The Fed held int rates steady, and the new dot plot showed 2 rate cuts totaling 50bp this year. The Fed reduced its outlook for GDP growth to 1.7% from 2.1%, raised its core inflation forecast to 2.8% from 2.5%, and slightly raised the unemployment rate to 4.4% from 4.3%.
In the Fed statement, the biggest change was to add the statement that “Uncertainty around the economic outlook has increased.” Officials also removed prior language stating that risks to achieving their employment and inflation goals were roughly in balance. The Fed also announced it would slow the pace of QT (balance sheet asset runoff) from $25B/mo to $5B/mo given some evidence of tightening liquidity.I expect a balanced Jerome Powell at today’s press conference, stressing continued good economic growth (GDP growth 1.7%), but reinforcing that the Fed stands ready to cut rates if the economy falters under the specter of higher tariffs and reduced govt spending.
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