As expected, the Federal Reserve (Fed) kept monetary policy on hold again in its June meeting, reiterating that it will take longer to gain confidence that inflation is on its way back to 2%, says Rogier Quaedvlieg, Senior Economist at ABN AMRO.
“The policy statement contained a minimal change, revising the ‘lack of further progress' on inflation to ‘modest progress (…),' following April PCE and May CPI inflation releases. A stronger revision was seen in the dot plot, which reduced the median number of cuts from three in March to a single one in June.”
“This meeting also saw the release of updated economic projections. Headline and core PCE inflation forecasts for 2024 rose to 2.8% for 2024, from 2.6% in March, and to 2.3% in 2025, from 2.2% in March. Median growth forecasts remain unchanged, while the unemployment rate in 2025 and 2026 was raised by 0.1 pp.”
“In the press conference, Fed's Chair Jerome Powell generally struck a more balanced tone compared to the relatively doveish performance in May. He reiterated the need for confidence that inflation will come down to 2%. Reflecting on inflation readings of this year, he noted that one has to be careful not to dismiss inflation readings one doesn't like, referring to the high readings in the first quarter.”