Rising inflation expectations could put Fed on shallower rate-cut path

American consumer sentiment has significantly declined, causing concerns about economic growth. Current inflation expectations stand at 3.9% over the next five years, marking the highest level in 30 years, presenting additional challenges for the Fed.

Market predictions suggest the Fed may initiate rate cuts as early as June 2025, forecasting three reductions this year. However, diminishing confidence in the December cut reflects the mixed economic signals, where high inflation expectations contrast with faltering consumer confidence.