The Fed's decision to hike interest rates and then hold them at a 23-year high has helped to significantly lower elevated inflation, although it remains stuck firmly above the US central bank's long-term target of 2 per cent.
"Another round of elevated inflation data is likely to lead to a more hawkish-leaning message at the May FOMC meeting," economists at Deutsche Bank wrote in a recent note to clients.At the most recent FOMC meeting in March, policymakers pencilled in three quarter-percentage-point rate cuts this year, although Fed Chair Jerome Powell also warned that inflation was"still too high".
Richmond Fed President Tom Barkin, who is a voting member of the FOMC this year, told AFP earlier this month that the recent inflation data had not been"supportive" of the case for cuts. In light of the recent data, traders do not see a greater-than-50 per cent chance of an interest rate cut until the Fed's decision in mid-September, according to CME Group.
"Stubborn inflation and resilient economic activity through the first few months of the year have left the FOMC little reason to ease policy in the near term," Wells Fargo economists wrote in a recent note to clients.The Fed is not publishing updated economic forecasts this week, and so analysts will instead have to parse FOMC policymakers' public comments in the coming weeks for signs of their thinking on interest rate cuts.