Marina Lyubimova
On April 28 - 29, the Federal Open Market Committee (FOMC) will meet to decide on interest rates. It is expected that the committee will keep the current rates the same. By looking at market pricing, Truflation reports that a pause is almost certain.
Current data show a 99.5% probability that the Fed will keep the target range between 3.50% and 3.75%. There is only a 0.5% chance that the Fed will increase the rate. At this time there is no expectation that the Fed will lower the rate.
The market predicts no cuts, as the March CPI skyrocketed to 3.3% while jobs remained fairly stable.
In recent months inflation data and labor market conditions have influenced those expectations. As the latest CPI reading is 3.3%, it shows that price increases are higher than the target level. Because of this data, the Federal Reserve does not feel a need to lower rates immediately.
And other projections show that the effort to lower inflation will continue for a long time. As an example the Federal Reserve's September Outlook indicates that inflation will be above 2 % for an extended period - this reinforces the idea that interest rates are likely to remain at high levels.
But different ways of measuring inflation show different results. To explain this Truflation says that its real time tracker shows prices are rising more slowly.
Conflicting Inflation Signals
Our alternative daily inflation index based on real price data suggests inflation has been below 2% for quite some time, even with the latest oil and gasoline price shocks.
This difference shows that people are unsure about the actual state of inflation. If official data are slow to react, they may not show the most recent changes in prices.
When the meeting occurs, people will expect the rates to stay the same. To understand what will happen next, individuals will look for signals about when the Fed might lower rates in 2026.
Marina Lyubimova
