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FOMC meeting, June 17-18

Meeting preview

The Federal Reserve will hold the federal funds rate unchanged at 4.25% to 4.50% at next week’s Federal Open Market Committee (FOMC) meeting. Recent Fed commentary has reinforced a wait-and-see approach, with officials signaling little urgency to adjust policy amid increased uncertainty around the economic outlook.

The policy statement may not be altered much. The FOMC is likely to reaffirm that inflation remains “somewhat elevated” with labor market conditions seen as “solid” and the unemployment rate having “stabilized at a low level.” The FOMC will likely reiterate that “risks of higher unemployment and higher inflation have risen,” especially given the uncertain economic outlook.

We anticipate the dot plot of median rate expectations will remain unchanged with two 25 basis points (bps) rate cuts expected by year-end. We foresee the dot plot still showing a further 50bps of policy easing to 3.4% in 2026 and another rate cut to 3.1% in 2027. Policymakers’ median estimate of the long-term neutral rate will likely remain unchanged at 3%.