---
title: 'Inflation Is Going Up… So Why Is the Fed Cutting Rates?'
source: 'https://youtube.com/watch?v=gbLja35Uw-A'
video_id: 'gbLja35Uw-A'
date: 2026-08-01
duration_sec: 712
---

# Inflation Is Going Up… So Why Is the Fed Cutting Rates?

> Source: [Inflation Is Going Up… So Why Is the Fed Cutting Rates?](https://youtube.com/watch?v=gbLja35Uw-A)

## Summary

The video breaks down the key takeaways from the Federal Reserve's FOMC meeting, where rates were held steady while inflation projections were revised upward. The host walks through Powell's press conference, focusing on why the Fed still forecasts a rate cut in 2026 despite slower expected disinflation.

### Key Points

- **Fed holds rates steady** [00:01] — As widely expected, the Federal Reserve decided not to cut interest rates at this meeting.
- **GDP growth forecast raised** [00:15] — The Fed revised its 2026 GDP growth projection upward from 2.3% to 2.4%.
- **Unemployment projection unchanged** [00:39] — The unemployment rate is currently 4.4%, and the Fed left its year-end projection unchanged.
- **Inflation expectations worsen** [01:07] — Headline PCE inflation is now seen ending 2026 at 2.7%, up from the 2.4% projected in December; core PCE is projected at 2.7% versus 2.5% before.
- **One rate cut still projected** [01:35] — Despite slower expected progress on inflation, the Fed's median projection still shows one interest rate cut in 2026.
- **Powell on oil prices: wait and see** [02:00] — Asked how higher oil prices might affect policy, Powell said the impact is uncertain and the Fed will have to wait and see.
- **Progress on goods inflation is key** [03:44] — Powell said the main thing the Fed is looking for is a reduction in goods inflation as tariffs pass through the economy, before deciding whether to look through energy shocks.
- **Why cut if inflation progress is slow?** [05:59] — Powell explained that the rate forecast is conditional on the economy's performance; if tariffs fade and progress appears, a cut could be justified.
- **Labor market vs inflation risk** [07:45] — Powell said he wouldn't say one is more at risk; unemployment has been stable since September, while inflation remains a full percentage point above target.
- **Next meeting outlook** [09:56] — The next FOMC meeting is April 29th; markets imply a 95.9% chance of no rate cut and a 4.1% chance of a hike.

### Conclusion

The takeaway is that the Fed is holding a data-dependent stance, with a high bar for rate moves as it watches for tariff-related disinflation and energy price shocks. The market sees no cut at the next meeting, and the 'wait and see' tone dominates.

