Fed Dot Plot Is Set to Offer Glimpse of Rate-Cut Resolve

(Bloomberg) - Investors may glean more on the Federal Reserve’s resolve to ease monetary policy when US policymakers update their forecasts for interest rates Wednesday for the first time in three months.

The central bank — led by Chair Jerome Powell — is widely expected to hold borrowing costs steady for a seventh consecutive meeting, but there’s less certainty on officials’ rate projections.

A 41% plurality of economists expect the Fed to signal two cuts in the closely watched “dot plot,” while an equal number expect the forecasts to show just one or no cuts at all, according to the median estimate in a Bloomberg survey.

After raising their benchmark federal funds rate more than five percentage points starting in March 2022, the Federal Open Market Committee has held borrowing costs at a two-decade high since July.

A host of Fed leaders have suggested in recent weeks they see no rush to cut rates, with inflation more persistent and the outlook for growth staying solid.

What Bloomberg Economics Says:

“The June FOMC meeting will be one of the most pivotal this year as Powell may provide the clearest hint yet to the rate-cut timetable. The new dot plot likely will indicate two 25-basis-point cuts this year, compared with three in the March version.

With growth indicators consistently surprising to the downside since the April 30-May 1 meeting — even as inflation data have met expectations — we expect Powell to sound relatively dovish in his news conference.”

—Anna Wong, chief US economist. For full analysis, click here

Inflation by the Fed’s preferred measure was 2.7% in the year ended April, compared to the central bank’s 2% target. Data released Friday showed a surge in payrolls last month as well as accelerating wages, prompting traders to dial back expectations on rate cuts this year.

“The Fed will opt to keep rates steady for longer,” said Thomas Simons, senior US economist at Jefferies. “They will want to see a renewed run of more favorable data in line with an inflation trend closer to 2% before they feel comfortable cutting rates.”

By Steve Matthews and Craig Stirling


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