WASHINGTON, July 25 (Reuters) – With the Federal Reserve steaming toward another interest rate hike this week, policymakers face a choice over how much weight to put on recent economic data that has made hoped-for outcomes on inflation and unemployment seem more likely while also posing a risk the economy is too strong to keep prices in line.
Since the U.S. central bank’s policy meeting in June, inflation has slowed more than expected towards the Fed’s 2% target, with many analysts arguing a cycle of moderating price hikes is underway and should continue without further rate increases beyond the quarter-percentage-point hike broadly expected to be announced on Wednesday.
But the sense of optimism in a Fed-orchestrated ‘soft landing’ – a scenario in which inflation falls, unemployment remains relatively low and a recession is avoided – has also buoyed financial markets in ways that could counter the central bank’s aims, something…
