Federal Reserve officials are expected to announce a shift in their outlook for interest rate cuts, as inflation continues to hover above their 2% target. They are likely to project only two rate cuts by the end of the year, down from the three cuts they had initially anticipated. The decision to revise their rate cut projections comes in light of new economic forecasts that will be influenced by the government’s May inflation data.
Despite the potential disappointment for potential homebuyers and borrowers due to higher borrowing costs, the Fed’s quarterly projections for interest rate cuts are subject to change based on evolving economic growth and inflation measures. The high borrowing rates could also have implications for the upcoming presidential race, with voters expressing a sour view of the economy under President Joe Biden. Achieving a “soft landing” to curb inflation through rate hikes without causing a recession has become more challenging, especially with delays in expected Fed rate cuts in response to higher inflation in the first quarter of the year. Fed officials are cautious in their approach, emphasizing the need for more confidence in the inflation data before considering rate cuts.
