"Federal Reserve Speaker": The Federal Reserve's stagflation forecast may become the keynote of the June economic forecast summary

"Fed Messenger" Nick Timiraos pointed out that it is important that Fed staff presented a clear stagflation forecast at their May meeting, as this could form the basis for the Summary of Economic Projections (SEP) that officials will submit next month. As usual, the Fed's description was fairly sober, but Fed staff made it clear that a substantial slowdown in the labor market would lead to higher unemployment this year and keep it high over the forecast period (through 2027). Fed staff also predicted a "significant" increase in inflation this year and "smaller" price increases in 2026. It is worth noting that staff said that if their forecasts for 2026 and 2027 (where inflation is expected to reach 2%) are wrong, it is more likely to underestimate rather than overestimate the risk of inflation.