The Federal Reserve is expected to keep interest rates steady in its upcoming meeting, but the forecast could send ripples through the market. Here are the key points to watch out for :

  • Interest Rate Forecast: The Fed's "dot plot" grid of individual members' rate expectations will be crucial. The committee previously indicated two quarter-percentage-point reductions this year, but just two participants changing their approach could swing the median forecast down to one cut.

  • Inflation Trends: Officials will update their projections for employment, inflation, and GDP growth. Goldman Sachs expects the FOMC to raise its inflation expectation to 3% for 2024, 0.2 percentage points higher than 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 down to 1.5% from 1.7%, with a slight increase in the unemployment rate to 4.5%.

  • Tariffs and Global Politics: 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 navigate policy.

  • Market Expectations: Markets are pricing in the next rate cut for September, marking the one-year anniversary of a half-percentage-point reduction. Goldman Sachs expects the Fed to stick with its two-cut forecast but ultimately sees only one cut.

The Fed's decision will likely be influenced by various economic signals, including:

  • Softening Labor Data: The May nonfarm payrolls report showed a gradual softening in the labor market.

  • Benign Inflation Prints: Recent inflation data indicates tariffs have had little effect on prices.

  • Disinflating World: Former Dallas Fed President Robert Kaplan notes that the Fed would be more proactive in cutting rates if not for prospective tariffs.

Some experts' insights include :

  • Bank of America Economist Aditya Bhave: Expects the Fed to remain in "wait-and-see mode" with no rate cuts this year, but leaving open the possibility for one reduction.

  • Goldman Sachs Economist David Mericle: Sees the Fed sticking with its two-cut forecast, but ultimately expects only one cut.

  • Krishna Guha, Evercore ISI: Believes the FOMC will maintain its wait-and-see posture and point to September as the next decision point on rates.


👉The outcome of the June FOMC meetings will be announced today at 2 p.m. Eastern Time(6 p.m GMT).



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