"Fed's Mouthpiece": Fed's Stagflation Forecast May Set the Tone for June Economic Summary

According to a report by Jinse Finance, "Fed's mouthpiece" Nick Timiraos pointed out that Federal Reserve staff made a clear stagflation forecast at the May meeting, which is significant as it may form the foundational framework for the Summary of Economic Projections (SEP) submitted by officials next month. As usual, the Fed's description is quite calm, but the staff clearly indicated a substantial slowdown in the labor market, which will lead to a rise in unemployment this year and maintain a high unemployment rate during the forecast period (until 2027). The Fed staff also predicted that inflation will rise "significantly" this year, with price increases being "smaller" in 2026. Notably, the staff stated that if their forecasts for 2026 and 2027 (where inflation is expected to reach 2%) are wrong, it is more likely to be an underestimation rather than an overestimation of inflation risks.