Odaily News , Federal Reserve mouthpiece Nick Timiraos wrote that the Federal Reserve’s economic expectations have changed significantly, but interest rate expectations have not yet fully reflected this change, and the threshold for rate cuts is rising.
Fed officials have raised their core PCE inflation forecasts twice in a row, from 2.2% in September 2023 to 2.5% in December 2023, and then to 2.8% in March 2024 (forecast for the end of 2025). Some officials even raised their inflation forecasts for 2026 and 2027. In addition, 18 of the 19 officials believe that inflation risks are biased to the upside, which means that the Fed may need to see a significant weakening in the labor market before considering a rate cut.
Federal Reserve Chairman Powell said the upward revision in inflation expectations was driven "almost entirely" by changes in trade policy, and former Fed officials believed that it may be difficult for the Fed to ignore the upward price pressure caused by tariffs, and they may need to wait until more evidence of slowing economic growth emerges before taking action.