Fed’s Focus Has Returned Firmly to Inflation

Policymakers don’t expect to reach their 2% inflation goal until 2027, so “from here on out, it is going to be much harder to get rate cuts without much further improvement on inflation.”

By Craig Torres | December 19, 2024 at 03:28 PM

Federal Reserve officials capped 2024 with a third-straight interest rate cut and a strong signal that inflation concerns are back in the fore. Chair Jerome Powell put it plainly: The central bank’s year-end inflation projection has “kind of fallen apart.” Officials now see it taking much longer for inflation to reach the Fed’s 2 percent target, which they have missed for nearly four years. As a result, they dialed back expectations for rate cuts next year, and Powell made clear that any adjustments will hinge on further progress in cooling price increases.

The stronger focus on inflation is a significant shift in strategy from September, when officials saw labor market softening as the greater risk. But recent data have reignited concerns about inflation stalling above the central bank’s 2 percent goal—as have policy proposals from President-elect Donald Trump.

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Fed’s Focus Has Returned Firmly to Inflation

Policymakers don’t expect to reach their 2% inflation goal until 2027, so “from here on out, it is going to be much harder to get rate cuts without much further improvement on inflation.”

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Fed’s Focus Has Returned Firmly to Inflation

Policymakers don’t expect to reach their 2% inflation goal until 2027, so “from here on out, it is going to be much harder to get rate cuts without much further improvement on inflation.”

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