11 articles · Updated · investinglive.com · May 29
Paulson said inflation remains uncomfortably high even as U.S. growth and consumer spending slow, arguing the economy is still on track for modest expansion.
She said current policy is already mildly restrictive and should help guide prices lower, while holding rates steady gives the Fed time to assess incoming data.
The labor market, with unemployment near full-employment levels, remains broadly stable in her base case, and she said current activity is not materially adding to inflation pressure.
Paulson said inflation was too high even before the Middle East war, pointing instead to multiple shocks and supply-side forces, while long-run inflation expectations remain well anchored.
She added that markets are right to shift toward a tighter monetary outlook, signaling rates could stay elevated longer than investors had previously expected.
As global conflicts and AI demand fuel inflation, is the Fed's current policy too little, too late?
With consumer debt at a tipping point, can the economy's 'resilience' last while household finances crumble?
2026 Fed Policy Report: Why Persistent Inflation Means No Rate Cuts and Possible Hikes
Overview
In May 2026, the Federal Reserve is maintaining its 'higher-for-longer' interest rate policy as inflation remains persistent, with the April PCE Price Index up 3.8% year-over-year and core PCE rising 3.3%. Although recent data shows some moderation in inflation, these levels are still above the Fed’s target and have not changed market expectations for monetary policy. Month-over-month, prices continue to climb, reinforcing the Fed’s cautious stance. As a result, most analysts no longer expect rate cuts this year, and there is even a growing chance of a rate hike by December, reflecting ongoing concerns about inflation’s stubbornness.