Federal Reserve Keeps Watchful Eye on Economic Slowdown and Inflation

The economy is expected to slow down at a faster pace, but there are no signs of it happening yet. Any weakening is only incremental and the speaker is closely monitoring the situation. In the long run, the economy needs to slow down in order to reach the inflation target. The speaker is considering just one rate cut this year and is carefully watching how things progress before making any changes to policy.

If the economy continues on its current trajectory, it may be appropriate for the Fed to start cutting rates in Q4. However, inflation remains a concern for the speaker, who predicts that it will reach its target by 2026.

Secondary measures in inflation numbers have caused some concern and suggest that things may slow down even more. However, employment contacts have not raised any concerns and the speaker’s hawkish stance may not quiet the conversation about a more hawkish Federal Reserve.

The percentage of goods in the CPI basket growing higher than 3% and 5% are trending back to previous high inflation periods. The speaker will closely monitor these trends to ensure they do not hide any upward pricing pressure before considering a change in policy.

Overall, while there are some concerns about inflation and employment, the speaker is taking a cautious approach to policy changes in order to maintain economic stability.