The Fed anticipates a rate cut this year, leaving rates unchanged

The Federal Reserve remains on hold, leaving the federal funds target unchanged at 5.25%-5.50% at its June meeting. In the statement from the Federal Open Market Committee, officials said that “modest further progress” is being made in the fight to reduce inflation to its 2% target.

In its quarterly Summary of Economic Forecasts, officials reduced the number of cuts they see this year to one in three. In 2025, they now see cuts worth 100 basis points, down from 75 previously.

Jennifer Schonberger of Yahoo Finance reports the latest details.

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

It does not change that the large reserve is set in the range of five and a quarter to 5.5%.

But reducing the number of rate cuts this year to one in three, though, was a very close call because eight officials saw two cuts this year, while seven saw one and four saw no cuts at all.

Next year.

Officials have revised the number of cuts to four from three previously.

This came after officials raised their inflation forecast for this year to 2.8% from 2.6 previously and changed key language in the statement to say there was a lack of further progress towards the committee’s 2% inflation target, as there has been modest further progress.

Now officials have said they won’t cut rates until they have more confidence that inflation is returning to their 2% target.

Now, the neutral rate, that is the rate that neither boosts nor slows growth was revised above to 2.8% from 2.6% previously, officials maintained their outlook for the unemployment rate at 4% which is the prevailing rate for unemployment.

Right.

Now they also maintained their outlook for GDP at 2.1%.

This decision was unanimous for you.

Whats your opinion?

I mean, listen, you, you know, feeding backwards and forwards, they keep the rate steady.

We expected them to indicate as you noted only one rate, only one rate cut coming this year.

So that’s a change as you read this.

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 split almost evenly.

This could easily have been cut right.

There were eight officials who saw rate cuts twice this year, and I think the CP I report that we got this morning probably affected them because officials are able to make changes to their interest rate forecasts coming into the second day of the the meeting.

The story continues

So it will be interesting to see what the PA says during the Q&A here at 230 because he will have to toe the line of his colleagues.

Is he a little too Dovish?

Which camp is in one, two, maybe not four that say no cuts.

The fact that we saw a change in language now has modest further progress from the lack of further progress.

I think that’s a tip for this morning.

However, CP I again, we will need to see more consecutive quarters of what we saw in CP I this morning for the Fed to feel comfortable cutting the Yen.

Thank you very much.

I appreciate.