Weak US Economic Outlook Persists Despite Brief Trade Truce with China

• The outlook for the U.S. economy remains weak despite a temporary cooling of the U.S.-China trade war, a Reuters poll of economists showed, with a debate over the country's fiscal health hanging in the balance.
• A 90-day truce to temporarily slash steep U.S.-China import duties has marginally reduced U.S. recession risks, but the fiscal outlook is worsening ahead of an imminent vote in Congress on President Donald Trump's sweeping tax-cut bill following a sovereign credit rating downgrade from Moody's on Friday.
• Economists in a May 14-21 Reuters poll were unanimous the Trump administration's policies have hurt the economy, with over 55% saying "significantly hurt". However, after big downgrades to their growth and upgrades to inflation forecasts in April, economists kept these broadly unchanged in May.
• The US economy, which contracted 0.3% last quarter largely due to a record surge in imports, is forecast to grow 1.5% this quarter. It would grow just 1.4% this year, a sharp slowdown from last year's 2.8%. Next year, it was forecast to expand 1.5%. The median probability of a U.S. recession over the coming year did, however, decline to 35% from 45% in April.
• Economists barely changed their views on inflation, expected to average above the Fed's 2% target until at least 2027, echoing consumer expectations which are already at a multi-decade high.
• Fed officials have highlighted elevated risks of a resurgence in inflation, primarily due to U.S. tariff policies and appear to be in no hurry to cut rates anytime soon. The federal funds rate has stayed in a 4.25%-4.50% range since the start of this year.

Source: Reuters)