00:00 Brad
The FOMC’s June rate decision coming Wednesday. Investors aren’t expecting the Fed to cut rates, but they are awaiting an important update on the economic outlook. Yahoo Finance Fed correspondent, Jennifer Schonberger, has more. Jennifer.
00:18 Jennifer Schonberger
Good morning, Brad. That’s right. The Federal Reserve widely expected to hold interest rates steady when they conclude their policy meeting this Wednesday, but all eyes are on whether the Federal Reserve will remain committed to two rate cuts this year. The central bank has been holding rates steady in the range of four and a quarter to four and a half percent since December, and some former Fed officials say the central bank is unlikely to change that projection in light of so much policy uncertainty from the administration. The Fed is likely to remain in a holding pattern and reiterate that rates are well positioned to react to changes in the economy. Officials have stressed that they’re worried about higher inflation from tariffs, even as the past two inflation readings have been mild in the face of tariffs, as well as slower growth, and even as the latest jobs report showed the labor market is cooling, the unemployment rate remains historically low at 4.2%, as wages are growing at a nearly 4% clip, giving the Fed time to see which direction they think rates need to go. And while some expect few changes to the economic forecast, JP Morgan’s Michael Feroli says the Fed could increase its forecast for inflation, as well as the unemployment rate by lowering its outlook for growth, giving more of a stagflationary whiff. Though, in the weeks leading up to the meeting, while officials haven’t said the risks to both sides of their dual mandate have changed, commentary has tilted towards fears for higher inflation rather than a job market that’s cracking. Now, this is preceding tensions between Iran and Israel ratcheting up. JP Morgan’s Feroli and Deutsche Bank’s Matt Luzzetti are calling for only one rate cut this year, but former Kansas City Fed President, Esther George, tells me the Fed doesn’t want to shake the markets and make people think they want to hold rates higher for longer when they’re not ready to do that just yet. Of course, President Trump highly likely to criticize the Fed’s decision to hold rates steady. He has been harping repeatedly on Fed Chair, Jay Powell, and the Fed to lower rates, citing other central banks around the world, like the ECB, which has already cut eight times. President Trump also telling Jay Powell, in his first face-to-face meeting with the Fed Chair earlier last month, for the first time this term, that he’s making a mistake by not lowering rates now.