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Middle East Conflict Reshapes Federal Reserve Forecasts: Nearly Half of Policymakers Now Expect Rate Hikes; Inflation Forecasts Revised Up Across the Board
Svmuu News: Foreign media analysis indicates that nearly half of the policymakers at Federal Reserve no longer believe that, amid soaring oil prices following the war in Iran, simply keeping borrowing costs stable will be enough to bring inflation back down to the 2% target. Federal Reserve The latest dot plot reveals policymakers’ individual views on the interest rate path. It shows that the focus of the internal Fed debate has shifted rapidly: whereas the previous focus was on how long to keep rates steady before cutting them, attention has now turned to growing concerns about rate hikes—with some even convinced that Federal Reserve rate hikes will be necessary. In addition, forecasts released on Wednesday show that since March, Federal Reserve policymakers’ views on inflation have become more pessimistic, reflecting the sharp rise in inflation since the outbreak of the war.The median projections indicate that the year-over-year increase in the PCE price index is expected to reach 3.6% by year-end, up from the 2.7% forecast in March; the year-over-year increase in the core PCE price index is projected to reach 3.3%, up from the 2.7% forecast in March;the unemployment rate is projected to reach 4.3% by year-end, matching the actual reading in May and lower than the 4.4% forecast in March. This suggests that policymakers are increasingly convinced the labor market is not weakening and does not require support through interest rate cuts. (Jin Shi)
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