## Transcript

the five most important video clips, the highlights of the Federal Reserve FOMC So, the first thing that you need to know is that the Federal Reserve decided to not cut interest rates at this meeting. This was widely expected, so
there was no surprise here. The next thing I want to show you is the Federal Reserve's updated projections. So, they don't update their projections at every single meeting, so this meeting was a special one.
Okay, back in December, the Federal Reserve projected that the US economy Reserve projected that the US economy would grow at a rate of 2.3% in 2026. would grow at a rate of 2.3% in 2026. Now, they revised it upward to 2.4%.
Now, currently the unemployment rate is at 4.4%. projected that we're going to finish the year at an unemployment rate of 4.4%, year at an unemployment rate of 4.4%, and they left this projection unchanged.
labor market to remain stable for the remainder of 2026. Now, if you take a look at their updated projections, the inflation expectations projections, the inflation expectations rose. For PC inflation, we're currently
at 2.8%, okay? Back in December, the Fed thought that they could bring it down to 2.4% by the end of the year, and now they're saying 2.7%. Therefore, they expect slower progress
And of course, you have to remember that their goal is to get it down to 2.0%, which they've actually been saying that for the past 5 years. Core PC inflation is at 3.1% right now.
They thought, you know, back in December that they could bring it down to 2.5% by the end of 2026. Now, they're saying 2.7%. And finally, the Federal Reserve is still projecting one interest rate cut
this year in 2026. But, I want you to think about that because even though they expect slower progress on bringing down inflation, it cutting expectations. Now, I want to show you the highlights, the video
clips. And the first question is, and I think it's a very good question, how are higher oil prices going to affect your decisions to the Federal Reserve? of things, but the biggest takeaway is that Well, you're going to see it.
just going to have to wait and see. So, please take a look. Um I two questions. One, how high would oil prices and broader inflation have to go and for how long for the committee to consider hiking rates?
Uh and then secondly, diesel prices are rising faster than gas prices. How concerned are you that the increase in diesel might drive up food and goods prices and lead to broader inflation? Yeah, I I I'm not going to give you an
example example or specific answer on the first question. You know, we we done, but I wouldn't want to hypothesize about what that what that might be. You know, in terms of diesel prices prices um
Well, so your question there is are we concerned about it? I mean How concerned and and whether or not it will drive up, you know, the cost of food and and other think it's more general concern than that. It's
diesel prices because that's that's transportation of food and things like that. There are just lots of ways that that oil and derivatives of oil get into the production and transportation of many many things. So, and those
headline inflation, but things like that leak into core as well. And it the the the effects may not be as big, but they're quite real and they're they're material. So, we we are aware of that
we're right at the beginning of this and we don't know how big it just don't know how big this will be and how long it lasts. You know, it may or may not be something that really makes a big imprint on the US economy. We're just
going to have to wait and see. Okay, after watching that, a good follow-up question is, okay, well, is the Federal Reserve just going to ignore And you're going to see what Powell says, but he essentially says that
progress of goods inflation. So, please take a look. Times. There's been some debate about whether the Fed should look through the inflation that will come from higher oil prices stemming from the Middle East
conflict. Is that the right approach at this juncture? And to what extent does the fact that inflation has been above target for roughly 5 years now influence the committee's thinking around this? So,
So, first let me say we're well aware of um uh the performance of inflation over the last few years and how a series of shocks have uh have interrupted progress that we've made over time. And uh that
happened most recently with tariffs and then and now there will be some effects then and now there will be some effects on inflation coming forward. Um the the thing that's really important that we see this year is progress
uh on inflation through a reduction in goods inflation as tariffs go through the system, go through the economy. That's the main thing we're looking for going into this exercise. And we need to be seeing that
uh to you know, to sort of understand that we actually are making progress because on net we didn't make progress. And if you look at total inflation, sorry, total core inflation, it's about 3% and some big chunk of that
tariffs. So, we're looking for progress on that. The question of whether we look through uh the energy inflation doesn't really arise until we have kind of check that box. It of course is kind of standard
learning that you look through energy shocks, but that's always been dependent inflation expectations remaining well anchored. And I think now it's also dependent on on what you mentioned, which is that broader context of of 5
years now of inflation above target, we have to keep all of those things in mind and the question of looking through when it does arise will be one to approach not lightly, but you know, in in the context that you mentioned.
Why are you still going to cut interest rates in 2026 if the inflation going to make much slower progress on inflation than what What's the rates? So, you're going to hear what Powell
in a nutshell, he says that with the tariffs going away and an improving economy, that's going to afford them to cut interest rates. honestly, that doesn't make any sense because if the if the economy is going
to improve, that's reasons to raise interest rates, not cut them. But whatever. Please take a look. And just on the SEP, can you help us make sense of why there is still a bias to cut for most officials this year despite
the upward revision to headline and core inflation and the essentially unchanged forecast for growth and unemployment. Just curious kind of what What's the genesis behind the need What's the need for the cut? Yeah, so you know, there
are 19 people and so 19 reasons, 19 individual submissions. You know, but but it And if you notice, um the median didn't change, but there was actually some movement toward a meaningful amount of movement toward
toward fewer cuts by by people. So, four or five people went from two to one, or five people went from two to one, let's say, two cuts to one cut. Um And each person has individual uh
stories behind behind what they want to do. But essentially, it is that, you know, the the the the forecast is that we will be making progress on but some progress on inflation. It should come as we start to see in the
middle of the year uh progress on on tariffs, uh you know, inflation coming down. That's We should be seeing that. And you know, the the rate forecast is conditional on the performance of the economy. So, if we
don't see that progress, then you won't see the rate cut. Now, here's a very good question. Is a weakening labor market a greater risk remember that the Federal Reserve has a dual mandate.
And you're going to see Powell say no, even though jobs are being lost right now, that the unemployment rate is the most important stats, and that's holding steady. But, honestly, okay, so
what's really going on here is they want to know, like the reporters want to market, like a weakening labor market, as an excuse to cut interest rates even what they're really trying to get at. So, please take a look.
>> Thanks, Jerome Powell. Edward Lawrence with Fox Business. So, in December, we saw employment numbers revised down to -17,000. January revised down. February posted a loss of 92,000. Is that is is the employment side a far greater risk
than the inflation side? Because we are seeing inflation, CPI is close to 2%. PCE has ticked down overall. You know, it's really I wouldn't say that. I wouldn't say that that's clear at all, that one is more at risk than
the other. So, you can you can point to the unemployment rate being stable. And, you know, in a world where both supply and demand for workers have come down very, very sharply over the course of the past year due to immigration policy
you know, a ratio is going to be a better thing to look at than job creation, for example. So, and the ratio is the unemployment rate, and it's been stable since September. So, that that that tells you that. Um, inflation, I
uh, we're we're we're at we're at 3.0% core inflation, 2.8% uh, headline. So, we've been well above the 2% uh, that that amount, whatever it is.
0.7, 0.8, we're a full percentage point above 2% for some time. And that's a concern. You know, we need to get back down to 2% and uh we need to keep focused on that even though we do now face some some new
inflation from energy. So, I I'd be hard-pressed to say that one of other. Now, in this video clip, the question is how are you thinking about the next meeting in light of all the current
events that's going on. So, please take a look. Um I just wanted to ask for know, how the Middle East war develops between now and then. How are you thinking about what might guide action at your next
meeting? I mean, if if we have oil prices, you know, above $100 a barrel is that going to change your wait-and-see stance? Like what wait-and-see stance? Like what what would lead you all to move or is uh
are you on hold pretty indefinitely? We'll have to wait and see. Um you know, um we always say we're going to learn more by the next meeting. we're going to learn a lot because we're going to learn 6 weeks to the day till
And um you know, we're going to see whether the what happens is it's going to be very important for the way the economy looks and the way the outlook uh with what happens in Middle East. That's going to be a big factor and we'll know
that then. I don't know how it's going to affect our thinking. I really don't. we did we did talk about alternative scenarios a little bit, but it's just I wouldn't bring that in here. It's it's very uncertain and I I just want to
just remember that we don't know and we shouldn't assume it's going to be one thing or another. We're going to see. Okay, I want to conclude with this. The next Federal Reserve meeting's going to be on April 29th.
meeting as chair of the Federal Reserve unless uh Fed chair like the new Fed chair doesn't get put in place in time. And there's a 95.9% chance that the Federal Reserve will not cut interest rates in April, and there's a 4.1%
raise interest rates. So, basically, a rate cut is off the table for the next meeting. With that being said, you are now up to date with hope that was helpful. Please subscribe. Thank you for the support, and I wish
Thank you for the support, and I wish you a very nice day. Take care.