FOMC REVIEW: Fed holds as expected, 2025 dot plot unchanged but 2026 and 2027 dots lifted

The Federal Reserve left rates unchanged at 4.25-4.5%, as was widely expected, with the 2025 dot plot left unchanged at 3.9%, which signals 50bps of cuts this year, although the 2026 dot plot was revised higher to 3.6% from 3.4% and 2027 was revised up to 3.4% from 3.1%. However, there was some discourse over the number of cuts seen this year. Seven members see no cuts this year, vs. four in March, while two see 25bps cuts, down from four in March, eight see 50bps (prev. nine), and two see 75bps of easing (unchanged from March). Highlighting the close proximity for the median dot, 9 members see FFR above median, 10 members see FFR at median or below. GDP forecasts were cut for both 2025 and 2026 to 1.4% (prev. 1.7%) and 1.6% (exp. 1.8%), respectively, while unemployment rate forecasts ticked higher across all time horizons ex. long-run. Headline and Core PCE inflation dots were also notably lifted with the 2025-end headline rate seen at 3.0% (prev. 2.7%) and 2026 at 2.4% (prev. 2.2%). In regards to the statement, the Committee said the uncertainty about the outlook has "diminished further but remains elevated", a change from the prior "increased further", and it also removed the stagflation warning line that "risks of higher unemployment and higher inflation have risen" - we look to Fed Chair Powell's Press Conference to see if this was a just a statement "clean-up" or to indicate that these risks have not risen further, or even pared. However, stagflation risks remain given inflation forecasts were revised up, with growth forecasts revised down. 

18 Jun 2025 - 19:30- Fixed IncomeData- Source: Newsquawk