With the Federal Reserve widely expected to keep its key rate unchanged today - which stands at 5.0%-5.25% following 10 consecutive hikes - investors will focus on the central bankers' statement for any inkling of guidance about its intentions at the July meeting. At the last gathering, the FOMC
kept the door open for a rate increase at future meetings when it said "additional policy firming may be appropriate to return inflation to 2% over time." Any changes to that wording will let markets know which way the Fed may be leaning - toward another "skip" to assess data or toward resuming a path of tightening.
Snapshot: If the FOMC keeps rates unchanged at 2 PM ET, look to see if any members voted to raise rates this month, which can give
insight into the debate that occurred at the meeting. Fed policymakers will also provide their expectations for inflation, growth, unemployment and where they see rates going over the next couple of years in the Summary of Economic Projections. In March, the central bankers'
median projection was 5.1% at the end of 2023, unchanged from the December 2022 meeting, while the median projection for 2024 year-end was 4.3%, up from 4.1% in the prior dot plot.
"Mixed economic signals have made the Federal Reserve's
job much more difficult," writes SA analyst
Victor Li, especially after
headline CPI data for May came in softer than expected. "The labor market continues to show resilience, with an unemployment rate of 3.7% hovering near 50-year lows and 339,000 net jobs created in April. Additionally, job vacancy rates have increased, with more than 1.5 jobs available for every unemployed person, and the consumer confidence numbers have increased in 8 of the last 10 months. Unfortunately, overall GDP growth has slowed from the previous two quarters; however, the annualized growth rate of 1.6% is still higher than what was seen in the last quarter of 2022."
Market angle: "Investors have been waiting most of this year for the Federal Reserve to 'pivot' from its tight monetary stance," adds SA analyst
John Mason. "Now, investors in the stock market seem to be waiting for the Federal Reserve to 'pause' in its efforts to increase its policy rate of interest." Mason also discusses the recent S&P 500 bull market rally in
Federal Reserve Watch: Question Marks, citing an indication of how "mixed up" the U.S. economy is given that only a "handful of companies have been posting outsized gains over the past few months." (
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