#FOMCMeeting

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%.

The Summary of Economic Projections (SEP) will likely have a stagflationary feel with lower median GDP growth expectations around 1.2% year over year (y/y) in Q4 2025 (vs. 1.7% in the March projections) and higher inflation expectations. The 2026 growth projection likely won’t be much changed, even if the risk of a downward revision exists. The unemployment rate trajectory may be revised up a tick to 4.5% in Q4 2025 and 4.4% in Q4 2026. The core personal consumption expenditures (PCE) inflation projection, meanwhile, will be revised up to 3.0% y/y in Q4 2025 (vs. 2.8% y/y in the March projections) while the 2026 projection may be revised 0.1 percentage point higher to 2.3% y/y.

During the press conference, Fed Chair Jerome Powell will likely strike a tone of cautious patience