What to expect from the Fed's June FOMC meeting next week
Federal Reserve officials will be convening in Washington, D.C, next week for their June FOMC meeting, starting on Tuesday and concluding on Wednesday with a decision on interest rates and a press conference with the US central bank's Chair Jerome Powell.
Yahoo Finance senior Fed reporter Jennifer Schonberger outlines what to expect from next week's Fed meeting, including what the dot plot may signal about interest rate cut forecasts for 2025.
To watch more expert insights and analysis on the latest market action, check out more Market Domination here.
The Federal Reserve likely to hold interest rates steady at next week's June meeting, but we are expected to get an updated dot plot on Wednesday. For more on what to expect from that upcoming Fed meeting, let's welcome in Yahoo Finances Jennifer Schonberger. Hey Jen, how are you? What, what are we looking for?
Hey Julie, I mean, has it been six weeks already? Because I feel like I just blinked, and here we are, another Fed meeting. The Fed are widely expected to hold interest rates steady next week, but investors are going to have their eye on something else. Whether policymakers retain expectations for two interest rate cuts this year. And many Fed watchers expect the Fed will stick with two cuts as they weigh so many unknowns, from whether tariffs will push up prices or push down growth, to geopolitical risks. Former Kansas City Fed President Esther George told me, given just how fluid things are at the moment, she predicts that they'll be reluctant to signal changes from where they were earlier. She says they don't want to shake markets and cause people to think that things are going to be tighter for longer. President Trump, of course, has been hammering the Fed and Fed Chair J. Powell to speed up the timetable for any rate cuts, most recently citing milder inflation. But Powell and many of his fellow policymakers have made it clear in recent weeks that they're still more worried about the risks of higher prices from Trump's tariffs than any risk in unemployment as they weigh both sides of their dual mandate. Adding to that, the impact of Israel's strike on Iran, and whether a protracted war could lead to higher oil prices and inflation this summer. Fed not Fed watchers note that the job market, although it has been cooling, isn't showing any cracks, with the unemployment rate holding steady at 4.2%, a historical low, while wages are growing at nearly 4%. Investors currently betting that the Fed is not going to cut rates until September, but many I talked to say the Fed ought to leave the door open for a rate cut in July, lest they box themselves in like they did last summer, where they took July off the table during the June meeting, only to find themselves having to cut by 50 basis points in September. Julie?
Yes, and Fed critics will always say that they're too late or too early, so we'll see what happens this time.
There's always an opinion, right?
There is. Thanks, Jen.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Forbes
43 minutes ago
- Forbes
What Markets Forecasts For Interest Rates In 2025
WASHINGTON, DC - SEPTEMBER 18: Federal Reserve Chairman Jerome Powell speaks during a news ... More conference following the September meeting of the Federal Open Market Committee at the William McChesney Martin Jr. Federal Reserve Board Building on September 18, 2024 in Washington, DC. The Federal Reserve announced today that they will cut the central bank's benchmark interest rate by 50 basis points to a new range of 4.75%-5%. (Photo by) Markets expect the Federal Open Market Committee to cut rates between one and three times in 2025 from their current level of 4.25% to 4.5%. However, the first cuts may not come until the fall on the market's current view as tracked by the CME FedWatch Tool. The FOMC is expected to hold rates steady in June and, most likely, in July, too. That might leave the first cut of the year until September, with perhaps a second cut in December. Nonetheless, despite the predictions of fixed income markets, FOMC officials have largely spoken of a wait and see approach, meaning that the impact of tariffs and other government policies on the economy will ultimately shape interest rate decisions. Fears of accelerating inflation or slowing growth, which some FOMC policymakers believe are a likely consequence of tariffs, haven't materialized in reported economic data to this point. That arguably gives the FOMC the opportunity to be patient. For example, the unemployment rate has held in a range of 4.0% to 4.2% for the 12 months to May 2025. Without evidence of a weakening labor market and inflation above target, there is little obvious pressure for interest rate cuts. That said, President Trump has been vocal in calling for interest rate cuts. However, the FOMC's monetary policy decisions are independent of the President. Another factor causing relatively restrictive monetary policy for now is that headline inflation is running at 2.4% to May 2025. With more volatile food and energy prices removed, that same figure is 2.8%. This remains above the FOMC's annual inflation goal of 2%. Provided the job market remains robust, the FOMC may be tempted to wait for prolonged, cooler inflation before dropping interest rates. For example, Federal Reserve Governor Adriana Kugler said at a speech on June 5. 'Progress in lowering inflation toward the Committee's 2 percent target has slowed some since last summer, even if headline and core inflation have continued to decline. The FOMC's preferred inflation gauge, based on personal consumption expenditures (PCE), grew at a 2.1 percent annual rate in April. While that is quite close to the FOMC's target, it was dragged down by a decline in energy prices. Core inflation—which excludes volatile prices for food and energy and is a good guide to future inflation—came in at 2.5 percent, so I do believe that our monetary policy stance, which I view as modestly restrictive, is currently appropriate to achieve and sustain 2 percent inflation over the longer term.' This statement was before the most recent Consumer Price Index report for May, though Kugler's comments appear to remain relevant as that CPI report was largely as expected. Even though the jobs market and inflation do not appear to have been impacted by tariffs in recent reports, that could change. Policymakers generally expect tariffs to raise prices to a degree, although how much of any potential cost will be shouldered by importers and exporters relative to consumers remains to be seen. Anecdotal data from statements by major firms implies that price increases from tariffs may be coming in June and July, if so, that won't have been picked up by reported data yet. Furthermore, the consumer reaction to any potential price increases is unknown, too. With five FOMC meetings remaining in 2025, any change in interest rates is expected to be weighted towards later in the year. Modest cuts in interest rates are viewed as likely. That assumes, broadly speaking, that job market continues to remain robust, but the FOMC gains are little more confidence that inflation is returning to 2%. There is a chance that tariffs or other government policies change the economic trajectory as weaker survey data signal is possible, but for now that hasn't been materially evident in reported data. If that remains the case the FOMC may return to cutting interest rates later in 2025. Should the economy unexpectedly weaken, larger and sooner cuts are possible.
