FOMC Update
June 12, 2024
As expected, the FOMC did not change its benchmark rate range from 5.25%-5.50% for the seventh consecutive meeting. The Fed also updated rate cut projections for 2024 from 75bp to 25bp, and increased 2025 rate cut projections from 75bp to 100bp. The median forecast for PCE inflation increased to 2.6% (from 2.4%) and the core PCE inflation forecast increased to 2.8% (from 2.6%). The economic-growth estimate from 2024 remains unchanged at 2.1%.Rates and Market:
- Fed Funds Target: 5.25%-5.50%
- Market Reaction: The S&P 500 ticked up to 5430, the US Treasury 2Y is down 12bp to 4.72% and the US Treasury 10Y remained unchanged following the announcement. The market is pricing a 58% chance of a 25bp rate cut at the September 2024 FOMC meeting.
The FOMC announced the following actions and analysis:
- Unanimous policy vote.
- The Fed changed its statement from “lack of further progress” to “modest further progress” toward its 2% inflation objective.
- The Fed noted that although inflation has “eased somewhat”, they would like to see more “good data” before cutting rates.
- Powell says the labor market conditions have returned to where they were before the COVID pandemic.
- The Fed cut the Treasury Runoff Cap to $25B from $60B.