- At some point it will be appropriate to cut
- Timing of policy adjustments will depend on data and outlook
- Rising inflation expectations would mean maintaining a restrictive policy for longer
- Inflation has slowed and labor market tensions have eased
- Disinflation trend expected to continue
- Expect inflation to move sideways on a 12-month basis for the rest of the year, then slow more sharply next year.
- Expect bumpy declines in 3- and 6-month inflation rates
This is the Fed’s usual rhetoric, but its commentary on 12-month inflation is important to keep in mind. Year-over-year CPI numbers always include many base effects going back 12 months. If his forecasts are correct and inflation moves sideways, it will create a “stuck” progress narrative, but that won’t really be the case, so there should be an opportunity.
This article was written by Adam Button at www.forexlive.com.
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