US | The Fed is set to uphold its “wait-and-see” stance

Summary

While signals on how the Fed now assesses the evolution of risks to its goals will draw significant attention, all eyes will be on the dot plot to see whether a majority still favors at least one rate cut this year.

Key points

• Key points:
• The Fed is set to hold rates at 4.25-4.50%, but the updated SEP will likely reflect lingering risks to inflation and emerging risks to unemployment.
• Data since the May FOMC meeting indicate that real activity remains generally firm, supporting the Fed’s decision to hold rates steady.
• Labor market conditions continue to reflect resilience and stability, though some signs of softening are gradually emerging beneath the surface.
• Inflation data have remained broadly benign, with little indication to date that tariffs are significantly passing through to consumer prices.
• Treasury yields and rate expectations have aligned more closely with the Fed’s cautious stance, reversing earlier bets on swift easing.

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