The Federal Reserve expects inflation to finish this year noticeably below its 2% target, a trend that could make it more likely policymakers will cut short-term interest rates in the coming months.
In its latest set of economic projections, Fed policymakers forecast that its preferred inflation gauge would increase just 1.5% by the end of 2019 compared with a year earlier, down from its March forecast of 1.8%. It sees core inflation, which excludes the volatile food and energy categories, finishing the year at 1.8%, down from 2% in March.
Fed policymakers also note in their statement that financial markets are expecting inflation to slow. That is typically a concern because inflation expectations can become self-fulfilling. If business executives, for example, expect inflation will be lower, they will likely limit their own price increases.
In April, Fed Chairman Jerome Powell said that the weak inflation readings would be "transitory."
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