Federal Reserve Chairman Jerome Powell spoke at the seventh anniversary conference on International Finance in Washington, DC on June 2, 2025.
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Federal Reserve officials this week on the future interest rate path and the impact of tariffs and the Middle East turmoil on the economy and the impact on the economy.
While any immediate movement to interest rates seems impossible, the policy meeting ended on Wednesday will be with an important signal that the market can still be diverted.
One of the biggest things to watch will be whether the FAP members stick to previous forecasts for the two drops this year, how they view inflation trends and any reactions from the Chairman Jerome Powell This has become a unified White House movement to achieve easier monetary policy.
“At the June meeting, the main message of the Fed is that it remains comfortable for treatment,” Bank of America economist Aditya Bhave said in a note. The BOFA said the Fed does not expect to cut this year, but will unveil the possibility of a reduction. “Investors should focus on Powell’s labor data, recent benign inflation prints and the risks of ongoing tariff-driven inflation.”
The individual rate expectations of the Commission’s “point chart” grid will be at the forefront and center of investors.
In its last update in March, the committee said this year was equivalent to a quarter-point drop this year, which is in line with current market pricing. However, it was a close call, and only two participants changed their approach to lower the median forecast to one.
The meeting is a complex geopolitical context where Donald Trump’s tariffs on inflation have little impact, but the future is unclear. Meanwhile, Trump and other administration officials Strengthen their urging The Fed’s fee rate is lower.
The most important thing is Israel-Iran conflict Threats to understate the stability of global energy pictures provide another variable in navigation policy.
“We expect Chairman Powell to repeat the message from the May press conference,” Buff said. “Policy is a good place and the Fed is not in a hurry to take action.”
However, the landscape may change soon.
Different economic signals
Although the unemployment rate is still below 4.2%, Possible non-agricultural wage report Shows a continuous gradual Labor market softening. most Recent inflation data It also shows that tariffs affect prices at least on the macro scale, which increases momentum for the Fed to consider at least relaxation.
“We are in an outrageous world,” Robert Kaplan, former Dallas federal government president, said in a CNBC interview last week. “If it weren’t for these expected tariffs that would have flowed and were flowing through, I think the Fed would be looking to lower rates on their front feet.”
As things get into the meeting, the market is priced in the next cut in September, which will be a surprisingly aggressive anniversary Reduce by half a percentage point FOMC raised it amid concerns about the labor market. The committee added two quarter moves before the end of the year and has been on hold since then.
In the current climate, “trade tensions have decreased, inflation is low, and hard data shows only limited signs of softening,” wrote Goldman Sachs economist David Mericle.
Goldman saw the Fed stick to its two forecasts, but the company’s economists said they hope they can only see one in the end.
“Inflation news is actually quite soft in addition to tariffs. Although it may be earlier, the peak impact of summer tariffs on monthly inflation prints is likely to be too fresh to cut by December,” Mericle said.
Officials will also update their forecasts for employment, inflation and GDP growth.
Goldman believes that FOMC will increase inflation to 3% for the whole year of 2024, 0.2 percentage points higher than March. The company also believes that GDP growth has slightly dropped to 1.5% from 1.7% and the unemployment rate has risen to 4.5%.
Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said officials will use the summer to watch the data and from there what the company will do later this year.
“The FOMC will maintain its waiting posture at its June meeting on Wednesday, highlighting that it still hopes to learn more about the evolving prospects in the coming months and continue to point to September, which is the next decision point for interest rates,” Guha said in a note.
