BAY AREA — Federal Reserve officials may consider raising interest rates at their upcoming meeting if core inflation exceeds expectations. This consideration follows recent employment data that indicated stronger labor market growth than previously anticipated.
The Consumer Price Index report is scheduled for release on Wednesday, and the Producer Price Index report is scheduled for release on Thursday. These reports will provide the first inflation data for May. The Personal Consumption Expenditures index serves as the Fed's primary gauge of inflation.
Market pricing has shifted from expecting two additional rate cuts in 2026 to expecting two rate hikes. This change in expectations occurred after the Fed implemented three interest rate cuts in the fourth quarter of last year, with the most recent cut in December 2025.
Recent economic data has shown mortgage rates increased. In the housing market, closed home sales increased in May, while new housing listings reached their highest level since 2022. U.S. home prices rose by 2% compared to the previous year.
Conversely, pending home sales remained unchanged in May. Home sellers are removing properties from the market at elevated rates due to extended listing durations and unmet price expectations. Previously delisted properties now account for 2.5% of active listings, representing the highest proportion since 2020.
Consumer sentiment data is scheduled for release on Friday. Consumer sentiment reached its lowest recorded level. The latest Job Openings and Labor Turnover Survey report showed higher than expected figures, though underlying metrics were weaker than the headline number.