Fed's New Economic Projections May Come With a Dose of Maybe, Maybe Not

• Updated economic projections from Federal Reserve officials this week are expected to show fewer interest rate cuts than policymakers anticipated three months ago, faster-than-expected inflation, and slower growth. This pinpoint economic outlook will carry the weight of the U.S. central bank's authority.

• With their forecasts stymied last year by faster economic growth and lower inflation than expected, and now by higher inflation and slowing growth, Fed officials of late have supplemented discussion of their outlook with the top alternate paths they think the economy may follow.

• Both a nod to what they don't know and a way to keep public expectations more fluid, it's a strategy Powell may well follow in his press conference after the end of a two-day policy meeting on Wednesday. This strategy could redirect focus from the new Summary of Economic Projections and its market-shaping plot of where officials think the policy interest rate is heading, with a focus on the median.

• Since the end of last year, precision has not been the Fed's ally as officials appeared to lock in three rate cuts for the year, only to be side-swiped by inflation that didn't decline as expected. As a result, they'll likely revise their outlook to just two quarter-percentage-point rate reductions for the year or perhaps just one, with doubts even around that.

• The U.S. Labor Department will publish new inflation data on Wednesday, just hours before the 2 p.m. EDT (1800 GMT) release of the Fed's updated projections and new policy statement. Powell's press conference will follow at 2:30 p.m. EDT. The central bank, which aggressively raised rates in 2022 and 2023 to combat a surge in inflation, is widely expected to keep its benchmark interest rate in the 5.25%-5.50% range that was set last July.
(Source: Reuters)