Markets expect the U.S. Federal Reserve will likely hold rates steady at 5% to 5.25% when they next meet on June 13-14, with some small chance of a another hike. At a speech in Germany on May 12, Fed Governor Michelle Bowman largely mirrored this assessment saying, “In my view, our policy stance is now restrictive, but whether it is sufficiently restrictive to bring inflation down remains uncertain.”
Inflation
The problem the Fed is facing is that inflation is still too high. Recently CPI inflation dropped below a 5% annual rate, but that’s still above the Fed’s 2% target. Even though headline CPI inflation is declining from peak levels reached last summer, core inflation, which strips out food and energy has stayed stubbornly high and that’s a big concern for Fed decision makers.
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