Fed Shock: Fed Officials Forecast Higher Rates and Higher Inflation

[mystery-ak]

Fed Shock: Fed Officials Forecast Higher Rates and Higher Inflation

John Carney 18 Jun 2025

The Federal Reserve delivered an unexpected blow to hopes for lower borrowing costs in the future, projecting higher inflation and higher interest rates in updated forecasts released Wednesday. While policymakers left their benchmark rate unchanged and signaled that they may cut in the second half of this year, forecasts of officials showed they expect fewer cuts next year and the year after that.

The central bank held the federal funds target at 4.25 to 4.50 percent, its level since the December rate cut. But the accompanying economic projections revealed rising concern that inflation is not receding fast enough—and that rates may need to stay elevated to keep it in check.

Officials now forecast that the Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) index, will climb to 3.0 percent by the end of 2025. Core PCE inflation, which excludes food and energy, is expected to reach 3.1 percent. Both represent notable upward revisions from the March forecast, which anticipated 2.7 percent and 2.8 percent respectively.

“We expect a meaningful amount of inflation to arrive in the coming months,” Fed chairman Jerome Powell said. “We have to take that into account.”

This came as a surprise to many Fed watchers because recent inflation data has come in softer than expected, with prices holding steady or rising only at a slow rate. The  annualized quarterly pace of the PCE inflation is 1.5 percent, below the Fed’s two percent inflation target, and core PCE inflation is two percent, according to the Federal Reserve Bank of Cleveland.

Despite the Fed’s rising inflation concerns, the Fed also raised its forecast for unemployment, now expecting it to rise to 4.5 percent this year from the current 4.2 percent and the earlier forecast of 4.4 percent. That combination—higher prices and weaker job growth—explains the hesitancy of Fed officials, who are wary of cutting too early and reigniting inflation, yet also cautious of allowing economic conditions to deteriorate.

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https://www.breitbart.com/economy/2025/06/18/fed-shock-fed-officials-forecast-higher-rates-and-higher-inflation/

[DefiantMassRINO]

Eh, if they lower rates, inflation runs rampant.

If they increase rates, financial institutions will fail as their reserves of 30 Year Treasury Bonds lose value, technically making them insolvent.

Trump and GOP Congress need to put deregulation and supply-side economic policies on the fast track to fight inflation.

Increasing the velocity of money via deregulation is one way to grow GDP without printing more dollars.