Yahoo
5 hours ago
- Yahoo
US Fed set to hold rates steady in the face of Trump pressure
The US central bank is expected to keep interest rates unchanged for a fourth straight policy meeting this week, despite President Donald Trump's push for rate cuts, as officials contend with uncertainty sparked by the Republican's tariffs. While the independent Federal Reserve has started lowering rates from recent highs, officials have held the level steady this year as Trump's tariffs began rippling through the world's biggest economy. The Fed has kept interest rates between 4.25 percent and 4.50 percent since December, while it monitors the health of the jobs market and inflation. "The hope is to stay below the radar screen at this meeting," KPMG chief economist Diane Swonk told AFP. "Uncertainty is still very high." "Until they know sufficiently, and convincingly that inflation is not going to pick up" either in response to tariffs or related threats, "they just can't move," she said. Since returning to the presidency, Trump has slapped a 10 percent tariff on most US trading partners. Higher rates on dozens of economies are due to take effect in July, unless an existing pause is extended. Trump has also engaged in a tit-for-tat tariff war with China and imposed levies on imports of steel, aluminum and automobiles, rattling financial markets and tanking consumer sentiment. But economists expect it will take three to four months for tariff effects to show up in consumer prices. Although hiring has cooled slightly and there was some shrinking of the labor force according to government data, the unemployment rate has stayed unchanged. Inflation has been muted too, even as analysts noted signs of smaller business margins -- meaning companies are bearing the brunt of tariffs for now. At the end of the Fed's two-day meeting Wednesday, analysts will be parsing through its economic projections for changes to growth and unemployment expectations -- and for signs of the number of rate cuts to come. The Fed faces growing pressure from Trump -- citing benign inflation data -- to lower rates more quickly, a move the president argues will help the country "pay much less interest on debt coming due." On Wednesday, Trump urged Fed Chair Jerome Powell to slash interest rates by a full percentage point, and on Thursday, he called Powell a "numbskull" for not doing so. He said Powell could raise rates again if inflation picked up then. But Powell has defended US central bank independence over interest rates when engaging with Trump. - 'Cautious patience' - For their part, Fed policymakers have signaled "little urgency" to adjust rates, said EY chief economist Gregory Daco. He believes they are unwilling to get ahead of the net effects from Trump's trade, tax, immigration and regulation policy changes. Powell "will likely strike a tone of cautious patience, reiterating that policy remains data dependent," Daco said. While economists have warned that Trump's tariffs would fuel inflation and weigh on economic growth, supporters of Trump's policies argue the president's plans for tax cuts next year will boost the economy. On the Fed's path ahead, HSBC Global Research said: "Weak labor market data could lead to larger cuts, while elevated inflation would tend to imply the opposite." For now, analysts expect the central bank to slash rates two more times this year, beginning in September. The Fed is likely to be eyeing data over the summer for inflationary pressures from tariffs, said Ryan Sweet, chief US economist at Oxford Economics. "They want to make sure that they're reading the tea leaves correctly," he said. Swonk warned the US economy is in a different place than during the Covid-19 pandemic, which could change how consumers react to price increases. During the pandemic, government stimulus payments helped households cushion the blow from higher costs, allowing them to keep spending. It is unclear if consumers, a key driver of the economy, will keep their dollars flowing this time, meaning demand could collapse and complicate the Fed's calculus. "If this had been a world without tariffs, the Fed would be cutting right now. There's no question," Swonk said. bys/jgc
Miami Herald
17 hours ago
- Miami Herald
Veteran fund manager issues dire stock market warning
The stock market loves climbing a wall of worry. We've certainly seen that over the past two months. Despite worry over mounting US debt and tariff impacts on inflation and the economy, the S&P 500 has rallied 20%. Technology stocks have done even better. The Nasdaq Composite, home to most tech leaders, is up 27%. The rally since President Trump paused most reciprocal tariffs announced on April 2, so-called "Liberation Day," for 90 days has been impressive. However, there's good reason for concern, especially since the S&P 500 is challenging all-time highs and its valuation is arguably becoming frothy again. Related: Bank of America unveils surprising Fed interest rate forecast for 2026 The risk that stocks could lose some of their luster after their rally has caught the attention of many Wall Street veterans, including long-time hedge fund manager Doug Kass. Kass has been navigating the markets since the 1970s, including as research director for Leon Cooperman's Omega Advisors, and his experience