WASHINGTON—Consumer inflation – the Federal Reserve's preferred inflation index – exceeded its 2% target for the first time in nearly five years, according to Commerce Department data. As a result, NAFCU Chief Economist and Director of Research Curt Long said credit unions should be preparing for the next quarter-point rate hike, possibly in June.
"On paper, the Fed has achieved its goals of full employment and 2% inflation," Long said. "While there are some caveats – some slack surely remains in the labor market and core inflation remains below target – Fed officials appear eager to normalize rates. Credit unions should prepare for the next quarter-point rate hike as early as June, and for a total of two to three more increases this year."
In February, the personal consumption expenditure price index surpassed the Fed's target for a 2% annual gain, according to data released Friday, NAFCU reported.
Last month, the Federal Open Market Committee, the Federal Reserve's monetary policy setting arm, raised the federal funds target rate a quarter-point to a range of 0.75% to 1% – an anticipated move.
It was reported last week that most Fed officials expect to raise the federal funds target rate two more times this year, but some are anticipating even more increases – up to three, or according to Chicago Fed President Charles Evans, maybe even four, NAFCU noted.