00:00 Speaker A
Well, the Fed did hold interest rates steady in June. Released also its latest summary of economic projections, what we also call the dot plot, and for more on the details of the dot plot, we bring in Yahoo Finance senior reporter, Allie C***. Hey, Allie.
00:19 Allie C***
Well, yes, truly, considering the expectation was for the Fed to remain on hold, which as we saw they did. All eyes have been on that summary of economic projections, otherwise known as the SEP, which includes the highly anticipated dot plot. That maps out where policy makers think interest rates will head in the future, and, uh, and for the month of March, similar to what we saw, uh, for June, the Fed is still pricing in two rate cuts, but there were a few notable changes, including a more stagflationary picture. But let’s start first with the dot plot. So these are the latest projections for June. As you can see, each dot represents a specific FOMC member. There’s more dispersion, the further you get along in the future there, but we did see some dispersion for June. So I want to start there. If we zoom in on June, you’ll see the majority of officials there, eight officials anticipate two interest rate cuts this year. But what I thought was interesting is that seven anticipate us to stay on hold, and just two anticipate one cut. If we take a look and compare that directly to March, you’ll actually see that it’s a bit different there. There seems to be growing divergence among, uh, those FOMC members. Jerome Powell was directly asked about this during the post decision press conference. Here’s a bit more of what he had to say.
02:27 Jerome Powell
As we see more data, we’re going to learn more about where inflation is headed, and that means when it is time to look at, at, at normal, at sort of, at, you know, resuming, uh, our normalization process, the differences you may, you see should be smaller because we’ll have seen actual data. Right now, it’s just a forecast in a very foggy time.
03:03 Allie C***
Forecast in a very foggy time that seems to encapsulate the moment that we’re in right now. But I want to switch gears and look at the inflation picture, because this was revised higher, core PCE inflation now projected at 3.1% in 2025. And if you look out over the long term, 2027, 2.1%. The Fed’s target is 2%. So currently, FOMC officials don’t expect us to reach that Fed target by 2027, and that is higher than what we saw in March. On a similar vein, let’s take a look at GDP growth projections. That was lowered this time around, 1.4% expected for 2025, and then we will eventually reach that 1.8% that was projected in March by 2027 and remain at that level through the long term. But GDP growth, if that’s expected to slow, you’ll usually see that trickle through into the labor market and the unemployment rate, and to that point, we’ve seen the unemployment rate slightly tick higher, 4.5% in 2025. We will eventually reach 4.2%, this is the current level of unemployment that we’re at right now by, uh, the longer term picture here. But for the time being, it looks like the Fed thinks we’re going to be in this stagflationary environment where inflation is higher, growth is lower. At the same time, we have a lot of unknowns with the tariff picture, along with some policy, uh, workings in DC. Trump’s tax bill, for example, is making its way through Congress right now. So that’s another potential risk here. So, um, very interesting to see some of the stagflation pictures baked into these forecasts, and again, going back to that dispersion that we saw for these June SEP numbers, Julie.
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