The Federal Reserve has issued a concerning forecast predicting stagflation and rising unemployment in its May meeting minutes. This projection will be reflected in the Summary of Economic Projections (SEP) to be submitted by officials next month. Despite maintaining a calm public stance, the Fed’s statements strongly signal a significant slowdown in the labor market leading to increased unemployment rates throughout 2023 and continuing into 2027. Furthermore, they anticipate inflation to rise significantly this year, though price increases are expected to moderate in 2026. Notably, Fed staff acknowledge that if their projections for inflation in 2026 and 2027 fall short of the anticipated 2%, it’s more likely they underestimated rather than overestimated inflationary risks.