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The Federal Reserve’s next moves are becoming less certain as economists grapple with surprisingly resilient U.S. employment figures and sticky inflation.
While the Fed has indicated plans for two rate cuts in 2025, some prominent economists, including BofA’s Aditya Bhave, are now discussing the possibility of a rate hike instead.
The key trigger for such a move would be if core PCE inflation, currently at 2.8%, rises above 3%, or if inflation expectations continue to climb. Consumer concerns about future inflation have already reached their highest level since 2008, partly due to uncertainty around proposed trade policies.
However, most economists still favor a prolonged pause rather than a hike, noting the delicate balance between controlling inflation and maintaining labor market strength.
