The Fed is likely to keep rates the same, but give a forecast that moves markets. What to expect

Officials of the Federal Reserve can express their perspectives this week on the future route of interest rates as well as the impact that the prices and disturbances of the Middle East will have on the economy.

Although any immediate movement on interest rates seems improbable, the political meeting, which concludes on Wednesday, will include important signals which could still move the markets.

Among the greatest things to watch, it will be whether the members of the Federal Open Market Committee stick to their previous forecasts of two rate drops this year, how they see the trend of inflation and any reaction of the chair Jerome Powell To what has become a concerted White House campaign for a easier monetary policy.

“The main message from the Fed at the June meeting will be that there remains comfortably in waiting mode,” said the economist of the Bank of America, Aditya Bhave, in a note. Bofa thinks that the Fed will not be reduced at all this year but will leave the possibility of a reduction open. “Investors should focus on Powell’s point of view on work softening data, recent prints of benign inflation and the risks of persistent inflation focused on prices.”

The “DOT Field” network of the Individual Members’ Rate Committee will be at the forefront of investors.

During the last update in March, the Committee indicated the equivalent of two points quarters of points this year, which is in accordance with current market prices. However, it was a tight call, and only two participants who change their approach would change the median forecasts to a cup.

The meeting comes in a complicated geopolitical backdrop in which the impact of President Donald Trump’s prices on inflation has been minimal so far but not very clear for the future. At the same time, Trump and other administration officials have intensified their request Fed to reduce rates.

In addition to that, the Israeli-Iran conflict threatens to destabilize the global image of energy, providing another variable through which politics would sail.

“We expect President Powell to repeat his message from the May press conference,” said Bhave. “Politics are in good place and it is not in a hurry for the Fed to act.”

However, the landscape could change quickly.

Although the unemployment rate remains low at 4.2%, the The report of the not enlarged payroll showed a continuous continuous Labor market softening. Most recent inflation data Also indicated that the prices did not do much to have an impact on prices at least on a macro scale, adding another Fed incentive to at least think about the softening.

“We are in a disinflative world,” said former president of Dallas Fed, Robert Kaplan, in a CNBC interview last week. “If it was not for these potential prices that will cross and cross, I think the Fed would be on their foot before to reduce rates.”

While things arise in Reunion, the markets are prices in the next cup to come in September, which would be the first anniversary of a surprisingly aggressive birthday Reduction of the percentage point The FOMC has established itself in the midst of concerns concerning the labor market. The committee added two other a quarter -point measures by the end of the year and has been suspended since.

In the current climate, “trade tensions have decreased somewhat, inflation has been low and hard data showed only limited signs of softening,” wrote Goldman Sachs economist David Mericle.

Goldman sees the Fed stick to her two -cut forecasts, but the company’s economists are finally expecting to see one.

“We are convinced that we are always on the right track for possible rate reductions, because apart from the prices, the news of inflation has in fact been quite soft. Although an earlier reduction is possible, the cutting -edge summer tariff effects on monthly inflation printing will most likely be too fresh for the FOMC to be reduced before December,” said Mericle.

Officials will also update their projections for employment, inflation and gross growth in interior products.

Goldman sees the FOMC taking the expectation of inflation at 3% for all 2024, 0.2 percentage point greater than Mars. The company also sees a slight drop in GDP growth to 1.5% against 1.7% and a higher tick in the unemployment rate at 4.5%.

Officials will then use summer to watch the data and judge from there what he will do later, said Krishna Guha, head of the central bank’s global policy and strategy in Evercore ISI.

“We believe that the FOMC will maintain its waiting posture at its June meeting Wednesday in June, will stress that it is still expecting to know much more about the evolution of prospects in the coming months, and continues to emphasize in September as the next point of decision on rates,” said Guha in a note.