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On the radar: Atlanta Fed’s Business Inflation Expectations inch higher in May

The Atlanta Fed’s Business Inflation Expectations Index edged up to 2.0% in May after holding at 1.9% in February through April, and returning to the 2.0% in January. The reading matches the Fed’s 2% inflation objective. Businesses are anticipating only modest inflation at a level that would neither encourage nor discourage the FOMC from adjusting short-term rates.

In the context of the dual mandate, Fed policymakers might be reluctant to remove any more accommodation out of concern for price stability falling below objective, but the taut labor market and extended undershoot of the longer-run unemployment rate forecast will counsel that a rate cut is not needed at present.

Consumer inflation expectations for May will not get their first read until Friday at 10:00 ET when the University of Michigan Survey of Consumers is published. If it does point to recent lower readings having bottomed out, it will give policymakers another reason to wait-and-see on interest rate policy.

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