The inflation forecasts that are being watched most closely are those for 2023, since it makes sense the Fed would expect to raise interest rates then if inflation persists. The Fed watches core personal consumption expenditure inflation. Economists are focused on the 2023 forecast, since higher inflation in the future could prompt the Fed to change its interest rate forecast as well. The consumer price index for May was up 5%. The Fed is expected to boost its inflation forecast for this year after hotter-than-expected readings this month and last month. We continue to expect the first hint in August or September, followed by a formal announcement in December and the start of tapering at the beginning of next year," the Goldman economists said in a note. "We think that Powell likely agrees with Governor Brainard and President Williams that the labor market has not yet come far enough. Officials at the core of the Fed - Governor Lael Brainard and New York Fed President John Williams - do not. We anticipate Powell will reiterate that it is still some time away."īut Goldman Sachs economists say it is too soon for the Fed to 'talk about talking about tapering' even though some Fed officials would like to begin the process. "On taper, we think they will start talking about talking about it. Most of it will be characterizations around tapering and what the Fed says about that, along with adjustments in the Fed's forecast," said Mark Cabana, head U.S. "We're not expecting any major policy changes from the Fed. Powell could choose to bring up the tapering during his post-meeting press briefing, and he surely will be asked about it.
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