FOMC preview – shift to projection for two rate cuts for 2024 from 3 is a “close call”

Snippet from CIBC on what they expect from the Federal Reserve’s FOMC today:

• The funds rate will be left unchanged, and Powell ought to avoid giving any definitive signal on when the first cuts will arrive.
• We’ll concede that recent data on inflation hasn’t been friendly to our forecast for 100 bps of cuts in the latter half of the year, and we’ll need to see some softening in jobs, wages and underlying inflation in the coming months to stick with that view.
• While it’s a close call, with some risk of a more hawkish turn to only 50 bps of easing, we see the Fed just hanging on to its median projection for three cuts in 2024, and the median call for 2025 also looks likely to be little changed, with the individual dots still widely dispersed.
• Median forecasts for growth, inflation and unemployment for this year could shift by a decimal place or two here and there, which won’t be material. If so, the biggest change could be in the ‘long term’ outlook for rates, typically viewed as the Fed’s assessment of where neutral will lie. With the economy showing resilience to rates above 5%, the long-term projection will likely move higher, with 2.75% or even 3% now looking like more plausible outcomes.

Earlier:

• FOMC preview – a 25% to 30% chance of the Fed signaling only two rate cuts in 2024

• Federal Open Market Committee (FOMC) preview: the clear risk is it defers cuts
• FOMC preview – we’ll get hints on 3 or 2 cuts ahead this year

• Fed preview: Ignore the dots, focus on Powell

This article was written by Eamonn Sheridan at www.forexlive.com.