Today, the Fed starts its two-day meeting with the release of its statement tomorrow evening alongside revised economic projections of FOMC members, including a fresh ‘dot plot’, and then Chair Powell’s press conference.
The markets are clamouring for a rate cut, or at a minimum, a signal of a precautionary cut next month which would be the first in more than a decade. The key question for one of the most eagerly anticipated Fed meetings of recent times is a simple one - is the easing priced into Fed Funds futures over the next 12 months overdone?
Elevated geopolitical and trade issues, weakness in manufacturing indicators and downward trends in consumer prices and inflation expectations mean the conditions for a ‘patient’ stance are fading. But there is still tightness in the labour market and retail sales showed up well last week indicating that any demise of the US consumer is overstated.
It is certainly a conundrum for the Fed with relatively stable data continuing to fight off the protracted trade conflict. There is also a potential game-changing Trump/Xi G20 Meeting due to take place at the end of June.
Ulitmately, the Fed has to walk a tight-rope on their market message whilst also trying to achieve some stability. The strong bounce in stock markets, now only a couple of percentage points off their all-time highs, will disappear fast if there is no explicit willingness by the FOMC to more accommodation.
Here are some of the numbers to know ahead of the meeting:
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