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Fed's View on Inflation Key at Yellen's Last Meeting

Rates are set to rise this week, but how fast they increase next year under a new Fed chair will depend on if inflation moves back toward 2%.

Fed's View on Inflation Key at Yellen's Last Meeting

Jim Sinegal: The Fed meeting this week has been widely anticipated, and it's widely expected that the Fed will move short-term interest rates up by 25 basis points. 

We're not expecting a lot of surprises. What we are interested to see is what the Fed has to say about inflation. Inflation still remains below the long-term 2% target, yet the Federal Reserve seems intent on raising rates. They are expecting inflation to rise going forward; they'd like to have some dry powder in the event of another economic downturn. But what we're seeing from the market is some are concerned that the Fed may be raising rates too fast. The Fed has outlined a fairly aggressive path for further increases in 2018, but futures data show that the market is only expecting one more rate increase. We think that's because inflation has been lower than the target, and wage growth has also been relatively slow. 

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