Fed Chairman Powell’s testimony before congress has affirmed the markets belief that the Fed will cut rates later this month. In choosing not to push back against futures pricing in a 25 bps July rate cut, Powell is tacitly signaling a willingness to follow the market’s lead. The Fed does not appear to be looking to retain optionality around the possibility of delaying to future meetings (September is next).
Based on the summary of uncertainty and risks in economic projections from the Federal Open Market Committee’s June release, the balance of risks among Federal Reserve officials shows why they’re leaning toward an interest-rate cut.
Concerns about missing their growth forecasts for gross domestic product are the most widespread since 2012. Meanwhile, worries about inflation not hitting the Fed’s 2% target also have increased.
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