FOMC Meetings

“The time to support the labor market is when it’s strong, and not when you begin to see layoffs.”

Our new baseline is a 50 bps cut with a total of 75 bps of cuts in the SEP for 2024. It’s a close call but we think a 50 bps cut is more likely than a 25 bps cut. We think a 50 bps point cut is the right move.

While Fedspeak has certainly shifted during the past few weeks, few members are itching to cut rates at the July meeting.

If the next month delivers either another round of soft inflation data, or a weak jobs report, the FOMC should be prepared to deliver a cut in July. If they continue to delay beginning rate cuts to gain certainty, they should consider a 50 bps cut for their first cut.

With the labor market still strong and April inflation representing an improvement over Q1 but still not good enough, the committee is in “looking for confidence” mode.

Every member that's spoken since the March meeting has expressed both a further desire to be patient on starting rate cuts (in response to the inflation data) and confidence that holding rates steady for longer will, on the margin, come with less downside risk to the labor market.

There was a lot to like from the FOMC press conference this week. Here are the highlights from Powell’s press conference.

Our baseline forecast of the dots sees most of the dots holding steady, with some dots taking cuts off for this year. . This leaves three cuts as our baseline median dot—but just barely.

With lots of new data around the corner, the Fed will want to keep its options open.