Key Points

  • The National Association for Business Economics (NABE) said Monday that President Trump's sweeping "Liberation Day" tariffs announced on April 2 have prompted economists to raise inflation and unemployment expectations and increase the probability of a recession.
  • NABE said economists surveyed from April 7 to 9 raised their forecast for growth in the Personal Consumption Expenditures (PCE) price index excluding food and energy in 2025 to 3.3%, up from 2.8% in March (before Trump's announcement). They lowered their forecast for annualized U.S. GDP growth this year to 1.3% from 1.9%, with 37% of economists seeing a recession probability of 50% or higher.
  • Federal Reserve Governor Christopher Waller said in a speech Monday: "The new tariff policy is one of the largest shocks to the U.S. economy in decades." He added, "The future of this policy and its potential impact remain highly uncertain."

In-Depth Analysis

Economists surveyed by NABE expect this surge in inflation may be brief but will remain above the Fed's 2% target until next year. According to NABE's median forecast, core PCE could rise 2.4% in 2026.

Data released by the New York Fed on Monday showed consumers also expect price pressures to rise this year but ease in 2026. The data is based on surveys collected last month. Consumers expect prices to rise 3.6% a year from now, up 0.5 percentage points from February's expectations.

However, New York Fed data showed consumers' expectations for inflation three years from now remained unchanged at 3%, while expectations for inflation five years from now fell 0.1 percentage points from February to 2.9%.

The New York Fed's survey results differ from the more recent survey by the University of Michigan. According to that university's survey, which ended April 8 and was released last Friday, consumer inflation expectations surged to their highest level since 1981 amid heightened global trade war concerns.

The university said consumers expect inflation to rise to 6.7% over the next year, up 1.7 percentage points from the previous month. Long-term inflation expectations rose to 4.4% this month from 4.1% in March.

"Consumers reported multiple warning signs of a higher recession risk: expectations for business conditions, personal finances, income, inflation, and the labor market all deteriorated this month," Joanne Hsu, the university's survey director, said in a statement.

Hsu said consumer confidence has fallen more than 30% since December, "due to growing concerns about the trade war." She noted the decline "is broad-based and consistent across age, income, education, geographic region, and political affiliation."

Waller said many economists see the economic outlook as unusually uncertain.

"Given the many uncertainties about how trade policy will evolve and how businesses and households will respond, I, like many I have spoken with, have been working to integrate these various possibilities into a coherent outlook," he said.

However, Waller noted there are also reasons for optimism. He mentioned that price pressures may have eased in March before the tariff escalation. He said core PCE likely rose less than 0.1% last month, with an annual rate of 2.7%.

"The new tariffs are hitting an economy with solid fundamentals, which encourages me to believe that households and businesses will continue to spend and hire during the period when trade negotiations lead to significantly lower import tariffs and possibly gradually remove barriers faced by U.S. exporters," he said.