Fed expected to dial back 2024 rate calls after digesting new inflation data
How did the "core" CPI rate change from March to May, and what does this rate exclude?
The "core" Consumer Price Index (CPI) rate is expected to show continued moderation in May after an encouraging April. The year-over-year change in core CPI, which excludes volatile food and energy prices that the Fed cannot control, is expected to edge down a tenth of a percent to 3.5%. This is compared to 3.6% in April and 3.8% in March.
What specific inflation data is the Federal Reserve considering before potentially adjusting interest rate forecasts for 2024?
The Federal Reserve is considering the Consumer Price Index (CPI) data before potentially adjusting interest rate forecasts for 2024. In particular, they are looking at the "core" CPI, which excludes volatile food and energy prices that the Fed cannot control. The year-over-year change in core CPI is expected to edge down a tenth of a percent to 3.5% for May, compared to 3.6% in April and 3.8% in March. However, even with this improvement, the Fed is expected to maintain a cautious stance, as they require more than a quarter's worth of data to make a judgment on whether inflation is steadily falling toward their 2% target.
What is a "dot plot" and how is it used by the Federal Reserve to communicate future policy expectations?
A "dot plot" is a chart used by the Federal Reserve to communicate future policy expectations. It is updated quarterly and shows the prediction of each Fed official about the direction of the federal funds rate. The chart displays interest rate projections of individual FOMC members, with each "dot" representing a member's individual view4. By analyzing the dot plot, investors try to anticipate future interest rate moves and understand the Fed's current thinking on interest rates. The dot plot provides a transparent window into the Fed's individual guesses, but it is important to remember that these projections are subject to change as the economic landscape shifts.