#FOMCMeeting Federal Reserve Meeting: Here's what to expect
The Federal Reserve is expected to keep interest rates stable at its next meeting, but the forecast may ripple through the market. Here are the key points to watch:
Interest Rate Forecast: The 'dot plot' grid of individual Fed members' rate expectations will be crucial. The committee previously indicated two quarter-point reductions this year, but just two participants changing their approach could make the median forecast drop to a cut.
Inflation Trends: Authorities will update their projections for employment, inflation, and GDP growth. Goldman Sachs expects the FOMC to raise its inflation expectation to 3% in 2024, 0.2 percentage points above March.
Economic Indicators: The unemployment rate remains low at 4.2%, but the labor market has shown signs of softening. GDP growth is expected to slow to 1.5% from 1.7%, with a slight increase in the unemployment rate to 4.5%.
Tariffs and Global Policy: The impact of President Trump's tariffs on inflation has been minimal so far, but the future remains uncertain. The Israel-Iran conflict could destabilize the global energy picture, adding another variable to consider in policy formulation.
Market Expectations: Markets are pricing in the next rate cut for September, marking the first anniversary of a half-point reduction. Goldman Sachs expects the Fed to maintain its forecast of two cuts, but ultimately sees only one cut.
The Fed's decision is likely to be influenced by several economic signals, including:
Softening Labor Data: The May non-farm payroll report showed a gradual softening in the labor market.
Benign Inflation Prints: Recent inflation data indicates that tariffs have had little effect on prices.
World in Disinflation: Former Dallas Fed President Robert Kaplan notes that the Fed would be more proactive in cutting rates if it weren't for potential tariffs.
Some insights from experts include:
Bank of America Economist Aditya Bhave: Expects the Fed to remain in 'wait mode' without rate cuts this year, but keeping the possibility of a reduction open.
Goldman Sachs Economist David Mericle: Thinks the Fed will maintain its forecast of two cuts, but ultimately expects only one cut.
Krishna Guha, Evercore ISI: Believes the FOMC will maintain its wait-and-see stance and will point to September as the next rate decision point.
