The FOMC meets on Tuesday and Wednesday of the June 10 week. The FOMC statement released at 14:00 ET on Wednesday will get a close read for any guidance in regard to the interest rate outlook. However, it is the summary of economic projections (SEP) that may be more informative. Markets will be looking for hints about any changes in the FOMC forecasts that will shape expectations for moves in the fed funds rate.

The prior SEP was issued on March 20 and implied three rate cuts of 25 basis points later in 2024. Shortly after that, the data on inflation, the labor market, and economic growth made that projection out-of-date. The inflation data for the first quarter as a whole showed a “sideways” move that didn’t change much at the start of the second quarter in data for April. Labor market data through May is consistent with tight conditions. GDP growth in the first quarter was a modest 1.3 percent – somewhat below the FOMC’s longer-run forecast of up 1.8 percent – while early forecasts for the second quarter point to growth a little faster than the longer-run. The combination of recent lack of progress in disinflation, a healthy labor market, and tempered growth will keep the FOMC on hold as far as rate cuts go.

It is widely anticipated that the SEP will reduce the forecast for rate cuts to only one or two this year – and maybe even none.

The June 11-12 FOMC meeting is almost certainly the last before Chair Jerome Powell delivers his semiannual monetary policy testimony before Congress. It isn’t on the Fed’s event calendar yet. It could be scheduled before the recess around the Independence Day observance on July 4, or it could be a week or two after that. In any case, Powell’s prepared remarks for that testimony are probably going to closely align with the June 12 FOMC statement and his remarks at the press conference which will happen at 14:30 ET on Wednesday.

Fed policymakers will remain wary about under- or over-reacting to any one piece of economic data. It will probably take a full quarter’s worth of numbers consistent with a resumption in disinflation before the hawkish tone of Fed comments ease while the economy chugs along with moderate growth and the labor market shows little sign of substantive loosening.

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