through good and bad times helped him correctly predict the sell-off earlier this year and the market bottom in April. This week, Kass updated his stock market outlook, including a surprisingly long list of red flags for why investors should be cautious. The best set-up for tantalizing returns is a market that's oversold enough to have reset forward price-to-earnings ratios to levels near the lower end of their historical averages. In February, when stocks were notching all-time highs right before the tariff-fueled reckoning, the S&P 500's P/E ratio eclipsed 22, and most sentiment measures were flashing overbought. Related: Legendary fund manager sends blunt 3-word message on economy The sell-off through early April erased much of that frothiness, driving the S&P 500's P/E ratio to 19 and below five-year averages of 19.9-not bargain-basement priced, but low enough to help catapult stocks from severely oversold readings. As a reminder, CNN's Fear & Greed indicator was at "Extreme Fear," and bearishness by most measures was sky high in the days after the April 2 tariff announcement. Now that the stock market is back near its highs, sentiment has turned optimistic again, with CNN's measure flashing "Greed." Because earnings forecasts haven't materially increased, the S&P 500's P/E ratio is north of 21-hardly cheap. "Valuation multiples expanded in a relief rally from mid-April to now and the S&P 500 now trades at 21x forward earnings, 35% above average," wrote Bank of America analysts to clients on June 14. "The index looks statistically expensive relative to its own history on all 20 of the valuation metrics we track." Doug Kass has tracked the market successfully through 1970s skyrocketing inflation, 1980s double-digit interest rates, the Savings & Loan crisis, the Internet boom and bust, the Great Recession, a pandemic, and the bear market of 2022. He's seen a lot over his nearly 50-year career, making his stock market warning now worth paying attention to. "Equities haven't been this unattractive since late 2021," wrote Kass on TheStreet Pro. "There is little room for disappointment. More Economic Analysis: Hedge-fund manager sees U.S. becoming GreeceA critical industry is slamming the economyReports may show whether the economy is toughing out the tariffs The concern that stocks have priced in much of the good news likely to come from ongoing trade negotiations may have merit, given this week's China trade deal news left tariffs at current levels near 55%. As the impact of tariffs flows through supply chains, inflation may start rising within months, crimping household and business spending. Unfortunately, that's not the only risk on Kass's mind. The money manager provided a long list of threats that could derail stocks' rally. It's a long list, so you may want to refill your beverage. He writes: Political and geopolitical polarization and competition will probably translate into less political centrism and a reduced concern for deficits, creating structural uncertainties, limited fiscal discipline, and imprudence around the globe ... and for the possibility of bond markets to "disanchor."The cracks in the foundation of the bull market are multiple and are deepening, but they are being ignored (as market structure changes have led to price momentum (fear of missing out) being favored over value and common sense).With the S&P 500 Index at around 6000, the downside risk dwarfs the upside reward for equities - in a ratio of about 5-1 (negative).Valuations (a 22-times forward Price Earnings Ratio) and (consensus) expectations for economic and corporate profit growth are all dismissed are JPMorgan CEO Jamie Dimon's and others' dour comments on complacency and a view that the corporate credit market is "ridiculously over-stretched."Look for the soft data (see last week's weak ISM and climb in jobless claims) to move into (and weaken) the hard data led by a slowing housing market likely to provide ample near-term evidence of the exposure and vulnerability of the middle trend-line economic growth (housing will lead us lower) coupled with sticky inflation lie ahead ("slugflation") - uncomfortable for a Federal Reserve which has to make increasingly more difficult profit growth (rising +13% in 1Q2025) will markedly decelerate in this year's second equity risk premium is at a two-decade low - typically consistent with a slide in S&P Dividend Yield is at a near record low of 1.27% - and the spread between the dividend yield and the 10-year U.S. Treasury note yield has rarely been as wide. With so many possible adverse outcomes, my baseline expectation is for seven lean months ahead over the balance of 2025. Kass' is clearly nervous that any single or combination of these headwinds could cause stocks to give back some gains. What should investors do? Over time, the stock market goes up and to the right, so those with long-term horizons are often best off sticking to their plan, recognizing that there will be bumps and bruises along the way. However, investors with a shorter-term horizon may want to rein in some risk, pocket some profit, and increase 'dry powder' to take advantage of any weakness if Kass's warning proves prescient. Related: Veteran fund manager revamps stock market forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
