Is The Fed Confident It Can Cut Rates This Year?

From our friends at JP Morgan…

As widely anticipated, the Federal Open Market Committee (FOMC) voted to leave the Federal funds rate unchanged at a target range of 5.25%-5.50% at its June meeting. The statement was largely unchanged though it did acknowledge that inflation has seen “modest further progress,” a slight improvement from “lack of further progress,” stated at its May meeting. The committee likely quickly penciled this in following the May CPI report which showed broad cooling in price pressures.

Updates to the Summary of Economic Projections (SEP) were also largely uneventful though the biggest surprise came with the Fed dot plot:

Real GDP growth projections was unchanged.
Unemployment rate projections were nudged higher by 0.1% in 2025 and 2026.
Both headline and core PCE projections were raised 0.2% to 2.6% and 2.8% in 2024 and by 0.1% in 2025 to 2.3%, before normalizing to 2.0% by the fourth quarter of 2026.
Median policy rate projections (dot plot) shifted to signaling just one rate cut this year, down from three rate cuts at its March meeting. Long run Fed funds rate projection was also raised to 2.8% from 2.6%.

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