The Federal Reserve has raised the threshold for interest rate cuts, and inflation expectations have been increased twice in a row

Odaily Planet Daily reports, Federal Reserve mouthpiece Nick Timiraos stated that the Fed's economic expectations have undergone significant changes, but interest rate expectations have not fully reflected these changes and the threshold for cutting rates is rising. Fed officials have twice raised their core PCE inflation forecast, from 2.2% in September 2023 to 2.5% in December 2023, then to 2.8% in March 2024 (predicted by end of 2025), with some officials even raising their inflation forecasts for 2026 and 2027. In addition, out of nineteen officials, eighteen believe that there is an upward risk of inflation which means the Fed may need to see a significant weakening in the labor market before considering a rate cut.

Federal Reserve Chairman Powell said that the increase in inflation expectations was "almost entirely" driven by changes in trade policy; former Federal Reserve officials believe that it might be difficult for the Fed to ignore price pressures caused by tariffs - they may need to wait until more evidence of economic growth slowdown appears before taking action.