Fed’s June Shake‑Up: Not the “Hawk‑Says‑Stay‑Sharp” Version Out There
Yeah, you heard the buzz. Some chatter is painting the June FOMC gathering as a “hawkish Fed” in a way that feels a little over the top. In truth? It’s the opposite of that. The committee actually nudged the dial toward policy normalisation, giving that legendary “Fed put” another power‑boost.
What the Quick‑Read Misses
- Dot‑plot geeks are grinning in the press, pointing to the 2024 median that just carved out 25 basis points of cuts this year.
- But the dot plot’s reputation? Unreliable. Even after a SEP drop, the picture can shift like a weather report on a windy day.
- Left on the fringe: 8 FOMC members still see two cuts as a realistic plan, and that could shift in September depending on how inflation prints behave.
Inflation’s New Game Plan
Long gone is the idea that “price stability” means a tidy 2% target. Think of it more like a flexible range with 2% as the floor.
- 2024 & 2025 core PCE forecasts got bumped up by 0.2pp and 0.1pp respectively.
- The package now includes 125 basis points of easing across that same horizon.
- This mild‑dovish reinterpretation says that the first rate cut might arrive sooner on the basis of inflation moving “toward” 2%.
Labour Market Sleight‑of‑Hand
Ben Powell added an extra layer at the press conference: the current labour market is “unexpectedly weak”, and “more than the forecast” means we might have to lean on policy.
- Caretaker’s median forecast for 2024: 4% unemployment.
- Job report shows 4% in May, climbing the line that triggers easing.
- The bar to start cutting is now visibly lower.
Why This Isn’t “Dovish” News
In plain speak, the Fed’s stance is more ambitious and ready to cut—especially after a year of a terminal‑level federal funds rate. The “Fed put” isn’t just alive; it’s been given a stronger wake‑up call.
What Traders Should Do
Take this as a green light: risk assets can keep rallying. No need to brace for deep dips—“dip” will likely be a quick stop‑over, and markets will gear toward a medium‑term upswing thanks to the supportive backdrop.
- Get out of thin places before the Fed’s easing kicks in.
- Keep an eye on how policy shifts influence volatility; the Fed’s hands are on the wheel.
- Feel confident that the board can dial rates down quite sharply if needed.
Bottom Line
What matters now is the Fed’s power to back away on rates when required—much more than a set timeline or magnitude. That power has pushed equities up in the first half of 2024 and will likely keep them headed in that direction for the second half, as long as the council stays ready to help the market anchor.
