Despite threats, recent data will keep the Fed on course

The data released over the past week don’t warrant changes to our latest baseline forecast for growth to improve this year and for the Federal Reserve to keep policy steady until June.

• An encouraging CPI report points to inflation being within striking distance of the Fed’s 2% target by the end of this year.
• Receding inflation will give the central bank the freedom to lower rates sooner if the labor market weakens from here, but we don’t see much evidence of that in the latest data, including jobless claims and the Beige Book.
• The criminal investigation into Fed Chair Jerome Powell doesn’t alter our forecast for Fed policy either.
• Uncertainty about trade policy lingers as we await the Supreme Court ruling on the Trump administration’s use of the International Economic Emergency Powers Act to justify tariffs.