This is a surprise as most had thought after CPI the FOMC dot plots would show two cuts.
Here are how the projections compare to the last set of forecast from March 20:
- Median at 4.1% vs 3.9% prior Fed funds rate for end-2025
- 2024 GDP growth median +2.1 vs +2.1% prior
- 2025 GDP +2.0% vs +2.0% prior
- Unemployment rate in 2024 4.0% vs 4.0% prior
- Unemployment rate in 2025 4.2% vs 4.1% prior
- 2024 PCE inflation 2.6% vs 2.4% prior
- 2025 PCE inflation 2.8% vs 2.6% prior
- 2024 core PCE 2.8% vs 2.6% prior
- 2025 core PCE 2.3% vs 2.2% prior
The only change in the statement itself is that it says there has been 'modest further progress' towards 2% inflation compared to the old statement that said there "has been a lack of further progress". That's a notable change but we will have to wait until Powell at 2:30 pm and his press conference for more clarity.
The main surprise here is the dot plot, which isn't as dovish as markets assumed and that's led to some moderate US dollar buying on the kneejerk. The new projection shows 11 of 19 policymakers expecting no more than one rate cut this year, including four officials who pencilled in no cuts. Eight officials saw two cuts.
The odds of a September FOMC rate cut are down to 70% from 80% after CPI.
