Federal Reserve officials could announce plans to cut interest rates if May’s inflation data shows enough progress.
The Federal Open Market Committee will hold a two-day meeting this week to discuss monetary policy. Many hope the latest inflation data — which drops Wednesday morning — will persuade officials to grant some interest rate relief.
Fed officials last met on May 1 and left interest rates unchanged due to their strong commitment to “moving sustainably” towards the 2% inflation target, per a statement released after the meeting.
The committee’s hesitancy stems from data from the first four months of the year, which showed the inflation rate still hovering over the 3% threshold compared to the declining rates logged in the latter half of last year. Nevertheless, inflation cooled slightly between March and April, waning from 3.5% to 3.4%.
If May similarly shows a downward trajectory, there may be hope for borrowing costs to come down for businesses and consumers in the near future.
However, some economists think that even if the inflation report shows promise, the Fed will still hold off on rate cuts until this September and keep its benchmark rate unchanged at approximately 5.3%, according to the Associated Press.
Many economists are predicting just two cuts to the benchmark rate this year despite three having been previously anticipated.
The economy’s relative strength is a key reason why the Fed will likely be slow to change its monetary policy before seeing consecutive drops in inflation.
Despite American consumers spending less in April amid growing financial pressures, job growth has remained robust. Last Friday, the U.S. Bureau of Labor Statistics reported that wage employment increased by 272,000 jobs, suggesting that the economy is still growing.
The unemployment rate, which had been holding steady just below 4%, finally broke through, ending the 27-month streak, as previously reported by The Dallas Express.