Federal Reserve officials hoping for evidence of a clear decline in inflation and a slowing economy got some of each from data since their last meeting, but likely not enough of either to downplay the possible need for further rate increases later this year. Overall consumer prices rose month-over-month at the fastest pace in 14 months in August, and while that was driven largely by volatile energy costs, a measure of underlying inflation also accelerated unexpectedly. While economists believe inflation trends are still moving in the Fed's favor, August represented the sort of surprise that would keep officials leaning towards at least one additional rate increase to be reflected in new economic projections at the end of their upcoming Sept. 19-20 meeting.
FILE PHOTO: A customer counts his cash at the register while purchasing an item at a Best Buy store in FlushingWASHINGTON - Federal Reserve officials hoping for evidence of a clear decline in inflation and a slowing economy got some of each from data since their last meeting, but likely not enough of either to downplay the possible need for further rate increases later this year.
Month-to-month inflation numbers "will inevitably hop around," wrote Pantheon Macroeconomics Chief Economist Ian Shepherdson, who sees underlying consumer inflation nevertheless slowing to a "benign" level of below 3% by early next year. Investors are largely betting against any further increases, though Fed Chair Jerome Powell has emphasized the bias will remain in favor of tighter monetary policy, kept tight for longer, until it is clear inflation is on a sustained path back to the Fed's 2% target.
The Business Roundtable's latest quarterly survey of chief executives showed the economic outlook dipped slightly, as did expectations for hiring and sales. What hasn't happened - and what Powell says is necessary - is a decline in overall economic growth to the sort of below-trend pace that would add to policymakers' confidence that inflation will continue what has been a sustained decline since the summer of 2022, when it hit a 40-year high.
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