June 2024 FOMC Preview: Markets Hold Their Ground

Fed’s June Meeting: A Patient Pause With a Twist of Hope

Grab a coffee, because the Federal Open Market Committee (FOMC) is set to keep the gold‑finger steady on the rate dial for the June boardroom session. No big surprises, just more of the same cautious vibes that Americans have been hearing all year long.

Where The FOMC’s Lens Is: The 2% Inflation Dream

The key question isn’t whether rates will change—no, that will stay fixed at the 5.25% to 5.50% band. The real chase is how soon the price pressures will ease enough to justify a cut. Think of it as a slow‑roll, not a sprint.

Why it matters:

Policy patience: The Fed is giving its tighter stance time to do its job.
Confidence check: They want to be certain that inflation’s moving sustainably toward 2% before snapping a lever.
Market mood: Money markets see a tiny probability of a shift this session, so the FOMC will likely vote unanimously to stay the course.

Market Sighs and Silent Nod

There’s been a faint shift in the Overnight Indexed Swap (OIS) curve since the last May meeting, but the big picture is still that the Fed is likely to wait until later in 2024 to cut rates.

Consumers and investors note that the first 25 basis points (bp) cut might happen around the November meeting—just two days after the election. The data that comforts everyone right now is the healthy dip in core CPI, which hit a near three‑year low in April.

Guidance and Whispered Words

The FOMC’s guidance will probably stay chilling: they’ll say “rate cuts aren’t ‘appropriate’ until we feel strongly that inflation is moving toward 2%.” The phrase will stick wherever the Fed’s policy language winds up. However, there is a chance they’ll tweak the wording when they’re to speak about the economic outlook. While describing GDP growth as “solid” and job gains as “strong” stays acceptable, a softer tone may land when the numbers sag a bit.

New Numbers in the Forefront: The December Summary of Economic Projections (SEP)

Fitting as always, the June meeting will unveil the newest quarterly SEP. While GDP forecasts won’t swing dramatically, there might be slight adjustments in labor and inflation predictions.

GDP: A Balance of Confidence and Caution

GDP is projected to grow at 2.1% YoY this year—no dramatic change from the earlier estimate.
Even though the first‑quarter quarterly growth didn’t meet expectations, the services sector and manufacturing provide a sturdy base.

Labor Market: A Waltz of Weakening Jobs

The 3‑month averaged payrolls in April slipped to 242k, just shy of the “breakeven” pace needed to keep up with a growing labor force.
Unemployment nudged up to 3.9% in April, the highest since early 2022, as the workforce participation rate dipped a slice below peak.
The projection heads toward 4.1% unemployment for the year, reflecting a quiet slowdown in hiring.

Inflation: A Balancing Act Between Relief and Reality

Core CPI and Core PCE took a nice plunge into near‑3‑year lows—good news for the Fed.
However, the first quarter’s hotter‑than‑expected price numbers still need giving weight to the new SEP.
The 2024 core PCE to bump to 2.7% from 2.6% raised in March, but both headline and core inflation are still expected to chase the 2% target by the forecast horizon.

What the “Dot Plot” Looks Like Now

The median dot from March pointed to about 75bp of cuts this year. With no cuts taken by mid‑2024, markets shift toward a more hawkish tone, expecting roughly 50bp of cuts in total—just a hairtopst he link calibrate difference from the current expected path.

Even a single FOMC member who thinks three cuts are viable could shift the median up by 25bp. If the policy expects a twelve‑cut line, something called “100bp of easing” will stay a distant goal. The longer‑run dot (currently at 2.562%) may push higher as policy talk moves toward a structural rise in the neutral real rate (r*).

POTUS Poll the Press Conference

The big highlight at the June FOMC will be Chair Powell’s press conference. All signs point to him staying on the same script: the policy remains restrictive, taking time for the tightening to cool prices, and not leaning toward an immediate hike.

His approach will likely cover:

Cut if inflation improves.
Cut if labor market signs deteriorate.
Keep rates steady until confident that inflation is headed toward the target.

How the Market Sits in the Wings

There’s little chance of a surprise from the FOMC, but the dot plot might provoke a quick hawkish reaction among traders. Over the medium term, though, if a rate cut remains the potential move and hikes stay off the table, the likely path is a climb for equities.

Meanwhile, investors will stay in a “dip‑buying” mood, keeping the “Fed put” functional. The small policy variance among G‑10 central banks may help cushion G‑10 FX volatility, leaving the Dollar Index (DXY) in a reasonably tight range.