What specific inflation data prompted Fed officials to reconsider raising interest rates?

Fed officials cited two key inflation metrics: a New York Fed gauge of underlying inflation that jumped to 4% in April from 3.5% in March, and the Personal Consumption Expenditures (PCE) Price Index, which rose to 3.8% year-over-year in April from 3.5% in March — both showing accelerating price pressures excluding housing and reinforcing concerns that inflation remains 'too hot' and persistently above the 2% target.

Why did even dovish Fed Vice Chair Michelle Bowman signal openness to shifting her stance on interest rates?

Bowman acknowledged that while it is 'still early to assess the size and persistence of the economic effects from the Iran conflict,' she warned that 'should disruptions persist well into the second half of the year, we could start to see broader effects on inflation,' making it 'more likely that [she would] consider shifting [her] approach to thinking about the balance of risks' — a notable departure from her traditionally dovish position, though she stopped short of endorsing rate hikes.

Fed Officials Mull Raising Rates to Curb Growing Inflation Risk

May 29, 2026

Federal Reserve officials are considering raising interest rates amid inflation risks driven by the Middle East conflict and resulting energy shock. Markets anticipate potential rate hikes to address price pressures exceeding the 2% target.

reuters

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