Global Economic Weekly: The Fed is passively easing policy

Research evidence excerpt

Global Economic Weekly: The Fed is passively easing policy

Accessible version

Global Economic Weekly

The Fed is passively easing policy

Global Letter: The Fed is passively easing policy 12 June 2026

Amid rising inflation and inflation expectations, the Fed is effectively easing monetary Economics

policy by not hiking rates, loosening financial conditions. The textbook policy response is Global

to look through supply shocks, but after five years of above-target inflation, and with

supply shocks becoming the new normal in a more geopolitically fragmented world, Table of Contents

sound risk management for monetary policy may advocate otherwise. Furthermore, the

Global Letter 2

recent decomposition of inflation is bleak. Unless core goods inflation somehow

US 4

becomes negative, no cuts should be in sight any time soon, even with a deal in Iran.

Euro area 8

UK 10US: June FOMC preview – park the bus

We expect the FOMC to keep the policy rate at 3.5-3.75% in June and remove the easing Japan 13

bias from its statement. We don’t anticipate any dissents. The SEP should show higher Emerging EMEA 15

inflation, a lower u-rate and no cuts this year. A few policymakers will likely project Emerging Europe, Middle East and Africa 15

hikes. We don’t think Warsh will submit forecasts. We expect him to lean dovish in the Latin America 18

presser, arguing: i) supply shocks are one-offs, ii) the Fed should be forward looking on Key forecasts 20

AI disinflation, iii) trimmed-mean PCE and wage inflation don’t look problematic. Detailed forecasts 21

Euro area: ECB review – indeed, a short hiking cycle Research Analysts 27

ECB delivered the first hike (25bp) of what appears a short-hiking cycle - in line with our

base case of two hikes.