

Market Analysis
The June dot plot surprised markets with a more hawkish stance, revealing a median projection of one rate cut in 2024, contrasting the consensus expectation of two cuts.
However, during his Wednesday press conference, Fed Chair Jerome Powell indicated that many participants saw the decision as a close call, suggesting both outcomes remain possible.
After the softer-than-anticipated SPI report, the market's implied probability of a rate cut by September initially rose from 59% to a peak of 85%, then settled back to 65% following the FOMC meeting.
Goldman economists stated, "We still anticipate the first rate cut in September and a second in December." They noted their inflation forecast for 2024 is slightly below the FOMC's, described by Chair Powell as "fairly conservative." They suggested that with two consecutive rounds of improved inflation data and if subsequent rounds follow suit, there's likely momentum towards a September cut.
Despite the FOMC's baseline expectation of a single rate cut, economists pointed out subtle signs of openness to cutting rates in response to inflation progress. They highlighted the FOMC statement's revision from "a lack of" to "modest" progress towards the 2% target. Chair Powell underscored in his opening remarks that inflation had decreased from a peak of 7% to 2.7%, emphasizing cumulative improvement.
Powell also made significant remarks during his speech, noting that labor market data would need to disappoint relative to expectations to justify a rate cut, given the FOMC's adjusted unemployment and NAIRU estimates. Additionally, he downplayed the importance of neutral rate estimates, which rose to 2.75% recently, in policy decisions. Finally, Powell mentioned that the upcoming framework review, starting later this year, will concentrate on refining the Fed's communication strategy.
Paraphrasing text from "Reuters" all rights reserved by the original author.