The Federal Reserve is almost certain to leave interest rates unchanged at its policy meeting next week, based on recent remarks by Fed officials, analyst comments and market bets.
But there is much more uncertainty about what the Fed plans to do in the remaining six months of the year.
At its June policy meeting, the bank is due to publish a “dot plot,” a visual summary of the central bank’s expectations for possible rate cuts over the coming months and years.
“The big question is what the median for 2024 will be,” JPMorgan analyst Michael Feroli said Friday in previewing the Fed’s next meeting. “We expect two easings this year, down from the three at the March meeting.”
Since the last Fed policy meeting, views on interest rate policy have become more pessimistic as subsequent inflation and employment data have shown signs that the economy is not yet strong enough to merit lower interest rates.
The question on many investors’ minds is how much further Fed officials expect to cut interest rates.
Feroli said hawks expect the Fed to cut rates only once or not at all this year, while doves expect two cuts.
As for the prospect of rate hikes, as some Fed officials have hinted at, Feroli sees that as unlikely.
Feroli said Fed Chairman Jerome Powell, who has been seen as mostly dovish in the face of sometimes conflicting data, is likely to stick to his message while taking a big-picture view. He is expected to emphasize that inflation is stubborn but declining and that the labor market is becoming more balanced on the back of strong economic growth.
