Federal Reserve Admits Forecast Errors For Past 2 Years: Expert Says 'No More Fed Hikes!!!'

Acknowledging a two-year error in its inflation forecast, the Federal Reserve on Wednesday opted to hold interest rates steady just after the BLS issued data showing inflation at its lowest point since March 2021.

The central bank’s usual confident demeanor was undercut by its own chair, Jerome Powell, admitting, “Fed forecasts have been wrong on inflation for the last 2 years.”

Wednesday's pause is the first in a tightening cycle that started in March 2022. Despite the widely expected pause, committee members see two more 25-basis point rate hikes before the year ends.

However, the contrarian voice of Robin Brooks, chief economist at the Institute of International Finance, echoes Powell's comments. Brooks has been sounding the alarm against further rate hikes, backing his stance with definitive data.

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The chief economist indicated that “the US inflation shock is over,” citing a sharp decline in inflation generalization in the CPI, a trend not seen since the start of the inflation surge in February 2021.

Recent CPI data lends credence to Brooks’ viewpoint — inflation in May plunged faster than expected, registering at 4% year-over-year, compared to the 4.1% projection, down from the 4.9% figure posted in April.

Though, the latest PCE price index figures issued in April — the Fed’s preferred inflation measure — delivered a surprise. It rose by 4.4% year over year, ahead of both the predicted 4.3% increase and March’s 4.2% rise.

The figures underscore the FOMC's hints that high borrowing costs may be here to stay, a markedly different narrative from Brooks’ insistence on halting further Fed rate hikes.

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