains at around 103.50 following this report.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
