Fitch cuts US growth forecast, expects Fed to wait on rate cuts

Fitch Ratings has sharply lowered its US economic growth forecast for 2025 to 1.2%, down from 2.8% last year. The ratings agency does not expect the US Federal Reserve to cut interest rates anytime soon.Brian Coulton, Chief Economist at Fitch, said, “We slashed our US growth forecast, but we still think the Fed will wait until the fourth quarter before cutting rates.” He pointed to rising inflation from recent tariff hikes as the main reason, saying, “We have got the US inflation rate heading above 4% by the end of the year.”
Coulton also noted that household inflation expectations are rising, which could challenge the Fed’s credibility and delay policy easing.
Also Read | India’s tariff edge can’t shield market from weak earnings, says Ambit’s Dhiraj AgarwalFitch’s downgrade of the US forecast comes as it also cut global growth estimates for 2025 to 1.9%, compared to 2.9% in 2023. The last time world growth fell below 2% outside the pandemic was during the global financial crisis in 2009.

The rating agency highlighted China’s growth slowing to below 4%, the eurozone at just 0.6–0.7%, and India as a relative outlier with forecasts still above 6%. However, it warned that India could still see some impact from global trade disruptions.

Also Read | Fitch Ratings upgrades Bank of Maharashtra’s viability rating, reaffirms IDR at ‘BBB-‘

Coulton added that capital flows to emerging markets (EMs) could face pressure due to the “risk-off” environment, though some relief may come from recent dollar weakness. He also said the current trade tensions are more widespread, making supply chain shifts harder compared to the last US-China trade war.

Fitch assumes current US tariffs on China are effectively around 100%, but may ease to about 60% by early 2026. For the rest of the world, average tariffs are expected to stay around 15%.

For the full interview, watch the accompanying video

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