TechFlow news — On March 20, Nick Timiraos, known as the "Fed whisperer," wrote that the Federal Reserve's economic projections (though not yet its rate forecasts) show a significant shift in the economic outlook over just three months, raising the bar for rate cuts.
Officials not only raised their core personal consumption expenditures (PCE) inflation forecasts by 3 percentage points—marking the second consecutive upward revision (from 2.2% in September to 2.5% in December and now 2.8% in March for end-2025)—but some also slightly increased their forecasts for 2026 and even 2027. Moreover, 18 out of 19 officials see inflation risks tilted upward. Going forward, the labor market may need to weaken before rate cuts can be considered.
Chair Powell suggested that nearly all the change in inflation expectations stems from shifts in trade policy. ("We're now seeing inflation coming from external factors.")
I spoke with two former Fed officials who lived through both the 2019 trade tensions and the 2021 pandemic-driven inflation, and they believe the Fed will struggle to ignore price resets caused by tariffs.
"You're essentially saying, look, we have an underlying inflation problem here. We’re watching it closely, and we’re willing to react when we get more evidence on the growth side—but not act preemptively. Nobody wants to do that. But in the current environment, it might be the path they have to take."
