The Federal Reserve says the economic outlook could force an interest rate cut - something Donald Trump wants.Read more
US Federal Reserve
The US Federal Reserve will begin its two-day monetary policy meeting later today.
While the central bank is not expected to move this week, some are expecting a rate cut later this year.
"Given the worsening economic outlook in the US, it seems like only a matter of time before the US Fed starts to cut interest rates," Capital Economics said in a research note.
"Financial markets are pricing in a 20% chance that the Fed will cut rates this week. Our US team believes the first cut will come in September."
Here's some reaction to the news that the US consumer price index rose by a subdued 0.1% in May.
Michael Pearce, senior economist at Capital Economics, said he did not think today's figures were enough to cause the Federal Reserve to reduce interest rates.
"We don’t think the Fed will cut interest rates imminently," he said.
"But we expect that a further slowdown in economic growth, together with still muted inflation, will be enough for the Fed to pull the trigger and begin cutting rates later this year."
Federal Reserve Chairman Jerome Powell has said the US central bank is "closely monitoring" trade developments and will respond to them "as appropriate".
"I’d like first to say a word about recent developments involving trade negotiations and other matters. We do not know how or when these issues will be resolved," he said in a speech on 4 June.
"We are closely monitoring the implications of these developments for the US economic outlook and, as always, we will act as appropriate to sustain the expansion."
The US economy is set for solid growth of 2.25-2.50% rate this year, according to a top Fed official.
However, Dallas Federal Reserve Bank President Robert Kaplan told the FOX Business Network that it was too soon to say what effects US tariffs on Chinese imports would do to the country's currency or inflation rate.
Kaplan also reiterated that he wants to be patient on rates and avoid policies that might create excesses or imbalances in the US economy.
The Fed minutes have had little impact on Wall Street with all three indexes continuing to trade lower.
"I don't think the Fed is a major consideration for the market right now," says Robert Phipps, a director at Per Stirling Capital Management.
"There are times when geopolitical factors overwhelm everything else, and we believe this is increasingly one of those times."
The US Federal Reserve minutes from their interest rate meeting last month have just been released.
They show that officials agreed that their current patient approach to setting monetary policy could remain in place "for some time."
Officials also spoke in depth about how they could best structure their holdings of several trillion dollars of securities to battle a future economic downturn, the minutes show.
US President Donald Trump has been breaking with tradition, putting pressure on the Federal Reserve to keep interest rates low.
This is unusual for presidents who have historically tried to respect the independence of the central bank in order not to erode confidence on its decisions.
But Mr Trump went a step further this week:
"China will be pumping money into their system and probably reducing interest rates, as always, in order to make up for the business they are, and will be, losing," Trump said on Twitter
"If the Federal Reserve ever did a 'match,' it would be game over, we win! In any event, China wants a deal!"