The U.S. Federal Reserve will most likely keep rates steady at its June 16-17 FOMC meeting, the first under newly appointed Fed Chair Kevin Warsh. However, stakeholders have come to the conclusion that there is not much scope for near-term rate cuts as inflation remains stubborn.
What To Expect From The Upcoming FOMC Meeting?
The CME FedWatch tool shows a whopping 97.4% probability of Fed keeping rates in the current 3.50% to 3.75% range during the June 17 FOMC meeting. Just 2.6% of traders are anticipating a possible rate cut to 3.25%-3.50%.
According to a Reuters poll of economists, 72 of 102 economists believe the Fed will keep rates unchanged until the end of 2026. The outlook for policy easing has been further dimmed by the stronger-than-anticipated U.S. employment growth in May. This dampened hopes the Federal Reserve could start lowering borrowing costs in the near future.
One of the Fed’s primary concerns on the agenda for the meeting is inflation. Economists polled predict consumer inflation was up to 4.2% on the year last month. The Fed’s preferred inflation measure, the Personal Consumption Expenditures Price Index, was at 3.8% in April.
What Do Experts Say?
“It’s going to be very hard for the Fed to justify any action at this point and in the foreseeable future. It will be incredibly difficult to get a consensus of Fed officials to go along with the idea of cutting rates,” noted Tom Porcelli, the chief economist for Wells Fargo.
Porcelli went on, “The way we could get there is if we find an exit from the Iran conflict in the very immediate term …. There’s no sense that’s where we’re going with this.”
Political tensions have also been stirred up around the FOMC meeting. President Donald Trump has consistently been calling for Fed rates to be reduced. However, Warsh has indicated the Fed will keep its policymaking process independent.
Ahead of the meeting, Senate Banking Committee Chairman Tim Scott shared his outlook on the Fed decision. “I believe that they will keep rates where they are next week and not increase them,” he said in an interview.
Scott also mentioned inflation concerns. He stated, “The trend is not going in the right direction.”
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