Nearly half of Federal Reserve policymakers no longer believe that holding
borrowing costs steady would be sufficient to bring inflation back to 2% if oil
prices spike after a war involving Iran. The Fed's latest dot plot shows views
on the rate path shifting from how long to hold rates before cuts to growing
concern about the need for additional hikes; some officials now expect rate
increases. Wednesday's projections revised inflation sharply higher since March:
median PCE YoY is now seen at 3.6% by year-end (March: 2.7%), median core PCE
YoY at 3.3% (March: 2.7%). Median year-end unemployment is 4.3% — matching May's
reading and below March's 4.4% — indicating policymakers increasingly see the
labor market as not weakening and reducing the case for rate cuts.
