The Federal Reserve kept interest rates steady for the fourth meeting in a row on Wednesday, revealing a cautious outlook that highlights stagflation risks now on the horizon. The FOMC retained the federal funds rate at 4.25% to 4.50%, navigating through a challenging landscape marked by rising inflation and slowing growth.

Narrowing Path for Fed Rate Cuts

While the Fed continues to anticipate two rate cuts in 2025, its outlook for future rates has turned less dovish:

• 2026 benchmark rate forecast raised to 3.6% (up from 3.4%).

• 2027 benchmark rate predicted at 3.4%, higher than the previous estimation of 3.1% from March.

Fed Chair Jerome Powell emphasized that these forecasts depend heavily on incoming data.

Signs of Stagflation? Inflation Rises as Growth Slows

The Fed revised its core PCE inflation forecast upward:

• 3.1% for 2025, up from an initial forecast of 2.8%.

• 2.4% in 2026, an increase from 2.2%.

• 2.1% in 2027, compared to the previous estimate of 2%.

These adjustments suggest that policymakers are bracing for persistent inflation, driven by factors such as:

• Tariffs implemented under former President Trump’s trade policy.

• A tightening labor market due to immigration restrictions, potentially increasing wages.

Stay Informed: Upcoming Economic Data

As the Fed grows increasingly reliant on data, market participants must track important economic announcements. Use the Economics Calendar to stay updated on inflation reports, labor data, and Fed comments.

For those focused on inflation-sensitive assets and commodities, the Commodities endpoint provides real-time updates on pricing and sector performance driven by broader economic changes.