Economists Raise U.S. Inflation Forecasts, Delay Fed Rate Cut Expectations to December on Iran War Pressure

According to Jin10 on May 22, economists raised their U.S. inflation forecasts and pushed back expectations for the Federal Reserve's next rate cut due to price pressures from the Iran war. Core PCE inflation is now expected to rise more than previously predicted, with both inflation gauges forecast to remain above 3% through year-end. Economists are now evenly split on whether the Fed will cut rates in December, compared with previous expectations for an October cut.

The survey showed economists still forecast U.S. consumer spending and GDP growth of approximately 2% for the year, with recession probability declining to 25% over the next 12 months. Unemployment is projected to peak at 4.5% in the third quarter.