The Federal Reserve forecasts only a modest uptick in U.S. unemployment next year as inflation cools, but history and current labor market trends make us less certain.

Amid an outlook for slower growth and more moderate inflation, the Fed shifts to data dependence.

After stubborn U.S. inflation in the first half of 2023 kept the Federal Reserve raising rates, June’s softer inflation report suggests July may mark the end of the hiking cycle.

The Federal Reserve paused in June but raised its estimates for the policy rate later this year. We expect a July increase but remain skeptical about subsequent hikes.

Tighter credit conditions pose increasing risks to economic activity, leading the U.S. Federal Reserve to signal a likely pause.