The Federal Reserve remains on pause, leaving the federal funds target range unchanged at 5.25%-5.50% at its June meeting. At the Federal Open Market Committee declaration, Authorities say “modest progress” is being made in the fight to reduce inflation to its 2% target.
In their quarterly Summary of Economic Projections, authorities reduced the number of cuts they foresee this year to one in three. In 2025, cuts worth 100 basis points are now expected, up from the previous 75.
Yahoo Finance Jennifer Schonberger reports the details of the break.
For more expert insights and the latest market action, click here to watch this full episode of Market Domination.
This post was written by Stephanie Mikulich.
Video transcript
There is no change in the reserve, which remains largely fixed in the range of five and a quarter at 5.5%.
But reducing the number of rate cuts this year to one of three was a very difficult decision because eight authorities saw two cuts this year, while seven saw one and four saw no cuts at all.
Next year.
Authorities revised the number of cuts from three previously to four.
This is because authorities increased their inflation forecast for this year to 2.8% from 2.6% previously and changed the key language of the statement to say there had been a lack of further progress towards the inflation target of 2% of the committee, for there to have been modest additional progress.
Now, authorities have stated that they will not cut rates until they gain greater confidence that inflation is returning to its 2% target.
Now, the neutral rate, which is the rate that neither boosts nor slows down growth, which was revised upwards from 2.6% to 2.8% previously. Authorities maintained their outlook for the unemployment rate at 4%, which is the prevailing rate for unemployment.
Right.
Now they also maintained the outlook for GDP at 2.1%.
This decision was unanimous for you.
What’s your opinion?
I mean, listen, you know, the ones fed backwards keep the rate constant.
We expected them to indicate, as you noted, just one rate, just one cut coming this year.
So that’s a change as you read this.
Uh Jennifer, what surprises you about the statement?
I think Josh, if we look at the dot plot, there’s a lot of division within the Fed.
I mean, they were all split almost evenly.
This could have easily been cut correctly.
There have been eight officials who have seen rate cuts twice this year and I think the CP report we got this morning probably influenced them because officials are able to make changes to their interest rate projections on the second day of the meeting.
So it would be interesting to see what PA says during the Q&A here on 230, because he will have to toe the line of his colleagues.
Is he a little more Dovish?
Which field is in the one, the two, probably not the four that say uncut.
The fact that we have seen a change in language now is modest progress given the lack of further progress.
I think that’s a tip for this morning.
But again in CP I, we will have to see more consecutive quarters than we saw in CP I this morning for the Fed to feel comfortable cutting Jen.
Thank you very much.
Appreciate it.
