Fed will need to acknowledge plunging inflation soon

With markets already convinced that the Fed’s tightening cycle is over, the focus at next week’s FOMC meeting will be on any clues as to how soon and how far rates will be cut. We suspect officials will still be wary of sending an overly dovish message in the updated statement and projections and any explicit discussion of near-term rate cuts is unlikely. Nevertheless, the Fed will need to acknowledge the reality that inflation is rapidly heading back to the 2% target.