Blow to Donald Trump as interest rate cuts paused and US GDP growth DOWNGRADED amid 'uncertainty'

President Donald Trump has been dealt a blow to his agenda for the economy as the Federal Reserve has opted to keep interest rates at their current level and downgraded gross domestic product (GDP) for the United States.The US central bank's Federal Open Market Committee (FOMC) voted to keep the country's base rate at a range of 4.25 per cent to 4.5 per cent.Furthermore, the Fed slashed their growth forecasts and raised their projections for further inflation in 2025 amid "uncertainty" as a result of the Trump administration's global trade war.President Trump has launched sweeping tariffs on allies, such as Mexico and Canada, as well as launched import taxes on global industries such as aluminum and steel; which has impacted the UK.With its latest forecast, the Federal Reserve now expect GDP to grow by 1.7 per cent this year, with prices forecast to rise by 2.7 per cent.This comes amid ongoing concern over Trump's tariff agenda and sweeping cuts to Government spending being spearheaded by Elon Musk under the Department for Government Efficiency (DOGE).Just three months ago, the FOMC forecast 2.1 per cent growth in 2025 and expected inflation would end up at around 2.25 per cent.However, the committee cited that "uncertainty around the economic outlook has increased" amid stock market volatility and consumer apprehension.Do you have a money story you’d like to share? Get in touch by emailing money@gbnews.uk.Despite its revised forecast, Federal Reserve officials shared that they still see another half percentage point of rate cuts through the year. As the central bank opts to move in quarter percentage point increments, this would mean two base rate cuts from the Fed in 2025.David Morrison, a senior market analyst at Trade Nation, broke down how the market has been reacting to the administration's actions over the past week.He explained: "US stock indices fell sharply yesterday, giving back around half of the gains made over the previous two sessions. Once again it was Big Tech that led the decline. "There had been high hopes that generative AI chipmaker, NVIDIA, could boost investor confidence as it concluded its GPU Technology Conference."But CEO Jensen Huang was unable to provide the spark needed to ignite a big rally, and the stock sold off in response. "NVIDIA lost around four per cent yesterday, contributing to a 1.7 per cent decline in the NASDAQ and a drop of 1.1 per cent in the S&P 500."Investors were also left nonplussed by reports which followed a phone call between Presidents Trump and Putin concerning the war in Ukraine and its aftermath. "Putin would not agree to a full 30-day ceasefire, but said he would hold back from targeting Ukraine’s energy infrastructure, on the understanding that Ukraine would do likewise."As Russia has already done huge damage to Ukraine’s infrastructure, while Ukraine has only just begun to successfully target Russia’s, this looks like a big win for Putin."LATEST DEVELOPMENTS:Trump issues WW3 warning after admitting Putin left call with 'advantage' before launching attackConor McGregor 'has complete backing of Donald Trump's administration' after raging over immigrationDonald Trump issues 'dire' warning to Iran unless Houthi attacks stopWhitney Watson, Goldman Sachs Asset Management’s global co-head and co-chief investment officer of fixed income and liquidity solutions, noted that the Fed's decision was expected.She shared: "Revisions to FOMC members projections had a somewhat ‘stagflationary’ feel with forecasts for growth and inflation moving in opposite directions."For the time being the Fed is in wait and see mode, as it monitors whether the recent growth slowdown develops into something more serious."