Federal Reserve officials on Wednesday will likely make official what’s been clear for many weeks: With inflation sticking at a level well above their 2% target, they are downgrading their outlook for interest rate cuts.
FILE - A screen displays a news conference with Federal Reserve Chairman Jerome Powell on the floor at the New York Stock Exchange in New York, May 1, 2024. On Wednesday, June 12, 2024, the Federal Reserve ends its latest meeting by issuing a policy statement, updating its economic and interest-rate projections and holding a news conference with Powell.
The Fed's updated economic forecasts, which it will issue Wednesday afternoon, will likely be influenced by the government's May inflation data being released in the morning. The inflation report is expected to show that consumer prices excluding volatile food and energy costs — so-called core inflation — rose 0.3% from April to May. That would be the same as in the previous month and higher than Fed officials would prefer to see.
In early May, Chair Jerome Powell said the central bank needed more confidence that inflation was returning to its target before it would reduce its benchmark rate. Powell noted that it would likely take more time to gain that confidence than Fed officials had previously thought. “Fed officials have clearly signaled that they are in a wait-and-see mode with respect to the timing and magnitude of rate cuts,” Matthew Luzzetti, chief U.S. economist at Deutsche Bank, said in a note to clients.
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