The Federal Reserve has raised the threshold for interest rate cuts, and inflation expectations have been increased twice in a row
Odaily Planet Daily reports, Federal Reserve mouthpiece Nick Timiraos stated that the Fed's economic expectations have undergone significant changes, but interest rate expectations have not fully reflected these changes and the threshold for cutting rates is rising. Fed officials have twice raised their core PCE inflation forecast, from 2.2% in September 2023 to 2.5% in December 2023, then to 2.8% in March 2024 (predicted by end of 2025), with some officials even raising their inflation forecasts for 2026 and 2027. In addition, out of nineteen officials, eighteen believe that there is an upward risk of inflation which means the Fed may need to see a significant weakening in the labor market before considering a rate cut.
Federal Reserve Chairman Powell said that the increase in inflation expectations was "almost entirely" driven by changes in trade policy; former Federal Reserve officials believe that it might be difficult for the Fed to ignore price pressures caused by tariffs - they may need to wait until more evidence of economic growth slowdown appears before taking action.
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European Commission President Ursula von der Leyen stated on the 6th that the European Union will implement measures such as launching a strategic dialogue with European refineries and strengthening joint energy procurement to address rising energy prices and further reduce dependency on imported fossil fuels. Speaking at a plenary session of the European Parliament, von der Leyen noted that since the end of February, European natural gas prices have increased by 140%, diesel prices have doubled, and additional spending on imported fossil fuels has grown by about 100 billions euros. As winter approaches, the high energy costs may further intensify pressure on businesses and residents. On the supply side, the EU will initiate a strategic dialogue with European refineries to reduce costs and ensure energy supply, including meeting defense sector needs. On the demand side, the EU will establish a new working group to pool member states' energy demand and further upgrade the joint procurement mechanism. (Xinhua News Agency)
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