As inflation remains above the Federal Reserve’s target of two per cent, officials are expected to downgrade their outlook for interest rate cuts during their meeting this week. Previously anticipating three rate cuts this year, policymakers are now likely to project just one or two cuts by year-end based on the May inflation data. The government report showed that inflation unexpectedly cooled in May, with core prices rising just 0.2 per cent, the smallest monthly increase since October.
The Fed’s rate decisions have a significant impact on borrowing costs for consumers and businesses, affecting mortgages, auto loans, and credit card rates. The potential downgrade in rate cuts could mean that borrowing costs will remain higher for longer, disappointing potential homebuyers and others.
Despite the quarterly projections, Fed officials continually revise plans based on economic indicators. Chair Jerome Powell noted that more time is needed to gain confidence in inflation returning to target levels, delaying expected rate cuts and impacting the possibility of a “soft landing.”
Economists, such as Matthew Luzzetti from Deutsche Bank, suggest that Fed officials are currently in a wait-and-see mode regarding rate cuts, closely monitoring economic data. The Fed’s approach now emphasizes the unpredictability of forecasting inflation accurately.
\
[ad_2]
Source link
