① As expected by the market, the Federal Reserve kept the benchmark interest rate unchanged at the range of 5.25%-5.50% for the seventh consecutive time; ② The latest 'dot plot' shows that more than half of the committee members have lowered their expectations for interest rate cuts to at most once this year; ③ Wall Street analysts remain relatively optimistic.
On June 13th, Caixin reported (Editor Huang Junzhi) that the Fed remained unchanged at its June interest rate meeting as expected, maintaining the federal funds rate target range at 5.25% to 5.50%. This is the seventh consecutive time since September last year that the bank has maintained interest rates unchanged. As for inflation, the Fed's view has also undergone significant changes. The bank now believes that there has been a slight further progress in achieving the committee's 2% inflation target in recent months. Powell emphasized that although he acknowledged that recent monthly inflation data has slowed down, confidence has not yet reached the level to reduce interest rates.
Although there were no surprises in the interest rate decision, it is worth noting that the Fed's latest "dot plot" slashed the rate cut expectations, from the three in March to only one. Specifically, 11 officials believe that there will be at most one rate cut this year, while the remaining eight expect to cut interest rates twice.
As for inflation, the Fed's view has also undergone significant changes. The bank now believes that there has been a slight further progress in achieving the committee's 2% inflation target in recent months. Powell emphasized that although he acknowledged that recent monthly inflation data has slowed down, confidence has not yet reached the level to reduce interest rates.
On this issue, Wall Street analysts made the following comments:
Comerica Bank's chief economist Bill Adams said.
What is important is that the balance of opinion in the dot plot does not necessarily reflect how the FOMC will vote from now to the end of the year. All regional Fed presidents have a dot in the dot plot, but only a few have the right to vote in FOMC decisions. The majority of the vote is cast by Fed directors, who are often more receptive to the idea of rate cuts. This suggests that most voting FOMC members may think that cutting interest rates twice before the end of the year may be the most appropriate.
At the same time, if economic data is different from their expectations, most people will not feel obliged to stick to rate cuts. FOMC members have repeatedly emphasized that they will make decisions based on upcoming data and meetings.
In short, the Fed clearly defined its decision-making process at today's meeting, and policy makers are responding to upcoming data in a manner consistent with that process. If inflation continues to slow down, as it has for the past year and a half, the Fed will start cutting interest rates in the second half of 2024.
Quincy Krosby, Chief Global Strategist for LPL Financial, said.
The Fed's statement acknowledges that inflation is moving toward the Fed's target of 2%, but does not indicate that the Fed is moving toward an accommodative monetary policy. This is likely because the Fed does not want to unnecessarily ease financial conditions, as the data-dependent Fed needs a series of cooling inflation reports to initiate a cycle of rate cuts.
Chris Low, chief economist at FHN Financial, said.
This indicates that it is still too early to be too excited about the rate cut. The May CPI released on Wednesday is a good news, but the one or two rate cuts implied in the June dot plot remind us that we need more reports like May before the Fed is confident in cutting interest rates.
Nate Thoft, CIO and Senior Portfolio Manager of Multi-Asset Solutions team at MassMutual Investment Management.
The biggest gain from this meeting is the change in the dot plot, from three 25 bp rate cuts to one remaining rate cut in 2024. Although the median forecast is one, the latest vote is between 1 and 2. However, by 2025, the median forecast for rate cuts will increase from three to four. Therefore, the net impact on the next 18 months is a reduction of 25 basis points less in the rate cuts.
In addition, the moderate adjustments to increase inflation estimates and unemployment rate estimates are also noteworthy and necessary modifications to support the reduction in the number of rate cuts.
Bankrate's Chief Financial Analyst, Greg Mcbride, said.
The only hint acknowledged in the Fed's statement is that there has been "moderate" progress in achieving the 2% inflation target, rather than the "lack" of progress mentioned in March.
Gene Goldman, CIO of Cetera Investment Management, said.
Although the Fed has lowered its rate cut expectations to once or twice, it may cut rates twice or more later this year. The reason is that the cooling rate of inflation is quite fast.
Brian Jacobsen, Chief Economist of Annex Wealth Management.
This policy statement is much milder than the previous one. Today's good CPI data helped. The dot plot may be more important than the policy statement. The Fed cut rates from three times to one, but they extended the time frame for rate cuts to 2025. The net effect is to cancel one rate cut in the next 18 months, which may not have a significant impact on the overall economy.
Editor/Somer