Inflation has persisted at 3.5% despite the Federal Reserve's target of 2%, leaving markets on edge. While the economy remains strong, the Fed prioritizes inflation control over interest rate cuts, posing a dilemma. Experts discuss the possibility of the Fed's policy being too loose, while others advise maintaining it due to inflation and financial risks. The ongoing inflation has resulted in falling real incomes, becoming a political challenge for the Biden administration as it affects consumers and households.
Despite a more positive economic growth outlook, the Federal Reserve still predicts three interest rate cuts in 2024. This is because inflation is still higher than the Fed's target of 2%, and recent data suggests it may not be declining as quickly as hoped. The median projection for the federal funds rate is 4.6% in 2024, down from the current 5.25%-5.50% range.
