Inflation is cooling, and parts of the economy appear to be weakening.
But Chair Jerome Powell is likely Wednesday to underscore that the Federal Reserve's primary focus remains the need to fight surging prices with still-higher interest rates.and possibly even cut them later this year, analysts say Powell will need to push back against such optimism. If financial markets expect lower rates than what the Fed plans to deliver, the central bank's already treacherous task can become even harder.
Now, though, inflation has weakened since the fall. As a result, the risks that the Fed’s rate hikes could send the economy into a painful recession, with waves of job losses, are rising. Consumer prices, by the Fed's preferred measure, have risen at just a Over the past year, with businesses offering healthy raises to try to attract and keep enough workers, Powell has expressed concern that hefty pay growth in the labor-intensive service sector would keep inflation too high. Businesses typically pass their increased labor costs on to their customers by charging higher prices, thereby perpetuating inflation pressures.
Since March, the statement has said that “ongoing increases in the target range will be appropriate.” Some economists expect officials to slightly alter that part of the statement to make it a less specific commitment and give the Fed more flexibility. “Everybody is basically saying, ‘Hey, Chair Powell, let’s do your victory lap,' ''Reinhart said. “And he's like, 'We're only where we are because of our vigilance, and we can't let it down now.' ”
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