The central bank uses the Personal Consumption Expenditures price index in setting its 2% inflation target. Economists polled by Reuters estimate the PCE excluding more volatile food and energy components rose at a 4.3% annual pace last month, a slight improvement from the 4.4% jump in December. But on a month-to-month basis, that core inflation measure is expected to have actually increased to 0.4% from 0.3% in the prior period.
Bullard has not yet shifted his own rate outlook higher because of the recent data, and still thinks a policy rate in the range of 5.25% to 5.50% will be adequate to keep inflation falling through this year. Most do not see the Fed returning to larger half-percentage-point increases, but they do see the central bank moving rates higher than previously anticipated and leaving them at an elevated level for longer as well - a change in sentiment likely welcomed by Fed officials concerned that market pricing had understated their resolve in bringing inflation back to the 2% target.The minutes, scheduled to be released at 2 p.m.
While there was little disagreement last year over what the Fed needed to do as inflation raced to a 40-year high, the central bank is now in a more two-sided debate "to find out to what extent the resilience of the economy thus far reflects time lags on monetary tightening versus a higher short term neutral rate" needed to cause businesses and households to slow spending, analysts for ISI Evercore wrote in an analysis ahead of the release of the minutes.
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