Fed Watcher: Fed caution builds on inflation and supply disruptions

Research evidence excerpt

Fed Watcher: Fed caution builds on inflation and supply disruptions

Deutsche Bank

Research

Fed Watcher Date

Fed Watcher 18 May 2026

Fed caution builds on inflation and supply

Amy Yang disruptions

Economist

+1-212-250-9959

Fed communications on balance over the past week continued to remain

somewhat hawkish, with officials increasingly emphasizing persistent inflation Matthew Luzzetti, Ph.D.

risks tied to tariffs, energy, and services prices, while largely reaffirming that Chief US Economist

+1-212-250-6161 policy is “in a good place” near neutral and signaling a wait-and-see stance.

On the more dovish/centrist side, NY Fed’s Williams reiterated that policy is mildly Brett Ryan

Senior US Economist

restrictive and appropriately calibrated, with no reason to adjust rates in either +1-212-250-6294

direction for now, noting that tariff effects have largely passed through and goods

prices should stabilize. That said, Williams did note a modestly higher view of r* - Justin Weidner

a hawkish development given his traditionally low r* view. Conversely, hawkish Economist

+1-212-469-1679

officials - including Governor Barr, Minneapolis Fed’s Kashkari, and KC Fed’s

Schmid - pointed to the strong April CPI report and characterized the inflation risk Avik Chattopadhyay

as “overwhelming” or “most pressing” (see April CPI recap: Inflation in full bloom). Research Associate

While Collins hoped that policy normalization could resume later this year, she

repeated that policy should remain on hold “for some time”, with a tightening

scenario not ruled out. Both Collins and Chicago Fed’s Goolsbee highlighted

sticky services inflation from the April CPI reports and warned that supply shocks

could broaden price pressures, reinforcing a hold for longer bias at the margin.