Inflation Data Is Coming Just Before the Fed Meeting. Will It Be a Game Changer?

Federal Reserve officials insist that they are “data dependent” as they craft interest rate policy. This month, the data they depend on is coming at the last possible moment.

America’s latest inflation reading — the Consumer Price Index report for May — will come out at 8:30 a.m. on Wednesday, just hours before the Fed releases its policy decision and new economic projections at 2 p.m.

There is little chance that the inflation data will change the Fed’s plans for this month. Officials are widely expected to leave interest rates unchanged, no matter what happens. But the fresh inflation reading could help shape officials’ estimates of how many times they will cut rates this year, because policymakers will have a chance to update their forecasts in response to the data.

Policymakers came into the year expecting to lower interest rates three times in 2024, but economists expect the Fed on Wednesday to change those projections to predict two cuts. Some see a small chance officials could project just one rate reduction.

The Fed’s increased wariness around rate cuts has come as inflation has proved surprisingly stubborn. While it is down sharply from its peak — the C.P.I. measure topped out at 9.1 percent in 2022 — central bankers have been concerned by a recent lack of progress. Inflation fell steadily in 2023, but it has recently plateaued.

Wednesday’s report will show whether that stickiness persists. Economists in a Bloomberg survey expect that the overall price index probably climbed 3.4 percent from a year earlier, matching the April reading. A measure of “core” inflation that strips out volatile food and fuel prices is probably running at 3.5 percent. That would be slightly slower than 3.6 percent in April.

The Fed defines its 2 percent annual inflation goal using a different but related measure, the Personal Consumption Expenditures index, which comes out later in the month andstood at 2.7 percent in April.

Slower progress on inflation has not been enough to prod Fed policymakers to raise interest rates further, but it has spurred them to hold off on lowering interest rates. Policymakers have been clear that in a solid economy with a strong job market, they have the wiggle room they need to wait for inflation to restart its decline before they lower interest rates.

“We will need to be patient and let restrictive policy do its work,” Jerome H. Powell, the Fed chair, said in mid-May.